CHRP 20: ENTREPRENEURSHIP

AND HUMAN RESOURCE CONSULTANCY

LECTURE NOTES

Topic 1: Concept of Entrepreneurship

Introduction

Definition of Entrepreneurship and Entrepreneurs

Definition an entrepreneur

An entrepreneur is basically a person who identifies a business opportunity,

harshness and obtains the resources necessary to initiate a successful basis
activity.
The entrepreneur implements the idea
Undertakes to operate the business
Entrepreneurship meaning

Entrepreneurship refers to the means of stimulating innovative and creative

undertakings for a better business community or world.
Entrepreneurship can exist in any situation – therefore it is the creation of values
through establishing a business enterprise.
Entrepreneurship means having an idea of ones own and trying to implement the idea to
create values on it.

Entrepreneurship is a term which encompasses what entrepreneurs do i.e

o Identifying a business opportunity of a particular demand o Look at
the opportunity as a process of creating, something that did not exist.
o Constantly searching/ harnessing ones environment and resources to
implement the activities.
o Creating a totally new product and using it in as new.
Entrepreneurship there is the practice at starting of a new business or revitalizing existing
businesses in response to identifying opportunities.

Advantages of Entrepreneurship
i) Financial gains
ii) Self-employment which leads to job satisfaction and flexibility iii) Provide
job opportunities to the unemployed or those seeking better jobs.
iv) A means of opening up new industries especially in the rural areas-
facilitating globalization
v) A source of generating income and increased economic growth.
vi) facilitates competition encouraging high quality products vii)
facilitates production of more goods and services viii) Leads to the
development of newer markets
ix) Promotes use of modern technology in especially small- scale manufacturing
to enhance higher productivity

Drawbacks of entrepreneurship

a) Challenges of a bidding entrepreneur

long working hours
poor pay
unclear future
fear of loosing all that has been invested
bankruptcies and closure

b) Other challenges
Fear of delegating
the problem do it your self and know it all
competition by established business
lack of funds especially before break even
Mis- management by employees

Promotion of Entrepreneurship
Integrating entrepreneurship into the education system Registration to
encourage risk taking
National companies to promote entrepreneurship
Support of entrepreneurs through friendly loans at the appropriate time.
 Evolution of entrepreneurship

1. The earliest period: During the earliest period, Marco Polo was one of the earliest
entrepreneurs as a go-between who attempted to establish trade routes to the Far East. As a
go-between, Marco Polo would sign a contract with a money person (forerunner of today’s
venture capitalist) to sell his goods. A common contract during this time provided a loan to
the merchant- adventurer at a 22.5% rate including insurance. While the capitalist was a risk
bearer, the merchant –adventurer took the active role in trading, bearing all the physical
and emotional risks. When the merchant-adventurer successfully sold the goods and
completed the trip, the profits were divided, with the capitalist taking most of them upto
75% and the merchant-adventurer settling for the remaining 25%.
2. Middle Ages: In the middle ages, the entrepreneur was described both an actor and a
person who managed large production projects. In managing large production projects, this
individual did not take any risks, but managed the projects using the resources provided by
the government of the country in most cases. An example of an entrepreneur in the middle
ages was the cleric who used to be in charge of great architectural works, such as castles and
fortifications, public buildings, abbeys and cathedrals.
3. 17th Century: The re-emergent connections of risk with entrepreneurship developed in the
17th century, with an entrepreneur being a person who entered into a contractual
arrangement with the government to perform a service or to supply stipulated products.
Since the contract price was fixed, any resulting profits or losses were the entrepreneur’s. Eg,
John Law a French man who was allowed to establish a royal bank which eventually evolved
into an exclusive franchise to form a trading company in the new world – the Mississippi
company. Unfortunately, this monopoly on French trade led to Law’s downfall when he
attempted to push the company’s stock price higher than the value of its assets, leading to
the collapse of the company.

An economist Richard Cantillon understood Law’s mistake and developed one of the early theories
of the entrepreneur which makes him being regarded as the founder of the term. He viewed the
entrepreneur as a risk taker, observing that merchants, farmers, craftsmen, and other sole
proprietors buy at a certain price and sell at uncertain price therefore, operating a risk.

4. 18th Century: This differentiated between the person with the capital and one who needed
capital. Hence the entrepreneur was distinguished from the capital provider (the present
 day capitalist). The main reason for this differentiation was the industrialization occurring
throughout the world. Many of the inventions developed during this time were reactions to
the changing world. i. e. Eli Whitney and Thomas Edison who were developing new
technologiesand were unable to finance their inventions themselves. Whitney financed his
cotton gin with expropriated British crown property, Edison raised capital from private
sources to develop and experiment in the fields of electricity and chemistry. Both were
capital users (entrepreneurs) not providers (venture capitalists). A venture capitalist is a
professional money manager who makes risk investments from a pool of equity capital to
obtain a high rate of return on the investments.
5. 19th and 20th Centuries: Entrepreneurs were frequently not distinguished from managers
and were viewed mostly from economic perspective. They were viewed as organizers and
operators of an enterprise for personal gain. He pays current prices for the materials
consumed in the business, for the use of land, for the personal services he employs and the
capital he requires. He contributes his own initiative, skill, and ingenuity in planning,
organizing and administering the enterprise. He also assumes the chance of loss and gain
consequent to unforeseen uncontrollable circumstance. The net residue of the annual
receipts of the enterprise after all costs have been paid, he retains for himself. An example of
the 19th century entrepreneur is Andrew Carnege who invented nothing but adapted and
developed new technology in the creation of products to achieve economic vitality. He
made the American steel industry one of the wonders of the industrial world, primarily
through his unremitting competitiveness rather than his inventiveness or creativity.
The entrepreneur as an innovator was established in the middle of 20th century. His function is to
reform or reform or revolutionize the pattern of production by exploiting an invention or more
generally an untried technological method of producing a new commodity or producing an old one
in a new way, opening a new source of supply of materials or a new outlet for products, by
organizing a new industry.

6. The entrepreneur today the 21st century: The concept of entrepreneur today is further
refined when principles and terms from a business, managerial and personal perspective are
considered. The concept of entrepreneurship from a personal perspective has been
thoroughly explored in the 21st century. The definitions for the exploration are embedded
in:
 Initiative taking
  The organizing and reorganizing of social and economic mechanisms to turn resources and
situations to practical account
 The acceptance of risk or failure

How the government planned to promote entrepreneurship

✓ The development plan laid down proposed to:

i) implement small scale industrial policy

ii) Review the central and local government regulations that a hindrance to
entrepreneurial development.
iii) Provision of direct assistance to the small scale businesses all over Kenya.
iv) Establishment of an organization that would give extension services to the
small scale enterprises.
v) Creating and strengthening institutions and schemes for the assistance of the
small enterprise sector
vi) Establishment of credit guarantee schemes for loans given by commercial
banks
vii) Establish procedures to improve small scale training through the ministry of
technical training and Applied Technology.
viii) Overhaul the education system i.e introduction of the 8.4.4 system.
ix) Establish a full fledged small industrial division in the ministry of commerce
and industry – which gave rise to the District focus for rural development.
x) Introduction of entrepreneurship education is all levels of training.

Economic, Social and Political Factors Affecting Entrepreneurial Development

a) Corruption and official harassment

✓ Occurs where entrepreneurs are forced to bribe officials in various
government departments to allow operation or start up.
Raids under one pretext or another which tends to be very harassing.
b. High taxation levels. For business and personal incomes
Which in effect reduce profits earned making it un attractive to engage in
business
Taxation of raw materials and other inputs raise production costs.
✓
b) Unregulated competition from the outside world due.
✓ Liberalization which opened importation competing locally produced goods.

c) Declining personal incomes of people due to

Over-increasing cost of living
Arise in unemployment
 d) The high cost of finance
The cost of borrowing is high
Business collapses because they lack ability to repay loans.

e) Lack of necessary skills and knowledge due to

lack of training opportunities
high education costs

f) Poor transport and communication network

making business difficult
Inconveniencing consumers
High energy costs
g) Lack of entrepreneurial culture
Entrepreneurial process

The process of starting and running one’s own business.

Steps in the Entrepreneurial Process

1. Discovery
2. Concept Development
3. Resourcing
4. Actualization
5. Harvesting

1. Discovery: The stage in which the entrepreneur generates ideas,, recognizes

opportunities, and, and studies the market the market.
During this stage:

• Consider your hobbies or skills

• Consider consumer needs and wants
• Conduct Surveys and questionnaires – test the market
• Study demographics
2. Concept Development: – Develop a business plan: a detailed proposal
describing the business idea the business idea

3. Resourcing: The stage in which the entrepreneur identifies and acquires the
financial, human, and capital resources needed for the venture startup etc
During resourcing:
Identify potential investors
Hire employees
Apply for loans and grants and assistance
4. Actualization: The stage in which the entrepreneur operates the business and
utilizes resources to achieve its goals/objectives.
5. Harvesting: The stage in which the entrepreneur decides on venture’s future
growth, development, or, demise.
The Entrepreneurship Culture
Culture Definition
Culture is defined as asset of values; perceptions wants and behaviour learned by
a member of a society from family and other institutions
Culture is a tool of leaned behavior patterns of living. It is a powerful human tool
for survival constantly changing and easily lost.
Weber argues that “Protestantism encourages a culture which emphasizes
individualism, achievement motivation, legislation of entrepreneurial vocations,
rationality and self – reliance.
Hosted – defines culture as a collective programming of the mind which
distinguishes the member of one group or category of people from another.

Entrepreneurial Culture
Refers to the way of embracing the concept of finding new opportunities in
business and gathering the necessary resources to fill the opportunity.

Many governments around the world want to promote entrepreneurship

because they have recognized the importance of entrepreneurship.
In other words entrepreneurial culture is away of people embarrassing life by
participating in activities that enable then create new business enterprises.
A country can develop the entrepreneurial culture by forming policies that
constitute the following ; o Integration of entrepreneurship training in the
overall education sys tem to tap on youths
o Exposure of entrepreneurship those look potential to actual business
practices and activities through the networks and business contacts of
rule models.
o Creation of a conducive and enabling that permits new business to
immerge and flourish.
The creation of entrepreneurial culture has to come from deep social convictions
based on strong values and systems of the locals

It should be created in away that it welcomes entrepreneurship and respects the

investor and also reflecting the core values

What Constitutes Entrepreneurial Culture?

Growth in concentration of firms’ networks and linkages
Growth in intermediary organizations to which some tasks are delegated and it
different form of entrepreneurship
 ✓ High levels of education skills and learning.

Importance of Entrepreneurship Culture

o Enhances economic growth and building of social capital.

o Enhances job creation

o Acts as a primary source of innovation

o Helps in the devolution of government power for policy
implementation.
o Direct influence development in tech. H/R capital formation e.t.c.

The cultural habits that promote entrepreneurial development

a) Money orientation
Money oriented people know the value of money and has the intention of
making it.
The money-oriented people use the need of money as a motivating factor
pushing then to being entrepreneurs.
b) Future orientation
A society that has foresight to know about the future business environment is
likely to have more entrepreneurs.
This is because they are likely to visualize key changes that are likely to
create opportunity.
c) Time consciousness
Knowledge that time exists and its importance
Knowing the right time to start an entrepreneurial activity.
Utilization of time
The correct timing of the market conditions
d) Trust and honesty
Through trust consumer demand is gained on the products and services
available.
Entrepreneurs should reciprocate this by ensuring honesty by providing the
expected standards.
 e) Hard work i.e
✓ Willingness to work hard distinguishes between successful and unsuccessful
persons.
The cultural factors inhibiting entrepreneurial development.

a) Religion – religious believes may deter entrepreneurial investments in items

such as night clubs and pubs.
b) Language – establishing businesses in areas where language barrier may allow
poor communication or fear of invation.
c) Personal relationship – Married people may avoid getting involved in business
activities since no time is spared for the family.
d) Attitude towards innovation
✓ Especially in cultures which oppose innovation due to fear of change

e) Networks – poor networking and ability to meet people limit new

i) Opportunities ii) New
knowledge iii) New
information.

f) Technology – lack of technical skills and knowledge may slow growth and dev.
Of entrepreneurial o Lock one out of being competitive.

Ways of managing Factors which Inhibits Development of Entrepreneurial Culture.

1. Working in related business to gather the necessary skills required before
one starts his own business.
2. Setting policies t hat ensure that entrepreneurship training is established
in the school syllabus.
3. Your people to be encouraged to read articles from newspaper, watch
television and business contacts to enable them choose products in
demand with a bright future.
4. Young youths as wll as aspiring adults entrepreneurs should be
encouraged to get better and faster access to a.
Knowledge

b. Information or business
c. Competition
d. Internet e.t.c
5. Aspiring entrepreneurs to seek guidance in selection of machines and other
facilities.
Role Entrepreneurship in Economic Development

(1) Promotes Capital Formation: Entrepreneurs promote capital formation by

mobilizing the idle savings of public.

(2) Creates Large-Scale Employment Opportunities: Entrepreneurs provide

immediate large-scale employment to the unemployed which is a chronic problem of
underdeveloped nations.

(3) Promotes Balanced Regional Development: Entrepreneurs help to remove regional

disparities through setting up of industries in less developed and backward areas.

(4) Reduces Concentration of Economic Power: Economic power is the natural

outcome of industrial and business activity.

(5) Wealth Creation and Distribution: It stimulates equitable redistribution of wealth

and income in the interest of the country to more people and geographic areas, thus
giving benefit to larger sections of the society.

(6) Increasing Gross National Product and Per Capita Income: Entrepreneurs are
always on the lookout for opportunities. They explore and exploit opportunities,
encourage effective resource mobilization of capital and skill, bring in new products and
services and develop markets for growth of the economy.

(7) Improvement in the Standard of Living: Increase in the standard of living of the
people is a characteristic feature of economic development of the country. Entrepreneurs
play a key role in increasing the standard of living of the people by adopting latest
innovations in the production of wide variety of goods and services in large scale that too
at a lower cost.

(8) Promotes Country's Export Trade: Entrepreneurs help in promoting a country's

export-trade, which is an important ingredient of economic development. They produce
goods and services in large scale for the purpose earning huge amount of foreign
exchange from export in order to combat the import dues requirement.

(9) Induces Backward and Forward Linkages: Entrepreneurs like to work in an

environment of change and try to maximize profits by innovation.

(10) Facilitates Overall Development: Entrepreneurs act as catalytic agent for change
which results in chain reaction. Once an enterprise is established, the process of
industrialization is set in motion. This unit will generate demand for various types of
units required by it and there will be so many other units which require the output of this
unit.
ENTREPRENEURSHIP VERSUS CORPORATE MANAGEMENT

All entrepreneurs are managers in that they must manage their venture, but all managers
are not entrepreneurs. To a great extent, this is because most large corporations have
become highly structured with restrictive rules necessary to control an entity of that size.
Small ventures do not have these problems. Entrepreneurship includes a healthy dose of
management. But entrepreneurship and management are not synonymous.
Entrepreneurship involves a unique brand of management, with its own philosophies,
goals, and methods. It differs from corporate management in the following ways:

a) Risk Management Versus Risk Minimization

Corporate management deals in risk minimization while entrepreneurship deals in
risk management. Corporate management tends to be risk-averse. Its goal is to
reduce risk to a minimum while being as productive and as profitable as possible,
for example its heavily budget oriented.
Entrepreneurship is not necessarily risk seeking, but it is risk assuming. It realizes
that start-up or high-growth ventures, by nature, entail amount of risk. Risk, in
many cases, cannot be reduced significantly in entrepreneurial situations but it can
be subjectively measured, and actions can be taken to offset risks.
b) Opportunity Driven Versus Resource Driven
Corporate management tends to be resource driven while entrepreneurship tends
to be opportunity driven. Corporate management is resource-driven investment. It
determines the amount available to invest first and then determines where that
investment should be made. Even if a number of opportunities have crossed
management’s desk, the issues are often put on hold until available resources are
determined.
Entrepreneurship on the other hand studies opportunities from the viewpoint of
what the eventual payoff might be. If the payoff is great enough, capital can be
found to underwrite it. If payoff is not great, then the entrepreneur must decide
whether the venture should be funded at some lower level or scrapped completely.
c) Action Versus Analysis
Corporate management moves methodologically, studying each move carefully
while entrepreneurship involves a sense of urgency, realizing that many
opportunities have a short window. Management in large corporations is
characterized by committees, which take time, even though they may produce
well- studied, well-written decisions.
Entrepreneurs realize that action often must be taken quickly, sometimes without
full knowledge and without a definite answer.
 d) Lean Management Team Versus Personnel Heavy
Corporate management tends to become personnel heavy over time, while
entrepreneurship tends to stay lean with overworked team members. Corporations
tend to grow over time due, generally, to increases in volume. Entrepreneurial
firms, on the other hand, have lean management teams and few layers of
management, most of which are directly related to providing the product or
service. These teams are willing to work long hour, often at low pay in order to
reap the payoff at a later time.

INTRAPRENEURSHIP: THE CORPORATE COMPROMISE

The preceding discussion suggests that corporate management tends to be more

traditional, more cautious, and perhaps less exciting that entrepreneurship. However,
some corporations are taking steps to gain the benefits of entrepreneurship within the
corporate framework. This corporate entrepreneurship or intrapreneurship is to create or
develop the entrepreneurial spirit within corporate boundaries, thereby allowing an
atmosphere of innovation to prosper. This may take a more formal approach by creating
venture groups within the corporation, spinning off subsidiaries that invest in high-risk
ventures, or contributing capital to selected ventures outside the corporation.

Intrapreneurship has substantial pote3ntial if one correctly because of the amount of

ready capital, the industry experience, and the knowledge of the production and
marketing processes.

The development of entrepreneurs and intrapreneurs boils down to a fairly simple

principle: Human beings are endowed with the urge to create-to bring into being
something that has never existed or worked so well before. It follows, then that
corporations can foster profit-making innovations by encouraging employees to think like
intrapreneurs, and then giving them the freedom and flexibility to pursue their projects
without bogging down in bureaucratic inertia.

Intrapreneurship requires special attention from managers, because by design it cuts

against the grain of established organizational activities. Thus the following are important
to support intrapreneurship:

 Explicit goals for entrepreneurial processes

 A system of information exchange between managers and intrapreneurs
 An emphasis on individual responsibility and accountability
 Rewards for creative effort.
Early Theories of Entrepreneurship/Approaches to Entrepreneurship

Various theories of Entrepreneurship have been propounded by thinkers. These can be

classified mainly in three categories:
1. Sociological
2. Economic

3. Cultural

4. Psychological

PSYCHOLOGICAL THEORIES

1. David McClelland’s Motivational Needs Theory

American David Clarence McClelland (1917-98) achieved his doctorate in psychology at

Yale in 1941 and became professor at Wesleyan University. He then taught and lectured,
including a spell at Harvard from 1956, where with colleagues for twenty years he studied
particularly motivation and the achievement need. He began his McBer consultancy in
1963, helping industry assess and train staff, and later taught at Boston University, from
1987 until his death. McClelland is chiefly known for his work on achievement
motivation, but his research interests extended to personality and consciousness. David
McClelland pioneered workplace motivational thinking, developing achievement-based
motivational theory and models, and promoted improvements in employee assessment
methods, advocating competency-based assessments and tests, arguing them to be better
than traditional IQ and personality-based tests. His ideas have since been widely adopted
in many organizations, and relate closely to the theory of Frederick Herzberg.
David McClelland is most noted for describing three types of motivational need, which he
identified in his 1961 book, The Achieving Society:
 achievement motivation (n-ach)
 authority/power motivation (n-pow)
 affiliation motivation (n-affil)

The Need for Achievement (n-ach)

The n-ach person is 'achievement motivated' and therefore seeks achievement,

attainment of realistic but challenging goals, and advancement in the job. There is a
strong need for feedback as to achievement and progress, and a need for a sense of
accomplishment.
McClelland contrasted achievement-motivated people with gamblers, and dispelled a
common pre-conception that n-ach 'achievement-motivated' people are big risk takers.
On the contrary - typically, achievement-motivated individuals set goals which they
can
influence with their effort and ability, and as such the goal is considered to be achievable.
This determined results-driven approach is almost invariably present in the character
make-up of all successful business people and entrepreneurs.
McClelland suggested other characteristics and attitudes of achievement-
motivated people:
a) Achievement is more important than material or financial reward.
b) Achieving the aim or task gives greater personal satisfaction than receiving praise
or recognition.
c) Financial reward is regarded as a measurement of success, not an end in itself.
d) Security is not prime motivator, nor is status.
e) Feedback is essential, because it enables measurement of success, not for reasons
of praise or recognition (the implication here is that feedback must be reliable,
quantifiable and factual).
f) Achievement-motivated people constantly seek improvements and ways of doing
things better.
g) Achievement-motivated people will logically favour jobs and responsibilities that
naturally satisfy their needs, i.e. offer flexibility and opportunity to set and achieve
goals, e.g., sales and business management, and entrepreneurial roles.

McClelland firmly believed that achievement-motivated people are generally the ones
who make things happen and get results, and that this extends to getting results through
the organisation of other people and resources, although as stated earlier, they often
demand too much of their staff because they prioritise achieving the goal above the many
varied interests and needs of their people.
Are individuals born with certain characteristics that predispose them to
entrepreneurial endeavors?
Is there a set of traits that can be attributed to an entrepreneurial personality?

Or does environmental context, such as early exposure to entrepreneurialism

make the entrepreneur?

2. Entrepreneurs are Born (Traits Theory)

Professor of psychology Alan Jacobwitz, holds that entrepreneurs are born, not made.
Through interviews with over 500 entrepreneurs over a three-year period, Jacobwitz
observed that entrepreneurs commonly share certain personality characteristics. These
include:
 Restlessness
 Independence
 A tendency to be a loner
 Extreme self confidence
  Innovative
 Action oriented
 High on need for personal control
 Highly autonomous

Trait theories such as Jacobwitz’s suggest that entrepreneurial aptitude is static- that is,
either people are born with the related characteristics, or they are not.

While the majority of theorists supported this approach at the dawn of entrepreneurial
research, some criticize that it has yet to be empirically proven.

3. Precipitating Events Theory (Entrepreneurs are Made)

Other researchers offer a dynamic model that suggests entrepreneurial intention is based
on the interaction between personal characteristics, perceptions, values, beliefs,
background and environment (situational context).

They base this approach on a model of the entrepreneurial event in which

entrepreneurship is defined as “the pursuit of an opportunity irrespective of existing
processes.”

Unlike the traits models, this approach incorporates the influence of environment, and
the notion that entrepreneurial behavior is planned and intentional.

This approach is process-focused in that the interactions of several factors are examined
in order to predict behavior. Beliefs, perceptions and assumptions are learned within the
context of a given environment (such as a business or community). These attitudes and
perceptions predict intentions, which in turn influence behavior. Entrepreneurial
intention is thus mediated in the following manner:

 Environment or event causes an individual to form perceptions, attitudes

and assumptions (consider the assumptions and beliefs that might be
formed in a change-oriented environment as opposed to a static
environment).
 These perceptions then translate themselves into intentions, or potential.
 Intentions or potential then are expressed through behavior.

Thus, this model suggests that entrepreneurial characteristics not only can be learned,
but also can vary across individuals and situations.
4. Beyond Born and Made (Venture Theory)

Other researchers take the dynamic approach to entrepreneurial behavior a step further
by declaring a model that explains sustained and repeated entrepreneurial behavior
(venturing). In essence, the model moves beyond attempting to explain why individuals
initiate ventures to why or how entrepreneurs are motivated to continue with the
behavior as a career choice.

They conclude that, like the intention to act entrepreneurially, the decision to continue
with behavior is influenced by the interaction of various factors. These include:

 Individual characteristics
 Individual environment
 Business environment
 An individual’s personal goal set
 The existence of a viable business idea.

Through these interacting factors, individuals make several comparisons between their
perceptions of a probable outcome, their intended goals, intended behavior and actual
outcomes.

The model predicts that:

 When the outcomes met or exceed perceived outcomes, positive behavior

(continued engagement in entrepreneurialism) is reinforced.
 It also predicts that the opposite occurs when the perceived outcomes are not

met. This model clearly incorporates psychological, behavioral and situational factors.

Economic Theories

Richard Cantillon (1680-1734) was the first of the major economic thinkers to define the
entrepreneur as an agent who buys means of production at certain prices to combine
them into a new product. He classified economic agents into landowners, hirelings, and
entrepreneurs, and considered the entrepreneur as the most active among these three
agents, connecting the producers with customers.

Jean Baptise Say (1767-1832) improved Cantillion’s definition by adding that the
entrepreneur brings people together to build a productive item.
a) Mark Casson's Economic Theory
Mark Casson (1945- ) holds that entrepreneurship is a result of conducive economic
conditions.
In his book "Entrepreneurship, an Economic theory" he states the demand for
entrepreneurship arising from the demand for change.
Economic factors that encourage or discourage entrepreneurship include:
 taxation policy
 industrial policy
 easy availability of raw materials
 easy access to finance on favorable terms
 access to information about market conditions
 availability of technology and infrastructure
 marketing opportunities

b) Joseph Schumpeter’s Innovation Theory

Joseph Schumpeter’s innovation theory of entrepreneurship (1949) holds an entrepreneur
as one having three major characteristics: innovation, foresight, and creativity.
Entrepreneurship takes place when the entrepreneur

 creates a new product

 introduces a new way to make a product
 discovers a new market for a product
 finds a new source of raw material
 finds new way of making things or organization

Schumpeter’s innovation theory however ignores the entrepreneur’s risk taking ability
and organizational skills, and place undue importance on innovation. This theory applies
to large-scale businesses, but economic conditions force small entrepreneurs to imitate
rather than innovate.
Other economists have added a dimension to imitating and adapting to innovation. This
entails successful imitation by adapting a product to a niche in a better way than the
original product innovators innovation.
c) Schumpeter’s Theory of innovation:
The above theory implies carrying one of new combinations of entrepreneurship. ‘An
Entrepreneur is an innovator – who carries new combination of:
1. New goods/ services.
2. New method of production.
3. New market.
4. New source of supply of raw materials.
5. New organization.
d) Frank Knight's Risk Bearing Theory

Frank Knight (1885-1972) first introduced the dimension of risk-taking as a central

characteristic of entrepreneurship. He adopts the theory of early economists such as
Richard Cantillon and J B Say, and adds the dimension of risk-taking.
This theory considers uncertainty as a factor of production, and holds the main function
of the entrepreneur as acting in anticipation of future events. The entrepreneur earns
profit as a reward for taking such risks.
e) Alfred Marshall’s Theory
Alfred Marshall in his Principles of Economics (1890) held land, labor, capital, and
organization as the four factors of production, and considered entrepreneurship as the
driving factor that brings these four factors together.
The characteristics of a successful entrepreneur include:
 thorough understanding of the industry
 good leadership skills
 foresight on demand and supply changes and the willingness to act on such risky
foresights

Success of an entrepreneur however depends not on possession of these skills, but on the
economic situations in which they attempt their endeavors.
Many economists have modified Marshall’s theory to consider the entrepreneur as the
fourth factor itself instead of organization, and which coordinates the other three factors.
f) Israel Kirtzner’s Theory
Israel Kirzner (1935- ) hold spontaneous learning and alertness two major characteristics
of entrepreneurship and entrepreneurship is the transformation of spontaneous learning
to conscious knowledge, motivated by the prospects of some gain.

Kirzner considers the alertness to recognize opportunity more characteristic than

innovation in defining entrepreneurship. The entrepreneur either remedies ignorance or
corrects errors of the customers.
His entrepreneurship model holds:

a) The entrepreneur subconsciously discovering an opportunity to earn money by

buying resources or producing a good, and selling it
b) Entrepreneur financing the venture by borrowing money from a capitalist.
c) Entrepreneur using the funds for his entrepreneurial venture
d) Entrepreneur paying back the capitalist, including interest, and retaining the "pure
entrepreneurial profit.”
g) Leibenstein’s Theory of Entrepreneurship
Harvey Leibenstein (1922-1994) consider entrepreneur as gap-fillers. The three traits of
entrepreneurship include:
1. Recognizing market trends
2. Develop new goods or processes in demands but not in supply
3. Determining profitable activities
Entrepreneurs have the special ability to connect different markets and make up for market
failures and deficiencies.

h) Peter Drucker’s Theory of Entrepreneurship

Peter Drucker (1909-2005) holds innovation, resources, and an entrepreneurial behavior as

the keys to entrepreneurship. According to him entrepreneurship involves

a. increase in value or satisfaction to the customer from the resource

b. creation of new values
c. combination of existing materials or resources in a new productive
combination

Entrepreneurship in Economic Theory

Let us take a closer look at how the figure of the entrepreneur is treated in economic
theory. We have a surprise in store. Astonishingly, in the literature of economics the
entrepreneur has been largely left out. Entrepreneurship is an important and, until
recently, sadly neglected subject, says Mark Casson (1990, p.XIII), who could be called the
rediscoverer of the entrepreneurial figure.
In the past ten years, research has taken a new direction, bringing out the separate and
distinct function of the entrepreneur in contrast to that of the manager. Why is so much
emphasis placed on this difference? Because it is about a quality all of its own, something
new. The essence of entrepreneurship is being different says Casson. What is so different
here? The manager, one could argue, must operate under normal conditions and in
routine business, while for successful entrepreneurship exactly the opposite qualities are
needed.

The entrepreneur is not the capitalist, either, a distinction that goes back to J. B. Say
and which was taken up by Joseph Schumpeter (quoted from the 1993 edition, p. 217), the
classic economic reference for entrepreneurial behaviour. This distinction is significant,
since the two functions have been repeatedly treated, in non-specialist literature but to
some extent in the history of economics as well, as if they were one and the same. The
difference can be otherwise expressed in a current bon mot: “The entrepreneur creates
jobs, the capitalist opens them up. The entrepreneur has an idea, founds a business,
employs people. The capitalist has money, buys into an enterprise and tries to increase
the return on his capital. He rationalizes or closes unproductive parts of the business,
thereby tending to make employees redundant.
Schumpeter, too, describes the entrepreneur as forsaking well-trodden paths to open up
new territory and as turning (believe it or not!) dreams into reality. Schumpeter puts the
stress on innovation, not on the invention. The entrepreneurial function consists not of
inventing things, but rather of bringing knowledge to life and into the market.
Schumpeter himself assumes that with innovation existing structures are destroyed. He
saw the markets, realistically viewed, as dominated by oligopolies. Competition, and with
it a more efficient allocation of resources, arises only through the invasion of these
markets by new entrepreneurs, who destroy the existing market equilibrium with their
innovations. This mechanism has been taken into economic discourse and is termed
creative destruction.

Hans Hinterhuber (1992) points out a special relationship between the entrepreneurial
vision and the person: entrepreneurial ideas, he says, are an expression of one´s own life
and professional experience. He even speaks of the feeling of a mission. This sense of
mission must be present to set free the energies needed to market a product successfully.
The author gives several examples of some entrepreneurial ideas that have marked our
society more than others, because their originator had an idea in the Platonic sense and
were imbued with a sense of mission: Gottlieb Duttweiler in Switzerland, with his idea of
breaking down traditional commercial structures and offering products much cheaper,
especially to poorer population groups, or Steven Jobs and Stephen Wozniak, with their
vision of democratizing the computer. Interesting, too, the indication that
entrepreneurial vision is an idea of sweeping, classic simplicity. Going along with this is a
sense of reality: ideas by themselves do not yet constitute vision. A sense of reality means
seeing things as they are, not as one wishes them to be.

And finally the ability to withdraw from reality: the highhande creation of new basic
conditions which redefine the rules of the game. In the American literature, this latter is
often described thus: The entrepreneur has to put the odds in his favour, even if and
especially if founders of enterprises when first presenting their ideas often cannot make
them comprehensible.as
SOCIOLOGICAL THEORIES/APPROACHES
a) Max Weber’s Sociological
The sociological theory entrepreneurship holds social cultures as the driving force of
entrepreneurship. The entrepreneur becomes a role performer in conformity with the role
expectations of the society, and such role expectations base on religious beliefs, taboos,
and customs.
Max Weber (1864-1920) held religion as the major driver of entrepreneurship, and
stressed on the spirit of capitalism, which highlights economic freedom and private
enterprise. Capitalism thrives under the protestant work ethic that harps on these values.
The right combination of discipline and an adventurous free-spirit define the successful
entrepreneur.
Salient features of his theory are:

1. Spirit of Capitalism is highlighted

2. Adventurous spirit facilitate taking risk
3. Protestant ethic embodying rebellion is conducive
4. Inducement of profit is the criterion

CULTURAL THEORIES/APROACHES
Hoselitzs Theory
1. He explains that the supply of Entrepreneurship is governed by cultural factors &
culturally minority groups are the spark – plugs of entrepreneurial economic
development. Marginal-men- Reservoir of entrepreneurial development. Ambiguous
positions from a cultural or social statement make them creative.
2. Emphasis on skills- Who possess extra-ordinary skills. Function of managerial
additional personal traits & leadership skills. Additional personal traits. Exportation of
profit Ability to lend.

3. Contribution of social classes- Socio-economic economic background of specific

classes makes them entrepreneurs. Family patterns in France, Protestants in UK/USA &
Parsees in India.

What is Locus of Control?

Within psychology, Locus of Control is considered to be an important aspect of

personality. The concept was developed originally Julian Rotter in the 1950s (Rotter,
1966).
Locus of Control refers to an individual's perception about the underlying main causes of
events in his/her life. Or, more simply:
Do you believe that your destiny is controlled by yourself or by external forces (such as
fate, god, or powerful others)?

The full name Rotter gave the construct was Locus of Control of Reinforcement. In giving
it this name, Rotter was bridging behavioral and cognitive psychology. Rotter's view was
that behavior was largely guided by "reinforcements" (rewards and punishments) and that
through contingencies such as rewards and punishments, individuals come to hold beliefs
about what causes their actions. These beliefs, in turn, guide what kinds of attitudes and
behaviors people adopt. This understanding of Locus of Control is consistent, for
example, with Philip Zimbardo (a famous psychologist):
A locus of control orientation is a belief about whether the outcomes of our actions are
contingent on what we do (internal control orientation) or on events outside our personal
control (external control orientation)." (Zimbardo, 1985, p. 275)

Thus, locus of control is conceptualized as referring to a one-dimensional continuum,

ranging from external to internal:
 External Locus of Control Internal Locus of Control
Individual believes that his/her Individual believes that his/her
behavior is guided by fate, luck, behavior is guided by his/her
or other external circumstances personal decisions and efforts.

Is An Internal Locus Of Control Desirable?

In general, it seems to be psychologically healthy to perceive that one has control over those
things which one is capable of influencing.
In simplistic terms, a more internal locus of control is generally seen as desirable. Having
an Internal locus of control can also be referred to as "self-agency", "personal control",
"self- determination", etc. Research has found the following trends:
 Males tend to be more internal than females
 As people get older they tend to become more internal
 People higher up in organizational structures tend to be more internal However,
it’s important to warn people against lapsing in the overly simplistic view notion
that internal is good and external is bad (two legs good, four legs bad?). There are
important subtleties and complexities to be considered. For example:

Internals can be psychologically unhealthy and unstable. An internal orientation usually

needs to be matched by competence, self-efficacy and opportunity so that the person is
able to successfully experience the sense of personal control and responsibility. Overly
internal people who lack competence, efficacy and opportunity can become neurotic,
anxious and depressed. In other words, internals need to have a realistic sense of their
circle

 of influence in order to experience 'success'.

 Externals can lead easy-going, relaxed, happy lives.
Despite these cautions, psychological research has found that people with a more internal
locus of control seem to be better off, e.g., they tend to be more achievement oriented
and to get better paid jobs. However, thought regarding causality is needed here too. Do
environmental circumstances (such as privilege and disadvantage) cause LOC beliefs or
do the beliefs cause the situation?
Locus of Control
Entrepreneurs tend to have a strong internal locus of control. Locus of control is a
concept defining whether a person believes he/she is in control of his/her future or
someone else is in control of it. For example, we all know people who believe they have
no control over their lives. They believe that what happens to them is dictated by outside
forces. People who feel they are victims of outside forces have an external locus of
control – “it’s not my
fault this happened to me.” By contrast, entrepreneurs have a very strong internal locus of
control. They believe their future is determined by the choices they make.

Control of their Future

Entrepreneurs want to be self-directed. They want to be in control of their activities. This
is linked to the “locus of control” discussion above. Entrepreneurs often don’t fit well in
traditional employment positions. They don’t want to be told what to do. Entrepreneurs
know what they want to do and how to do it.

CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURS

1. Self-motivated
Successful entrepreneurs do not need someone who holds them accountable or forces
them to be efficient and productive. Unfortunately, without a manager, many people
cannot take their business past the planning stages.
2. Creative
When creating a business idea, many entrepreneurs have to be very creative. There is a
good chance that someone else has already established himself as the authority for the
niche that a new entrepreneur chooses.
3. Intuitive
Entrepreneurs do not become successful due to luck. Every successful entrepreneur
created his own path with his intelligence, creativity and intuition. Business models are
constantly changing.
4. Authoritative
If you were to open your own business, you would learn very quickly that there are many
people with whom you need to network. However, not everyone has your best interest in
mind. You may encounter naysayers, manipulators and scammers. Therefore, you must
not allow yourself to be easily influenced; you must be authoritative.
5. Strong-willed
Successful entrepreneurs started their business with a vision - a dream. They acted on
their dream by taking small steps towards accomplishing their goals.
6. The Dreamer
The Dreamer is the least understood out of the four dimensions. Many think dreaming is
the same as daydreaming; because of course every entrepreneur has a dream. But The
Dreamer must have a much larger vision in place.

7. The Thinker
The Thinker is The Dreamer's most important companion. The Dreamer represents the
"what" and The Thinker represents the methodical "how." He compliments The Dreamer
by knowing the special role he plays in the manifestation of The Dreamer's vision.
8. The Storyteller
The Storyteller invokes excitement in others when conveying the dream. He knows that
without encouragement and excitement no dream has a chance to become reality.
9. The Leader
The Leader is who assumes the responsibility to move the dream forward. He takes the
pieces of the puzzle—that of The Dreamer, Thinker and Storyteller—and puts them
together.

10.Determination
There are millions of opportunities around us but what are usually lacking are people who
take initiative to transform these opportunities into profitable business ventures.
Opportunity seekers do not sit around and wait to be told or forced by events to act. Seek
opportunities.

11. Risk Takers

Entrepreneurs take risks but they have to be calculated. Entrepreneurship is not like
gambling where everything is left to chance.

12. Goal Oriented

Perhaps the most important trait is that of setting goals. Entrepreneurs have clear picture
on how they would want their businesses to be in three or five year’s time. They work
with the goals they have set for their businesses.
13.Planinadvance
Successful entrepreneurs are systematic planners. They decide what they are going to do
in an orderly and logical way.
14. Persuasive

Successful entrepreneurs have to be persuasive with customers, financiers and employees.

It is important to build and maintain a network of business contacts.
15. Confidence

Finally, the successful entrepreneur does not walk with drooping shoulders and shuffling
feet, no. Successful entrepreneurs are self-confident whether they are faced with a
difficult task or challenge.

16. Tenacity
Starting a business is an ultra-marathon. You have to be able to live with uncertainty and
push through a crucible of obstacles for years on end. This is trait is known by many
names-
-perseverance, persistence, determination, commitment, resilience etc.
17. Passion

It's commonly assumed that successful entrepreneurs are driven by money. But most will
tell you they are fueled by a passion for their product or service, by the opportunity to
solve a problem and make life easier, better, cheaper.

18.Tolerance of Ambiguity

This classic trait is the definition of risk-taking--the ability to withstand the fear of
uncertainty and potential failure.

19.Vision

One of the defining traits of entrepreneurship is the ability to spot an opportunity and
imagine something where others haven't. Entrepreneurs have a curiosity that identifies
overlooked niches and puts them at the forefront of innovation and emerging fields.

20. Self-belief

Self-confidence is a key entrepreneurial trait. You have to be crazy-sure your product is

something the world needs and that you can deliver it to overcome the naysayers, who
will always deride what the majority has yet to validate.

21.Flexibility
Business survival, like that of the species, depends on adaptation. Your final product or
service likely won't look anything like what you started with. Flexibility that allows you to
respond to changing tastes and market conditions is essential.
22 Goal Oriented
Every entrepreneur always has an aim and this aim is the reason for all the actions she
takes in her business. If an entrepreneur is fully oriented towards that aim/goal, her
entire business revolves around achieving that goal.
24. Pro-active
(The List is endless)

DIFFERENT TYPES OF ENTREPRENEURS

The following are some types of entrepreneurs:

a) Co-operative Entrepreneur
A Co-operative Entrepreneur collaborates with other co-operative entrepreneurs
to start and complete projects where each co-operative entrepreneur brings
different skills and talents to the collaboration.
b) Creative Entrepreneur
 A Creative Entrepreneur is a creative artist who values their product above all else
and puts Intellectual Property (IP) first. Creative Entrepreneurs are dedicated to
the artistic and creative expression that is unique to them.
c) Lifestyle Entrepreneur
A Lifestyle Entrepreneur values their lifestyle first and builds their businesses so
that they have a rewarding and sustainable lifestyle founded on and driven by their
personal interests and talents.
d) Social Entrepreneur
A Social Entrepreneur values social change first and is driven to improve and
transform their society, their environment, and economic conditions.
e) Bottom-Line Entrepreneur
A Bottom-Line Entrepreneur takes the initiative and launches a new enterprise
that takes advantage of market opportunities with the goals of building capital and
profits.
f) Innovative Entrepreneurs:
An innovative entrepreneur in one, who introduces new goods, inaugurates new
method of production, discovers new market and recognizes the enterprise. It is
important to note that such entrepreneurs can work only when a certain level of
development is already achieved and people look forward to change and
improvement.
g) Imitative Entrepreneurs:
These types of entrepreneurs creatively imitate the innovative technical
achievement made by another firm. Imitative entrepreneurs are suitable for
underdeveloped countries as it is hard for them to bear the high cost of
innovation.
h) Fabian Entrepreneurs:
Fabian entrepreneurs are characterized by very great caution and skepticism to
experiment any change in their enterprises. They usually do not take any new
challenge. They imitate only when it becomes perfectly clear that failure to do not
so would result in a loss of the relative position in the enterprise.

i) Drone Entrepreneurs:
They are characterized by a refusal to adopt any change even at cost of severely
reduction
of profit
Some Other Types of Entrepreneurs:
i) Solopreneurs
These are the entrepreneurs who essentially work alone and if needed at all employ a few
employees. In the beginning most of the entrepreneurs start their enterprises like them.
ii) Active Partners
Active partners are those entrepreneurs who start or carry on an enterprise as a joint
venture. It is important that all of them actively participate in the operations of the
business.

(iii) Innovators
Such entrepreneurs with their competence and creativity innovate new products. Their
basic interest lies in research and innovative activities.

(iv) Buyers’ Entrepreneurs

These are the entrepreneurs who do not like to bear much risk. They do not take the risk
of production but take the risk of marketing a product i.e. wholesaler and retailer.
(v) Life Timers
These entrepreneurs believe business as an integral part of their life. These entrepreneurs
actually inherit their family business i.e. goldsmith, potter etc.

(vi) Challengers
These are the entrepreneurs who initiate business because of the challenges it presents.
They believe that ‘No risk, No gain’. When one challenge seems to be met, they begin to
look for new challenges.
(vii) Serial Entrepreneurs
Serial entrepreneurs set up businesses, and bring them to a stage of development where
they can move on either by selling according to a pre-determined exit strategy, or place
the enterprise in the hands of a successor or group of successors whilst retaining some
degree of investment and/or strategic input, whilst they start their next venture, with a
view to repeating the process again.

(viii)Lifestyle Entrepreneurs

Lifestyle entrepreneurs choose businesses that reflect their passions and they are more
focused on doing something they love than on the pure profit motive for starting a
business. This includes making deliberate choices to fit a business around a way of living,
for example preserving time with children and family, for a hobby or interest, a sport, or
some other element of their life which they wish to retain a place of importance.
SOURCES OF BUSINESS IDEAS

1. Hobbies/Interests: A hobby is a favorite leisure-time activity or occupation. Many

people, in pursuit of their hobbies or interests, have founded businesses.
2. Personal Skills and Experience: Over half of the ideas for successful businesses
come from experiences in the work place, e.g. a mechanic with experience in
working for a large garage who eventually sets up his/her own car repair or a used
car business.
3. Franchises: A franchise is an arrangement whereby the manufacturer or sole
distributor of a trademark, product or service gives exclusive rights for local
distribution to independent retailers in return for their payment of royalties and
conformity to standardized operating procedures. Franchising may take several
forms, but the one of interest is the type that offers a name, image, method of
doing business and operating procedures.
4. Mass Media: The mass media is a great source of information, ideas and often
opportunity. Newspapers, magazines, television, and nowadays the Internet are all
examples of mass media.
5. Exhibitions: Another way to find the ideas for a business is to attend exhibitions
and trade fairs. These are usually advertised on the radio or in newspapers; by
visiting such events regularly, you will not only discover new products and
services, but you will also meet sales representatives, manufacturers, wholesalers,
distributors and franchisers.
6. Surveys: The focal point for a new business idea should be the customer. The
needs and wants of the customer, which provide the rational for a product or
service, can be ascertained through a survey. Such a survey might be conducted
informally or formally by talking to people – usually using a questionnaire or
through interviews
– and/or through observation.
7. Complaints: Complaints and frustrations on the part of customers have led to
many a new product or service. Whenever consumers complain bitterly about a
product or service, or when you hear someone say ‘I wish there was … “or “If only
there were a product/service that could … “, you have the potential for a business
idea.
8. Brainstorming: Brainstorming is a technique or creative problem-solving as well
as for generating ideas. The object is to come up with as many ideas as possible. It
usually starts with a question or problem statement.

When using this method, you need to follow these four rules:
 Don’t criticize or judge the ideas of others
 Freewheeling is encouraged – ideas that seem to be wild or crazy are
welcome
 Quantity is desirable – the greater the number of ideas, the better
 Combine and improve upon the ideas of others

Reasons for Generating Business Ideas:
• Business idea generation is a sine-qua-non (inevitable) for business.
• Ideas are generated to respond to market needs
• Ideas are also generated to respond to changing fashions and requirements.
• In order to stay ahead of competition
• To be in tune with latest technology so as to do things better.
• In response to product life cycle
• In order to spread risk and allow for failure.

FUNCTIONS OF ENTREPRENEURS

According some economists, the functions of an entrepreneur is classified into five broad
categories:

1. Risk-bearing function,
2. Organizational function,
3. Innovative function,
4. Managerial function, and
5. Decision making function.

1. Risk-bearing Function:
The functions of an entrepreneur as risk bearer are specific in nature. The entrepreneur
assumes all possible risks of business which emerges due to the possibility of changes in
the tastes of consumers, modern techniques of production and new inventions. Such risks
are not insurable and incalculable. In simple terms such risks are known as uncertainty
concerning a loss.
2. Organizational Function:
Entrepreneur as an organizer and his organizing function is described by J.B. Say as a
function whereby the entrepreneur brings together various factors of production, ensures
continuing management and renders risk-bearing functions as well. His definition
associates entrepreneur with the functions of coordination, organization and supervision.
According to him, an entrepreneur is one who combines the land of one, the labour of
another and the capital of yet another and thus produces a product. By selling the
product in the market, he pays interest on capital, rent on land and wages to laborers and
what remains is his/her profit. In this way, he describes an entrepreneur as an organizer
who alone determines the lines of business to expand and capital to employ more
judiciously.
3. Innovative Function:
The basic function an entrepreneur performs is to innovate new products, services, ideas
and information for the enterprise. As an innovator, the entrepreneur foresees the
potentially profitable opportunity and tries to exploit it. He is always involved in the
process of doing new things. According to Peter Drucker, "Innovation is the means by
which the entrepreneur either creates new wealth producing resources or endows existing
resources with enhanced potential for creating wealth".
According to him innovation may occur in any one of the following five forms:
 The introduction of a new product in the market with which the customers are not
get familiar with.
 Introduction of a new method of production technology which is not yet tested by
experience in the branch of manufacture concerned.
 The opening of a new market into which the specific product has not previously
entered.
 The discovery of a new source of supply of raw material, irrespective of whether this
source already exists or has first to be created.
 The carrying out of the new form of organization of any industry by creating of a
monopoly position or the breaking up of it.
4. Managerial Function:
Entrepreneur also performs a variety of managerial function like determination of
business objectives, formulation of production plans, product analysis and market
research, organization of sales procuring machine and material, recruitment of men
and undertaking, of business operations.
5. Decision Making Function
The most vital function an entrepreneur discharges refers to decision making in various
fields of the business enterprise. He is the decision maker of all activities of the
enterprise.
A. H. Cole described an entrepreneur as a decision maker and attributed the following
functions to him:
 He determines the business objectives suitable for the enterprise.
 He develops an organization and creates an atmosphere for maintaining a cordial
relationship with subordinates and all employees of the organization.
  He decides in securing adequate financial resources for the organization and
maintains good relations with the existing and potential investors and financiers.
 He decides in introducing advanced modern technology in the enterprise to cope
up with changing scenario of manufacturing process.
 He decides the development of a market for his product develops new product or
modify the existing product in accordance with the changing consumer's fashion,
taste and preference.
 He also decides to maintain good relations with the public authorities as well as with
the society at large for improving the firm’s image before others.

COMPETENCES OF ENTREPRENEURS

The following are some of the competences of entrepreneurs:

 Business Planning
 Risk-Taking
 Decision Making
 Time Management
 Leadership
 Instituting and adopting to change
 Franchising

1. Business Planning

To start a business, an entrepreneur must have an idea. Next, the entrepreneur needs to
devise a business plan to guide planning and development. Later decisions focus on form
of ownership, the financial resources needed, whether to buy an existing business, start a
new one or buy a franchise.

A key element of a business success is the business plan. It is meticulous statement of the
rationale for the business and a step-by –step explanation of how to achieve its goals. A
business plain is essentially:

 A description of a proposed or an existing business and includes an explanation of

the business, an evaluation of the competition, estimates of income and expenses,
and other information.
  It is a written document that convincingly demonstrates that ones business can sell
enough of its products to make satisfactory profit or to be attractive to potential
financiers
 A basic management tool that helps guide the future directionof a business
enterprise
 A financial tool
 A communication tool

Components of a Business Plan

A complete document will include the following:

 Executive Summary: This outlines the main focus of the plan. The summary
should briefly highlight the key elements of the business, that is a brief history of
the business concept, a description of the product or services, market, marketing
strategies, an assessment of the competition, operations strategy, financial needs
and projection and the critical risks and analysis
 Business Description: This covers in detail the background of the business owner,
the type of business, the location of the business, the products/services offered and
the entry and growth strategies of the business. The purpose of this section is to
provide background information of the company and to describe the conditions
and prospects of the enterprise.
 Marketing Plan: This part describes how the business intends to sell its product(s)
or offer its service(s). It defines the customers and the competition and outlines
the pricing, promotional and distribution strategies.
 The Organizational Plan/Management Plan: This section explains how the
business will be co-ordinated to accomplish its objectives. It shows the
organizational structure, identifies key management personnel, their duties and
responsibilities. It also provides proposed salaries and incentives for personnel. The
main objective is to demonstrate that management and leadership is capable and
able to fulfil the goals of the company
 The operational Plan: Describes how the product(s) of the business will be
manufactured. It shows a breakdown of the equipment, materials and other costs
that will be incurred during the production process. For a service, the plan
indicates the requirements for providing a service. The objective of this section is
to prove that the enterprise is capable of producing products and services at a
profit.
 The Financial Plan: This section determines the financial requirements of the
business venture. It provides proposal for sources, amount and uses of funds that
the business downer is seeking. Further financial information is contained in
 Pro-forma income statements, pro-forma balance sheets and projected cash flow
statements. An accountant should draw this section, although the owner of the
business must participate.
 Critical Risks and Assumptions: The development and operation of any business
involves risks and problems. It is important for the business owner to identify the
potential negative factors and explore their implications. In order to come up with
the risks, the owner must first state the assumptions of the busyness or any
potential problems.

2. Risk Taking
Risk involves a psychological assessment of the probabilities of success or failure for any
given action plan. Risks situations involve two or more alternatives where at least one or
more alternatives expose a person to a chance of loss. Most risks are not catastrophic, but
can cause loss of life and great damage

Types of Risks
There are different ways of categorizing entrepreneurial risks:
Some schools of thought look at risk as high, moderate and low. Others consider risk as
foreseen or unforeseen.

Unforeseen risks are non-predictable risk. They are caused by uncertainties and an
entrepreneur has no control over, for instance natural disasters, fire etc.

Foreseen risks refer to risk inherent in a particular business ventures. They are
predictable risks and are prevailing in our environment, for instance, government change
of policies, possible loss of capital. An entrepreneur can transfer such risk through
insurance.

Further Categorization of risks includes the following:

 Critical Risks: Refers to risks that can adversely affect the performance of the
business
 Social Risks: Most entrepreneurs are on their own, work longer periods and loss
social contacts. These brings about erosion of emotional and social support leaving
the entrepreneur increasingly alone and emotionally stressed (psychological risk)
 Career risks come in form of missed opportunities for career advancement in
work. In doing so, the entrepreneur engages in experiences and develops a
aresume that may have little market value
  Financial Risks: Include “putting it all one in one line” by investing one’s savings
and pensions, mortgaging one’s house and the future education of the children,
downscaling the family’s lifestyle. Many entrepreneurs also risk other people’s
money in the early stages of the business

Role of Risk in Enterprise Development

Risk-Taking has both positive and negative roles:
 Risk-Taking leads to high financial rewards to the entrepreneur. An entrepreneur
always learns something new form the risks, whether failure or success, it’s a
learning experience. (Experiential learning)
 Risk-Taking makes an entrepreneur realize his/her own potential. It leads to self-
confidence especially if the business succeeds
 McClelland suggested that moderate risk bring out the most achievement
motivation in people. Risk-Taking leads to self-fulfillment or self-actualization
 Entrepreneurs tend to be risk oriented and this encourages creativity and
innovations.
 However, risk-taking can have negative effects on an entrepreneur especially when
business fails and he/she incurs losses. This can bring down confidence and be
stressful to the entrepreneur

Managing Risks
Entrepreneurs can manage risks through the following ways:
 Plan for risks comprehensively
 Be aware of the enterprise opportunities and threats
 Identify your distinctive competences, that is your strengths and weaknesses
 Increase your creativity capacity
 Asses your risks by taking calculated risks
 Act decisively and make decisions continuously
 Transferring risks by shifting risks to others
 Risk reduction through safety controls

3. Decision Making
Decision-Making is the process of choosing among the alternative courses of action to
resolve a problem. A decision is a choice made from alternative courses of action in order
to deal with a problem. Making decisions is widely recognised as a key aspect to
management and is considered to be the most crucial element of business management.
Factors Affecting Entrepreneur’s Decision-Making
 The nature of the problem
 The resources available
 Government laws and regulations
 Effect of the decisions, that is, benefits verses costs
 The environment factors
Decision Making Approaches
Some of the decision-making approaches include the following:
 “Rule of the Thumb”: What the practice has always been. What has always worked
though it depends on the nature of the problem
 Committee approach
 Brainstorming: This involves the use of a group that interacts in free environment.
Continuous interaction through free environment will result in spontaneous and
creative thinking

4. Leadership
Leadership is the art of inspiring others to perform their duties willingly, competently and
enthusiastically. It is the act of directing and influencing others towards a certain cause.
Leadership is an influence process by which an executive imaginatively direct, guides and
influences goals by mediating between the individuals and the organization in such a
manner that both will obtain maximum satisfaction.

Role of Leadership in Enterprise Management

All successful organizations have one common attribute, which is leadership. Leadership
is an important aspect of managing. By performing the functions of planning, organizing,
staffing and controlling, entrepreneurs can achieve better results, which are brought
about by effective leadership. Entrepreneurs are managers but not just any sort of
managers as what distinguishes them from others is human dimension. This refers to the
way in which they use leadership and their ability to motivate those around them.

For entrepreneurs, leadership is a managerial tool for achieving profits.

Leadership is mainly concerned with controlling, focus and direction for the venture

Entrepreneurial leadership can be thought as having the following essential keys:

 Personal Vision: The entrepreneur’s vision is the driving force behind leadership.
It is a vision, which transforms disparate group of stakeholders into people who
will act to move the venture forward.
  Communication with Stakeholders: The entrepreneur must relate their vision to
stakeholders through variety of communication channels and fora. This
necessitates leadership that is built on effective communication and the style of
communication is very vital.
 Organizational Culture: An organization’s culture is the web of rules, which
define how it goes about its tasks. Culture in a sense is “the way things are done
round” the culture defines what is allowed, and what is not allowed for both
internal and external relationship
 Knowledge and Expertise: Entrepreneurs are experts. This expertise may be in
some specialist technology, particulars of an industry sector. In addition to this
specialist knowledge there is the general sense of an entrepreneur being an
“expert” decision maker.
 Credibility: Leadership offers the possibility of shaping the venture and directing
it in a particular way. Followers only accept an entrepreneur’s style of leadership
when they are confident in the ability of the entrepreneur to take the venture in a
direction that will benefit them. Conversely, if an entrepreneur loses credibility,
then leadership is likely to be made more problematic
 A leader acts as a motivation factor to the organization
 A leader serves as a coordinator of activities and controller of scarce resources
 Liaison Officer: A leader liaises with other officers and support groups

5. Time Management
An entrepreneur’s work is performed within time constraints. An entrepreneur may know
the best way to handle a particular situation but may not have the time to do all that is
necessary. No matter how knowledgeable and motivated supervisors are, the ability to
manage time affects how successful they will be.

Time management is defined as “The process of improving an individual’s group’s ability

and productivity through more efficient use of time. It’s the ability to accomplish given
tasks and goals within a time frame

Basic Principles of Time Management

 Principle of Desire: Entrepreneurs need to have a strong desire to optimize in

time by having the willpower and self-desire. They must recognize that any person
can be a time waster and should start to value time and change any personal
attitudes and habits likely to lead to time wasting. Major time wasters include:
telephone
 interruptions; casual visitors; poor communication channels; failure to delegate;
gossiping, meetings; that had not been planned for or poorly conducted and failure
to set clear lines on responsibilities
 Principle of Effectiveness: Entrepreneurs should be able to focus on most
important issues even when under pressure, try to accomplish a task in a single
session and remember that quality and perfectionism important
 Principle of Analysis: This is trying to establish how your time is being spent. This
can be accomplished through keeping a time inventory or a daily log. This will
reveal some areas where time is wasted and will provide a basis for prioritization.
This ensures planned solid block for important things
 Principle of Prioritized Planning: You should list things to be accomplished and
their degree of importance and urgency. Similarly, establish your most optimal
period of the day and maximise it
 Teamwork: Foster co-operation and proper delegation

Benefits of Time Management

 Increased productivity, that is prioritization of most important things leads to
success and growth of the business venture
 Job satisfaction: Getting major breakthroughs and being successful is very
motivating for both the entrepreneurs and his/her subordinates
 Improved Interpersonal Relations: The entrepreneur will experience less time
pressure enabling him/her have time for personal life and family. He/she will also
have better relationship with workmates and friends
 Less time anxiety and tension: Entrepreneur will have time to rest hence
experience reduced stress. Anxiety and tension do not only lead to poor health but
reduction of mental efficiency and effectiveness.
 Good time management facilitates timely decision-. One is able to ,meet deadlines

6. Instituting And Adopting To Change

Successful Entrepreneurs manage change effectively and this leads to good business
management. Change is a systematically planned effort to improve the effectiveness of a
business. Change should be planned for so that its implications may be clear and the
people who are involved may adapt to it

Specific reasons for change include the following:

 To ensure efficient utilization of resources
 To increase the effectiveness of business such as marketing effectiveness,
production effectiveness etc
  Technological changes such as introduction of machinery or procedures to the
business
 To reflect changes in ownership, management or policy direction
 Decline in profit
 To cater for other environmental factors such as competition, social, political, and
economic considerations

Entrepreneurs have a responsibility to ensure change is accepted and successful. The

following are common mistakes some entrepreneurs make while instituting and
adopting to change:
 Lack of proper communication to employees
 Improper financial analysis
 Improper forecasting
 Proper environment scanning
 Lack of technical expertise
 Instituting change at the wrong time
 Conventional activities must properly be addressed
 Failing to create plans for trials, efforts and revision
 Failure to include the participation of credible figures
 Failure to make change incremental so that it is internalized, that is, gradual
introduction of change
Entrepreneurs can cope with change in an enterprise by considering the following:
 Proper communication in good time. There should be transparency about the
change
 Ensure implementation of change is gradual. If possible, change should be
introduced in phases or stages
 Change should be organization oriented and not personal oriented
 Clarify the purpose of change
 Plan for those who are likely to lose, instance, training, counselling etc
 Reassurance of employees
 Be proactive by instituting action groups within the organization. Identify credible
people to participate
 Have an evaluation team to monitor change. This will ensure change is successful

7. Franchising
Franchising is a unique approach to business that originated in the United States and has
spread throughout the world. While survival rates among businesses are always
questionable due to the difficulty in reaching those who failed, the survival figures for
franchises are impressive. An entrepreneur therefore needs to consider franchising as one
of the options to consider in planning a venture’s strategy
A franchise may be defined as a business opportunity whereby the owner (producer or
distributor) of a service or a trademarked product grants exclusive rights to an individual
for the local distribution and/or sale of the service or product, and in return receives a
payment or royalty and conformance of quality standards.

The individual or business granting the business rights is called the franchiser, and the
individual or business granted the right to operate in accordance with the chosen method
to produce or sell the product or service is called the franchisee. Therefore a franchise is
an agreement whereby dealers (franchisees) agree to meet the operating requirements of
a manufacturer or other franchiser

The business arrangement or franchise opportunity has three major components:

 A trademark and/or logo
 The use of a product or service following a marketing plan
 A payment or royalty fee:- Royalty can take the form of money paid to the owner of
a copyright for permission to publish copyright material and to the owner of a
patent for permission to use a patented design usually at an agree percentage of
the selling price of the product. It can also take the form of money paid to the
owner of mine or other land for the right to extract minerals from it usually at an
agreed rate per ton extracted or money paid by a publisher to an author, composer
etc
Franchising has been a successful means of operating a business for several reasons. Two
primary reasons are:
 The tremendous preparation a franchise undertakes before opening an outlet
 The degree of personal involvement brought to the business activities by
both the franchise and the franchiser
The greatest differences between starting a franchised business venture and opening an
independent business lies in the extensive training and preparation provided to the
franchisee before the opening of the outlet. A franchisee is taught how to plan, start,
operate and control all of the functions of the business
FUNCTIONS OF ENTREPRENEURS

i) The bearing of uncertainty is the primary function of the

entrepreneur i.elosses or profits.
ii) The management of the business enterprise can delegate
iii) Provision of risk capital and invention.
iv) Identifying gaps in the market and turning such gaps to business
opportunities i.e to initiate a business.
v) Financing the businesses, through raising and mobilizing the
necessaryresources to exploit opportunity.
vi) Searching for business opportunities through environmental scans.
vii) Mobilization of resources needed to start and run a business e.g. from
a) Personal savings
b) Friends & relatives
c) Financial institutions e.t.c
viii) Evaluation of business opportunities to access viability and any other
benefitsthat might accrue to the business.
ix) Provide the necessary leadership for the business and those working
in it.
x) Idea generation- Implies product selection and project identification.
Determination of business objectives - Formulate the business objectives.
Clear about the nature and type of business.
xi) Market research • Undertake market research to know the details of the
intending product.
xii) Determining form of enterprise -Based on the nature of the product, volume of
investment, etc.
xii) Recruitment of manpower- Requirement for short term and long term.
Implementation of the project-Develop schedule and action plan for the
implementation of the project within the time bound.
Techniques of enhancing entrepreneurial qualities

1. Take a different path: “Creativity is the root of entrepreneurship.” -- Karndee

Leopairote, Thammasat University.
Creativity is the ability to see things differently and to provide solutions where there are
gaps.
2. Start a business: “You don't learn to walk by following rules. You learn by doing, and
by falling over.”
3. Stick with challenges: Every successful entrepreneur has learned to develop their
perseverance and tenacity muscles. The life of an entrepreneur is never smooth sailing,
and it takes guts to keep going when people doubt your abilities.
4. Delay gratification. Entrepreneurs have to get used to countless failures and almost
zero rewards until they finally hit the jackpot. To train yourself to be able to delay
gratification, start small.
5. Manage your own finances: Understanding basic finance is essential in running your
own company. You don’t have to be an accountant, but you should at least be able to
understand the basics around cash flow, assets, and profit and loss.
6. Volunteer to lead: The ability to lead a team and stay organized is important when
you become an entrepreneur. You can start by looking for volunteer and leadership
opportunities around you. Volunteer to lead a Meetup group, start a fundraising project
for your favorite non-profit organization or get involved with your local community
board.
7. Practice communication skills: The best entrepreneurs have learned how to
communicate their passion and dreams in an engaging way, both online and offline.
8. Learn from a mentor: The value of a mentor is priceless when it comes to building
your entrepreneurial skills.
9. Work in sales: In every business, sales play a vital role in the survival, sustainability
and success of a business. You can have the best product in the world but if you don’t
know how to sell it, it is worthless.
10. Get involved with other entrepreneurs: Whether it’s attending entrepreneurial
events, conferences, seminars or meetups; spending time with other entrepreneurs will
help you grow in your own entrepreneurial skills.
11. Help others with their businesses. Being an entrepreneur is about solving problems
with the resources that you have. The more you help others solve problems with their
own businesses, the more your own skills will grow.
12. Keep learning: Keep your own learning and personal development active. There are
so many courses online, both free and paid, that teach a variety of entrepreneurial skills

Entrepreneurs Contribution to National Development

1. They have enhanced generation of employment: entrepreneurship activities raises

levels of employment in the economy and also levels of national income

2. Capital formation: it is easily brought up by entrepreneurial activities through

production of goods and services.

3. Increasing per annual capital income: this refers to average income in a country
with all the citizens assumed equal shares. Entrepreneurship raises levels of individual
income and therefore boosting per capita income.

4. Growth of infrastructure: It plays a great role in opening of infrastructure such as

factories, roads, buildings, schools, which contributes to economic growth and
development.
 5. Boosting economic independence: entrepreneur through their activities enhances
self-reliance or it minimizes the level of external or foreign dependence economies. This
makes community/country self-reliant.

6. Improving the standards of living: through innovative activities, they produce

essential goods and services that contribute to the welfare of the citizens

7. Growth of industries: entrepreneurial activities result in growth of industries.

8. Provision of essential goods and services which are key to economic growth and
development.

ENTREPRENEURSHIP MOTIVATION

Entrepreneurial behavior is the result of entrepreneurial motivation.

Motivation has been derived from the word ‘motive’ whichimplies the inner state
of mind that activates, provokes anddirects our behavior towards the goal.

Motivation is a process that motivates a person into action and induces him to
follow the course of action till the goals are finally achieved.

Introduction & Definition of Motivation

To motivate means to provide motive, to impel people to action, and tocreate

incentives to work.

“Motivation is the work a manager performs to inspired, encourage,and impel people

to take required action” – Lewis Allen

“The act of stimulating someone or oneself to get a desired course ofaction”- Michael
J

“Motivation means stimulating people to action to accomplish desiredgoals.”- William

Scott

Nature of Motivation.

 Internal feeling of an individual.

 These feelings prompt him to work more.

  Energies towards productive action.

 Motivation is linked to satisfaction.

 An individual is motivated in totality.

Importance of Motivation:

I. Improves morale of employees.

II. Lower labour turnover.
III. Improves goodwill of organisation.
IV. Creates cordial industrial relations.
V. Changes are more easily accepted by employees.
VI. Contribution to organizational goals
VII. Acceptance of organizational change.

Types of Motivation.

Positive Motivation: Results in willing co-operation of workers by tempting them towards

rewards or incentives.

Negative Motivation: Creates fear amongst workers by threatening them with demotions,
pay cuts, lay offs, etc.

Incentives to motivation

An incentive is something that stimulates a person toget it by engaging in desired

behaviour

a) Financial incentives

I. Pay and allowances

II.Productivity linked incentives
III.Bonus
IV. Profit Sharing
V. Stock Option
VI.Perks
B) Non-financial incentives

I. Status
II. Organizational Climate
III. Job enrichment
IV. Job Security
 V. Employee Recognition
VI. Employee participation

Theories of Motivation.
Maslow Need Hierarchy Theory:

Based on human needs.

Strong needs of an individual dominate the other needs.

The second need does not arise till the first need is satisfied i.e. needs have a definite
sequence of domination

( B ) McClelland’s Three Need Model:

Includes: -

1. Need for achievement: Drive to excel, advance and grow.

Desire to achieve something with own efforts.

2. Need for Power: Drive to influence others and situations.

Desireto influence and dominate others through use

ofauthority.

3. Need for Affiliation:

Drive for friendly and close interpersonal relationships.

Desire to establish and maintain friendlyrelationship with others.

People possess the above needs in varying degrees and these needs may be
simultaneously acting on an individual. In case of entrepreneurs the need for
achievement is more dominating.

(C ) Alderfer’s ERG Theory:

Existence, Relatedness and Growth Theory.

1.Existence Needs: Includes basic needs and safety needs.

2. Relatedness Needs: Needs are satisfied by personal relations and socialinteractions.

3. Growth Needs: Includes self-actualization needs.

For the proper development of entrepreneurship, relatedness and growth needs are more
important.

Motivating Factors:

( A ) Internal Factors:

 Educational Background.
 Occupational Experience.
 Desire to do work independently.
 Desire to branch out to manufacturing.
 Family Background.
 ( B ) External Factors:

 Assistance from Government.

 Assistance from financial institutions.
 Availability of technology.
 Availability of raw material.
 Demand of the particular product.

ENTREPRENEURSHIP AND CONSULTANCY

What Is Consultancy?

Consultancy is a process by which a skilled outsider helps an individual, group or organisation

analyse and reflect upon their work. The skilled outsider, the consultant, is a trained and
experienced person who helps you understand, analyse and develop the work you are
involved in.

Consulting is the process of seeking for a professional and skillful advice to a problem. It is
the process in which the consultant shares expertise with the client. The client participates as
closely as possible during the assignment, and both parties spare no effort to make the
assignment as valuable as possible. Consulting is an advisory service and consultants are often
referred to as “Change Agent”. There are basically two approaches to consultancy definitions:

According to Larry Greiner and Robert Metzger, “management consulting is an advisory

service contracted for and provided to organizations by specially trained and qualified
persons who assist, in an objective and independent manner, the client organizations to
identify management problems, analyze such problems, recommend solutions to these
problems, and help, when requested, in the implementation of solutions”.

PURPOSE OF BUSINESS CONSULTING

A manager may turn to a consultant if he or she perceives a need for help

from an independent professional and feels that the consultant will be
the right source of this help.

Five broad purposes pursued by client organizations irrespective of

differences in the technical area of intervention are:-

1) To achieve organizational objectives

Consultants help clients to achieve their business, social and other objectives e.g.
a) Improving competitive advantage
 b) Customer satisfaction and retention
c) Achieving corporate excellence
d) High performance
e) Improved business results
f) Profitability etc
2) To solve management and business problems
This involves offering professional assistance and identifying, diagnosis and
finding solutions to problems affecting business.

3) To identify and seize new opportunities for businesses

This involves helping organizations to identity new opportunities in business
environment.

4) To enhance learning
Consultants educate, train and advices the client staff of organizations they serve

5) To implement change
Change process may require expert intervention. Consultants may be
regarded as agents for change introduced by organizations. They assist
business firms in implementing effectively a wide range of change.

Characteristics of management consulting

1. Professional service

2. Advisory service

3. Temporary service

4. Commercial service

5. Independent service

 Technical independence

 Financial independence

 Administrative independence

 Political independence
  Emotional independence

Effective management consulting is based on the integration of three types of skills

namely:-

1. Analytical Skills
That enables new opportunities and possibilities to be identified
on behalf of the client organization.

2. Project management skills

That enables those ideas to be delivered to the client organization.

3. Relationship Building Skills

Basic Characteristics of Management Consulting

The key question is: What principles and approaches allow consulting to be a professional
service that provides added value to clients?

1. Adding Value by Transferring Knowledge: Whether practiced as a full-time

occupation or an ad hoc service, management consulting can be described as
transferring to clients knowledge required for managing and operating businesses
and other organizations. To provide added value to clients, this knowledge must
help the clients to be more effective in running and developing their business,
public administration agency or other non-profit organization.

The fields of knowledge embraced by management consulting relate to two critical

dimensions of client organizations:
i. The technical Dimension, which concerns the nature of the management or
business processes and problems faced by the client and the way in which
these problems can be analysed and resolved.
ii. The Human Dimension, i.e. interpersonal relationships in the client
organization, people’s feelings about the problem at hand and their interest
in improving the current situation, and the interpersonal relationship
between the consultant and the client.
2. Advice and Assistance: Consulting is essentially an advisory service. This means
that, in principle, consultants are not used to run organizations or to take
decisions on behalf of the managers. They have no direct authority to decide on or
implement changes. Their responsibility is for the quality and integrity of their
advice; the clients carry all the responsibilities that accrue from taking it.
 The advice given should not only be right but should also be given in the right
way, to the right people and at the right time – these are the critical skills and art
of a consultant
In explaining the nature of consulting, the terms help or assistance have also been
used. This means that the consultant must be useful to the client and help the
client to achieve results, the consultant often need to do more than give “pure”
advice, i.e. suggestions and recommendations that the client may choose to accept
and apply, or ignore.

3. The Consultant’s Independence

Independence is a salient feature of consulting. A consultant must be in a position
to make unbiased assessment of any situation, tell the truth, and recommend
frankly and objectively what the client organization needs to do without having
any second thought on how this might affect the consultants own interests. This
detachment of the consultant has the following facets:
i. Technical Independence means that the consultant is in a position to
formulate a technical opinion and provide advice independently of what the
client believes, or wishes to hear.
ii. Financial Independence implies that the consultant has no financial interest
in the course of action taken by the client, e.g. in a decision to invest in
another company or to purchase a particular computer system. The desire
to get more business from the client in the future must not affect the
objectivity of the advice provided in the current assignment
iii. Administrative Independence implies that the consultant is not the client’s
subordinate and cannot be affected by his or her administrative decisions.
iv. Political Independence means that neither the client organization’s
management nor its employees can influence the consultants using political
power connections, political party membership, club membership and
similar influences
v. Emotional Independence means that the consultant preserves personal
detachment and objectivity, irrespective of empathy, friendship, mutual
trust, emotional affinities and other personal pressures that may exist at the
beginning or develop in the course of an assignment

4. Consulting as a Temporary Service

Consulting is a temporary service. Clients turn to consultants for help to be provided over
a limited period of time, in areas where they lack technical expertise, or where additional
professional support is temporarily required. This may even be in areas where the
requisite
skills are available in the organization, but managers or staff specialists cannot be
released for a major problem or project.

5. Consulting as a Business

A practitioner who does management consulting for a living has to charge a fee for all the
work done for clients. Consulting firms are sellers of professional services and clients are
buyers. In addition to being professional service organizations, consulting firms are also
businesses.

What should not be required from Consulting?

There is an abundance of case histories of successful assignments carried out by some of

the world’s best management consultancies in order to rescue companies facing
bankruptcy, or give new life to ageing firms. They have created a reputation that suggests
that some consulting firms can resolve virtually any management difficulty. This is
exaggerated. There are situations where nobody can help. And even if help is possible, it
would be unrealistic and unfair to expect consultants to work miracles

Also, the consultant should never be expected to take a problem away from the client, on
to his or her own shoulders. A consultant’s presence and intervention may provide
considerable relief to a troubled client, but they will not liberate the client from inherent
managerial responsibility for decisions and their consequences.

Why are Consultants Used?

A manger may turn to a consultant if he or she perceives a need for help from an
independent professional and feels that the consultant will be the right source of this
help.

The following are five broad purposes pursued by clients using consultants:

 Achieving organized purposes and objectives

 Solving management and business problems
 Identifying and seizing new opportunities
 Enhancing learning
 Implementing changes
How are Consultants used? Ten Principles

 Provide information
 Providing specialist resources
 Establishing business contact and linkages
 Providing expert opinion
 Doing diagnostic work
 Developing action proposals
 Developing systems and methods
 Planning and managing organizational changes
 Training and developing management staff
 Counselling and coaching

The Consulting Process

During a typical consulting intervention, the consultant and the client undertake a set of
activities required for achieving the desired purposes and changes. These activities are
normally known as “the consulting process.”

This process has a clear beginning (the relationship is established and work starts) and
end (the consultant departs). Between these two points the process can be subdivided
into several phases, which helps both the consultant and the client to be systematic and
methodical, proceeding from phase to phase, and from operation to operation
Phases of Consulting

Entry

Diagnosis

Action Planning

Implementation

Termination

1. Entry: In the entry phase, the consultant starts working with a client. This phase
includes their first contact, discussion on what the client would like to achieve or
change in his or her organization and how the consultant might help, the
clarification of their respective roles, the preparation of an assignment plan based
on preliminary problem analysis, and the negotiation and agreement of a
consulting contract.
 2. Diagnosis: the second phase is an in-depth diagnosis of the problem to be solved.
During this phase the consultant and the client cooperate in identifying the sort of
change required, defining in detail the purposes to be achieved by the assignment,
and assessing the client’s performance, resources, needs and perspectives. Is the
fundamental change problem technological, organizational, informational,
psychological or other/ If it has all these dimensions, which is the crucial one?
What attitudes to change prevail in the organization?
3. Action Planning: The third phase aims at finding the solution to the problem. It
includes work on one or several alternatives solution, the evaluation of alternatives,
the elaboration of a plan for implementing changes and the presentation of
proposals to the client for decision. The consultant can choose from a wide range of
techniques, in particular if the client actively participates in this phase. Action
planning requires imagination and creativity, as well as a rigorous and systematic
approach in identifying and exploring feasible alternatives, eliminating proposals
that could lead to trivial and unnecessary changes, and deciding what solution will
be adopted.
4. Implementation: Implementation, the fourth phase of the consulting process,
provides an acid test for the relevance and feasibility of the proposal developed by
the consultant in collaboration with the client. The changes proposed start turning
into reality. Things begin to happen, either as planned or differently. Unforeseen
new problems and obstacles may arise and false assumptions or planning errors
may be uncovered. Resistance to change may be qite different from what was
assumed at the diagnostic and planning stages.
5. Termination: The fifth and final phase in consulting process includes several
activities. The consultant’s performance during the assignment, the approach
taken, the changes made and the results achieved have to be evaluated by both the
client and the consulting firm. Final reports are presented and discussed. Mutual
commitments ae settled. If there is an interest in pursuing the collaborative
relationship, an agreement on follow-up and future contacts may be negotiated.
Once these activities are completed, the consulting assignment or project is
terminated by mutual agreement and the consultant withdraws from the client
organization.

SELF ASSESSMENT OF ENTREPRENEURIAL POTENTIAL

Self-assessment helps trainees to understand their strong and weak entrepreneurial

characteristics. Having identified them, the entrepreneur will be able to develop the
strong ones and find ways of improving the weak traits in readiness to become self-
employed
The following are examples of self-assessment tests used by potential entrepreneurs:
1. Self-Completion Tests (SCT): In this test, multiple choices are given to complete a
sentence. Respondent reflect their behaviour patterns towards money, security,
independence, achievement, risk-orientation, initiative and fear of failure.
2. Paired Comparison Test (PCT): in this test, pairs of statements are given and the
participants have to select one of the two statements. On the basis of the choices
made, it is possible to measure certain traits which indicate the degree of
achievement motivation of a participant.
3. Group Discussion: The participants are divided into groups. Each group is given
one or two business situations to discuss among themselves. This group discussion
helps in measuring their initiative, problem solving, aptitude, leadership, quality,
planning, organizing ability and decision making capability
4. Interviews: Interviews are used to investigate:
a) Relevance and usefulness of interviewee’s experience and
accomplishment/achievements for becoming a successful entrepreneur
b) Feelings, motives and attitudes of the interviewee reflecting his
entrepreneurial capabilities

Types of Client Systems

1. Official clients- This is the person or group who hired you (if you are external) or
assigned work to you (if you are internal). They probably interviewed you during your
first meeting with them. They probably sign your paycheck. Usually, they have positions
of authority to make decisions and provide resources during the entire project. They often
define “success” for the project and ultimately decide if the project was successful or not.
Usually, the official client remains the same throughout the project

2. Direct clients -This is the person or group whom you directly and regularly interact
with during a particular time in the project. They could be different people at different
times, depending on the current priorities and focus of your project

3. Indirect clients -This is the person or group who is indirectly and ultimately affected
by your work in the organization.
Qualities of a consultant
1. Demonstrable Depth of Experience: A good consultant’s depth of experience should
be evident from the first conversation they have with a prospective client. Ideally, their
credibility surfaces naturally without the consultant having to articulate their
accomplishments, hand over their resume, or name-drop past clients. With Open Eye,
our depth of experience is apparent in our strategy sessions.

2. Client-first Mindset: Quality consultants recognize that they are playing a supporting
role in a cast in which the client is the star; they do not try to ‘steal the spotlight’ from the
client.

3. Analytical Problem Solver: A good consultant has the ability to analyze large
amounts of data, ask relevant, powerful, open-ended questions that reveal new insights,
and deliver tangible results.

4. Reliable in Word and Deed: A good consultant sets out to meet or exceed the client’s
objectives, and positions the project for success by under-promising and over-delivering.
They bring a “whatever it takes” mindset to engagements, and are laser-focused on
delivering on expectations.

5. Professional: Experienced consultants know that they must strike a balance between
being professional and relatable. People skills are as important as technical skills or
industry knowledge, when it comes to consulting. They must be personable enough to
maintain a natural rapport with a client, while also being professional enough to become
the client’s trusted business advisor.

6. Excellent Listener: One of the most important qualities of a good consultant is the
ability to listen deeply. The consultant must listen without interrupting, digest and
process large amounts of information, organize their thoughts quickly, and respond
thoughtfully.

7. Lifelong Learner: Many of the best consultants joined the industry for one simple
reason: they love to learn. A good consultant doesn’t just believe in continuous
improvement as a best management practice - they embody it in their personal lives as
well.

8. Driven: Another critical quality of a good consultant is the constant, disciplined drive
towards excellence. A good consultant demands productivity from themselves, so that
measurable results are delivered in a short amount of time. They view the reward for their
work not as a factor of billable hours, but rather in their continuous ability to execute
beyond the deliverable and thus exceed their client’s expectations.
9. Natural Influencer: A good consultant has the ability to persistently move a project or
initiative forward, without being disruptive or damaging relationships. Amiable and
reasonable, good consultants lead with authenticity, and are humble enough to admit
their shortcomings. They maintain a positive attitude, and demonstrate energy and
passion that matches or exceeds the client’s.

10. Intuitive Communicator: A good consultant is an intuitive, skilled communicator

with an expansive vocabulary. They know when and how to bring a complementary tone
to a client setting, and can communicate their expertise through a variety of means.

11. Detail-oriented: A good consultant must produce a work product that is consistently
flawless. They meet deliverable deadlines, stay within budget, produce written materials
and supporting media (such as presentation decks) that are free of typos and grammatical
errors.

12. Emotional Intelligence: Managing a client’s expectations, deadlines, and deliverables

can be stressful. A good consultant must be in touch with their emotions and have the
capacity to quiet their nerves when under pressure.

Models of Consultancy

1. The doctor-patient model. where clients typically feel rather helpless and/or
ignorant and seek a knowing powerful ally to "heal" them (Lundberg, 1984.

Clients essentially give themselves over to the care of the consultant for diagnosis and
prescription. The consultant in this situation usually takes a generalist view, probing
for- the t 'real" problems (often complex and touching many parts of the system) and is
concerned with making recommendations.

2. The expert supplier-purchaser -clients believe they have identified a need or

problem which requires attention but they choose to go outside of the system and
contract for assistance. What is desired from consultants is their expertise, whether
technical, scientific, or managerial. Consultants , predictably, are specialists in
something, e.g. , compensation schemes , information systems, goal-setting, and so
forth.

3. The facilitator-participant model. The essence of the client-consultant relationship

is that it is collaborative. Both parties explore and learn together about the clients'
problems and what can be done about them. The consultant has an expertise, but it is in
the problem solving process rather than in the content or substance of the problem. The
two best known
examples of the facilitator consultant are organizational development consultants
(Lundberg, 1977) and what Nees and Greiner (1983) call the friendly co-pilot.

Obligations and duties of consultants

 conducting research, surveys and interviews to gain understanding of the business

 analysing statistics
 detecting issues and investigating ways to resolve them
 assessing the pros and cons of possible strategies
 compiling and presenting information orally, visually and in writing
 making recommendations for improvement, using computer models to test them
and presenting findings to client
 implementing agreed solutions
 developing and implementing new procedures or training

Key skills for consultants

 Commercial awareness
 Good numerical skills
 Attention to detail
 Analytical skills
 Excellent interpersonal skills
 Tact and persuasive ability
 Teamworking skills
 IT skills
 Good oral and written communication skills
 Self-motivation

Foreign language abilities can also be useful

Principles for Ethical Consulting

Codes of Ethics to Avoid

Behaviours That You Perceive as Unethical

1. Do no harm to your client.

2. Keep client information private unless the client or law requests otherwise.

3. Do not create dependence by you on your client, nor by your client on you.
4. Anticipate and avoid conflicts of interest (for example, representing two
opposing interests at once).

5. Do not act in the official capacity as an advocate for your client.

6. Do not go beyond your own expertise.

7. Do not skip the discovery phase of consulting.

8. Treat others the way you want them to treat you.

Avoiding Behaviors That Clients Perceive as Unethical

Examples of a Consultant’s Unethical Behaviors

To further your understanding of ethics, it might help to consider examples of
unethical behaviors. Ethics is often a highly subjective matter. Consequently, not
everyone might agree that all of the following are examples of unethical behaviors.

1. Because the consultant wants to have a good relationship with the client, the
consultant quickly adopts the client’s perspective on all issues and does not
voice any disagreement with the client, thereby colluding with the client.

2. Because the consultant offered guidance or advice that was well beyond their
expertise, the client’s organization implemented action plans that were
destructive to the organization.

3. Because the consultant did not conduct enough discovery (or “diagnosis”) to
further examine the client’s reported issue, the client’s organization
implemented action plans that were incomplete or destructive to the
organization.

4. Because the consultant wanted the client to promptly do as the consultant

advised, the consultant pushed their point of view well beyond what the
evidence of the discovery process revealed in the client’s organization.

5. Because the client wanted the consultant to come to the same conclusion
about the issue as the client, the client somehow did not tell “the whole story”
to the consultant who, in turn, made the wrong recommendations based on
inadequate information.
 6. Because the consultant wanted to further help the client’s organization, the
consultant did not terminate the current consulting project when the
outcomes (that were specified in the project’s work plan) are achieved.

7. Because the consultant wanted to help the overall community, the consultant
told investors information that the client believed was being held in
confidence between the consultant and client.

8. Because the consultant wanted to help the client’s organization, the consultant
arranged a meeting to report concerns about the Chief Executive Officer to the
members of the Board, without telling the Chief Executive Officer of the
consultant’s attendance at the Board meeting.

9. When the consultant learned about a particular new model or technique, for
example, in evaluation, he or she tried to convince the client of an issue with
the client’s products or services in order to create an opportunity to apply that
new learning.

10. During the discovery phase of the consulting process when interviewing one of the
entrylevel employees, the consultant tried to build trust with the employee by sharing his
or her confidential impressions of what he or she has concluded about the Chief
Executive Officer so far.

Five Steps to Effective Consulting Relationships:

1. Establish productive relationships with internal or external clients by:

 Collecting information about the client’s needs before the first meeting
 Understanding the customer as a person as well as a client
 Sharing with the client appropriate information about one’s own personal and
professional background
 Establishing and maintaining a trusting, open, and honest relationship with the
client
2. Commit to mutual goals with the client by:
 Clarifying the client’s perspective on the present status and future goals of
his/her business area
 Using questions to help the client express his/her perspective and to clearly
define goals to which both parties can honestly commit themselves
 Discussing differences of opinion with the client in a way that demonstrates
acceptance of and respect for the client
3. Plan for results collaboratively with the client by:
 Identifying and eliminating potential barriers to a desired change or
improvement before trying to implement it
  Assessing a client’s readiness to make a change by evaluating motivation, clarity
of vision, and the capability to implement the change
 Encouraging a client to plan ahead even though the client may not engage in a
formal planning process
4. Provide ongoing support to the client by:
 Helping the client anticipate problems that may be encountered in a planned
change or improvement
 Assisting the client in evaluating his/her activities to determine how they might
be improved
 Providing both positive and negative feedback to the client regarding ongoing
activities
5. Assess the consulting relationship by:
 Soliciting feedback from the client on how the client’s needs might be better
served
 Discussing the status of the relationship with the client and how it might be
improved
 Recognizing and celebrating the accomplishments of the client

EMERGING ISSSUES AND TRENDS IN ENTREPRENEURHIP

1. Advances in technology, changing demographics etc. have led to five emerging

consumer trends that entrepreneurs should take advantage of to create business
opportunities
2. The Internet Revolution:
Online shopping affects nearly every aspect of a consumer's purchasing decisions,
as shoppers are increasingly diligent about checking prices and product
information online
3. New Awareness about Health Concerns:
Consumers want products to help maintain or improve their health, with one-third
of Canadians willing to pay a premium for products that enhance their health
4. Buying Ethically Responsible and Local Products:
Six in 10 Canadians consider themselves ethical consumers and three-quarters said
they would pay more for products from a socially responsible company
5. Customization:
Three-quarters of shoppers are looking for products that are personalized to fit
their specific requirements and consumers are becoming more involved in product
creation
6. Frugality:
 Consumers are making fewer purchases and spending more time shopping around
for better values.

Problems and Challenges Facing Entrepreneurs In Kenya

1. Competition,
Competition is one of the Problems and Challenges to Entrepreneurship in Kenya.
Competition is seen in form of the size of Market Share in the Rural Setting. There
is limited expansion in these settings. New Competitors such as mini-super
Markets with wide varieties of products for those who were engaged in selling
household products are emerging.

2. Lack of accurate information

Lack of accurate information is one of the Problems and Challenges to
Entrepreneurship in Kenya. There is lack of knowledge on Business Management
which include; management of debtors and proper Record Keeping. There is also
need for effective communication to negotiate or bargain favorable with the
customers.
3. Lack of Finance
Lack of Finance is another of the Problems and Challenges to Entrepreneurship in
Kenya. The experiences the Women Entrepreneurs in Kenya have in running their
Businesses include such problems as lack of enough Capital, difficulties in
transportation and Marketing, the perishability of some commodities. They also
encounter difficulties in licensing procedures .Most Women Entrepreneurs who
need Financing lack the needed collateral to enable them secure bank loans. They
have limited opportunities to make Savings or undertake Business Expansion and
Diversification.
In Kenya only 1% of women own property and that makes it very difficult for
women to provide collateral for banks. Different instruments to address access to
finance issues for women, like mentoring them, helping them prepare proposals
for bank funding, and even providing a guarantee for the banks must be put in
place for them
4. Fear to Risk- Taking
One of the Problems and Challenges to Entrepreneurship in Kenya is fear to risk
take. Entrepreneurship always involves some level of risk taking. For women in the
rural areas, gender stereotyped perception of self, lack of confidence and
assertiveness appear to be major barriers that hinder Women Entrepreneurs in
Kenya from risk taking.
5. Lack of Education and Training
 Lack of Education is one of the Problems and Challenges to Entrepreneurship in
Kenya. Lack of sufficient Education and Business Training for Women
Entrepreneurs in Kenya is another hindrance to micro-enterprise success.
Culturally, and especially in the rural setting, the Girl Child was not given equal
opportunity to study like the boys; hence they had limited Education and Training
which tends to affect effective performance in later life.
6. Lack of Support.
One of the Problems and Challenges to Entrepreneurship in Kenya is lack of
support. Many rural Women Entrepreneurs in Kenya are unaware of support
mechanisms that include key Stake Holders like the Government or other income
generating activities. In the absence of such coordinated effort, these
Entrepreneurs will continue to suffer ‘eking’ a living at survivalist level only. This is
coupled with the reluctance of the formal Public Institutions to help women in
micro- and small- scale enterprises.
7. Managing Employees as a Barrier facing Rural Women Entrepreneurs in
Kenya
Managing employees is another challenge that Rural Women Entrepreneurs in
Kenya. Finding and retaining good employees is essential for the success of a
business, but can be difficult for women entrepreneurs in Kenya. Since women-
owned businesses tend to be smaller, they are often less likely to provide job
security and retain good talent. Some women find that they are not taken seriously
by their employees, especially in non-traditional sectors, and they have to make a
special effort to win their respect.

8. Lack of Education as a Barrier facing Rural Women Entrepreneurs in Kenya

Lower education levels puts Rural Women Entrepreneurs in Kenya at a
disadvantage compared to men. While the gender gap in primary education in
Kenya has decreased in recent years, the gap remains high at secondary and
tertiary education levels. Lower education does not emphasize entrepreneurship
skills. It decreases the chances that women will have the knowledge needed to
excel in business, and thereby contribute to the country’s overall economic
growth.
9. Discrimination as a Barrier facing Rural Women Entrepreneurs in Kenya
Another challenge that Rural Women Entrepreneurs in Kenya face is
discrimination. Even when women entrepreneurs do approach banks for financing,
they tend to face discrimination. Women report that bank officials tend to ignore
them in meetings and prefer speaking to their husbands or male business partners.
The fact that banks engage in gender bias prevents many women from even
approaching them. Some
 women get so discouraged that they do not bother to seek bank financing and turn
instead to informal savings groups.
10. Managing Employees as a Barrier facing Rural Women Entrepreneurs in
Kenya
Managing employees is another challenge entrepreneurs face. Finding and
retaining good employees is essential for the success of a business, but can be
difficult for entrepreneurs in Kenya. The small scale businesses, are often less likely
to provide job security and retain good talents.

11. Harassment from Government Authorities

City Council has proved to be a very big challenge to Entrepreneurs in Kenya. The
licenses are too many and the cost too much. Being a woman seems to exaggerate
that fact since most women are harassed by the city council officials when they
come to inspect the business premises. Moreover, women may be less likely to
meet and negotiate bribes with the predominantly male council officials. Business
licensing is an issue not only for the women entrepreneurs but also to their male
counterparts
MORE EMERGING TRENDS IN ENTREPRENEUSHIP

1. The Emergence of Social Entrepreneurship

Social Entrepreneurship is the process of pursuing innovative solutions to social
problems. More specifically, social entrepreneurs adopt a mission to create and
sustain social value.

Technological innovation and entrepreneurship are crucial to development. A new

entrepreneurial approach to development is emerging. This involves designing
new technologies and adapting existing ones to suit the specific requirements of
poor people. These are then bought by poor people to form the basis of small
businesses or used to help people meet their basic human needs.

a) One example of this approach is Kick Start — a non-profit organization

based in Kenya that develops, adapts and markets technologies in Africa. Low-
cost technologies are bought by local entrepreneurs (often farming families)
and used to establish small businesses. They create new jobs and income for
poor people. Examples of products include a brick press, oil press, treadle
pump and hip pump (a manual water pump).

Kick Start uses the following steps, which parallel many existing innovation
approaches:
a. Identify high potential small-scale business opportunities that could be
established by local people with limited capital investment.

b. Develop technologies and business packages - the tools, equipment,

manuals, and business plans required to establish small enterprises.

c. Train manufacturers to produce the new technologies, for example new

machines and tools.

d. Develop the market among small-scale businesses, ensuring that the new
technologies are available for purchase by businesses.

Kick Start monitors the number of new businesses and jobs created and the amount of
profits and wages earned by the new entrepreneurs and their employees. It has found that
its innovations have had a significant impact towards improving livelihoods in their
countries of work in Africa, which include Kenya, Tanzania and many others.
Kick Start estimates that $52 million per year of profits and wages is generated by the new
businesses with which it has been involved across Africa.

The experience of Kick Start highlights some key actions that can help foster pro-poor
innovation through social entrepreneurship in Africa:

Developing demand driven products is vital for social entrepreneurs. Product

performance in the market and the desired impact on intended beneficiaries must inform
product development.

Encourage social entrepreneurs to develop simple business plans and marketing

strategies to guide their business.

Encourage social enterprises to focus firmly on achieving poverty reduction, particularly

through income generation and quick returns on investment.

Direct more investment to local research and development to produce products for local
markets and needs.

Private sector organizations should be encouraged to fund pro-poor research by offering

them incentives such as tax concessions.

Better links between the public and private sectors should be encouraged, including
research partnerships between universities and the private sector.

b) Sustainable Healthcare Foundation

Liza Kimbo, Kenyan social entrepreneur who has created a franchise model of
medical clinics in remote areas run by unemployed nurses who sell life-saving
pharmaceutical drugs at affordable prices to families suffering from treatable
diseases.
In her native home of Nairobi, Kenya, Liza Kimbo works to deliver health care
services to the rural poor, calling upon the resources of a pool of otherwise
unemployed nurses.

As director of the Sustainable Healthcare Foundation, which operates the CFW

shops (Child and Family Wellness shops (CFW Shops) is a social entrepreneurship
project to deliver franchise pharmacy chains to developing countries. The
franchise is run by locally trained health care entrepreneurs. The franchisee is self-
motivated to run the business with a goal to serve the poor by supplying and
selling basic pharmaceutical medicines at very low cost to rural people distant
from hospital care.
 Liza the proprietor has provided thousands of employment opportunities to nurses
who were trained but unemployed by the government.

With assistance from the organization’s successful model approach, nurses have
started sustainable, profitable, and medically qualified CFW shops all over the
country.

With a background in health services, management, and finance, Liza has helped
grow the franchise model from its first eleven outlets to over sixty, now serving
400,0 00 patients a year.

c) Aleke Dondo – Juhudi Kilimo:

Aleke Dondo, often called the grandfather of microfinance in East Africa, built
Juhudi Kilimo from two of his strongest passions: microfinance and rural
development. He holds a Master’s degree in economics and has carried out more
than 30 major studies in the fields of small enterprise and microfinance
development.

In sub-Saharan Africa, 60-75% of people are employed in agriculture, mostly as

subsistence small-scale farmers, and often they have little access to bank loans or
technical training.

Juhudi Kilimo has provided asset financing to over 7,500 smallholder farmers,
roughly half of which are women. The average income of Juhudi Kilimo clients
doubles or triples as a result of their loan. In addition to offering loans for rural
farmers to invest in productive assets such as cows, agricultural equipment and
transport, Juhudi Kilimo offers compulsory asset insurance and life insurance to
the borrower at a small cost. These two insurance products ensure that the
borrower and her family cannot be further indebted by the loan, mitigating the
risks the rural poor often face when becoming clients of many micro-lending
institutions.

Other Examples of Social Entrepreneurs:

a) The Late Wangari Mathai

b) David Kuria (Kenya): David Kuria is creating high quality sanitation facilities
accessible to the urban poor, by connecting sanitation as part of the dignity of
living in community. He includes the community in the design, construction, and
management of the facilities.
Historical Examples of Social Entrepreneurs:
 a) Florence Nightingale (U.K.): Founder of modern nursing, she established the first
school for nurses and fought to improve hospital conditions.
b) Margaret Sanger (U.S.): Founder of the Planned Parenthood Federation of
America, she led the movement for family planning efforts around the world.
c) John Muir (U.S.): Naturalist and conservationist, he established the National Park
System and helped found The Sierra Club.
2. The Internet
a) Mobile Money

Mobile money is another key battlefield in the East African tech scene. The race between
players continues to pick up pace as telecommunications provider Orange Kenya
launched Orange Money in partnership with Equity Bank, the same bank that works on
Safaricom’s M-Kesho mobile banking product powered by M-Pesa and Essar Telecom’s
yuCash mobile money product.

Orange has chosen to differentiate its offering by targeting a different market segment
and offering a debit card to accompany the mobile banking and mobile money transfer
product. Safaricom’s M-Pesa numbers continue to grow steadily as they recently crossed
the 13.5- million mark, which accounts for over 80% of Safaricom’s 17-million subscribers.

b) Mobile Connectivity

Mobile connectivity has unlocked an opportunity to rapidly scale mobile enabled services
by connecting billions of people. At the end of 2013 there were 3.4 billion unique mobile
subscribers worldwide. By 2020, the developing world will add another 880 million.

Moreover, mobile broadband connections currently at 2.4 billion globally will nearly
double to 4.1 billion by 2020.3 rising connectivity across the globe is fuelling the growth of
Internet platforms such as Google, Yahoo, and Facebook.

Small and medium size enterprises have also benefited with some emerging as
competition to existing Internet platforms, for example Twitter and Instagram. For
entrepreneurs and innovating businesses in the developing world, the ubiquity of mobile
technology provides a tremendous opportunity to fundamentally change the business
landscape and the lives of the underserved. Where mobile infrastructure is already in
place, scaling mobile enabled services, even to underserved populations in rural areas, is
not only physically plausible but financially feasible.

c) Mobile Identity
Mobile identity is foundational to the digital economy by building trust among people or
businesses that would like to exchange information (including payments) via mobile
networks. Because a mobile user can be identified by their SIM and password or other
personal information, mobile networks foster trust between parties that may not have
met physically. This in turn unlocks the potential for digital commerce at local and global
levels.

The more people are connected to the network with an identity, the greater the
opportunity for mobile commerce and other mobile services that require identity
verification, such as health and government services.

d) Mobile Money

Mobile Money is the currency of the digital economy. In the developing world mobile
money enables previously unbanked populations to perform person-to-person money
transfers, bill payments, bulk payments (such as salary payments of government
disbursements), or other financial transactions using a mobile handset. Digital
entrepreneurs are also benefiting, as mobile payments platforms provide a mechanism for
startups to collect cash from customers interacting with their service or application.
Furthermore, data collected by mobile operators could be used to analyze customer
behaviour and assess credit worthiness, thereby creating opportunities for customized
services and the extension of credit to more customers.

e) Digital Content and Services

Digital content and services address business challenges, enable transparency and
efficiency for government, and offer convenience, entertainment, and empowerment to
consumers. In urban environments, smart cities use innovation and digital technologies
to address urban challenges, such as transport and utilities, and improve services for
citizens.

A thriving entrepreneurship ecosystem provides the creative talent, financial resources,

and shared infrastructure (such as office space and Internet connectivity) to enable
entrepreneurs to build locally relevant content and services.

f) Fast and Easy Selling of Products and Services

The rise of the internet and instant global finance has probably produced more
entrepreneurs than anything since the invention of money. The net was exactly what they
needed, a medium that could reach every possible market and conduct business directly.

Interestingly, a lot of entrepreneurs are also originators of their products and services, not
purely businesspeople. They've really benefited from the new technology and business
culture. It's made selling their products on websites around the world profitable. In
economic terms, it's also created market space and income for people who would
otherwise have been marginalized in the commercial sphere.

g) The Ten Second Entrepreneur

The effects of technology have huge benefits for entrepreneurs at all levels. Product sales
aren't the whole story. Entrepreneurs are also promoters, as well as sales experts. The
sheer reach of the Internet and new businesses has greatly expanded opportunities for
entrepreneurs. They can now do in seconds what used to take months. Business and
contracts can operate in a few clicks. They can also diversify across a range of business
ventures, and operate them simultaneously. This is in some cases where the 'Internet
millionaires' come from, but the main reason is doing much more efficient business.

3. Informed Consumer

a) The Changed Path of Consumer Purchasing

The Internet now shapes nearly every aspect of a consumer’s purchasing decision. The
first step consumers today begins on the web: they search for the product or service, are
heavily influenced by online reviews, compare product characteristics across websites,
locate businesses with proximity searches, and often purchase online

b)The New “Health Mania”

Health concerns are rising and health awareness is growing among consumers and will
continue to accelerate as the population ages. Consumers now look for products and
services to help them maintain and improve their health, changing the type of products
they purchase for their family, the sports they play, and how they spend their leisure time.
The demand for health and wellness-related products is increasing rapidly all over the
world.

Companies that can adapt their products to these growing health concerns are likely to
generate positive reactions from customers and position themselves favorably in the
marketplace.

C) Customization is King

Consumers are increasingly looking for custom-made solutions that fit their specific
needs, becoming more engaged in product creation. Many companies are expanding their
product lines to better address consumer preferences. Others have developed “mass
customization”
techniques, which deliver tailor-made solutions at prices and lead times that match
traditional mass-produced products.

4. Creation of an Enabling Environment

a) Awareness Creation on Entrepreneurship: The Kenyan Government has made

entrepreneurship a compulsory unit in all post-secondary institutions

b) Funds to Promote Entrepreneurship: The introduction of the Youth Fund; Uwezo

Fund and the Women Fund etc.

c) Ease of Access to Government Regulations: The Kenyan Government has tried to

do this through the introduction of Huduma Centres in the Counties

d) Motivators: The women and youth are encouraged to apply for tenders in the
counties and they are treated as special groups

5. The Effect of Consumerism

The culture of consumerism where people desire material goods encourages

entrepreneurship within the area as returns from a business become more than returns
from a job.

6. Future of Shops

Retailers are facing a digitally driven perfect storm. Connectivity, rising consumer
influence, time scarcity, mobile payments, and the internet of things, are changing where,
when and how we shop – if smart machines have not already done the job. Add the
sharing economy, driven by younger generations where experience and sustainable
consumption are more important than ownership, and traditional retail models break
down. The future of shops will be increasingly defined by experiential spaces offering
personalized service, integrated online and offline value propositions, and pop-up stores
to satisfy demands for immediacy and surprise.

7. Globalization

8 Home Based Industries

(THE LIST IS ENDLESS)

THE END