VERITAS UNIVERSITY ABUJA

(The Catholic University of Nigeria)

Bwari Area Council, Abuja FCT
FACULTY OF MANAGEMENT SCIENCES
DEPARTMENT OF BUSINESS ADMINSTRATION
LECTURE NOTE
COURSE TITLE: Introduction to Business II (3 credit units)

COURSE CODE: BUS 112

COURSE LECTURER: PROF. SAM. TENDE/ MR. SOLOMON JERESA

WEEK ONE TOPIC: CLASSIFICATION OF BUSINESS ENTERPRISE

Introduction

There are many ways a business enterprise can be classified but majorly they are classified

according to the sizes in which they operate such as Micro, Small, medium and large scale

enterprises; and in their various forms of operation such as sole proprietorship, partnership, etc.

However, this chapter is focused on classification of business enterprise according to their sizes

which include the following:

Micro enterprises: these are firms whose working capital is not more than ₦10,000,000

including total cost with a labour size of not more than thirty (30) full-time workers and a less

than ₦2,000,000 turnover SMEDAN (2007)

Small Enterprise: these are enterprises whose working capital including total cost with the

exclusion of land cost is between ₦10,000,000 and ₦100,000,000 with a work force which

spraings between eleven (11) and fifty (50) full time workers with no more than ₦10,000,000 in

turnover in a year SMEDAN (2007)

1
Medium enterprises: these are enterprises whose working capital including total cost with the

exclusion of land cost is not more than ₦100,000,000 but less than ₦300,000,000 with a work

force which springs between fifty-one (51) and two hundred and fifty (250) full time workers

with no more than ₦20,000,000 turnover annually SMEDAN (2007)

Large enterprises: these are enterprises whose working capital including total cost with the

exclusion of land cost is above ₦300,000,000 with a work force which springs above two

hundred and fifty (250) full time workers with more than ₦200,000,000 annual turnover

SMEDAN (2007). The diagram below categorized enterprises based on three criteria:

Enterprise

Category
Number of Employees Net Worth

Micro Less than 10 Less than 10million naira

Small Less than 50 10million – less than

100million

Medium sized Less than 250 10million – less than

300million

Large Above 250 Above 300million

Source: Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Abuja,

2007

Conceptualizing Micro, Small and Medium Scale Enterprises

2
The notion of micro, small and medium enterprises (MSMEs) was introduced into the

development landscape way back 1940s with the primary aim of improving business trade and

economic industrialization in present developed nations (Udechuckwu, 2003). Micro, small and

medium enterprises (MSMEs) are economic units whose turnover or number of employees falls

below certain limits.

The definitions of MSMEs are usually derived in each country which is basically focused on the

key role of that MSME in the economic programs and policy are designed by particular agencies

or institutions empowered to develop MSME. For instance, a small business in the developed

economies of countries like Japan, Germany and United States of America (USA), may be a

medium or large-scaled business in a developing economy like Nigeria.

More so, these definitions are changing over time which is as a result of changes on the level of

development of different countries or the overtime variance from agencies or developing

institutions to another, depending on their policy focus. However, the definition of MSMEs in

Nigeria as contained in the National Policy on Micro, Small and Medium Enterprises produced

by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in 2007, is

adopted in this chapter because it is in line with the definition in other developing countries like

Indonesia (Timberg, 2000) and Ghana (Elijah and Nsikak, 2011) as well as in the European

Union (EU) (European Commission, 2007)

Challenges of Micro, Small, and Medium Enterprises

Most SMEs usually die within the first five years of their operation and smaller percentages also

go into extinction within the sixth to tenth year of existence. However only between five and ten

percent thrive to survive and grow to maturity. Certain factors have been clearly identified and

3
assessed as the possible reasons and contributions to the premature death of SMEs especially in

Nigeria. Key among these factors includes:

 Insufficient Capital base

 Over concentration on one or two markets only for finished products

 Poor succession planning process

 Inexperience personnel

 Poor book keeping method

 Inadequate or absence of market research

 Poor business strategy

 Inability to distinguish between revenue and profit

 Poor or ineffective plant and machinery

 Inability to employ the right staff fix for specific operations

 Irregular power supply

 Poor infrastructural facilities

 Unfavorable fiscal policies

The Small and medium enterprises are major engines that stimulate the growth of jobs as well as

the creation of wealth in a country’s economic system. However, SMEs definition varies from

country to country or sector to sector all depending on what motive for which it is been sought.

In Nigeria, SMEs are generally defined as businesses with turnover of less than N100mm per

annum or less than 300 employees (Oyeyinka, 2010). This sector of the economy is considered

to be the backbone of the Nigeria economy (CBN, 2014) absorbing majoring of the minimum

wage earners. The sector is also noted a provider of goods and services, and a driver in

4
promoting competition and innovation, enhancing the enterprise culture necessary for private

sector development and industrialization. Despite these numerous potentials of SMEs, the sector

is faced with various challenges and constraints that inhibit or constrain its growth.

Advantages of Micro, Small and Medium enterprise (MSMEs)

1. Quick decision making: in MSMEs decisions rest on an individual or a small group and

as such the process of making decisions is faster because it involves less mechanism and

less people.

2. Easy means of communication: because of its small nature, it is easier to communicate

between members as well as communicating with clients. This will enable new ideas to

flow and problems to be solved as a team.

3. Easy to link the staff to the company: there is a quick link between the staff and the

company which will make it easier to emotionally connect the worker with the

company’s objectives.

4. Maintaining close proximity to customers: this is a most visible advantages of MSMEs.

MSMEs creates more avenue to deal with their customers directly so as to be able to

identify and meet the required needs of their customers accurately and also establish

certain bond relationships with their clients/users

5. Flexibility: the simple structural nature of MSMEs as well as their size, have made them

develop adequate capacity to be dynamic and quickly adapt to change.

6. Ability to take advantage of smaller niches in the market is also an added advantage to

MSMEs.

7.

5
Disadvantages of Micro, Small and Medium enterprise (MSMEs)

1. Difficulties to fund: most MSMEs lack the financial power that large organization or

companies have and as such, they will require external funding which in most cases are

either limited or not available as a result of inability to access financial instrument which

usually are made available to large enterprises.

2. Difficulty in reaching large number of customers: the task of reaching and gaining

trust from customers can be difficult with MSMEs. As a result of the financial powers

of large companies, mass media advertizing is usually used to make themselves

known to their customers and publics which might be difficult for MSMEs to embark

upon.

3. Cost implication: MSMEs will have enormous impediments to benefit from the

economy of scale, which will cause costs to be higher in certain types of business, as

well as creating difficulties to adjust the prices offered to users.

4. Limited access to more skilled personnel: given the greater limitations that MSMEs

usually offers to develop a career, it will be more difficult to attract talented and well

prepared workers who will usually be more tempted to develop their skills in a large

enterprise.

5. Difficulties sometimes in adapting to changing technology

ROLE OF MSMEs IN ECONOMIC DEVELOPMENT OF NIGERIA

The economic downturn that resulted to a fall in world oil market and the Asia financial crisis of

1980s and 1990s respectively has brought about to play the economic importance of MSMEs in

the development of countries both industrial and economic wise. Small sized enterprises can

6
easily adapt to changing circumstances and pressure with greater ease because of their low level

of capital intensity which allows inputs and product lines to be changed at a relatively lower cost.

Small scale industry plays important and crucial roles in the industrial development of any

country (Hamilton & Nwokah 2009). Small businesses In Nigeria especially the gross under-

performance of most small businesses have undermined their contributions to economic growth

and development of the nation (Central Bank of Nigeria, 2014). In many countries MSMEs

account for a large proportion of the total employment growth by producing a many countries. In

such countries, SMEs produce a significant share of their increases in Gross Domestic Product

(GDP), while the contributions of larger enterprises tend to remain stable (Acha, 2009)

In Nigeria, well-managed productive and healthy MSMEs constitute significantly to diverse

sources of employment opportunities and creation of wealth. While the population benefit in

terms of employment and income, Government also benefits by generating revenue in form of

taxes. This can be a strong factor to social stability. It is important to note that not all MSMEs

are in the formal sector; some of these enterprises occupies an unofficial labour market, which

varies in structure and size from an estimation of about 4-6% in developed countries to over 50%

in developing countries. According to the International Finance Corporation, there is a positive

relationship between a country’s overall level of income and the number of MSMEs per 1,000

people. The World Bank’s Doing Business reports indicate that a healthy MSME sector

corresponds with a reduced level of informal or “black market” activities. Thus, managing SME

sector to reduce the number of informal business is essential in the Nigerian development

project.

More importantly, MSMEs are regarded as the bedrock of a country’s industrialization process.

This is because, a quite number of them possessed vast knowledge of resources, as well as

7
demand and supply trends, they therefore constitute the chief supplier of input to larger firms.

They also act as major customers to the larger firms by providing range of products such as food,

clothing, recreation, entertainment, healthcare, education etc. They help in economic

development through industrial disposal and production of primary and intermediate products.

They can also supply the material needs of the larger enterprises. In addition, they provide

specialized, and many times, personal services and constitute important sources of local supply

and service provision to larger corporations.

Developing countries represent a huge, largely untapped market for large corporations. By

working closely with

MSMEs, large corporations can develop new customer base that may not be accessible to the

traditional distribution networks of these corporations. MSMEs also act as vital sources of

innovation. They tend to occupy specialized market “niches” and follow competitive strategies

that set them apart from other companies. This might include re-engineering products or services

to meet market demands, exploring innovative distribution or sales techniques, or developing

new and untapped markets. This often makes them good partners for large corporations.

MSMEs are labour intensive compared to larger firms, and their capital requirements for its

establishment are quite low. This broadens the chances of most individuals to participate in them

and by doing such, it contributes to industrial development.

However,, the size and structure of MSMEs create an avenue for flexibility in different

management approaches which will make them respond quickly to adapt to changes and adapt to

market needs much more quickly than their large enterprise counterparts in comparable

industries. Thus in these days of increased emphasis on private-sector-driven economy, MSMEs

8
act as major engines room for most desired private-sector-led economic growth and

diversification.

The development of many small and private enterprises with the associated market competition

spur up entrepreneur spirit in many MSMEs. This will in turn have significant impact on

economic development. This is due to the fact that entrepreneurship is key factor in economic

development and social change, since it makes for continuous innovation, and commercialization

of innovation and technology. Entrepreneurs are proactive to change. They like competition and

are always ahead in the market place. They are change agents and catalyst for transforming

resources into new products and services with greater utility and value. All these immensely

impact on economic development and growth.

DIFFERENCES BETWEEN A SMALL AND MEDIUM ENTERPRISE AND LARGE

ENTERPRISE

There are many differences between a small and medium enterprise and large entities, namely:

speed of decision-making, attitude towards risk, allocation of resources, understanding of

business models and management of business models, and differing definitions of innovation.

Decision-Making Process

Large enterprises, in view of the different bureaucratic levels, will often require longer time to

make decisions. This can be very frustrating especially when a decision needs to made

immediately. Delay in decision-making may hinder the progress of the company. In this way,

SMEs are better-off as more often than not, decisions can be made at the point of urgency. This

helps the SMEs top grow more rapidly compared to a large-scaled enterprise.

9
Attitude Towards Risk

Large-scale enterprises can afford to take a bigger risk in running the operations of their

businesses. This is mainly due to the fact that their capital is larger and there is buffer to absorb

any uncertainties. Large size firm, such as Sime Darby and Petronas can afford to invest in

foreign countries and earn much more profits compared to other SMEs. However, SMEs need to

be wary of the negative consequences should their investments does not bring back the desired

returns which may affect their operations in totality.

Allocation of Resources

In small businesses, every ringgit counts. Resources can be scarce and are allotted based almost

solely on whether they will boost the bottom line. This bottom line focus may not be so distinct

in a larger corporation. With more abundant resources – at least in comparison to smaller

companies – people in large enterprises may be relatively free spenders.

Understanding of Business Models

A large enterprise understands the business models in a wider perspective as compared to SMEs.

Large enterprises have the resources to conduct in-house trainings or sent their employees

(especially management executives) to overseas countries to attend training programme. Such

programmes would provide a bigger horizon to its employees who are then able to strategies

their activities towards achieving the company’s goals and missions. This normally lacks in

SMEs.

Innovation

10
Competition in the business environment is getting more “violent” with more and more business

entering the market due to a more relax rules and regulations in setting up business entities. In

order for a company to remain competitive and relevant in the industry, huge investments need to

be made on the product or services. Consumers have the choice of choosing the goods in the

market. Large enterprises have the capacity to investment in such innovations compared to

SMEs. For example, recently Malaysian Airlines Systems (MAS) purchased new planes (A380

series) to remain relevant in the airline industries. SMEs will have limitation due its limited

financial resources.

REFERENCE

Adamu, B. (2009). Financing gap for small and medium enterprises in post consolidated
banking sector in Nigeria. Bullion, Central Bank of Nigeria. 33(3).

Acha, I. A. (2009). “Risk Management: An Imperative for Small and Medium Scale Enterprises”
Journal of Business and Finance. Faculty of Business Administration, Imo State
University, Owerri 2, 177-186.

Central Bank of Nigeria, (2014). Central Bank of Nigeria annual report and statement of
accounts for year ended 31st December, 2006 -2014. Abuja: CBN.

Ebitu, T., Basil G. & Ufot, A. (2016). An Appraisal of Nigeria’s Micro, Small and Medium
Enterprises (MSMES): Growth, Challenges and Prospects. International Journal of Small
Business and Entrepreneurship Research, 4(4), 1-15

Elijah, U. & Nsikak, J. (2011). Small and medium scale enterprises (SMEs) development
planning in Nigeria: lessons from Malaysian experience. Proceedings of the 52nd
Annual Conference of the Nigerian Economic Society. Ibadan: The Nigerian
Economic Society.

11
European Commission. (n.d). Definition of small scale enterprises. Retrieved March 17, 2007,
from http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm

Hamilton, D. I. & Nwokah (2009). “Dynamics of Corporate Innovation in Small and Medium
Enterprises”. Journal of Business and Finance, Faculty of Business
Administration, Imo State University, Owerr, 2(1), 298-314.

Nigerian Association of Small and Medium Enterprises (2003). The small and medium
enterprises: prospects and perspectives, Handbook/Directory. Ikeja, Lagos: Amanda
Communications Ltd. March.

SMEDAN. (2007). National policy on micro, small and medium enterprises. Abuja: Federal
Republic of Nigeria.

Timberg, T. (2000). Strategy of financing small and medium enterprises in a new economic
environment. Paper presented at the Conference on The Indonesian Economic
Recovery in Changing Environment, held by the Faculty of Economics, University of
Indonesia, Jarkata, October, 4-5.
Udechuckwu, F.N. (2003). Survey of small and medium scale industries and their potentials in

Nigeria. CBN Seminar on SMIEIS. Lagos: CBN Training Centre. 4: 2-11

12
 WEEK TWO TOPIC: BUSINESS ACTIVITIES

This is a general term that encompasses all the economic activities carried out by a

company during the course of business. Business activities, including operating, investing

and financing activities, are ongoing and focused on creating value for shareholders.

Business activities refers to the process of parsing a project, ideas, etc into a number of

individual tasks which must be completed before the deliverables can be completed.

These activities include enterprise environmental factors, organizational process assets,

the project scope statement and work breakdown structure. Business activities may be

seen as all the economic activities, whether directly or indirectly related to making the

goods and services available to the consumer and ensure profit earning through customer

satisfaction. All the business activities depend on each other to ensure constant process

and cannot serve the purpose of customer satisfaction solely

The following are various business activities:

 Primary activities

 Secondary activities

 Tertiary activities

 Quaternary activities

 Quinary activities

Primary activities

13
Primary activities involve the extraction of raw materials from the mother earth. This

extraction results in raw materials and basic food as such as coal, wood, iron and corn

processed and used in the industries for manufacturing of goods and services and further

production. Workers include farmers, coal miners and hunters etc

Secondary activities

Secondary Industries procure the natural resources produced by primary industries as raw

material to create different goods to meet customer requirement. Secondary activities

involve the transformation of raw material into finished products. This transformation

results in wood being made into furniture, steel being made into cars or textile being

made into clothes as examples. Workers in this sector include a seamstress, factory

workers or craftsman etc

The secondary industries are bifurcated into two streamlines:

A) Manufacturing: Industries engaged in the production and creation of goods to

convert raw material into the usable form are known as manufacturing industries.

There are four types of manufacturing industries:

 Analytical: Analytical industry focuses on extracting different products from the

specific raw material.For example; Extracting LPG from natural gas
 Synthetical: These industries concentrate on combining various ingredients to
create a newproduct. For example; the perfume industry
 Processing: When the raw material is treated at different stages to acquire the final
product, it is known as processing.
For example; The salt processing unit
14
  Assembling: Assembling refers to the compilation of different products to develop
a new product. For example; Mobile phones manufacturing
B) Construction: Building up of immovable goods using various goods as raw

material to serve the consumer’s utility is called construction.

For example; Construction of dams from bricks, cement, iron, etc

Tertiary activities

The tertiary industry refers to the service industry. It includes all kinds of services

provided to consumers to satisfy their needs and requirements.

For example; Schools, hospitals, hotels, banks, etc. Tertiary activities involve the

supplying of services to consumers and businesses. It is a service based and gives non-

tangible value to customers. This sector provides services to the general population and

businesses including retail, sales, transportation and restaurants. Workers in this type of

sector include restaurants bar-tenders, accountants and pilots etc

Quaternary activities

Quaternary activities consist of intellectual activities often associated with technological

innovation. It is sometimes called the knowledge economy. Activities associated with this

sector include government, culture, libraries, scientific research, education and

information technology.

Quinary activities

15
Quinary activities involve the highest level of decision making in a society or economy.

This sector includes top executives or officials in such fields as government, science,

universities, media, health care etc

Importance of Business Activities

The following are the importance of business activities:

01- Mass production of goods

The use of automatic machines, new materials and new processing methods have not only

lowered the cost of production of goods but also helped the producers in producing goods

in desired quality and quantity.

02- Expansion of market

In the modern world, goods are produced according to the needs of the customers. The

business tries to satisfy the customers both within and outside the country be developing

products according to the tastes and purchasing power of the customers. Therefore,

markets have expanded consumption of goods due to increase in number of customers all

over the world.

03- Provision of credit by banks

The Commercial banks and specialized institutions are providing credit facility to the

traders for producing goods and doing business on large scale.

16
04- Communication and transport

The fast developed means of Communication and transport helping the traders in these

days in providing goods to the customers at the right times, right place and right price.

05- Innovations

Today all the time busy in business making improvements by introducing new products

as well as new methods are very helpful for quality of products and reducing cost.

06- Employment

Business has generated employment on large scale both in the rural and urban areas.

07- Source of revenue

Business is providing revenue to the state due to which the government maintains law

and order situation, undertakes defense and carries on welfare and development activities.

Business pays a large share of taxes to government.

08- Raising standard of living

Business also helped the people to earn living either as owners of the business or

employees. Higher incomes have lead to increase in the standard of living in people.

09- Business supplies services

17
Services occupy an important role in modern business life. The major services which are

growing in importance are banking and finance, insurance, medical and health, education,

legal, domestic servants, engineering and other professionals etc. All the services which

perform simple or difficult task for earning profit are regarded an important part of

business.

18
 WEEK THREE - FOUR TOPIC: INTERNATIONAL BUSINESS

Introduction

International business is consisted of devised transactions in advance, which are implemented

through national borders, in order to satisfy the needs of individuals, companies and other

businesses. International business actually links all countries, institutions and individuals.

Enterprises should identify goals and objectives to be placed on the international market. It

means to determine the target countries and the possibilities of selling products and services in

these countries and of course to assess what profit to gain from selling of its products and

services on the markets in selected countries.

What is International business?

International business encompasses all commercial activities that take place to promote the

transfer of goods, services, resources, people, ideas, and technologies across national borders.

International business occurs in many different forms, the movement of goods from one country

to another (exporting, importing, trade), contractual agreements that allow foreign firms to use

products, services, and processes from other nations (licensing, franchising), the formation and

operations of sales, manufacturing, research and development, and distribution facilities in

foreign markets.

What is International trade?

International trade is the exchange of capital, goods, and services across international borders or

territories. It is the exchange of goods and services among nations of the world. All countries

need goods and services to satisfy their people. Production of goods and services requires

resources. Every country has limited resources; therefore a country solely cannot produce all the

goods and services that it requires. Required goods which cannot be produced or the amount is

19
insufficient as required, need to be provided from other countries. Similarly, countries sell their

products to others also when the production of goods comes in surplus quantities than demanded

in the country.

International business is realized within the process of globalization of business which actually

means increasing international integration and manufacturing processes and international market

for goods and services. It refers to realizing processes of liberalization of national economies,

reducing trade restrictions or barriers, free movement of foreign direct investment worldwide,

strengthening the role of international companies in the international production and mutual trade

and exchange.

Globalization

Globalization refers to growth of global connectivity, integration and interdependence of

economic, social, technological, cultural, political and environmental spheres. Globalization is a

notion or common term which best explains the processes of economic interdependence the

growing influence of culture, great advantages of information technology and new geopolitical

changes that lead to bringing people together in a global system.

Regarding globalization it can me noted that it represents an internationalization regarding

different countries.

Economical globalization can be measured in different manners; nevertheless those

measurements target four economic trends that it features:

 Movement of goods and services and increase of the national income per capita;

 Increased employment - movement of the population may result in better employment, if

not in person’s home country it may be realized in other countries;

 Movement of capital as direct investments;

20
  Technology development as a result of the flow of international research and

development and investment.

Globalization is about the increase in the processes of economic integration worldwide and

everything is actually achieved through trade and financial flows. The notion of globalization is

linked to the movement of people, labor and knowledge (technology) across international

borders. Also, there are broad dimensions of globalization pertaining to culture, political and

environmental aspects.

International trade system

In order to be able to perform in a foreign or international market it is necessary to know the

international trading system. They should be known what are the so-called trade restrictions and

organizations working on the promotion of trade or international trade in goods.

Development of international trade and other forms of international cooperation and state

influence on the conduct of international trade, leads to the necessity to establish some form of

mutual agreement and bargaining between companies from different countries. It is done on a

bilateral basis, but it must be pointed out that the issues of concern to many countries, can not be

comply in this way because it requires concluding multinational and multilateral conventions and

agreements.

One of the most important world organizations working on the development of creation of

conditions for free movement of goods and services between the countries in the world is the

World Trade Organization. WTO World Trade Organization – WTO, is new important and

powerful institution that monitors and influences the global, world or international trade. It is one

of the major mechanisms for joint globalization. It has occurred on 01.01.1995, with the

restructuring - the General Agreement on Tariffs and Trade GATT - General Agreement on

21
Tariffs and Trade.Svetskata Trade Organization - WTO, The World Trade Organization (WTO),

is an international organization that was established to controls and liberalize world trade. It

works with rules of trading between countries, on a direct global level, and is responsible for the

negotiation and implementation of new trade agreements and obligations of the agreements that

have signed numerous member states of the organization, from different countries.

International business is also subject to the law or the legislation of the members adopted to the

country's needs or "invited" countries. Domestic power can reach a conclusion or decision to

withdraw from working with uninvited partners. Many countries may prescribe measures such as

customs, ownership control, restrictions of work performance or property.

The performance of foreign markets is accomplished in an institutional environment that consists

of a set of political, social and legal rules. These rules form the right of production, exchange and

distribution, leading to it to achieve specified security and expectations about the actions with

others and will ensure steady realization of business.

The most important rules in each system are the rules that define, allocate and ensure the rights

of ownership and the terms and conditions that specify legal and illegal forms of cooperation and

competition (standards, rules of bargaining, trading conditions, etc.). A well-defined and secure

system of property rights is a basic system performance of foreign markets. Expression of

ownership and the right to use trade and other resources is essential for market development and

marketing activities.

Forms of establishing international business

The simplest form of realization of international business is exports, which may be direct or

indirect, using intermediaries such as agents. More complex forms of foreign market entry

22
include conducting more complex operations such as joint ventures or realization of joint

operations, direct investment, work in duty-free zones, etc.

How to make the choice to enter foreign markets depends on many factors, primarily on the

nature of the existing products of the company and the conditions for entering the foreign target

market. Exports can be applied for direct sales of the products of a foreign company or indirectly

through export intermediaries, such as agents or intermediary commissions by export or trade

companies.

Export

Export is one of the most traditional ways of entry and operation on foreign markets. Exports is

considered as taking action to sell the products in another country for products produced by the

manufacturer’s home country or a third country. Achieving the export business activities in

another country requires significant assets. These funds should not provide detailed information

on the implementation of export activities as they do to domestic companies, but to develop

appropriate information for the preparation of detailed export strategies. Exports can be

managed as an active and passive. Passive export is one in which the exporter is expecting to

receive order for purchasing when necessary. Aggressive export marketing means developing

strategies that creates an offensive and a clear picture of what the company’s plans are to the

foreign markets.

Indirect export means achieving exports of goods through mediator. They can be agents or

companies performing the export. Agents operate as brokers or establish relationship between

exporter and foreign buyers.

23
Generally the agent would not do the sale on the foreign market but will facilitate and help in the

realization of the export logistics, especially in the area of packaging, shipping and preparation

of product documentation.

Direct export to foreign markets is to control the movement of the goods and the logistics of

goods intended for foreign markets

Representative agents operate on the principle of a given sale. They find buyers for the products

of the company that wants to export. Agents shall have the authority to negotiate on behalf of the

exporting company that hired them.

License

The license is consent or permit given to someone that can use the intellectual property rights.

Intellectual property rights can be patent, trademark of a product, manufacturing technology of a

product, and the method of selling a product. A license may be given even for technical or

business knowledge or so-called know– how. The license is different from the authorization.

Authorization is transferring the IPR such as to work or to produce something. With the license

the intellectual property right usually remains with the owner named as licensors, and it is not

taken from the one who receives the license - licensee.

A license may be exclusive and non-exclusive.

Non-exclusive license refers to the right to use the intellectual property given to not more than a

single user license.

Exclusive license means that the right of use of intellectual property used alone for one user.

That could mean that access to the licensee or licensee may be someone who works in a certain

area or of a particular country.

24
Patent license is a consent or authorization to produce, use or to sell patented products to use

certain design or process. The license for branded product or service is a consent or permission

given by the owner of a brand of product, so that product is manufactured or sold by another.

This type of license is distinguished from other types because the licensor retains some degree of

control over the nature and quality of the product or service. With this type of license, the

licensor has the control to ensure products are produced from the one that received the license

having the same quality as those of the licensor.

Franchising

Franchising is one of the business strategies applied to ensure an increase of the number of

buyers. Franchising is a marketing system by which understanding picture of current and future

customers is created about how the products or services of company can serve to meet their

needs. Franchising is a method of products distribution and services to meet the needs of the

consumers

Franchising is a network of independent business relationships that enables:

 identifying product brand;

 method for successful operation;

 real marketing system.

In short, franchising can be defined as a strategic agreement between the two companies and two

commercial entities that build specific relationships and responsibilities in order to realize mutual

goals, and they can be expressed as a desire for conquest and domination of the market, ie attract

and retain more customers or consumers than their competitors.

25
Franchising is a marketing system established between two countries or two companies on the

basis of an agreement. A particular company or a firm contracts with each other to sell its

products or services in a particular market or in a certain area.

Franchising is not a business itself; it is a way to work. Franchising means building business

relationships in which the company realizing certain business alike - franchisor – by contract

with another company or companies - franchisees - allows its products to be sold directly to the

market and use the name of the company for certain period of time. Franchising of the

international market is defined as a continuous relationship between the person who gives the

franchise in order to provide benefits for business, the organization of work in sales and

management.

Joint ventures

Joint ventures or business activities is a term that defines the companies which are formed from

two or more persons or companies in order to work together and make a profit.

Joint ventures represent a form of organization of the enterprises in which two or more entities

come together to accomplish certain activities and create profit. Each participant invests funds

and risk taking.

In most cases, joint ventures or activities are bilateral. They are considered as bilateral relations

because it involved two sides of a business, they are partners in order to build certain strategic

advantages. The main reason for achieving such activities may be, for example, access to new

technical through which companies will gain competitive advantages; getting certain intellectual

knowledge, necessary human resources to the closed channels for product distribution in certain

regions of the world etc. Also, in this way the difficulties in integrating the cultures of the

organizations can be overcome.

26
Foreign direct investment

FDI - Foreign direct investment plays a very important role in the development of global

business. It may enable the company to provide new markets and marketing channels, cheaper

means of production, access to new technologies, products, knowledge and financial resources.

Foreign direct investment in its general definition is defined as investment of a company from

abroad in a particular country. Investments may take the form of physical investment that mean

build factories and provision of equipment and technique, direct purchases from foreign

companies, constructing facilities or investing in mutual activities and encouraging the creation

of strategic alliances intended to bring technology license or intellectual knowledge. When it

comes to direct investment it should be noted that they are direct investments of means of

production to a foreign firm in any country. Investments may be:

• manufacturing - with the intention to create new operational or production capabilities;

• establishing new or teaming up with existing firms;

• entry of international firms, companies that realizing business activities in more than one

country

International Trade

The notion of international trade refers to trade of goods and services between countries. Every

country, regardless of the technological advantages will still find a product that can be placed on

the foreign market.

International trade is an extension of the production, exchange and consumption, which are basic

elements of life. Producers and consumers included in international trade are from different

countries.

27
International trade is an exchange of goods and services between individuals and companies

from different countries

International trade is an economic activity that covers trade in goods and services abroad. It

represents the total exchange of material goods between countries. Narrowly foreign trade covers

only trade in goods between the economic entities from different countries and is subject to

exchange occurring only to those goods that cross state borders or customs lines of one or more

countries. In broad terms, foreign trade, despite the international exchange of goods includes the

exchange of services (visible and invisible exports and imports), the turnover of capital,

movement of people (tourism) and the transmission of news and Information.

International trade is a trade of goods and services etc. in which the exchange takes place

between entities from foreign countries, so that the subject of the sale renames borders or

customs line and the territory of the seller (exporter) and land buyer (importer). All this is done

under written foreign trade agreement. Foreign trade is normally performed by certain rules and

laws, and the rights and obligations of the participants are determined in the contract. In foreign

trade only competitive products and services are included in terms of quality, price, payment,

terms of delivery.

The significance and role of international trade are reflected in the fact that with its help of

foreign trade that countries supplying goods and services that cannot alone produce or unable to

produce sufficient quantities to meet the needs of consumers country. International trade

stimulates the division of labor reduces production costs, creates more competition between

buyers and producers, reduces the possibilities of creating monopolies and rapid price changes

and facilitate the movement of capital.

28
 ASSIGNMENT ONE

DISCUSS THE IMPACT OF COVID-19 ON BUSINESS ENTERPRISES IN

NIGERIA AND THE WORLD AT LARGE.

ASSIGNMENT TWO

DISCUSS THE ROLE OF A BUSINESS ENTERPRISE AS AN ECONOMIC AND

SOCIAL ENTITY IN A MODERN ECONOMY

29