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NOTES  Updated Study Notes and
TOPIC 1 Kits
 Certified Public Accounta
INTRODUCTION TO ENTREPRENEURSHIP FREE Study Notes…
 CPA PAST PAPERS
Small scale enterprises play a major role in the development of a country’s economy. Small
enterprises create many jobs, provide a variety of goods and services, contribute a lot of  PRINCIPLES AND PRACTIC
revenue and promote the use of locally available resources. MANAGEMENT KNEC NOT
 OFFICE MANAGEMENT AN
This sub-module unit introduces the concept of entrepreneurship and its importance in the ADMINISTRATION KNEC N
promotion of the national development of a country and the differences between self and
 CPA PAST PAPERS – 2015
salaried employment.
CPA MERGED PAST PAPER
Terms used in entrepreneurship  KISM MEMBERSHIP APPL
PROCEDURE
i)Entrepreneurship
 PUBLIC RELATIONS NOTE
The term entrepreneurship has been described different people in different ways.  KASNEB – Certified Public
Accountants (CPA)…
Entrepreneurship is the process of scanning the environment in order to identify a business  EMERGING TRENDS AND
opportunity, gathering resources with the aim of establishing a profit making enterprise, ICT NOTES
under conditions of risk.
 HOW TO REGISTER WITH
The concept of entrepreneurship became clear due to the researches scientists like FOR PROFESSIONAL…
McClelland(1969) who stressed need for achievement motive, Schumpeter( ) who prioritized  REVISED CPA KASNEB NO
new combinations of means of production which there occurs disequilibrium, Cantillon ( )  CPA – Financial accountin
who emphasized the functions of risk taking and uncertainty bearing, Drucker who stressed download
on ‘systematic innovation’ consisting purposeful and organized search for changes among
 BUSINESS STUDIES FORM
other scholars.
PDF
 CPA NOVEMBER 2019 PA
– FREE
 KENYAN UNIVERSITIES’ ST
ii)Entrepreneur RESOURCES PDF
 KASNEB Past Papers
The term entrepreneur is coined from a French verb ‘entreprendre’ which means to  BUSINESS STUDIES FORM
undertake. Various scholars have defined the term entrepreneur in different ways but all
 KASNEB – COMPANY LAW
place emphasis on the entrepreneur;
KIT ( PAST…
1. Bringing innovation and creativity into the enterprise.  INTRODUCTION TO BUSIN
2. Taking calculated and moderate risks and STATISTICS MOUNT KENY
3. Facing uncertainties
An entrepreneur is someone who detects a previously untapped opportunity to make some

profits (either lowering the costs of producing the existing goods /services or creating new
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ways for people to satisfy their needs or wants through new products). They then brings
together the necessary factors of production to exploit these opportunities.  INFORMATION SYSTEMS
AND INTEGRATION APRIL
PAPER
 COMPUTING SYSTEMS
Richard Cantillon defines an entrepreneur as a person who buys factor services at “certain”
prices, with a view to sell their product at “uncertain” prices in the future.  Certified Information Syst
Solutions Expert April 202
Papers
 Certified Information Syst
David McClelland defines an entrepreneur as a person with a high need for achievement,
Solutions Expert (CISSE) K
someone who has control over the means of production and produces more than they can
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consume in order to sell (or exchange) it for income.
 PRINCIPLES OF AUDITING
 FUNDAMENTALS OF FINA
Joseph Schumpeter defines an entrepreneur as a person who carries out new combinations  FUNDAMENTALS OF MAN
of means of production within an organization, while distorting the routine of the existing ACCOUNTING
products/services, to set up new products and services. WhatsApp us 
Menu  PRINCIPLES OF ECONOM
2022 PAST PAPER
iii)Intrapreneurship
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ACCA OF TAXATION
IFRS U
2022 PAST PAPER
 BUSINESS MATHEMATICS
It is the practice of entrepreneurship employees within an organisation. Intrapreneurship is a STATISTICS APRIL 2022 PA
novel way of making organisations more profitable where imaginative employees entertain
entrepreneurial thoughts. It is a significant method for companies to reinvent themselves
and improve performance.
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 Gloria on Financial Manag
iv)Intrapreneur Topic 2
An intrapreneur is an employee who uses entrepreneurial skills to generate profits for the  CHRISTINE MUTEGI on KI
venture they works for. MEMBERSHIP APPLICATIO
PROCEDURE
v)An enterprise  FREDRICK AWITI on CPA –
It is a business organisation that provides goods and services to make profits and has growth accounting Free PDF dow
potential.  Christopher on KISEB App
For Registration Form ( Pr
students)
 admin on CPA PAST PAPE
A business enterprise is a legally recognised organisation designed to provide goods and/ or
TO 2021 CPA MERGED PA
services to consumers.
vi)Business person
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A person who undertakes any business activity for the purpose of making profit
 June 2022
 May 2022
Difference between self employment and salaried employment
 April 2022
 March 2022
 February 2022
Self employment
 January 2022
 December 2021
Self employment is a situation in which a person starts and operates a business enterprise.  November 2021
Since entrepreneurial skills drive people into self employment, entrepreneurship training is  October 2021
therefore expected to prepare trainees for starting and operating their enterprises  September 2021
effectively.  August 2021
 July 2021
 June 2021
Self employment is a situation in which individuals create and run/operate their own income  May 2021
generating activities.
 April 2021
 March 2021
 February 2021
Salaried employment
Salaried employment is a process in which an individual is hired for a period of time, which  January 2021
may range from a few months to a few years, and is paid a given amount of money as salary  December 2020
or wages for the work done.  November 2020
 October 2020
 September 2020
The merits and demerits of salaried employment are varied and largely depend on a person’s  August 2020
qualification, experience and specialisation area. The merits and demerits are also
 July 2020
determined the magnitude of growth, investment ability, profit and government support of a
 June 2020
given organisation.
 May 2020
 March 2020
Defined working hours, guaranteed income, delegation of duties and specialisation are some  February 2020
of the main advantages of being in salaried employment. However, salaried employment is  January 2020
affected largely organisational elements such as change of management, especially where  December 2019
new management introduces new policies, rules, conditions of employment and other  November 2019
statutory requirements to the organisation. Job security is not guaranteed and personal
 October 2019
satisfaction and motivation is not wholly experienced.
 September 2019
 August 2019
Contribution of Entrepreneurship to National Development
Entrepreneurship is the process that creates people (entrepreneurs) who contribute to Categories 
economic development in various ways. The contributions are made through:
Uncategorized
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1. Stimulating indigenous entrepreneurship and technological development.
2. Creating
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3. creating wealth and distributing income
4. Utilising
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5. Dispersal and diversification of economic activities and mobilisation of savings.
6. Promotion of entrepreneurial culture i.e. they become models to be imitated potential
entrepreneurs because of successful images already potrayed existing entrepreneurs.
7. Increasing regional business activities through the export of manufactured goods.
8. Promotion of indigenous/local technology e.g. use of jua kali technology.
9. Raising the economic productivity level.
10. Narrowing the “missing middle gap”
TOPIC TWO
EVOLUTION OF ENTREPRENEURSHIP
Introduction
Entrepreneurship was introduced the economists of the eighteen century, and it continued
to attract the interest of economists in the nineteenth century. In the present century the
world has become synonymous or at least closely linked with free enterprise and capitalism.
Also it is generally recognised that entrepreneurs serve as agents of change, provide
creativity innovative ideas for business enterprises and help businesses grow and become
profitable.
HISTORY OF ENTREPRENEURSHIP GLOBALLY AND IN KENYA
History of entrepreneurship globally
Entrepreneurship has been part of human history since records began. The bible, in the old
testament, raises the idea of stewardship with regard to utility resources of the earth.( Gen.
2.15)The bible also in the new testament, reveals that gain requires risk (the parable of
talents) (Luke 17.11)
Entrepreneurship is also closely linked to the protestant work ethics and capitalists
(Weber 1995)
Early economists in the 18thc such as Richard Cantilon and Jean Baptiste Say recognized in
the role of the entrepreneur as essential to the progress of the world economic system 8
developed early economic theories on entrepreneurship.
During the industrial revolution entrepreneurship was linked to the creation of wealth and
prosperity (long 1983)
The 1920s and Schumpeter (1934)linked entrepreneurship with the dynamic process on
innovation from the 1960s entrepreneurial SME (s) have played an increasingly significant
role in the economic development of the world (Kirzner 1973)
From the 1980s government have increasingly seen entrepreneurship as a means of

creating innovative technology and services which can increase , national competitiveness
fosters economic growth and employment (stoner and Freeman1992) Commentators
suggests that two main reasons for the ascend reccefs of high tech .
Entrepreneurial SME(s) are the difficulty of the large organizations to grow and prosper in
an increasingly competitive market place .
Consequently, 8th need to decentralize despecialize and downsize the operations (Harrell
1992) In construst in the 1980s those high growth new ventures (SME(s)) known as
“gazelles’ represents only 5% of new business due, but were responsible for as much as
87% of all new jobs created (Zimmbrer&Scarbrough 1996) in the UK in the 1980s small
businesses generated more than 805% OF UNP and more than 40% of employment , more
than 80 Employment growth came from newly started companies (Burns and Dewhurst
1989) This development has accentuated during the 1990s and today entrepreneurs help in
high on the political agenda world wide.
History of Entrepreneurship in Kenya
In Kenya the concept of entrepreneurship was embraced at the end of the 1980’s and early
1990. This was as a result of the international labour organisation (ILO) working in
conjunction with the governments and private sector institutions in the projects related to
SME development and vocational education. Entrepreneurship education was seen as an
important element to develop entrepreneurial attitudes. However, no specific trainings were 
available.
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To close this gap, funds were provided ILO Geneva in 1996, to develop a training package for
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TIVET Institutions; that included entrepreneurship education and business skills.
History of entrepreneurship in Kenya started as a pioneer project borne out of the

collaboration among university of Illinois, International Labour Organisation (ILO), UNDP and
KTTC, in 1990. It was offered at Masters and PhD levels the University of Illinois and KTTC
provided the premises and conducive learning environment. In 1992 the program was
transferred to Jomo Kenyatta University of Agriculture and Technology (JKUAT) while at KTTC
started its first higher diploma class in 1993. The first class was sponsored ILO. Since 1995
students have been paying fees on their own without sponsorship. Otherwise it was, and
still is a popular course. satisfaction especially with those students who have been attached
and apprenticed at their organisations.
Myths associated with entrepreneurship in Kenya
The following are some of the myths associated with entrepreneurship:
1. Entrepreneurs take wild risks at the start of their business. Even though risk is an
integral part of business, the start of business is not considered the highest risk. An
entrepreneur is more likely to face bigger risks at the latter stage of the business.
2. Entrepreneurs introduce break-through inventions in their start-up business. It would
be easy to assume that entrepreneurs introduce new inventions, usually technological
inventions. This is not true. Innovation may be important, but what makes entrepreneurship
successful is the ability to execute an ordinary idea exceptionally.
Most successful entrepreneurs have years of experience in their chosen line of

business. Bill Gates was still a student when he started Microsoft with Paul Allen. This story
of several inexperienced entrepreneurs starting out a new business venture is replicated
over and over again in the lives of millions of other successful entrepreneurs.
1. One needs a lot of money to start a business. This is not so. Money is not always an
important prerequisite to be able to start a business. What sets the successful entrepreneur
apart from the not-so-successful is the ability to make do with what little he or she has. For
instance, they look for other sources of money such as borrowing to grow their business.
2. Start-ups use equity, not debt money. Entrepreneurs who put up equity coming from their
own pocket only comprise less than 50% of the total start-ups. The majority of the companies
are financed debt.
Theories of entrepreneurship
These refer to the various approaches, which have been advanced to give an explanation as
to why entrepreneurs behave the way they do. They are also known as the perspectives of
entrepreneurship.
The theories try to explain whether entrepreneurs are born or made. The born
entrepreneurs inherit the entrepreneurial behaviour from their parents and grandparents
while made entrepreneurs acquire entrepreneurial behaviour from the behaviour in which
they live in.
The following are some of the entrepreneurial theories:
Economic theory
The theory holds that entrepreneurial behaviour is determined economic factors.Thus

entrepreneurs are greatly influenced economic activities. From an economic point of view an
entrepreneur is a person who brings together the factors of production into a combination
to make their value greater than before.
According to Schumpeter, entrepreneurs are innovators who bring together the various 
resources to produce a new product/service through new ways/methods of production,
finding new markets, finding new sources of materials to create a new business. WhatsApp us 
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The economic theory provides basic data in the economic environment – activities for
business start-ups. Thus entrepreneurial activities take place where conditions are
supportive/conducive to investment. This theory revolves around an entrepreneur being an
innovator, combining the various resources/ factors of production to create new
products/wealth.
Psychological theory
The theory holds that entrepreneurs possess unique needs, values and attributes, which
drive them into entrepreneurial behaviour. It holds that people have personal traits and
attributes, mental desires to be independent.
The main proponent of this theory is McClelland who attributed entrepreneurial behaviour to
the high need for achievement. Entrepreneurs are characterised high need for achievement,
which tends to give them high desire to take personal responsibility in risks. They have little
interest in routine activities, which are not challenging. According to this theory,
entrepreneurial behaviour is environmentally determined and is inherent during childhood,
where parents have certain high standards achievement.
Sociological theory
The sociological theory maintains that environmental factors such as values and beliefs
influence entrepreneurial behaviour. (Max Weber, 1904). According too this theory, beliefs
and societal aspects such as social status and recognition influence entrepreneurial
behaviour.
Importance of Entrepreneurship theories
1. Entrepreneurship theories bring greater understanding of entrepreneurship behaviour

exhibited different entrepreneurs.
2. They enable one to understand the need for entrepreneurship and why some people are
more entrepreneurial than others.
The theories bring out various approaches and perceptions held entrepreneurs.
1. Show that the desire for entrepreneurship is innate as well as environmentally determined.
2. Helps us to understand the role played role models through networks that provide support.
Entrepreneurial Environment
The environment within which the business operate has a great influence on the
attractiveness of any opportunity. By business environment, we are referring not only to the
physical environment, which is important and increasingly so, but also the political,
economic, geographical, legal and regulatory contexts. Political instability, for example,
renders business opportunities unattractive in many countries, especially for ventures
requiring high investment with a long payback period. Similarly, inflation and exchange rate
fluctuations, or a week judiciary system, are not a good environment to start a business, even
if the potential returns are high. The lack of infrastructure and services (such as roads,
electricity, water supply, telecommunications, transportation, and even schools and
hospitals) also affect the attractiveness of an opportunity in a given environment.
TOPIC THREE
THE ENTREPRENEUR
Introduction
Different types of entrepreneurs portray certain characteristics and patterns of behavior

which could be all learned and/or acquired depending on the entrepreneur’s environmental
background.
Entrepreneurs may play various roles in the enterprise. They scan the environment, identify
opportunities, plan, organize resources, oversee production, marketing and liaise with their
employees. They also innovate and bear risk.
Types of Entrepreneurs
Entrepreneurs have their own typical qualities depending on their social, economic, political
and cultural environment. Each has an independent way of thinking and a unique approach 
to decision making and handling situations in the business.
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The following are the three main types of entrepreneurs.
1. Craft Entrepreneurs
2. Opportunistic Entrepreneurs
3. Egoistic Entrepreneurs
1. Craft Entrepreneurs
Craft entrepreneurs are those who may start a business using their learnt or acquired skills.
They may exhibit the following characteristics:
1. They are of blue collar origin i.e they come from the informal sector of employment.
2. Their education or training background is focused on the current business activity.
3. They may have low or high technology experience.
4. They have a reputation in a specific industry e.g masonry, teaching, engineering.
5. They are marginal people and were mostly associated with fellow workers. i.e they do not
identify with unions.
6. They have limited cultural background and social induction with entrepreneurship.
7. They are not interested in growing
8.
9. their business ie they are not ambitious. E.gmechanics who have worked in motor factories,
leave to start their own simple garages.
10. They insist that for things to be done right, they must be done themselves
11. They tend to hire people they have known for a long time.
12. They gain their customers through prior relations or personal contacts.
13. They do not hold the lowest post nor are they at the management level in the organization
they worked for.
2. Opportunistic Entrepreneurs
Opportunistic entrepreneurs are those entrepreneurs who may scan the environment in
search of a viable business opportunity that may exist. They are creative and very
hardworking and venture in businesses they do not necessarily have skills or training in.
These types of entrepreneurs exhibit the following characteristics:
1. They are of middle class origin

2. Their education involved many different kinds of courses
3. They have a variety of work experiences and they have been through various educational
courses.
4. They have a reputation across the industry.
5. They are more aggressive/ambitious.
6. They have been in senior profile levels in employment.
7. They are previously associated with managers and business owners.
8. They believe that those holding the lower posts in an organization should handle operations.
9. Their customers are neither gained through prior relations nor personal contacts.
1. Egoistic Entrepreneurs
Egoistic entrepreneurs venture into business not only because there exists a business
opening but because they would also like to satisfy their ego. They are highly motivated.
These types of entrepreneurs are:
1. They are very eager to experiment upon new ideas.

2. They can acquire material and financial resources to experiment upon new ideas
3. Their economic system is well developed enough to bear the costs of venturing into a
business.
4. They are well networked are able to find new markets and customers with ease.
Qualities of an Entrepreneur
Entrepreneurs portray certain characteristics and patterns of behavior which can be all learnt
and/or acquired. Every entrepreneur may not possess all of the qualities useful to make
him/her successful. The following are the various qualities an entrepreneur may have:
1. Risk taking
An entrepreneur is open to risk in his business. They has to make decisions and implement
plans, the success of which cannot be fully guaranteed. He risks financial, material and
human resources at his disposal in the venture that he undertakes.
1. Autonomy/independence
An entrepreneur his/her own nature likes to be his own boss and does not want to follow

the instruction of another person without thinking further. This, however, does not mean
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that they rejects counseling from others. They wants to try his own ideas and while making
decisions,
Menuthey has to form his own opinion and a set of course of action. They is ready to
carry the burden of the consequences of the decisions they makes. Independence of
thought is important.
1. Creativity and innovativeness
entrepreneurs must have an aptitude for searching out new ways and means of doing things.
They must be innovative in their approach to carrying out business activities. To remain
competitive, they must experiment to find out new techniques of production, kinds of
materials, types or variety of products. They attempt to modify the method of manufacture
to accommodate technological developments, discover marketing opportunities, identify
sources of supply and develop sound organizations to meet requirements of the
environment.
1. Internal locus of control
Entrepreneurs possess a high internal locus of control. They believe that achievement of
goals is dependent on their behavior or individual characteristics.
NB: A person with external locus of control believes that achievement of goals is a result of
luck or other people’s action. Such a person is not an entrepreneur.
1. Need for achievement
Entrepreneurs believe in achieving the set goals. The need to achieve may be satisfied
acquiring higher status, succeeding in business, inventing and popularizing a product,
targeting new markets and attracting a greater number of customers. It is the achievement
motive which makes an entrepreneur diversify, expand and innovate.
1. Keenness to learn
Entrepreneurs analyze the results and try to learn from them. They constantly watch the
path they take. They draw inferences from feedback, information and have alternative plans.
Ability to marshall resources
Entrepreneurs have to bring together all the required resources in the right quantities at the
right time. To achieve this, entrepreneurs must have patience, ability to convince others and
a strong conviction that their job is going to be successful.
1. Time-consciousness
Entrepreneurs are interested in timely delivery of results. In order to achieve this they must
complete their activities within a given time.
1. Organizational skills
Entrepreneurs have the ability to organize activities and utilize manpower in order to put
them to productive use.
For effective utilization of resources, the entrepreneur has to build a suitable organization
structure and with it, appropriate manpower.
Hardworking
Starting a business is hard work. An entrepreneur has to cope with the
demanding work of starting a business. Success comes very slowly for those
who are not willing to work hard.
Integrity
Integrity plays an important role in the advancement of any corporation and the lack of it
poses risks of loss of confidence, faith and commitment of employees, clients and colleagues.
Companies can promote integrity establishing the moral standards expected of its
employees and implementing systems to reinforce these standards. This will entail the
provision of model roles, developing codes of ethical conduct and providing information
channels to report questionable actions. Companies should also include integrity in their
evaluations and consider ethical aspects when formulating long-range plans.
Persistence
Successful entrepreneurs are persistent and hardworking. They master self-discipline to such
extent that if a work is important and related to their goals, they will, eventually, complete it.

Getting things done is the vital link between motivations and their outcome. At times,
entrepreneurs force themselves to choose work over fun, a boring job against a pleasant WhatsApp us 
one, working on tax papers rather than reading a glamour magazine. This requires a self-
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control that many people simply fail to develop in them.
Successful entrepreneurs persist.They understand that it takes time to make it really BIG !!!
They are prepared to go the extra mile and do that little bit extra for which they do not get
paid.
Self Confidence
Self confidence is a key entrepreneurial skill for success. It is easy to become demoralized,
frustrated and resentful if you lack self-confidence.
Self-confidence is concerned with how a person feels about his ability. A successful
entrepreneur believes in his abilities. He is not scared to explore, take risk and take difficult
decisions.
Entrepreneurs are highly motivated to achieve. They tend to be very competitive.
Information seeking
Opportunity seeking
Honesty
Goal oriented
Role of an entrepreneur in an enterprise
Entrepreneurs play different roles in an enterprise. These include:
1. Initiator
The entrepreneur as the prime mover of the business. He/she is the director of the
enterprise and comes up with ideas which he convinces the members of the organization to
follow. He/she is therefore the promoter of the business.
1. Director
The entrepreneur as a person who engages the participation of others. They knows that they
cannot run the enterprise single handedly. To effectively manage the enterprise, he requires
the knowledge and skills from diverse persons. The entrepreneur incorporates shareholders
incase;
1. The enterprise is too large for him/her to purchase.

2. They is not able to purchase the enterprise alone.
They does not want to commit his/her time wholly in the business.
1. Manager
The entrepreneur as the person in charge of coming up with the organizational structure.
The entrepreneur is in charge of developing an effective organizational structure showing the

distribution of the employees’ posts and responsibilities. The organizational structure is
important for effective control and monitoring operation in the firm and facilitates
communication with workers.
– The entrepreneur as the person in charge of developing an organizational design. He

has the role of establishing an effective organizational design reflecting the daily activities of
the organization in relation to time, beliefs and philosophies and how the business relates
with the external environment.
1. Financier
The entrepreneur and the director. They is the controller of all the enterprise activities. He
mobilizes resources needed to start and run a business i.e finances, raw materials, human
effort among others.
Entrepreneurial Tendency Test
Ring round your answer (Yes, Maybe, or No) to each of the following questions, then check
your score below. 
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I amMenu
persistent Yes Maybe No
When I’m interested in a project, I need less sleep Yes Maybe

No
When there’s something I want, I keep my goal Yes Maybe No
When there’s something I want, I keep my goal
Clearly in mind Yes Maybe No
I examine mistakes and learn to succeed
I have new and different ideas
I am adaptable
I am curious
In am intuitive
If something can’t been done, I find a way
I see problems as challenges
I take chances
I’ll gamble on a good idea, even if it isn’t a sure thing
To learn something new, I explore unfamiliar subjects
I can recover from emotional setbacks
I feel sure of myself
I’m a positive person
I experiment with new ways to do things
I’m willing to undergo sacrifices to gain possible long-term rewards
I usually do things my own way
I tend to rebel against authority
I often enjoy being alone
I like to be in control
I have a reputation for being stubborn
Once you have answered all the questions, give yourself 3 points for every ‘Yes’ answer, 2 for
every ‘Maybe’ and 1 for every ‘No’. Add up your score.
60-75 points
You possess the attributes of the entrepreneur. You can start your business plan
immediately.
48-59 points
You have potential but need to develop yourself. You may want either to improve your skills
in your weaker areas or hire someone with these skills.
37-47points
You may not want to start a business alone. Look for a business partner who can
complement you in the areas where you are weak.
37 points and under
The entrepreneurial life may not be for you. You will probably be happier and more
successful working for an established company. If you still hanker after doing your own
thing, remember there are organizations that reward those employees who take an
entrepreneurial approach in a corporate context.

TOPIC FOUR WhatsApp us 
CREATIVITY
Menu AND INNOVATION
Introduction
Customers’ tastes and needs are continually changing. Thus there is need for the
entrepreneurs to think of new ideas and better methods of running their businesses in order
to satisfy the customer. Creativity and innovation are therefore key to generation of such
new ideas and methods of improving goods and services to meet the customers’ needs.
This sub-module unit discusses the importance of creativity and innovation, the barriers to
creativity and innovation including managing barriers to creativity and innovation.
Content
Meaning of creativity and innovation
1. i) Creativity
Creativity is the ability to bring something new into existence. It is the ability to think and act
in new ways. This is done through the process of germination, preparation, incubation,
illumination and verification.
1. ii) Innovation
It is the process of doing things in a new way for value addition. It is thinking creatively about
something already existing. Innovation transforms creative ideas into useful application. For
example, having a new use for old things. It is also an intentional change to add value. For
example, the tape recorder, walkman, and CD player are all innovations on the phonograph
or landline telephone to cell (mobile) phone.
iii) Discovery
It is making known that which has been in existence but whose uses have not been
perceived. For example, Harvey’s discovery of the circulation of blood.
1. Invention
It means bringing something new that has not been in existence into existence. It is the act of
creating or producing exercise of the imagination and have no prior existence. For example,
cellular phone money transactions.
Process of creativity and innovation
Process of creativity and innovation
The process most commonly used to encourage creativity is brainstorming. It works best in a
group situation. Another process that can be used both individually and in a team
environment is the SCAMPER process. The process works particularly well in creating new
products and services that will add additional value to customers. Here is how to use the
SCAMPER process, step step:
SUBSTITUTE
1. Think of ways of replacing one thing with another. For example, could plastic replace wood,
aluminum, or steel? Could electronic transfer replace the mail or a phone call replace a fax
message?
COMBINE
1. Are there ways of bringing things together that could result in one unique item? For example,
could some services be combined to produce one-stop shopping?
ADJUST, ADD, OR ADAPT
1. Figure out what changes can be made to improve products. Similar products could be added
together, for example, such as two blades joined to a twin razor. Adding stamps to each
other can create a single roll or sheet. An alternative is to unite dissimilar products to create
something new, such as a Swiss Army knife. 
MODIFY, MAGNIFY, OR MINIATURIZE WhatsApp us 
1. Think
Menu about the possibilities of changing the size or the nature of the product itself. Post-it
Notes have done an exceptional job of taking the basic technology of a multiple-stick product
and producing
KASNEB different sizes,
RESOURCES  colours, shapes, and
UNIVERSITY uses.
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PUTPRODUCTS TO OTHER USES
1. This is a commonly used strategy. Excess newspapers can be made into fire logs; a kitchen
knife can be used as a screwdriver.
ELIMINATE OR ELABORATE
1. Consider the benefits that can be derived from less use. For example, packaging is reduced if
refills are used. Generic products save advertising.
REARRANGE OR REVERSE
1. Investigate the advantages of changing the order or sequence of events, or see if things can
work the opposite way. One example with a twist on this theme would be a car that goes in
two directions, not only one.
THE PROCESS OF INNOVATION
Creativity as a process has several stages. These are:
1. Germination
2.
Getting the mind ready for creative thinking using
methods such as
realizing that every situation is an opportunity to learn

reading on a variety of topics/subjects
creating a file of interesting articles
developing the ability to listen to and learn from others
attending professional/ trade association meetings, both to brainstorm with others having a
similar interest and to learn how others have solved a particular problem.
Investigation.
Studying the problem and understanding its components
1. *Transformation.
Identifying the similarities and differences in the information collected.
1. Incubation.
The subconscious needs time to reflect on the
information collected. Incubation can be enhanced by
doing something totally unrelated to the problem/opportunity under investigation

taking time to reflect (freeing the mind from self imposed restrictions)

playing and relaxing
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thinking
Menu about the issue before going to sleep so that the subconscious can work on it during
sleep
working
KASNEB onRESOURCES
the problem oropportunity in a different
UNIVERSITY environment.
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1.
This occurs when all the previous stages start getting
clear.
Verification.
Involves testing if the idea will work, is practical to implement and is a better solution to a
particular problem or opportunity. Experiments, test marketing and piloting are some of the
methods that can be used.
(vii) Implementation.
Transforming the idea into reality bringing it to the market. This is what distinguishes the
entrepreneur from the inventor.
Importance of creativity and innovation
Creativity and innovation are key to generation of new ideas and methods of improving
goods and services for customer satisfaction. They are key to the success of a business
particularly when strategizing during strategic planning, and when designing new products
and services. Creative thinking and innovation are particularly useful during planning and
setting out strategies to compete. Thus creativity and innovation:
1. i) Leads to increased productivity

2. ii) Helps in profit maximization
iii) Motivates employees to become more creative
1. iv) Leads to diversification of products and services

2. v) Introduces a variety of goods and services
In order to arouse creativity, the following ideas may be explored:
Is there a better way of doing things in a business organisation?

Need to challenge custom, routine and traditions of the organization.
Barriers to creativity and innovation
These are limitations to creativity and innovation which may include the following:
Negative Attitude
The tendency to focus on the negative aspects of problems and expend energy on worry.
Fear of Failure
For an entrepreneur failure is not a discouraging factor but is a necessary condition and a
stepping stone to success.
Executive Stress
It is the state of not having time to think creatively. An over-stressed person finds it difficult
to think objectively. Unwanted stress reduces the quality of all mental processes. An
entrepreneur should avoid executive stress because it hampers creativity
Following Rules
A tendency to conform to accepted patterns of belief or thought – the rules and limitations of
the status quo – hampers creative breakthrough. Some rules are necessary, but others
encourage mental laziness.
Making Assumptions
Both conscious and unconscious assumptions restrict creative thinking. There is a need for
an entrepreneur to identify and examine assumptions made to ensure new ideas are not
excluded.
Over-reliance on Logic

This is investing all intellectual capital into logical or analytical thinking – the step-by-step
approach – which excludes imagination and therefore creativity. WhatsApp us 
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Other barriers include the following:
High cost of research and development.
Inability to protect invention through patents
Searching for the one right answer
Being over specialized
Believing that one is creative
Creativity is not taken seriously
Managing barriers to creativity and innovation
Barriers to creativity and innovation can be overcome removing obstacles to creativity and
logical thinking. The barriers to creativity can be managed using the following process:
Stage 1: Experience
Experience is needed in order for one to discover a creative solution. That requires being
open to ones environment and feelings.
However, there are blocks to obtaining experience such as:
Fear of not learning. If you feel unable to retain information, you’ll be anxious about new
experiences. If you fear being tested on what you were supposed to learn, you may shut
down. If your self-concept calls you incompetent, you won’t put yourself in a position to be
humiliated. And if you are always being compared to people who are supposedly “brilliant,”
you may be driven away. All of these can limit your experiences.
Fear of violating standards. Were you raised to believe that certain topics are “none of your
business,” certain actions “impertinent”? If these feelings cause you to feel “out of bounds,”
you’ll avoid investigating a wide range of phenomena and your curiosity will shut down. You
may even close off your unconscious and all the creative potential it holds.
Stage 2: Association
You must be able to associate experiences into a useful product.
What are the blocks to making associations?
Over valuing rationality. If you stay in control being utterly rational, you may reject associative
thinking, and forgo using intuition. Equally, you will curtail your creativity..
Fear of self-awareness. To make useful associations, you must avoid self-deception and
understand the consequences of your actions. For example, one lab director eventually
realized that his unwillingness to acknowledge other people’s contributions stemmed from
his fear of seeming incompetent. Denigrating the “competition” helped him avoid feeling
uncreative himself.
Stage 3: Expression
Once you’ve associated diverse experiences or information, you must express your idea: a
creative association isn’t worth much unless you can communicate it.
What are the obstacles to expression?
Fear of embarrassment. If you are uncertain of your abilities, fear criticism, or fear
speaking before a group (or certain individuals), you’ll have difficulty bringing ideas to light.
Such ideas will remain underdeveloped for lack of feedback.
Fear of assertion. If you express what you feel, will people still like you? Will you get into
trouble? Tom Sawyer always figured that “staying mum” kept him out of a jam; but if you
agree, your inhibition about expressing ideas will limit your creativity.
Stage 4: Evaluation
People who undervalue their ideas tend not to be creative. Some hurdles an stand in the
way of your evaluation process:
Fear of humiliation. If you rate your solution highly, and other people think it’s rotten, you
could end up looking like a boaster or fool. (That’s why people adopt false modesty or
convince themselves that their creations are boring or obvious.)
Fear of rejection. On the other hand, if you are negative about your own solution or product,
people may ignore it—and you. After all, if you don’t think much of your work, why should
they?
Stage 5: Perseverance
Original ideas and products are fun, but unless you persevere, they won’t make anybody rich.
The concept of continuous improvement says any process or product should be endlessly
revised and improved.
Perseverance-related blocks include:

Fear of failure. What if you carry your idea to completion and find it’s not as good as you
thought (meaning you’re incompetent)? Therefore play it safe failing to develop your product WhatsApp us 
to the point where it’s a truly creative work.
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Lack of rewards. Much of your creative activity is probably motivated the admiration your
creations
KASNEBinspire in others.Unfortunately,
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creative impulse into a product is less rewarding. Do you regard yourself as an “idea” person
instead of a “detail” person? This attitude may partly stem from fear that you are poor at
follow-through, meaning your impulse will come to naught.
Other ways of managing barriers to creativity would include:

:
i)Budgeting for research and development
ii)Strengthening public institutions that process the(such as KIRDI, KIPRI and WIPO) patenting
proces
iii)Rewarding creativity
iv)Promoting creativity training
v)Avoiding mental blocks
vi)Being systematic
vii)Being a problem solver
viii)Approaching issues from different angles
Focusing on end results rather than the means

Embracing divergent views
TOPIC 5
ENTREPRENEURIAL CULTURE
Introduction
An Entrepreneurial Culture is a system of shared values, beliefs and norms of members of an

organization or community. It includes; valuing creativity and tolerance of creative people,
believing that innovating and seizing market opportunities are appropriate behaviors to deal
with problems of survival and prosperity, environmental uncertainty, and competitors’
threats, and expecting the community and organizational members and to behave
accordingly.
An entrepreneurial culture will lead to the growth of trade and industry in a country.
This sub-module unit discusses the concept of entrepreneurial culture and the factors that
inhibit entrepreneurial development.
Concept of Entrepreneurial Culture
Culture encompasses a wide variety of elements, such as values, norms and artefacts. These
are dependent on language, social situations, religion, political philosophy, economic
philosophy, education, manners and customs.
1. Values
These are ideas about what is important in life. They guide the rest of the society.
1. Norms
These are expectations of how people will behave in different situations. Each culture has
different methods called sanctions of enforcing norms.
Sanctions vary with the importance of the norm.
Norms that society enforces formally are called laws
Artefacts
These refer to material culture. They are derived from the cultural values and norms.
NB: Culture is dynamic. Cultural change can be caused the environment inventions and other
internal influences and contact with other cultures. 
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Example: th
MenuSome inventions that affected western culture in the 20 century were the birth
control pill, television
and the Internet. The television brought similar visual programmes into many homes but
influences how and when family members interact with each other.
The rate of savings and investment depends on the influence of cultural benefits upon the
people. The culture may emphasise on some jobs while detesting others. Some communities
may be more entrepreneurial than others. For example, the joint family system in which
elders opinions are not questioned, may lead to children who are unable to develop, expand,
innovate or change the business.
Elements of Entrepreneurial Culture
The following are elements of entrepreneurial culture:
People are empowerment focused

Value creation through innovation and change
Attention to the basics/detail
Hands-on management
Doing the right thing
Freedom to grow and to fail without embarrassment
Commitment and personal responsibility
Emphasis on the future
NB: It is through the interaction of founding values, theories and new venture that
organisational culture begins to take shape and perpetuate itself.
If long term values are held then the creation of culture the entrepreneurial team may be a
good predictor of the future of the firm.
Habits that promote entrepreneurial development
As stated earlier, values, norms and beliefs guide the society towards acceptable behaviour
which leads to formation of good habits which may promote entrepreneurial development.
The habits include:
Independence
A person who is independent finds it difficult to work for others. Such a person also has
the ability to create and innovate, therefore promoting entrepreneurial development.
Time consciousness
Entrepreneurs value and effectively manage time and are able to achieve set goals.
Direct/personal involvement
An entrepreneur is a hands-on person and believes in participatory approach.
Risk taking
An entrepreneur continually takes moderate or calculated risks. This enhances growth of the
enterprise.
Willingness to fail or make mistakes
An entrepreneur does not fear failure but learns from it.
*** continue from here


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Family history
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Decision
Follows dreams with decision
Relationship with others
Transactions and deal making. Build strong relationships with people around them
Factors inhibiting entrepreneurial development
The following factors may inhibit entrepreneurial development
Poor or lack of business acumen

Poor marketing techniques
Poor pricing policy or poor casting
Poor networking and benchmarking to expand business horizon, customer base and markets
Negative attitude towards entrepreneurial culture
Lack of achievement motivation
Poor delegation due to belief of self righteousness, confidence or lack of trust in other
people.
Inability to uphold new technology, ideas and practices
Failure to utilise time effectively
Ways of managing factors that inhibit development of entrepreneurial culture.
These include:
1. Relevant training to gain skills and experience

2. Ability to apply marketing, research, promotion and publicity
3. Employing people with right qualification to advice on pricing and costing of products to beat
competition
4. Upholding social networking, joining business groups like chamber of commerce and
business associations in order to expand business horizon, customer base and markets.
5. Inculcate entrepreneurial culture and have positive attitude outlook towards entrepreneurial
activity benefits.
6. Employ qualified experienced workers and delegate responsibility and encourage teamwork
and team spirit
7. Training workers in appropriate technology use and innovative ways and practices
8. Manage time effectively working within blocks of time. They can also be trained in time
management and time valuation.
TOPIC 6
ENTREPRENEURIAL OPPORTUNITIES
Introduction
Starting a business requires knowledge, skills, abilities and values. It is therefore important
for entrepreneurs to develop viable business ideas identifying community needs for products
and services.
This sub-module unit focuses on business ideas and opportunities, methods of generating
these ideas and opportunities and finally assessing the viability of the generated
opportunities.
Meaning of business opportunity
A business opportunity is an attractive idea which provides the possibility of a return for
the entrepreneur taking the risk. Such opportunities are presented customer requirements
and lead to the provision of a product or service which creates or adds value to the buyers or
end users.
Characteristics of a good business opportunity
A good business opportunity must fulfil or be capable of meeting the following:
Real demand i.e. it should respond to unsatisfied needs or requirements of customers who 
have ability to purchase and are willing to exercise that choice.
Return on investment – provide durable, timely and acceptable returns or rewards for the WhatsApp us 
risk and effort required.
Competitive
Menu – Equal to or better – from the viewpoint of the customer – than other available
products or services.
Meet objectives
KASNEB – meet thegoals UNIVERSITY
RESOURCES and aspirations of the personPDF
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Available resources and competencies – be within the reach of the entrepreneur in terms of
resource, competency, legal requirements etc.
Ways of Generating business ideas
What is a Business Idea
An opportunity in the environment which, can be translated into a business activity.

The existence of a situation in the environment which, can be advantageously turned into a
business activity.
The existence of an opportunity which can be exploited for making money through the
operation of business activities.
It is the response of a person (s) or organisation to solving an identified problem or to
meeting perceived needs in the environment (markets, community)
Why search and evaluate business ideas?
You need a great idea to start a new business. A good business idea is essential for
successful business venture both when starting a business and to stay competitive
afterwards
Business ideas need to respond to market needs. Customers have needs/wants waiting to be
satisfied. Firms that are able to satisfy these requirements are rewarded.
Business ideas need to respond to changing consumer wants and needs. i.e. provide
opportunities for the entrepreneur to respond to demand with new ideas ,
products/services
Business ideas help entrepreneurs stay ahead of competition. Challenge is to be different or
better than others. If you don’t come up with new ideas products/services a competitor will.
Business ideas use technology to do things better. Technology has become the major
competitive tool in today’s markets as a result of which many people have to come up with
new ideas.
Business ideas are needed because the life cycles of products are limited. Products have a
finite life, they become obsolete or outdated. Firms have to introduce new products
Business ideas help to ensure that businesses operate effectively and efficiently .
There are so many business opportunities available at any one time and the requirements
for translating them into business activities differ between each of them.
The need to develop a competitive edge providing something new that has little or no
competition
The success and profitability differ between various business opportunities, hence need to
pick one with profit and success potential.
Finding a good idea is the first step into transforming the entrepreneurs desire and creativity
into a business opportunity.
Sources of business ideas
Ideas can be generated from:
1. Hobbies/personal interests
2. Personal skills/experience
Franchises – An agreement where manufacturers or sole traders of a trade mark,

product/service gives exclusive rights for local distribution to independent retailers in return
for their payment of loyalties and their willingness to conform to standardized operating
procedures. Common type of franchise are those that offer name, image and method of
doing business and operating procedure.
1. Mass media (newspapers, magazines, TV, internet)

2. Business exhibitions
3. Surveys
Customer complaints
Changes in society
1. Brainstorming
2. Being creative

Ways of generating business ideas
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There are various ways through which business ideas can be generated. These include:
i)Identifying
Menu a need in the community: people usually have many unsatisfied needs. By
carrying out a market survey on the location where you need to establish your business and
talking to the potential
KASNEB RESOURCES customer
 may reveal gaps in
UNIVERSITY that market.PDF
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iii)Market research: Conduct a market survey and try to identify business opportunities
existing in the market. People may be requiring new product/services or the ones existing
could be having several weaknesses. These are good opportunities for you.
v)Listening to complaints of customers so that you improve an existing business.
vi)Brainstorming- this involves sitting in a group and trying to think of as many possible
businesses as possible using the ‘freewheel ’policy . take time and digest all the suggested
ideas as a basis for making the final decision on the one most suitable for you.
v)Creativity – By looking at things in a new way and combining two or more ideas in a new
way, such as, one stop shopping spots for customers e.g.. a restaurant and a salon
combination.
Business ideas can also be generated through developing personal hobbies and discussions
with friends
Guidelines for Business Idea Generation Process:
Think of as many ideas as possible

Go out, look and listen.
Always analyse ideas carefully before finally selecting which ones to implement.
Be simple
Start small . “If you want to go somewhere start small” Schummacer
Evaluation of business opportunities for viability .
Ideas and opportunities need to be screened and assessed for viability once they have been
identified or generated. This is not an easy task though important because it makes the
difference between success and failure.
The exercise certainly helps in minimising the risks and thus the odds of failure.
Identifying and assessing business opportunities involves determining risks and rewards/
returns reflecting the following factors.
i)Personal goals and competencies of an entrepreneur.
It is important for an entrepreneur to possess competencies, knowledge, skills and abilities

before starting a business where these competencies are lacking, it’s vital to develop or bring
in others/managers that compliment what is already available.
ii)Length of the ‘window of opportunity’.
Opportunities do not exist forever. The entrepreneur has to assess how long this window will
be opened in order to make an investment decision.
iii)Industry/market.
Is there a need for the product/service? It is also important to know the size of the market.
iv)Management skills.
Those businesses that require high level of capital injection, require proper management
skills.
v)Competition
Check out whether the business has a competitive edge over other competitors e.g. potential
constraints and if the industry faces existing entry barriers.
vi)Resources
Availability and access of these resources determines whether certain opportunities can be
pursued.
vii)Environment
This refers to political, economic, geographical, legal, regulatory and also
physical environment within which a business operates.


viii) Business plan
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process of examining the factors discussed above is often the initial step in developing a
business plan. Investors and lenders may require these issues to be considered and set out
in form of a business
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TOPIC 7ENTREPRENEURIAL MOTIVATION
For entrepreneurship to thrive, an entrepreneurs needs to be motivated. Motives are the

needs, drives and values that add energy to and direct one’s abilities.
This sub-module unit addresses the meaning of motivation, motivational theories and
factors.
Content
Definition of terms
Motivation refers to a drive that is sufficiently pressing to direct the person to seek
satisfaction of the need while a need becomes a motive when it is aroused to a sufficient
level of intensity. In human psychology it is realised when a person feels strongly that he is
lacking something. That person is bound to take a certain positive action so as to reduce or
eliminate the deficiency. The person is therefore motivated the need to act in a manner such
that his need is satisfied. Therefore, the forces that have moved that person to react in the
manner he does are his motivations.
Motivation can be viewed better looking at factors which help sustain the quality or intensity
of the manifested behaviour.
Many theories have been developed on motivation. The following are some theories that
could support motivation.
Achievement Theory (mcClelland)
Human beings are seen to be driven three main factors:
Need to achieve
Need for power
Need for affiliation
To achieve means success and therefore the underlying entrepreneur motivation. If you need
to achieve you select goals which will accomplish the need. This need makes an entrepreneur
to be persistent. They choose challenging tasks. This motivation behaviour is related to
parental characteristics, family, culture, role models.
Laws of Control
Talks about the need to control. To make things happen. We want to see the outcome of an
event. Our behaviour will determine the results. Self concept here is very crucial, want to
strive for your success(internal laws of control)
External laws of control – believes that outcome of an event is influenced factors beyond you.
They believe in others influence on an activity. So an entrepreneur must know whether they
is driven an inner need to succeed and win. Are you internally or externally driven. In
evaluating your internal – external control dimensions, an entrepreneur depicts a sense of
control over his/her life.
Abraham Maslow’s Hierarchy of Needs
This theory was developed Maslow in 1954. It states that human needs are arranged in
hierarchical order beginning with the most basic need.
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Maslow suggests that each level in the hierarchy must be achieved before an entrepreneur
can be motivated the next level. E.g. when a social need is satisfied, it ceases to be a
motivator. Your full potential motivation depends on you not others. One must strive to
realise your full potential.
Many people like the comfort and security they have in their jobs. As long as they are able to
provide to their families. They could be having resources needed to start a venture but have
no drive to do so.
Motivation for venturing into business vary a lot. Those frequently cited would include, both
internal and external motivational factors
Entrepreneurial motivation factors
Although the motivations for venturing out alone vary greatly, the following are some of the
reasons cited for becoming an entrepreneur:
Internal motivations and drives include:
1. Need for self actualisation

2. Need for achievement
3. Need to take up a challenge
4. Need for inadequacy
5. Need for success in certain class (social)
6. Need for adventure – discover the business world
7. Need to reduce tension
8. Need to acquire the social status
9. Need to control power
10. Unemployment
External motivations and drives
1. Role models – looking at those already successful in business

2. Family background
3. Training
4. Support social systems
5. Geographical position of the area
6. Needs for external income as a push 
7. Government incentives
8. Market availability WhatsApp us 
9. Infrastructure
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10. Credit facilities
TOPIC 8 ENTREPRENEURIAL COMPETENCIES

Introduction
Entrepreneurial competencies play an important role in entrepreneurship development. To

achieve high productivity levels in the enterprise, the entrepreneur needs to acquire
entrepreneurial competencies in order to carry out effective managerial and entrepreneurial
functions. With the acquisition of entrepreneurial competencies activities such as;
employee motivation, organisational communication, employees training and development,
participation and decision making, among others will be now be performed effectively.
Definition of entrepreneurial competence
A competence is the ability, which an individual requires to do an assigned job. It is a work

related concept which refers to areas of work at which the person is competent.
Entrepreneurial competencies are clusters of related knowledge, attitudes, and skills which
an entrepreneur must acquire through managerial training and development to enable him
produce outstanding performance, maximize profit, while managing a business venture or
an enterprise
Key entrepreneurial competencies
To achieve high productivity levels in the business enterprise, an entrepreneur requires

having entrepreneurial competencies. The following are some of the competencies
necessary for setting up and managing a successful business enterprise:
1. Time management
Time is a scarce resource, it is irreplaceable and irreversible, therefore to achieve more in the
day to day business, the entrepreneur must be thoroughly equipped with the skills for
managing his/her time effectively. The entrepreneur needs to learn how to manage their
time effectively carrying out activities such as; quick decision making habits, keeping diaries,
delegating duties, avoiding unnecessary interruptions, properly conducted meetings,
avoiding queues, selecting and following priorities among others. A successful entrepreneur
is an effective time manager.
1. Communication
Communication is the transfer of ideas from the sender to the receiver. It is a means of
transmitting information, work instructions and feedback in the business enterprise. It is an
indispensable management tool, and an entrepreneur must learn to communicate in correct,
clear, short and courteous manner in order to accomplish desired goals. The entrepreneur
requires effective communication skills for the following reasons:
1. Communication process helps the entrepreneur effect the managerial functions of planning,
organizing, staffing, influencing, interacting, controlling and coordinating.
2. It facilitates distribution of work to various categories of staff.
3. It is an effective tool for staff participation in decision-making and entrepreneurial
effectiveness.
4. It enhances the development of actual understanding among all organizational members.
5. It helps create good public relations of image for an organization.
1. Human Resources Management
The human resources are the most difficult to obtain, the most expensive to maintain and
the hardest to maintain in a business enterprise. The entrepreneur needs to put in place
both human resources (labor) and capital resources (money, machinery, materials and
methods) in order to achieve the overall organizational goals and objectives. The effective
management of human resources determines the success or failure of the organization 
because all other resources depend on the human element.
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As the business enterprise grows, the entrepreneur may need to hire new employees. To do
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so, he must follow important procedures for of interviewing, hiring, evaluating and preparing
job description for new employees.
1. Marketing Management
Marketing skills in the growth stage of a new venture are also critical to a venture’s continued
success. A business enterprise will need to develop new products and services to maintain
it’s distinctiveness in a competitive market. This should be an ongoing process based on
information regarding changing customer needs and competitive strategies. This information
can be obtained formally using survey or focus groups, or informally direct contact with
customers the entrepreneur or his/her sales forces.
1. Social Responsibility
The establishment of every business venture is backed up the profit motive which leads to
the production of goods and services. The business venture also has the responsibility to
embark on certain projects within and outside its environment as part of its social
responsibility. The entrepreneur needs to effect some social responsibilities contribution to
community development, product safely, employment generation, ethical business among
others.
1. Leadership
Leadership is an important factor in determining the success or failure of a business

enterprise. For an entrepreneur to succeed, they must have the ability to direct the
organization and persuade others to meet the objectives of the business. They has to be
creative with unique leadership qualities and personal styles.
1. Decision- making
Decision-making is very important to the success of an entrepreneur. They makes decisions

on a daily basis and therefore has to acquire adequate knowledge and skills in decision
making to enable him/her make the right decisions and implementing them in order to
achieve the optimum result in a given situation.
1. Financial Management
Every business enterprise requires capital with which to start its operation. This capital refers
to the money needed to start and operate the business assets. An entrepreneur needs to
acquire knowledge on financial management issues like anticipation of financial needs for
the enterprise, acquisition of funds and allocation of funds in order to yield optimum result.
The essence of financial management knowledge is therefore to ensure that there is

adequate cash on hand to meet the necessary current and capital expenditures as well as to
assist in maximizing growth and profits.
TOPIC 9 STARTING A SMALL BUSINESS
When starting a business the entrepreneur must comply with certain requirements and
regulations.
This sub-module unit looks at the procedure to be followed in starting a business, factors to
be considered in starting a business including support services required and available for the
entrepreneur.
Procedure for starting a Small enterprise
For a business to succeed the right approach must be followed. Below is a suggested
approach that can be followed:
1. i) Idea generation.
2. ii) Market survey: 
– Define problem, target population, select sample, define survey instruments, collect
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data,
analyse
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1. Business plan
– business description
– marketing
– operation/production
– management
– finance
– risks and assumption
1. Selection of a suitable location.
iv)mobilisation of finance
Business registration
v)Licensing
Factors to consider when starting a small enterprise
Below are some of the factors to consider when starting a business:
1. Entrepreneurial traits
2. Business management and technical skills
Long term market demand for product/service
1. The cost of starting, operating and personal finance

2. The level of competition – direct, indirect and future
3. The business location – zoning law and appropriateness
The rules and regulations for operating the business.

Legal registration
Tax compliance
Relevant licenses
Code of conduct
Environmental requirements
The anticipated profit.
Importance of profit
Adequate to cover inflation rate and opportunity cost
Adequate to cover all expense, savings and investment
1. The machinery, tools and equipment required and their cost.
Lease/buy decision
Calculation of lease/ buy decision
Maintenance cost
Availability of spare parts
Cost of service
Availability of technical support
Technological advances
1. The source of supply of goods/raw materials.
Identify long term supply sources/ reliable source

Quality of supply
Alternative sources of supply
Terms of supply should be favourable
Causes of Business failure
1. Inappropriate business management and technical skills (adaptable to changing customer

needs).
2. Inadequate financing
Start-up 
Operating
Expansion capital WhatsApp us 
Personal
Menu expenses
Lack of proper record keeping
Use of records
KASNEB for sound decision
RESOURCES  making
UNIVERSITY RESOURCES PDF KISM RESOURCES KNEC Section  CHRP ACCA IFRS U
Little understanding of accounting records
1. Improper costing and pricing
Retail
Manufacturing
Service business
Direct costs
Indirect cost
1. Incompetent employees
Lack of motivation
Poor pay
Unskillful
Job not marching skill
Employment of relatives
Inaccurate recruitment procedures
Training and development
Clear job description
1. Neglecting customers
Customer centered organization

Exceed customer expectations
Survey customer satisfaction
Provide avenue for resolving customer issues
Prompt service and resolution to customer
Customer friendly terms
Ignoring competition
Know your competitors
Know your position in regard to your competitor
Know the competitors strategies
Note direct, indirect and future competitors
Coping strategies
Neglecting suppliers
Make prompt payments
Develop good relationship with suppliers
Adequate time to supply
Forms of business ownership
The following are the types of business organisations:
i)Sole proprietorship –This is a business owned one person.
Advantages.
Ease of formation: this is the easiest form of business organization to establish. There are no
complex forms to complete and no documentation required between you and any other
party. It involves registering your choice of business with the registrar of companies filling in
a simple form and paying a small registration fee.
Easy to raise capital.
Owner makes independent decisions: the business owner has complete control over the
business is solely responsible for all decisions in the business.
Owner has personal contact with employees and customers.
Owner enjoys all the profits.
Flexibility: the business owner is able to respond quickly to business needs in day-to-day
management decisions of the business. One can easily take advantage of an attractive
business opportunity.
Total control of business
Disadvantages
Bears all the losses.

Capital base may be limited: This kind of business has less financing capacity. The amount of
funds a sole proprietor can raise is limited to their assets and their credit worthiness.
Has unlimited liability: The business owner has little or no protection against personal liability
in the event of bankruptcy or adverse legal judgement. Personal assets such as the owners 
house, land, car and investments are liable to be seized if necessary to pay outstanding
debts. WhatsApp us 
Success of the business depends on the entrepreneur’s hard work.
Business
Menu operations can be affected death of the owner.
ii)Partnerships
A partnership is an association of two or more persons who come together to carry on a

business with a view to making profit. Although it is possible to establish a valid partnership
without a formal agreement, it is advisable to sign an agreement first. The agreement will
state:
The effective date of the partnership.

The business name of the partnership.
The contributions of capital each partner
How the business profits and losses will be shared.
How a partner may withdraw from the partnership
How the business assets and liabilities will be shared in the event of a dissolution.
Advantages
Capacity for more capital; partners can raise more capital than a sole trader. The asset base is
much higher.
Work is divided among partners.
Better combination of skills and talents: for example, a mechanic and driver could successfully
combine resources and talents to start a driving school.
Losses and liabilities are shared among partners.
Business can easily expand.
Formation of the business is simple: the registration and legal formalities are easy and simple.
Disadvantages
The liability of partners is unlimited.

Partners are likely to disagree on various matters affecting the business.
If one partner makes a mistake, all other partners suffer the consequences.
Some partners may work harder than others, yet the profits are shared. This may discourage
a hard working partner.
If the business relies heavily on one partner and the partner leaves or dies, the firm can
easily collapse.
Control is shared
iii) Private limited company – It is formed a minimum of two shareholders
and a maximum of fifty.
Advantages
Can raise more capital through sale of shares.

It has limited liability.
Death of a shareholder does not affect its operations.
They are managed professionals.
Disadvantages
Shareholders can only transfer their shares with the consent of other shareholders.
The company is not allowed to appeal to the public for extra capital, so it may find it difficult
to raise money for expansion.
Accounts of the company must be filed annually with the registrar of companies.
iv)Public limited company – It has a minimum of seven shareholders and no
maximum number of shareholders
Advantages
1. Shareholders liability is limited to the amount contributed.

2. It can raise more funds through sale of shares.
3. There is no restriction on the transfer of shares.
4. Public companies can easily expand due to large capital base.
Disadvantages
1. The procedure of forming the company is long and complicated.

2. Raising capital can be expensive due to the cost involved.
3. As the company grows it may be difficult to manage. 
4. Once established it has to comply with many regulations.
5. The accounts of a public company must be published, so there is no secrecy or privacy about WhatsApp us 
its affairs.
6. Owners
Menuexercise little control over the business.
1. v) Co-operative – It is formed people with a common interest such as those in the same
trade or dealing in similar commodities.
Challenges faced when starting a small business
1. Estimating market demand

2. Estimating start –up capital and operating expenses
Meeting collateral requirement – obtaining money to adequately fund the start –up
1. Meeting legal requirements

2. Financial institutions are redundant to lend to start –ups
3. Identifying reliable source of supply
Lack of entrepreneurial skills, business management skills and technical

Selecting a suitable business location
1. Deciding on the type of business ownership
`Business life cycle
Insert diagram
Business Life Cycle: 5 Stages of Small Business
In the small business life cycle not every business will go through every stage, and not all
small businesses will succeed as a result of these stages. However, they are proven stages or
small business that are an important part of running a small business, whether from home
or from a formal office.
Stage One
The first stage of any small business is obvious – establishment. At this stage, the business is
being created, planned and the early days of its operations take place.
For some, this is the only stage that a small business may see, as it is far one of the most
difficult to survive. Many things can go wrong at this stage; thus, good business planning a
crucial and necessary part of it.
Without a good business plan, it is impossible to get a small business off the ground, running
and eventually moving through to the next stages of its life cycle.
Stage Two
The second stage of small business in the small business life cycle is the growth period.
During this stage, a business has an initial time of negative profit until it breaks even and
begins to show increased revenues that allow it to truly grow. This is also the stage that the
real test of a business comes into play.
How the business is managed and how it is able to compete within its designated market will
determine whether it will survive, heading to the next stage – or whether it will decline and
reach the last stage of its life.
Stage Three
The third stage of small business is about expansion. This is the point at which a business
gets to the point where there is sufficient revenue being brought in so that there are no
doubts of its survival and it can expand its horizons.
This includes taking on staff, expanding the office space of the business or even investing in
equipment to deal with a larger base of clientele. This stage also entails producing more
products if necessary.
Stage Four
The fourth stage of small or other business is about maturity.
The business is now stable enough to survive most unforeseen circumstances. It has enough
backing, capital and support to ensure that even if the market becomes unstable, it can pull 
through.
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may be accomplished rearranging its management plan, getting rid of one product to
replace another or adding an additional product to an already existing product line.
However, if the market declines, it may survive, though its profits may take a temporary slide
backwards.
Stage Five
In the small business life cycle the fifth stage of small business, is about decline. In fact, it is
the easiest stage to reach for any business because it is the point where a starting business
will fail.
An existing business, even a mature one, can decline in profits, take heavy losses and
eventually either fail or cease operations to avoid further losses. As any small business owner
can attest to, the stages of business are necessary and a normal part of the small business
life cycle.
Regulations Affecting Business
1. Legal registration e.g. registration of business names

2. Tax compliance e.g. VAT, income TAX, PAYE
Trade license e.g. single business permit
1. Public health inspection

2. Environmental requirements e.g. NEMA
3. Registration with relevant government department e.g. Ministry of Fishery, Livestock,
Training
Social Security requirement e.g. NSSF

Zoning regulation e.g. Industrial zone
1. Code of conduct
Business support services available for small businesses.
In order to increase chances of survival small businesses need to identify firms that offer
support services where they can get help with the running of the business. Some of the
support services for small enterprises include:
1. Training services
This is necessary to improve capital in entrepreneurial, management and technical skills
2. Marketing services
To determine market demand and provide market linkages
3. Business counseling
This will help improve management. Capacity of small business owners in effective planning,
implementation and control of business operations
4. Banking services
This enables businesses to build credibility, reduce risks of handling cash and save funds for
future use.
5. Insurance services
Insurance firms are important for small business as it enables them reduce risks associated
with operating businesses.
6. Postal services
To facilitate effective and affordable communication
7. Book keeping
To ensure business records are accurate and up to date and that the organization is tax
compliant. 
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8. Business
Menu incubators
To provide a nurturing environment for small businesses through the provision of a wide
range of business support services such as training, marketing assistance, networking, tax
preparation.
9. Technology provision
Enables small businesses to embrace appropriate and affordable technologies e.g.

Agriculture Technology Development Centers, Kenya Industrial Research and Development
Institute ( KIRDI)
Before you start-basic checklist
YOU
1. Are you a self-starter?

yes q no q
2. Are you willing to work harder than you’ve ever worked before and for long hours without
the security of as steady paycheck?
yes q no q
3. Can you afford to work without knowing how much money – or success – you’ll ultimately
earn?
yes q no q
4. Are you ready to make tough decisions on your own?
yes q no q
5. Do you know when you’re “in over your head” and need outside help?
yes q no q
6. Are you willing to seek outside help? Do you know where to find it?
yes q no q
7. Can you deal effectively with other people?
yes q no q
8. Are you an effective leader, motivator, and communicator?
yes q no q
9. Are you willing to delegate authority and responsibility to others?
yes q no q
10. Are you willing to admit it when you’re wrong?
yes q no q
11. Do you project a professional image to your clients and customers?
yes q no q
12. Can people trust what you say?
yes q no q
13. Can people trust you to do what you say you will do?
yes q no q
14. Do you have managerial experience?
yes q no q
SKILLS
1. Do you have the technical skills you will need to operate your particular business?
yes q no q
1. Do you have the business skills you need to run a business?

yes q no q
2. Do you know your strengths and weaknesses?
yes q no q
3. Do you have business partners or advisors who can compensate for your weaknesses?
yes q no q
4. Have you worked in a business like the one you want to start?
yes q no q
5. Have you researched your business thoroughly?
yes q no q
1. Do you read a lot about your business and its industry?

yes q no q
2. Are you a good listener?
yes q no q

YOUR IDEA
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1. Is your product or service idea unique?
Menu
yes q no q
2. Does it serve
KASNEB a customer need
RESOURCES  orUNIVERSITY
want? RESOURCES PDF KISM RESOURCES KNEC Section  CHRP ACCA IFRS U
yes q no q
3. Have you defined the competitive advantage your product or service offers ?
yes q no q
4. Do you know what your product or service will cost you?
yes q no q
5. Have you defined the “image” you want your product or service to have in the marketplace?
yes q no q
6. Can competitors easily copy your product or service?
yes q no q
7. Have you located suppliers who will sell you what you need at a reasonable price?
yes q no q
YOUR BUSINESS
1. Have you evaluated the various forms of ownership to determine which one is best for you?
yes q no q
2. If you have chosen to form a sole proprietorship, can you afford the unlimited personal
liability?
yes q no q
1. If you have chosen to form a partnership, have you created a partnership agreement?
yes q no q
2. If you have chosen to form a partnership, have you determined which partners are general
partners and which are limited partners?
yes q no q
3. If you have chosen to form a partnership, have you determined how a partner can leave the
business?
yes q no q
4. If you have chosen to form a partnership, have you determined how you will settle disputes?
yes q no q
5. If you have chosen to form a corporation, have you filed the articles of partnership with the
appropriate state?
yes q no q
6. If you have chosen to form a corporation, are you willing to tolerate the “double taxation” of
this form of ownership?
yes q no q
7. Have you considered the Limited Liability Company (LLC) as a form of ownership?
yes q no q
8. If you have chosen to form an LLC, have you filed both the articles of organization and the
operating agreement with the proper state?
yes q no q
9. If appropriate, have you filed a patent application with the U.S. Patent and Trademark Office
for your product?
yes q no q
10. Have you given your business, product, and service names proper trademark protection?
yes q no q
11. If the answer to question #42 is “Yes,” are you using the trademark properly?
yes q no q
12. If your business is built around original works of authorship, have you protected them with a
copyright?
yes q no q
YOUR STRATEGY
1. Have you defined the core values that will guide your business?
yes q no q
2. Do you have a well-articulated, meaningful mission statement for your business?
yes q no q
3. Have you assessed your company’s strengths and weaknesses?
yes q no q
4. Have you identified the key opportunities and threats facing your business?
yes q no q
KEY SUCCESS FACTORS
1. Do you know what the key success factors are for your business?
yes q no q
2. Have you analyzed your competition well enough to know their strengths and weaknesses?
yes q no q
3. Have you established meaningful goals and objectives for your company?
yes q no q 
4. Have you formulated a clear, coherent strategy that will serve as your company’s “game
plan”? WhatsApp us 
yes q
Menu no q
5. Have you created specific tactics to implement your company’s strategy in the marketplace?
yes q
KASNEB no q
6. Have you established accurate control systems that will give you feedback on how well your
strategy is working and how well your business is doing?
yes q no q
YOUR MARKET
1. Have you evaluated key economic trends and how they will affect your business?
yes q no q
2. Have you evaluated key technological trends and how they will affect your business?
yes q no q
3. Have you evaluated key sociopolitical trends and how they will affect your business?
yes q no q
4. Have you evaluated key demographic and lifestyle trends and how they will affect your
business?
yes q no q
5. Have you identified your company’s target market?
yes q no q
6. Have you researched your target customers enough to know their likes, dislikes, wants,
needs, and preferences?
yes q no q
7. Have you determined the level of satisfaction your target customers have with existing
products or services?
yes q no q
8. Have you defined how you will create value for your customers?
yes q no q
9. Do you know why your customers will want to buy your company’s product or service?
yes q no q
YOUR MARKETING STRATEGY
1. Have you developed a marketing strategy that is customer-focused?

yes q no q
2. Have you developed specific practices to implement this strategy?
1. Have you developed a marketing strategy that will produce a quality product or service for
your customers?
yes q no q
yes q no q
3. Have you developed a marketing strategy that is focused on providing customer
convenience?
yes q no q
yes q no q
5. Have you developed a marketing strategy that will generate innovations in your product or
service over time?
yes q no q
yes q no q
7. Have you developed a marketing strategy that exploits speed as a competitive advantage?
yes q no q
yes q no q
9. Have you developed a marketing strategy that is built on customer service?
yes q no q
yes q no q
11. Do you know what stage of the product life cycle your product or service is in?
yes q no q
12. Have you identified the channels of distribution you will use to get your product or service to
your target customers?
yes q no q
13. Have you established a price that will be reasonable to customers, profitable for your
business, and will create the image you want in the marketplace?
yes q no q
14. Have you determined which advertising media will be most effective in reaching your target
audience?
yes q no q
15. Have you identified the unique selling position that you will build your advertising messages
around?
yes q no q

16. Do the ads you are planning to run answer the customer’s question, “Why should I consider
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buying this product or service?”
yes q
Menu no q
YOUR FINANCIAL PLAN

1. Have you created projected income statements for three years for your business?
yes q no q
2. Have you created projected balance sheets for three years for your business?
yes q no q
3. Have you developed estimates for your one-time startup expenses?
yes q no q
4. Have you developed estimates for your on-going business expenses?
yes q no q
5. Can you analyze your company’s financial statements using ratio analysis?
yes q no q
6. Do you know what your company’s breakeven point is?
yes q no q
7. Have you reworked your startup cost estimates to see if you can lower your breakeven point?
yes q no q
8. Do you know how long your company’s cash flow cycle is?
yes q no q
9. Have you developed a cash budget for your company’s first year of operation using a
pessimistic, optimistic, and most likely sales forecast?
yes q no q
10. Have you developed a plan for collecting your accounts receivable promptly?
yes q no q
11. Have you set up a functional system for paying your accounts payable on time?
yes q no q
12. Have you set up a system for monitoring your company’s inventory?
yes q no q
13. Do you know how much inventory you should have?
yes q no q
14. Have you developed a plan to avoid the “cash crunch?”
yes q no q
YOUR BUSINESS PLAN
1. Have you developed a complete business plan for your company?

yes q no q
2. Does your plan include the “5 M’s’ – Market, Methodology, Management, Money, and
Menaces?
yes q no q
3. Have you scored your plan on the Business Plan evaluation Scale?
yes q no q
FINANCING YOUR BUSINESS
1. Do you know how much money it will take to launch your business, and have you included a
little extra for “Murphy’s Law”?
yes q no q
2. Do you understand the implications of both debt and equity capital to your business?
yes q no q
3. Have you identified family members and friends who might be willing to finance your
business?
yes q no q
4. Have you identified potential angels who might be willing to finance your business?
yes q no q
5. Is your business a possible candidate for a simplified registration or exemption for a public
offering?
yes q no q
6. Have you established a business relationship with a banker?
yes q no q
7. Have you answered the seven questions every entrepreneur should be able to answer before
approaching a banker for financing?
yes q no q
8. Have you considered other forms of debt financing?
Trade credit?
q q
Equipment suppliers?
q q
Commercial finance companies?
q q
Savings and Loans?
q q
Stock brokers? 
q q
Insurance companies? WhatsApp us 
q
Menu q
Credit unions?
qKASNEB q RESOURCES  UNIVERSITY RESOURCES PDF KISM RESOURCES KNEC Section  CHRP ACCA IFRS U
The Small Business Administration?
q q
State and local development programs?
yes q no q
YOUR LOCATION AND LAYOUT
1. Have you studied the demographics of your proposed location and matched them against
the profile of your target customer base?
yes q no q
2. Have you analyzed data from Census reports concerning your location?
yes q no q
3. Have you calculated the index of retail saturation for your proposed location?
yes q no q
4. Have you evaluated the site in terms of the level of competition, retail compatibility, and
other factors unique to your business?
yes q no q
5. Have you evaluated building, buying, and leasing a building to house your business?
yes q no q
YOUR PEOPLE
1. Have you developed a human resources plan for your business?

yes q no q
2. Have you created job descriptions and job specifications for each job in your company?
yes q no q
3. Have you developed a recruiting strategy to get the workers you need?
yes q no q
4. Have you developed a job application form that will give you the information you need about
candidates and will avoid charges of discrimination?
yes q no q
5. Have you developed interviewing questions that will give you the information you need about
candidates and will avoid charges of discrimination?
yes q no q
6. Have you developed a plan for orienting and training your employees on a continuous basis?
yes q no q
7. Have you developed a compensation plan that is equitable and motivating to employees?
yes q no q
8. Have you developed a plan for evaluating your employees’ performances regularly?
yes q no q
9. Have you developed a procedure for documenting employees’ performances in case you
must fire them?
yes q no q
TOPIC 10 BUSINESS ENTERPRISE MANAGEMENT
Introduction
Any business large or small must apply managerial skills in order to come up with decisions
that are practical. These decisions involve the utilisation of business resources so as to
achieve organisational goals.
This chapter will introduce to the trainees the basic functions of management such as
planning, organising and controlling for effective and efficient utilisation of business
resources.
Definition of the term management
Doing things through others

Activities carried out an organisation to achieve its objectives
Planning, directing and controlling available resources to meet the desired results.
Functions of management in an enterprise
Management is necessary because resources are scarce and factors such as employees ,
technology costs keep changing.

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Effectiveness
Menu is the ability to obtain the intended results, while efficiency is accomplishing the
objectives utilising minimum resources.
Management functions involve planning, organising, coordinating, controlling and directing a

business.
Planning
Planning is necessary for commitment of organisation resources. It involves deciding in

advance the actions to be taken, when and how. Planning involves setting of objectives and
goals to be achieved and deciding which activities should be carried out to achieve them. In
planning the manager needs to involve the other employees to get their commitment in
achieving the set objectives.
Organising
A manager must delegate tasks to others since he cannot do everything. These employees
must have the resources to be able to perform tasks effectively. The manager is therefore
responsible for organising people and resources in a manner that facilitates achievement of
organisations objectives.
Directing
Directing is influencing other people towards achieving organisation goals. It involves guiding,
leading, supervising and motivating others to achieve set targets and deadlines.
Controlling
Controlling involves checking the progress made towards the desired goal and correcting
deviations that may occur. The manager must try to measure and evaluate the work of all
individuals and groups to make sure that they are on target.
Coordinating
Coordinating involves working together. A manager must coordinate the various

departments in the organisation to ensure smooth running of organisation activities. This can
be done through regular meetings.
Leadership/motivation
Leadership involves directing human resource for optimum contribution. A good leader
works with his staff as a team. As a team leader the manager must motivate his staff and
take care of them. He should be able to tap and fully exploit the potential of those he leads.
Decision Making
All the management functions discussed above involve decision making. The manager should
make sound decisions for the smooth flow of the business. Not all decisions made in a
business have equal importance.
Decisions can be divided into:
Strategic decision – These are very important decisions that can affect the overall success of
the business. These are rarely taken (made) and could include: future plans, change of status,
long term investment etc.
Tactical decision – These are taken more frequently and are less important. They could
include: ways of training staff, methods of advertising, types of machine to purchase etc.
these decisions can be made middle management.

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Operational
Menu – These are day to day decisions taken lower level management. Examples
include: staffing levels, stocking levels, methods of delivery of goods etc.
Qualities of a good manager
To be a good manager one should have the following qualities
1. Intelligence – to enable him understand difficult ideas and deal with varied issues.
2. Initiative – to enable him get solutions to problems and take control of situations
Self confidence – to be able to lead others and set an example
1. Communication skills – to clearly pass ideas to others to enable them to respond positively
2. Energy and enthusiasm – to set high standards of effort and involvement to encourage
others to follow his example.
INVENTORY MANAGEMENT
In many businesses, the cost of purchasing merchandise for resale(retailing) or the costs of
purchasing and converting materialsinto finished products (manufacturing) represent the
business’smost significant expenditures. Keeping track of merchandise andmaterials, known
as inventory, is important because of theconsiderable costs involved. This can be
accomplished through agood inventory record keeping system.
Inventory Record Keeping
Inventory record keeping establishes and maintains information oncurrent inventory, the
additions and withdrawals to inventory andinventory balances at the end of specified periods
(week, month,
etc.). These records identify the products/materials, thequantities and the value (cost) of
these products/materials.
Inventory Strategies
Every business competes within an industry and each industry hasa life cycle. The strategies
employed the business depend onwhere in the life cycle the industry is. The management of
inventories is influenced this life cycle.Generally, there are four stages in the life cycle of an
industry. These are as follows:
* Development – Uniquely new products are being developed and market tested. Products
must be available for market testing. There is little concern about inventory
investment, other than to be sure products are available
for market testing and development.
* Growth – The product has been demonstrated to have
significant market potential and the business strives to
gain a major market share. Investment in inventory is heavy
to ensure product availability to gain significant market
share.
* Maturity – Growth has leveled off. Inventories are very
closely controlled to keep investment in them just 

sufficient to maintain market share. WhatsApp us 
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* Aging – A period of retrenchment as competitive industries
take away or eliminate markets. Inventories decline as
unprofitable and marginally profitable segments of the
business are weeded out.
The proper control of inventories is essential to the success of
any business in which investment in inventories is significant.
Awareness of the competition and the state of new product
development is just as important as a finely honed record-keeping
system. While the record-keeping system is important, how it is
applied will determine the success of the business.
MANAGING BUSINESS RESOURCES
MANAGING EMPLOYEES
One of the keys to successful businesses is the employment and retention of the right
people. However the employment of staff also brings with it legal obligations, including:
Provision of a safe working place as per the Occupational Health and Safety Act;
The need to have a policy dealing with discrimination and harassment in the workplace; and
Payment of minimum wages and provision of conditions.
Employment Conditions
All employers have certain legal obligations to their employees, including:
paying correct wages;

ensuring a safe working environment;
supporting an anti-discriminatory and anti-harassment workplace;
taking out workers compensation insurance;
paying superannuation contributions;
paying a range of employee-related taxes.
Employees may be entitled to:
a range of leave entitlements;

notice of termination and severance pay;
protection from unfair dismissal or unlawful termination.
All employers in Kenya are required to comply with, and exhibit a copy of, all relevant awards
applicable to their workplace.
To motivate and retain staff:
Try to pay staff electronically or cheque – avoid cash.

Introduce staff incentives that encourage sales.
Acknowledge staff performance and encourage good working morale.
Determine the reason for staff turnover, if applicable.
Identify training needs of staff and encourage ongoing learning.
Be aware of occupational health and safety (OH&S) issues and have risk management
policies and processes in place.
Ensure that staff and clients have facilities that will enhance relationships and satisfaction
levels.
Review the decor and layout of your premises to ensure that you are conveying the most
professional and appealing image to clients.
Personnel Selection
If your business will be large enough to require outside help, an important responsibility will
be the selection and training of one or more employees. You may start out with family
members or business partners to help you. But if the business grows – as you hope it will –
the time will come when you must select and train personnel.
Careful choice of personnel is essential. To select the right employees determine beforehand
what you want each one to do. 
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Then look for applicants to fill these particular needs. In a small business you will need
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flexible employees who can shift from task to task as required. Include this in the description
of the jobs youRESOURCES
KASNEB wish to fill. At 
the same time, look ahead
UNIVERSITY and planPDF
RESOURCES your hiring KISM
to assure an
organization of individuals capable of performing every essential function. In a retail store, a
salesperson may also do stock keeping or bookkeeping at the outset, but as the business
grows you will need sales people, stock keepers and bookkeepers.
Once the job descriptions are written, line up applicants from whom to make a selection. Do
not be swayed customers who may suggest relatives. If the applicant does not succeed, you
may lose a customer as well as an employee.
Some sources of possible new employees are:
1. Recommendations friends, business acquaintances.

2. Employment agencies.
3. Placement bureaus of high schools, business schools, and colleges.
4. Trade and industrial associations.
5. Help-wanted ads in local newspapers.
Your next task is to screen want ad responses and/or application forms sent employment
agencies. Some applicants will be eliminated sight unseen. For each of the others, the
application form or letter will serve as a basis for the interview which should be conducted in
private. Put the applicant at ease describing your business in general and the job in
particular. Once you have done this, encourage the applicant to talk. Selecting the right
person is extremely important. Ask your questions carefully to find out everything about the
applicant that is pertinent to the job.
References are a must, and should be checked before making a final decision. Check through
a personal visit or a phone call directly to the applicant’s immediate former supervisor, if
possible. Verify that the information given you is correct. Consider, with judgment, any
negative comments you hear and what is not said.
Checking references can bring to light significant information which may save you money and
future inconvenience.
Personnel Training
A well-selected employee is only a potential asset to your business. Whether or not he or she
becomes a real asset depends upon your training. Remember:
To allow sufficient time for training.

Not to expect too much from the trainee in too short a time.
To let the employee learn performing under actual working conditions, with close
supervision.
To follow up on your training.
Check the employee’s performance after he or she has been at work for a time. Re-explain
key points and short cuts; bring the employee up to date on new developments and
encourage questions. Training is a continuous process which becomes constructive
supervision.
Personnel Supervision
Supervision is the third essential of personnel control. Good supervision will reduce the cost
of operating your business cutting down on the number of employee errors. If errors are
corrected early, employees will get more satisfaction from their jobs and perform better.
Motivating Employees
Small businesses sometimes face special problems in motivating employees. In a large

company, a good employee can see an opportunity to advance into management. In a small
company, you are the management. One thing you may wish to consider is to give good
employees a small share of the profits, either through part ownership or a profit-sharing
plan. Someone who has a “share of the action” is going to be more concerned about helping
to make a success of the business.
Simpler ways of motivating employees include:
Introduce staff incentives that encourage sales.

Acknowledge staff performance and encourage good working morale.
Determine the reason for staff turnover, if applicable.
Identify training needs of staff and encourage ongoing learning.
Be aware of occupational health and safety (OH&S) issues and have risk management
policies and processes in place.
Ensure that staff and clients have facilities that will enhance relationships and satisfaction
levels.
Review the decor and layout of your premises to ensure that you are conveying the most 
professional and appealing image to clients.
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MANAGING CAPITAL
Cash shortages can prevent you from meeting your financial obligations and make it difficult
to expand your business. In some cases it will mean you will need to close your business. It is
important to know your cash flow position. To manage your cash flow, take note of the
following tips.
Account for Every Shilling and Cent
Install an accounting system that produces relevant financial reports and meets tax
requirements.
Keep your financial records and bookkeeping up to date.
Use the information in your accounting system to draw up a budget and cash flow forecast.
Manage your cash inflow and outflow – be prepared for anticipated tax installments and
other payments.
Do your banking regularly, both for security reasons as well as keeping track of your cash
flow.
Reconcile your bank statements regularly, double-checking receipts and payments with your
own records.
Ensure that you receive record and retain all tax invoices for taxable purchases to support
your claim for tax credits.
Consider visiting your accountant every three months to review your business performance.
Other Important Factors
Bill your customers early and often.

Keep a detailed account of all your debtors and act promptly on overdue accounts.
Promptly follow up any dishonoured cheques.
Consider offering discounts for cash sales or early payments of credit purchases.
Consider alternatives to improve your sales terms, eg lay-terms, payment terms, credit
terms.
Keep a detailed list of amounts that you owe. Your debts may build up without your
knowing.
Use payable credit terms to your benefit, increasing the effectiveness of your cash flow.
If suppliers want to be paid early, ask about discounts for early payments.
Manage your investment debt. Don’t over-borrow.
Keep some cash for rainy days.

Don’t over-commit your personal expenses.
MANAGING TIME
Time management is critical to the achievement of organization goals. Projects or activities

delayed due to poor time management can cost the company in terms of poor image and
loss of business opportunities due to being perceived customers as unreliable.
Benefits of Time Management
Proper time management has several benefits.
It conserves time allowing for the completion of many more projects or activities.
Proper time management ensures greater organization and therefore smoother operations
Reduces anxiety and stress
Motivates and organizes employees
Reduces avoidance or procrastination
Eliminates crisis management
Factors influencing the use of time
The use of time is influenced the following factors:
Goals, values, standards – whether or not one values time.

Responsibilities – Many responsibilities require proper time management to complete tasks.
Abilities:
to plan, organize, perform a task 
to manage time
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Managing
MenuTime Effectively
Rules for managing time effectively include the following:
Realistic time plan

Decisive – focus on the tasks at hand
Leave unnecessary jobs out
Delegate to competent employees
Work faster
Reward yourself and employees after successful completion of important tasks.
Avoid procrastination
Develop habits that save you time.
To-do Lists
Prepare to-do lists to ensure that you do the following;
Keep track of performance

Prioritize tasks – Important ones first
Focus on current task
Plan and ensure completion
Making a Written Time Plan
A written time plan will enable you to prepare accurate to-do lists.
Your time plan should be:
Simple to implement
Complete – include all that is necessary to complete required tasks
Flexible – able to be adapted to changing needs
Workable – Give adequate time to each task
Prioritize tasks according to importance rather than urgency.
MANAGING TECHNOLOGY
The use of technology is important because it increases labour productivity and this in turn
increases local competitiveness for both consumer and producer. Technology selected
entrepreneurs should favour locally produced tools and equipment. This makes it easier to
maintain them and replace them wwhen necessary.
Characteristics of appropriate technologies:
Simple: It must be simple to operate, with minimal adjustment problems..
Effectiveness: The technology should be judged how well it fits in with the objectives of the
user.
Availability: The technology should be easily available locally.
Flexibility: The technology selected must be able to adapt to changing times and technologies
e.g. upgrades.
Durable: Technology that is durable requires less maintenance and repairs.
Efficient: It should be efficient in utilization of resources.
Cost Effective: The cost of technology should be justified it’s overall benefits. Benefits should
outweigh costs.
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1. Technological
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2. Open office
TOPIC 11 FINANCIAL MANAGEMENT
The success of business enterprise is determined the ability of the entrepreneur to control
the financial resources of the business. An entrepreneur should maintain a sound system of
accounting records as this would aid in determining whether the business is making profit or
a loss. This is necessary for decision making.
This sub-module unit covers sources of business finance, recording of business transactions
and preparation of financial statements.
Meaning of financial management
This is the process of controlling the financial resources within a business enterprise. In
order for the entrepreneur to be an effective manager he needs to develop tools that aid in
decision making. Some of the tools that can be used are:
Cash budgets
Cash flow statements
Income statements and a balance sheet
Importance of financial management
Financial management is important because:-
It helps in planning business activities

Decisions can be made to make any necessary corrections where there’s need.
Evaluation of performance is necessary and proper management can be aided the tools that
have been used.
Efficiency of use of resources and capital can be determined.
Sources of business finance
A business enterprise can finance its operation from various sources. These vary with the
size of the business and the stage of growth. Sources are categorised as either internal or
external. Internal sources are generalised within the business while external sources are
acquired from other parties.
Examples of internal sources are:-
Personal finance- personal savings are a major source of capital during the start-up stage.
The personal savings may be obtained from former employment, money saved in savings/
fixed deposit accounts, sale of personal assets such as land.
Advantages of this source are:
It is the least expensive since no interest is paid.

It does not involve legal process of acquiring
It allows for flexibility on the use of funds
Disadvantages:
It may be inadequate for business needs.

May be used without proper planning.
May take too long to raise adequate capital.
Retained earnings – These are the unutilized profits from previous years which can be used
to finance other needs such as expansion and acquisition of more assets.
Provision for depreciation and provision for taxation – These can only be borrowed for a
short period of time before replacement of depreciated assets or payment due to taxes that
are made .
Sale and lease back – A business can opt to sell its assets and then lease the same from the
new owner. It will be paying rent for use of the assets.
Sale of assets – A business could have at its disposal assets that can be converted into cash.
Good examples of such assets are old equipment, motor vehicles and other chattels.
External sources of business finance.
This type of finance is obtained from persons and parties other than the business owners.
Examples of external sources are:-


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1. Trade
Menu creditors – these provide a business with goods on credit terms such as 90 days before
repayment can be made.
The entrepreneurs can sell the goods and use the proceeds to pay off the creditor on the due
date.
1. Loans – these are borrowings from commercial lending institutions. The terms and
institutions vary from one institution to another.
2. Overdrafts – These are short term sources of finance from commercial banks that a business
can resort to in order to solve its liquidity problem. The repayment period is normally one
year.
Hire Purchase – a business can get equipment from a hire purchase firm and pay for them in
installments until the whole line purchase price is paid. It becomes the property of the
business when the last installment is paid, otherwise it was on hire before such last payment.
Types of Business Records
There are various types of records that may be maintained a business depending on the size
of the business. The following are some of the important business records:
1. Purchases journal.
This is a record of all daily purchase of stock on credit. It keeps a record of daily purchase of
stock on credit. It keeps a record of persons from whom a business has purchased on credit.
It’s also referred to as the purchases day book.
ii)Sales journal.
This is used to record all the daily credit sales. It shows the particular persons to whom goods
have been sold on credit. It is also known as the sales day book.
iii)Purchases returns journal
It provides a list of goods returned outwards to supplies. Goods may be returned for reasons
such as, they are defective, wrong type of quantities or description supplied, or goods
damage on transit.
iv)Sales returns journal
It provides a list of goods returned inwards to the business the customers.
v)The cash book.
This is the book in which all the receipts and payments are made. There are different types of
cashbooks that a business may maintain. These include one column, two columns or three
columns cash book. The petty cash book and analysis cash book may also be maintained.
vi)The ledger
All accounts of assets, liabilities, capital, revenue and expenses are maintained in a book
known as the ledger. An account- a chronological entry of all transactions affecting a given
item or person.
Recording transactions in the ledger is made based on the concept of double entry which
means that ever transaction must have at least two effects and should therefore be recorded
twice
Recording business transactions in the books of accounts
Business transactions refer to the exchange of goods and services. Many transactions take
place in a business on a daily basis. Such transactions include: purchase of goods, selling of
goods , payment of expenses, return of goods, payment of expenses, return of goods
bought, purchase of assets, receipt of payment from debtors among others. These
transactions are recorded in the books of account in order to aid in preparation of financial 
statements at the end of the year. Business transactions are recoreded in different books of
accounts. These include: WhatsApp us 
1. The journals such as purchases journal, sales journal, returns journal, general journal
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2. The ledger
3. The cash book
FINANCIAL STATEMENTS
Financial statements are important for the entrepreneur in determining whether the
business is operating at a profit or a loss and the financial wealth of the business. Two major
financial statements the entrepreneur requires for sound decisions are:
1. Trading, profit and loss accounts

2. The balance sheet
Trading, profit and Loss Account
The financial statement is prepared to determine whether a business is operating at a profit

or a loss for a given period of time. E.g. one year
Trading Account
The trading account is prepared to determine the gross profit. The gross profit is the
difference between the net sales and the cost of sales
TOPIC 12 MARKETING
Marketing is an important aspect of business management. It is through marketing that a

business creates awareness about its products. An entrepreneur must endeavour to create
awareness and interest to customers about the products that his/her business deals with.
This sub-module unit deals with definition of the terms market and marketing, components
of marketing and methods of gathering market information
A market refers to conditions that bring sellers and buyers together. This may be a physical
location or any other medium such as electronic or print. A market can also be a group of
consumers or an organisation that are interested in a product, have the resources to
purchase the product, and is permitted law and other regulations to acquire the product. The
market definition begins with the total population and progressively narrows as shown in the
following diagram.
Marketing refers to the performance of business activities that direct the flow of goods and
services from the seller to the consumer. It is an integrated process through which
businesses create value for customers and build strong customer relationships in order to
capture value from customers in return.
Marketing is used to identify the customer, to keep the customer and to satisfy the customer.
With the customer as the focus of its activities, it can be concluded that marketing
management is one of the major components of business management.
Components of marketing.
Market components are commonly referred to as marketing mix. Marketing mix consists of
the following components:
1. i) Product
Product refers to tangible, phyical products or services that a business offers for sale. During
the product design and development, an entrepreneur must make decisions pertaining to
the following:
Brand name
Functionality
Styling
Quality
Safety
Packaging
Repairs and Support
Warranty 
Accessories and services
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1. ii) Place/ Distribution
Place refers to the actual location where the product is to be sold. It includes the activities
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that make the product available to target consumers. In this case, an entrepreneur must
make decisions
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Distribution channels
Market coverage (inclusive, selective, or exclusive distribution)
Specific channel members
Inventory management
Warehousing
Distribution centers
Order processing
Transportation
Reverse logistics
iii) Price
Price is the unit value attached to a product i.e. the amount of money that customers have to
pay to obtain the product. The entrepreneur in this regard must make decisions in relation
to:
Pricing strategy (skim, penetration, etc.)

Suggested retail price
Volume discounts and wholesale pricing
Cash and early payment discounts
Seasonal pricing
Bundling
Price flexibility
Price discrimination
1. iv) Promotion
Promotion is the process of letting buyers know about a product, how it is made, its benefits,
cost, and quality among others.
It constitutes the activities that communicate the benefits of the product and persuade target
customers to buy it. The marketing communication decisions include:
Promotional strategy (push, pull, etc.)

Advertising
Personal selling & sales force
Sales promotions
Public relations & publicity
Marketing communications budget
Limitations of the Marketing Mix Framework
The marketing mix framework was particularly useful in the early days of the marketing
concept when physical products represented a larger portion of the economy. Today, with
marketing more integrated into organisations and with a wider variety of products and
markets, some authors have attempted to extend its usefulness proposing other P, such as
people, process and physical evidence.
People
This refers to the consumers for whom the goods and services are intended. There are
various considerations made about the consumers in determining the suitability of the
market mix to be used. (Figure. 12.1)
An effective marketing program puts together all the marketing mix elements.
Figure 12.1 showing the marketing mix elements
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The other extended components of marketing mix include the following:
PROCESS
Refers to the systems used to assist the organisation in delivering the service. Imagine you
walk into Burger King and you order a Whopper Meal and you get it delivered within 2
minutes. What was the process that allowed you to obtain an efficient service delivery? Banks
that send out Credit Cards automatically when their customers old one has expired again
require an efficient process to identify expiry dates and renewal. An efficient service that
replaces old credit cards will foster consumer loyalty and confidence in the company.
PHYSICAL EVIDENCE
Where is the service being delivered? Physical Evidence is the element of the service mix
which allows the consumer again to make judgments on the organisation. If you walk into a
restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel
first class you expect enough room to be able to lay down!
Physical evidence is an essential ingredient of the service mix, consumers will make
perceptions based on their sight of the service provision which will have an impact on the
organisations perceptual plan of the service.
12.3.3 THE MARKETING PROCESS
Under the marketing concept, the firm must find a way to discover unfulfilled customer
needs and bring to market products that satisfy those needs. The process of doing so can be
modeled in a sequence of steps: the situation is analyzed to identify opportunities, the
strategy is formulated for a value proposition, tactical decisions are made, the plan is
implemented and the results are monitored.
The Marketing Process
Situation Analysis
Marketing Strategy
Marketing Mix Decisions
Implementation & Control
1. SITUATION ANALYSIS
A thorough analysis of the situation in which the firm finds itself serves as the basis for
identifying opportunities to satisfy unfulfilled customer needs. In addition to identifying the 
customer needs, the firm must understand its own capabilities and the environment in which
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situation analysis thus can be viewed in terms an analysis of the external environment
and an internal analysis of the firm itself.
The situation analysis should include past, present, and future aspects. It should include a
history outlining how the situation evolved to its present state, and an analysis of trends in
order to forecast where it is going. .
If the situation analysis reveals gaps between what consumers want and what currently is
offered to them, then there may be opportunities to introduce products to better satisfy
those consumers. Hence, the situation analysis should yield a summary of problems and
opportunities. From this summary, the firm can match its own capabilities with the
opportunities in order to satisfy customer needs better than the competition.
The two common frameworks used to do the situation analysis:
PEST analysis – for macro-environmental political, economic, societal, and technological

factors. A PEST analysis can be used as the “climate” portion of the 5 C framework.
SWOT analysis – strengths, weaknesses, opportunities, and threats – for the internal and
external situation. A SWOT analysis can be used to condense the situation analysis into a
listing of the most relevant problems and opportunities and to assess how well the firm is
equipped to deal with them.
1. MARKETING STRATEGY
Once the best opportunity to satisfy unfulfilled customer needs is identified, a strategic plan
for pursuing the opportunity can be developed. Market research will provide specific market
information that will permit the firm to select the target market segment and optimally
position the offering within that segment. The result is a value proposition to the target
market. The marketing strategy then involves:
Segmentation
Targeting (target market selection)
Positioning the product within the target market
Value proposition to the target market
III. MARKETING MIX DECISIONS
Detailed tactical decisions then are made for the controllable parameters of the marketing
mix. The action items include:
Product development – specifying, designing, and producing the first units of the product.
Pricing decisions
Distribution contracts
Promotional campaign development
1. IMPLEMENTATION AND CONTROL
At this point in the process, the marketing plan has been developed and the product has
been launched. Given that few environments are static, the results of the marketing effort
should be monitored closely. As the market changes, the marketing mix can be adjusted to
accomodate the changes. Often, small changes in consumer wants can addressed changing
the advertising message. As the changes become more significant, a product redesign or an
entirely new product may be needed. The marketing process does not end with
implementation – continual monitoring and adaptation is needed to fulfill customer needs
consistently over the long-term.
Before selling a product or service, it’s important to know the market that you will be
entering into. Research includes finding out what potential customers need, want and don’t
want, and why. Your goal is to build a demographic profile of your customers. A research or
business library can prove helpful for studying the manners in which other small businesses
have approached their target audiences. You can then take a similar approach, adding your
own creativity and the particular benefits of your products or services.
Surveys, questionnaires, and focus groups are three among the many ways to obtain original
data on potential customers. You can also get basic information when a customer calls for
your services, visits your facility, or browses your web site. When customers make a
purchase, or any kind of inquiry, you can find out where they heard about your business. In
this manner you can better plan, and track, your marketing efforts.
Ways of gathering market information
Market information can be gathered through:
1. i) Asking customers.
2. ii) Reading relevant materials e.g. business pamphlets.
iii) Getting information from chamber of commerce 

1. iv) Exhibitions/ shows/trade fairs.
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2. v) Listening to people talk.
Emerging
Menuissues and trends
1. i) E – commerce – use of ICT, e.g. the Internet to market business activities and products.
2. ii) Focusing on the customer needs or satisfaction
iii) The need for meeting quality standards (KEBS)
1. iv) The need to address environmental standards (NEMA)
TOPIC13 ENTERPRISE SOCIAL RESPONSIBILITIES
Social responsibility consists of those obligations a business has to society. It also involves
specific responsibilities and responsiveness to society. This requires obligation of
businessmen to pursue those enterprise policies to make those decisions or to follow those
lines of action which are desirable in terms of objectives and values to society.
Social responsibility refers to the fact that businesses should not just be concerned with
profit maximisation but should do so in a socially responsible manner. This responsibility
requires the management of the business to consider the social and economic effects of
their decisions on society. Businesses should therefore pursue profit maximisation within
acceptable moral limits.
Business ethics
Ethics concerns the rules and principles that define right and wrong good and bad conduct.
Ethics also deals with moral ability and obligations.
Business ethics is also called management ethics and it is the application of ethical principles
to business relationships and activities.
Statt (1999,19) sees business ethics as the application of ethical concerns to the world of
business and has three areas of concern namely;
1. Code of Ethics
Where a company has explicit guidelines for the members about what constitutes acceptable
behaviour to stakeholders like staff or customers
1. Changes in the board of directors
To include people from outside the business world who reflect broader interests.
1. Social responsibility
By a company in the marketing of its goods and services, The entrepreneurs and employees
have ethical responsibilities or obligations which are placed on them virtue of the positions
they occupy in the organisation.
Entrepreneurs should adhere to high ethical standards e.g. dealing fairly honestly and
responsibly with his employees and other stakeholders
Employees are expected to exhibit the same high ethical standard of behaviour that will
affect the company’s image financially and economically.
ENTERPRISE SOCIAL RESPONSIBILITY
The business operators have a responsibility to protect and improve society and their actions
should not in any way endanger a community or society.
They should display high degree of corporate responsiveness which is the ability of an
organisation to relate its operations and policies to the environment in ways that are
mutually beneficial to the organisation and the society.
Every enterprise small or large is expected to make positive contribution
1. To the community development

2. Product safety
3. Employment generation
4. Ethical business practices 
5. Contribution towards educational activities like award of scholarships
6. Creating opportunity for apprenticeship training etc WhatsApp us 
Undertaking
Menu some of these responsibilities may endear the entrepreneur to his host
community to enhance his/her image and social standing thus contributing significantly to
his business
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Every business has a social responsibility to contribute to the development of the society in
which it operates. This social responsibility can be carried out in various ways such as
1. Supporting and contributing towards environmental conservation programmes

2. Ensuring that the goods and services produced and sold to the people are safe for human
consumption
3. Ensuring that workplace is safe and secure for workers
4. Ensuring that the activities of the business do not cause environmental pollution or harmful
effects to the surrounding community.
5. Supporting and contributing towards social welfare programmes such as contributing
towards the care of orphans. , HIV/AIDs victims and flood victims.
Businesses have a duty to obey the laws of the countries in which they operate and also to
fulfil their contracts. Businesses are also a part of society and therefore they have a
responsibility to maintain healthy and safe surrounding.
This is done by;
1. i) reducing air and water pollution applying appropriate waste disposal methods
2. ii) packaging goods in environmentally friendly materials e.g. the polythene bags used for
carrying goods from the supermarkets or the shops do not decompose. They therefore
make the environment very untidy and unhealthy especially in towns.
3. Keeping the business premises and work place clean at all times.
4. Preserving the surrounding natural vegetation as much as possible
Producing goods and services that are safe to use. These may be sold to consumers when
safe especially when handling and using.
In conclusion therefore, is the implied obligation of the business acting in its official capacity
to serve or protect the interests of community other than itself only?
TYPES OF ENTERPRISE SOCIAL RESPONSIBILITIES
Social responsibility can be put into three main categories.
1. social obligation
2. social reaction
3. social responsiveness
1. social obligation
Based on the fact that society supports a business allowing it to exist, the business has a duty
to supply the society with quality goods and services.
It should carry out its activities and make profit `within the limits of the law.
1. social reaction
A business can sometimes be under pressure from society to do certain things. As such, the
response of business gives/shows is referred to as a social reaction because the business is
reacting to social pressure. This social reaction is not a voluntary action on the part of the
business.
It is a behaviour demanded a group or groups of people who have a direct interest in the
organisations actions. E.g. a business could be forced to withdraw offensive advertisements
the public through social pressure.
1. social responsiveness
This refers to actions taken a business voluntarily. These actions may be due to the
anticipation of future needs of a society which the business tries to satisfy.
A business that responds to the social needs will actively seek ways to solve social problems
e.g. a business operating in a given locality may decide to employ some of the local people in 
order to reduce unemployment in the area.
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A business should be socially responsible
Areas such as, to the customers ensuring
SAFETY OF PRODUCTS
A business should show social responsibility by
1. Producing quality and safe products i.e. products should not be harmful to people’s health
2. Fairly pricing products – prices should not be exploitative
3. Having clear advertisements that do not misrepresent facts
4. Treating customers fairly
5. Offering clear credit terms and adequate product information
6. Responding quickly to customers complaints
7.
8. Conducting research before allowing a product in the market
9. Proper labelling, packaging and presentation of products in a manner that the quality and
quantity hazards of use and limitations of use are clearly set.
10. Advising consumers about products and their use
TO THE GOVERNMENT
The business should be socially responsible to the government by:
1. Complying with the government laws and regulations

2. Paying proper taxes
3. Supporting the government in welfare and development programmes
TO EMPLOYEES
Business should show social responsibility to employees by:
1. Paying them fairly without delay and treating them humanly.

2. Safeguarding their health and safety providing safe working environment such as offering
safety gear e.g. dust coats, factory boots etc.
3. Providing employees welfare through provision of recreational facilities, housing, transport
and credit facilities
4. Offering equal opportunities in matters pertaining to promotions and training
5. Offering training and educational opportunities equally to employees
TO SUPPLIERS AND CREDITORS
Businesses should be socially responsible to suppliers through:
1. Fair and reasonable terms of purchase

2. Fairness in tender allocation
3. Paying suppliers for goods in time
4. Not defaulting in payments
5. Paying fair and reasonable interest rates to creditors
6. Paying interest and principle amount in time to creditors
TO THE COMMUNITY /GENERAL PUBLIC
1. By supporting or providing welfare programmes for the aged, handicapped and the under
nourished in the community
2. Making information concerning the business operations public
3. Ensuring that business activities of the business do not have harmful effects to the
community
4. Providing educational recreational and healthy facilities
5. Offering employment opportunities to disadvantaged in the society and even handicapped
members too. Thus offering equal employment opportunities for employment to both males
and females
6. Avoiding pollution of environment through such things as noise , and waste products
TO NATURAL ENVIRONMENT 
A business should be socially responsible towards the environment by: WhatsApp us 
1. Recycling
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carelessly can be taken back to the factory for recycling. Such materials become raw
materials
KASNEBwhen producingother products,
RESOURCES UNIVERSITYe.g. used plastic materials
RESOURCES PDF can be reprocessed
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pellets which in turn can be used for furniture or trays therecreating a healthy environment.
2. Reducing all types of pollution(noise, water, air etc.)
Ways of reducing noise can be devised e.g. those operating in Jua kali castor may be supplied
ear plugs
Business in the manufacturing sector should get a way of getting rid of unwanted chemicals
and other wastes instead of channelling them into rivers
Businesses should devise proper ways of disposing their gabbage, such waste pollutes the
environment when disposed carelessly and it may breed flies especially during rainy seasons.
– However where effluent from factories must be channelled into the river then it
needs to be treated first.
– used water business operators if put back into the rivers is a threat to life of water
creatures like fish and also unsafe for human consumption.
e.g. Nairobi river has suffered such pollution as a result of passing through an area that has
both manufacturing and service industries.
Importance of Enterprise Social Responsibility
A marketing tool
Conducive atmosphere for the success of the business
Environmental conservation programmes
Ensures security for workers
Social welfare programmes
Benefits of Social Responsibility
It leads to creation of a better social environment both for the society and the business
It improves the value of the business shares on the stock exchange
It improves the image of the business to the public
It makes the business follow government regulations
It makes business live up to the social expectations
Such social actions are profitable to the business in the future
The business can develop new measures from which the society benefits
Limitations of Social Responsibility
It increases costs to the business

It makes the business to spend resources and thus reduces profit
Increased social responsibility cost is passed onto the consumers in form of higher prices
Most businesses lack the skills to solve social problems
The business might misuse its powers on the society
The business may deviate from its main purpose of existence
ETHICAL BEHAVIOUR IN A BUSINESS ENTERPRISE
Ethics refers to prescribed or accepted code of conduct. For a business to run smoothly there
must be rules and regulations that govern the behaviour of each and every employee.
These rules could either be written implied or naturally accepted especially if they affect the
moral standards.
The Role of Ethics in Business
Encouraging good working relationships among workers

Ensuring good working relationship between employer and employee
Ensuring rights of individuals in working environment are protected e.g. a doctor is expected
to treat and not kill
Ensuring that professionals relate professionally to their clients e.g. counsellor and their
client
Helping workers to protect and hold a good reputation
Helping the workers to develop proper skills and right attitude towards their work. 
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– MenuThe business set up and operations should be such that they provide ample facilities
and opportunities for each employee too practice the business ethics. For example, it would
be very difficult
KASNEB for an employee
RESOURCES  to uphold business
UNIVERSITY ethics if the PDF
RESOURCES managementKISM
mistreats
him/her.
NB: Business ethics is not the same as social responsibility because social responsibility
refers to relationship between organisations and the society around.
While ethics refers to set values and principles which influence how individual groups of
people and society in general behave.
– Business ethics deals with how such values and principles affect business operations.
Business ethics therefore guides the business in ensuring fair play in business operations.
Need For Ethic Issues in Business
1. Creates fairness in competition
Business ethics ensures that there is fair play as business firms compete with each other. e.g.
It would be unethical to:
Buy competitors products and destroy them before they reach the market
Discredit competitors products with a view to reducing their sales
Damage the competitors promotional materials such as bill boards
2. Ensures no discrimination in business
Business ethics ensures that there is no discrimination in areas such as recruitment,

promotion training, remuneration, and assignment of duties. Everybody should therefore be
equal opportunity or equal chance regardless of set of ethnicity.
3. Ensures protection of the environment
Ethics in business prohibits business units from carrying out activities that may cause
pollution and degradation of the environment.
Environment degradation may be caused human activities such as logging and unplanned
cultivation.
Pollution may be caused activities like:
Dumping effluents from production units into water masses thus causing water pollution.
This is disastrous to human health and animal.
Emitting carbon dioxide and other gases into atmosphere causing air pollution.
Damping of waste materials on the land surface causing solid waste pollution.
4. Avoid consumer exploitation
Ethics ensures that consumers are not exploited the business through:
Overcharging
False advertisement
Selling poor quality goods and services
Selling wrong quantities
Selling harmful commodities
5. Ensures fair play in competition
Ethics ensures that businesses do not engage in unfair practices while competing with
others. These practices include:
Destroying a competitor’s product or promotional tools such as billboards

Buying and destroying competitors products before they reach the market
Giving false information about a competitor’s product

6. Ensures rights of employees are upheld WhatsApp us 
Ethics ensures that the employer does not violate the rights of employees especially as laid
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out in terms and conditions of employment. Such rights include payment of dues in time.
7. Eliminates use of unfair means of achieving business objectives
Ethics ensures that business operations are carried out in a professional way. For example it
is unethical to give or receive a bribe in order to win a business contract. It is also unethical to
hold goods awaiting for their prices to go up.
UNETHICAL BUSINESS PRACTICES
The question of ethical business practice is a widely debatable subject.
Profit and morality are incompatible. For instance the pursuit of wealth is a barometer of
success yet it is popularly believed that wealth tends to corrupt individuals.
All ethical problems have simple solutions i.e. right or wrong. This is a misconception based
on the assumption that there is an absolute standard for judging moral conduct.
Ethics is simply a matter of compliance with laws and regulations
Despite these misconceptions, unethical behaviour is inherent in many entrepreneurs. This

happens because of:
Greed
Inability to distinguish activities at work and at home
Survivalist thinking
Lack of foundation in the study of ethics etc.
However, some studies on ethical practices have shown that entrepreneurs have different
concerns regarding specific business issues. Etc.
Issues that entrepreneurs believe require a strong ethical Issues that entrepreneurs view with greater tolerance in
position regard to ethical position
Ø Evaluating faulty investment advice
Ø Tax evasion
Ø Favourism in promotion
Ø Collision on bidding
Ø Reporting dangerous design flaws
Ø Insider trading
Ø Misleading financial reporting
Ø Discrimination against women
Ø Misleading advertising
Ø Copying an idea etc.
Ø Cigarette smoking on the job
Code of Conduct
The code of conduct within a business is a statement of ethical practices or guidelines to

which an enterprise adheres. A variety of such codes exist; some relate to the business at
large and some relate to corporate conduct. The codes cover subjects such as misuse of
corporate assets, conflict of interest, use of inside information, equal employment practices,
falsification of books and records etc. The codes of conduct are normally written and
distributed to everyone in the business to read and follow.
Crime and the Small business
The cost of crime has become a major cause of small business failure all over the world.
Crime in the business may be internal i.e. employee dishonesty or external i.e. robberies
which sometimes may even be in collision with employees. The entrepreneur should be
aware of such crime possibilities and make adequate provision for tackling them as they may
lead to bankruptcy.
Fraud
Fraud is very common and popular with the use of credit cards. The use of credit cards has
grown tremendously in the recent past and the front-line defence in the small business can
be salespeople and cashiers. They should have the knowledge and means to discover this
type of crime effectively.
The following precautions can help reduce credit card fraud: 

1. Scrutinise Signatures – compare signature on sales ship to that on the card.
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2. Get Credit Authorisation – only one person whose signature is on the card is authorised to
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use it.
3. Ask for additional
KASNEB identification
RESOURCES  etc.
Cheque Deception
Sometimes small businesses pass bad cheques which costs themmillion of shillings. The
entrepreneur needs to establish a firm cheque cashing policy and procedure. This can be
done by:
Supervisor approval
Photographs of customers
Cheque cashing limit
Intensive identification etc.
Shoplifting
This is a crime involving the loss of stealing merchandise and this causes great loss to small
businesses. In many cases, shoplifting is done outsiders themselves, in collusion employeese
or outsiders themselves.
To deal with this problem, the entrepreneur should make employees aware of this problem
and minimise opportunities for shoplifting. For instance customers who visit the business
more often arrange the merchandise or send sales people away, bears watching. Employees
should also watch customers wearing loose clothing. Opportunities for shop lifting can be
minimised checking customers at entry points when entering and leaving etc. However, when
shoplifting occurs,, the culprit should be arrested and prosecuted under the law.
Internal Theft
Internal theft is also very common in small business. The Presence or increase in internal
theft may be attributed to poor hiring practices where the entrepreneur does not take due
attention to the background of employees, poor employer- employee relationships, presence
of theft opportunities, economic conditions etc.
The internal theft can be reduced reduction of theft opportunities i.e. controlling keys – who
should keep them, use of designated entry and exit points, signing in and out of employees
etc
Embezzlement
This is a fraudulent appropriation a person to whom it has been entrusted. In most cases and
embezzler is an employee of higher position of trust and confidence.
Example of Mary’s Successful Business that has Benefited Community
Mary is forty years old. She currently lives in Thika. Mary came to Thika when she was young.
Her father worked as a cook in a restaurant. She attended Secondary School. After
graduating, she did not qualify for college, but she was admitted at a Technical Institute
where she enrolled in a two –year course in tailoring. On completion of her course, she was
employed a tailoring company in the Industrial Area of Thika.
She worked for this company for two years. Then she decided to start her own business. She
obtained a loan from a commercial bank as capital for the business. From her savings, she
contributed additional capital.
Mary then rented a room in the shopping centre nearest her house so that she could walk to
work. She bought 4 sewing machines. She bought cloth and then employed 4 skilled tailors to
do the cutting and sewing of the clothes. At first she made dresses, trousers and shirts. She 
displayed the products in her shop for customers to come and buy them. Later Mary visited
several shops in the city square that sell uniforms in quantities. Two businesses placed WhatsApp us 
orders with her to supply uniforms. To be able to meet this order, she needed to employ 5
skilled employees’ full time and 2 employees on part time basis. She also needed to buy
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three more sewing machines. Mary was able to meet her orders and her customers were
satisfied with the
KASNEB products. 
As Marys business expanded, she needed additional space. She rented a bigger room in a
popular place in town. She was also nearer to her prospective customers as well as her
existing customers. She continued supplying uniforms to two same companies and at the
same time made clothes to sell to other customers. At this juncture she needed to employ an
account clerk to deal with the records and handle cash for the business, and a messenger to
do errands. Mary was the overall manager.
Mary organised exhibitions in Nairobi to advertise her products both to local customers and
to customers in foreign markets. Soon after the first two exhibitions, she started exporting
some of her products to neighbouring countries. Her net income rose quickly.
Mary is friendly to her customers. They like her because of her quality products and her
honesty. Her employees also like her and are loyal and committed to their work. Five of her
employees have worked in the business for over ten years. The employees and the
customers have nicknamed her “fashion”. She like the name and has accepted it. Mary pays
her employees reasonably well. She has also organised an insurance scheme for them. She
pays them a travel allowance in addition to their monthly salaries.
GROUP WORK
The instructor/trainer will divide the class into four groups: A,B,C,D and assign each group
two questions in relation to how Mary (as an entrepreneur ) has contributed to the national
economic development of the society she lives in.
A person from each group will present a report of group responses.
GROUP A: 1. Howhas Mary created employment for young people?
2. Howhas Mary raised the standard of living of her employees?
GROUP B: 1. Howhas Mary contributed to price stability and
increased completion in the textile industry?
2. Howhas Mary assisted the Government in earning
foreign exchange?
GROUP C: 1. Howhas Mary assisted the country in increasing the
Gross Domestic Product (G.D.P)?
2. Howhas she contributed of entrepreneurial spirit and culture?
GROUP D: 1. Howhas Mary utilised the local resources and how
has this contributed to the welfare of the nation?
2. Howhas Mary provided cheap skills in terms of 

Learning on the job?
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After discussions, the instructor/trainer will have a person from each group give a report on
their discussion. The class can then add their ideas after each report. Finally the
instructor/trainer will briefly summarise all the points mentioned each of the groups.
TOPIC 14 BUSINESS PLAN
INFORMATION COMMUNICATIONTECHNOLOGY (ICT) IN A BUSINESS
All businesses, small or large need information. Information is data that is relevant for a
specific purpose. Businesses require information on new products, technological changes
and competitors to be able to cope. The information must be communicated accurately and
timely. It must also be complete and relevant to meet the demands of today’s business
environment.
Definition of Information and Communication Technology (ICT)
Information and Communication Technology is an umbrella term that includes any

communication device or application. ICT describes a range of technologies for gathering,
storing, retrieving, processing, analysing and transmitting information.
Benefits/Importance of ICT to a small business enterprise
A business can utilise ICT in pursuit of its objectives. ICT enables a business to access the
relevant information for efficient management of the business. This is in turn leads to;
1. Increased profits,
2. Improved time management,
3. Increase in cost-effectiveness,
4. Increase in sales,
5. Higher market exposure
6. Reduced work force among others.
Uses of ICT equipment
The following are some of the benefits associated with the various ICT tools :
1. The Phone
The phone is used to communicate verbally with customers and suppliers. This includes
both the fixed line and mobile phones Other than verbal communication, the mobile phone
is also used for sending and receiving messages, sending and receiving money e.g. MPesa.
Benefits of a mobile phone
It is affordable
It is easy to use and any one can understand its functions
It is portable and therefore can be used anywhere at any time
It is efficient because feedback is immediate
It can be used in extreme remote areas as long as the network coverage is available
1. Radio
This is a very effective way to advertise a business

It is quite inexpensive and can reach a wide audience
Some communities have local radio service stations and the small business may use this
service to advertise its products or services where the entrepreneur may be interviewed
during a programme. Examples of such radio service stations are; Inooro FM, MurembeFM
and Ramogi FM.
Television
A small business may use the television as a tool for sourcing technological information, new
products/services, market trends and general information that will assist the entrepreneur to
run his business.
1. Print Media
Examples of such are; newspapers, advertising papers/magazines and business directories. 

Newspapers e.g. the local dailies(The Nation) which the business enterprise can use to ;
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Advertise
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Get information on market trends
Access
KASNEBinformation on newtechnology,
RESOURCES new products/services
Access information on political and economic trends in the country
Advertising Magazines/Papers/Journals/Business directories
These are useful tools for advertising products/services/ location of the business enterprise
1. The Fax machine
This is short of “facsimile machine”. This is a machine that allows transferring a copy of a
document through the telephone line. Both the person sending and receiving it must have a
fax machine.
Benefits of the fax machine to small business
The message sent is received instantly

If one is dealing with people far away, the fax can be a less expensive means of
communication
The sent copy is like the original copy
A message sent through a fax machine confirms in writing anything that has been
previously agreed on verbally
1. The Computer
This is one of the modern ways of communicating and advertising in use. It can be used in
the following ways;
Word processing – writing letters or receipts

Storing information – financial data, customers addresses, suppliers addresses
Keeping track of records – purchases and sales
Reminder messages – products or service delivery dates
Generating advertising leaflets, posters or flyers
Generating financial statements
E-business – this is publicizing the business through the Internet
Emerging issues and trends
1. i) Mobile phone money transfer: mobile phone payment service is used not only as a
means of sending and receiving money but also for selling goods/services, paying bills
(electricity, water, creditors), and also as a means of safe deposit/ banking.
2. ii) Marketing: the mobile phone can be used as a tool of advertising a business
product/service.
16EMERGING ISSUES AND TRENDS IN ENTREPRENEURSHIP
Due to the dynamic nature of the business environment, the user of this manual is advised to
scan the environment for any emerging issues and trends in every sub-module unit and
include it in the learning process. New marketing methods and technologies for example,
may emerge thus creating the need to be captured in the learning process.
Emerging issues and trends in entrepreneurship
Trends refer to long term movements in a certain direction. In society a trend describes a
direction in the tastes and desires of the general population. For entrepreneurs, trends
present an incredible world of opportunities. Once an entrepreneur identifies a specific trend
then all their imagination and creative ability can go into generating products and services to
satisfy the demand that the trend creates.

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DueMenu
to the dynamic nature of the business environment, entrepreneurs are advised to scan
the environment for any new trends. New marketing methods and technologies for example,
mayKASNEB
emerge thus creating theneed to
RESOURCES be inculcated
UNIVERSITY within continuing
RESOURCES PDF business ventures.
KISM RESOURCES KNEC Section  CHRP ACCA IFRS U
Emerging trends in enterprise management can be classified as technological, global,

social/cultural, or economic issues. Technological trends equip an entrepreneur with
knowledge that is useful in the expansion and growth of the business. The use of new
technology creates a competitive advantage for the business opening a potentially attractive
market for an entrepreneur.
Emerging Issues and Trends in Entrepreneurship
Environmental conservation and the need to address environmental standards (NEMA).

New marketing methods and technologies such as allowing managers to manage their
enterprises in the comfort of their homes or mobile offices.
introduction of business incubation centres such as:-
export processing zones (E.P.Z’s)
Kenya Industrial Research Development Institute (KIRDI)
Agricultural technology centres
Kenya Kountry Business Incubator (KeKoBi)
introduction of entrepreneurship education at all levels of education to inculcate the

entrepreneurial cultlure.
Globalisation –
Networks being created among entrepreneurs to enable them go global.

Opening unlimited business opportunities which small business enterprises can pursue.
Business clubs – entrepreneurs are more aware and are forming business clubs in order to
access opportunities and markets.
Gender equity – more women entrepreneurs in self employment hence various financial and
non-financial organisations to develop products targeting women.
More youths being involved in self-employment ( Ministry of Youth Affairs)
Large organisations are changing products and services regularly to suit for upcoming needs
of their customers.
Many people prefer to start small stalls rather than the traditional retail shops.
E-Commerce
Being used globally to access customers and suppliers.

Use of ICT such as the Internet to market business activities and products.
Allowing a business enterprise to post/ have its profile in a website.
E-learning.
1. the need for meeting quality standards (KEBS)

2. Use of business plans which is becoming more of a requirement with many financial
institutions.
3. money transfer for example mobile phone payment service is used not only as a means of
sending and receiving money but also for selling goods/services, paying bills (electricity,
water, creditors) and also as a means of safe deposit/ banking.
4. human rights
5. Alcohol and Drug Abuse (ADA)/ Drug and substance abuse.
6. HIV/AIDS
7. Conflict resolutions among others
Challenges posed emerging trends and issues in enterprise management
1. Delays in processing approvals

2. Meeting the required environmental standards
Management of challenges posed emerging issues and trends in enterprise

management
Complying with set rules.

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INTRODUCTION TO ENTREPRENEURSHIP Popular posts:

An entrepreneur is someone who detects a previously untapped opportunity to make some

Contribution of Entrepreneurship to National Development

HISTORY OF ENTREPRENEURSHIP GLOBALLY AND IN KENYA

History of entrepreneurship globally

From the 1980s government have increasingly seen entrepreneurship as a means of

History of Entrepreneurship in Kenya

History of entrepreneurship in Kenya started as a pioneer project borne out of the

Myths associated with entrepreneurship in Kenya

The following are some of the myths associated with entrepreneurship:

Most successful entrepreneurs have years of experience in their chosen line of

The following are some of the entrepreneurial theories:

The theory holds that entrepreneurial behaviour is determined economic factors.Thus

Importance of Entrepreneurship theories

1. Entrepreneurship theories bring greater understanding of entrepreneurship behaviour

Different types of entrepreneurs portray certain characteristics and patterns of behavior

They may exhibit the following characteristics:

These types of entrepreneurs exhibit the following characteristics:

1. They are of middle class origin

1. They are very eager to experiment upon new ideas.

1. Internal locus of control

1. Need for achievement

Ability to marshall resources

Starting a business is hard work. An entrepreneur has to cope with the

who are not willing to work hard.

Entrepreneurs are highly motivated to achieve. They tend to be very competitive.

Role of an entrepreneur in an enterprise

Entrepreneurs play different roles in an enterprise. These include:

1. The enterprise is too large for him/her to purchase.

The entrepreneur is in charge of developing an effective organizational structure showing the

– The entrepreneur as the person in charge of developing an organizational design. He

Entrepreneurial Tendency Test

When I’m interested in a project, I need less sleep Yes Maybe

When there’s something I want, I keep my goal Yes Maybe No

When there’s something I want, I keep my goal

Clearly in mind Yes Maybe No

I examine mistakes and learn to succeed

I have new and different ideas

If something can’t been done, I find a way

I see problems as challenges

I’ll gamble on a good idea, even if it isn’t a sure thing

To learn something new, I explore unfamiliar subjects

I can recover from emotional setbacks

I feel sure of myself

I’m a positive person

I experiment with new ways to do things

I’m willing to undergo sacrifices to gain possible long-term rewards

I usually do things my own way

I tend to rebel against authority

I often enjoy being alone

I have a reputation for being stubborn

37 points and under

Meaning of creativity and innovation

Process of creativity and innovation

Process of creativity and innovation

ADJUST, ADD, OR ADAPT

THE PROCESS OF INNOVATION

Creativity as a process has several stages. These are:

Getting the mind ready for creative thinking using

realizing that every situation is an opportunity to learn