CHAPTER ONE Entrepreneurs And Entrepreneurship

slide1. CHAPTER ONEEntrepreneurs And Entrepreneurship  what is entrepreneur?-action-oriented, -highly motivated individuals -who take risks to achieve goals -have the ability to see and evaluate business opportunities.<br>
slide2. ability to gather the necessary resources to take advantage of them

thinker and the doer.
sees an opportunity for a new product or service, a new approach anew policy, or a new way of solving a historic problem<br>
slide3. Entrepreneurial Traits and Competences Need for achievement- childhood exp., born
Self- Determination- reject influence of chance
Desire for Independence- wish for autonomy
Innovation- assess mkt dd & innovate to meet dd
Willingness to Take Risks-invest money, assume financial risk, leave secured jobs<br>
slide4. Factors Starting a Business Desire for Independence
Desire to Exploit an Opportunity
Turning a Hobby or Work Experience into a Business
Financial Incentive
Redundancy
Unemployment (or threat of)
Disagreement With Previous Employer:<br>
slide5. 4. Importance of Entrepreneurship country’s economic development and technological advancement
new jobs are generated by small business
low-paying service
foster innovation
government’s income from tax is increased
import substitution
exportable products are produced<br>
slide6. CHAPTER TWOEntrepreneurship and Innovation Creativity:
The ability to bring something new.
It is ability not activity of bringing something new
Innovation: is the process of doing new things.
is the transformation of creative ideas into useful applications, and creativity is a prerequisite to innovation.<br>
slide7. 2.2. The Creative Process Germination-seeding Stage of a new idea
Preparation-conscious search for knowledge
Incubation- subconscious assimilation of infn.
Illumination-Recognition of idea as feasible
Verification- Application or test to prove ideas has value<br>
slide8. Conditions Required for Success in Innovation executive leadership position to support strategic decisions that encourage creativity
operational leader to carry out the essential tasks
A clear need for the application by sufficient potential consumers
The realization of the product, process, or service as a useful innovation providing value to society.
Good cooperation among the crucial player
Availability of resources
Cooperation and support from external sources<br>
slide9. 2.5. Windows and Corridors A window
is a time horizon during which opportunities exist before something else happened to eliminate them.
The corridor
is opportunities evolve from entrepreneurs being positioned in similar work or having had experience<br>
slide10. 2.6. Success Factors for Entr. The Entrepreneurial Team

Venture Products and Services

Marketing and Timing

Business ideology<br>
slide11. Chapter Three Creating and Developing the Business Sources of new ideas
1 internal source :
-salesmen
-production personnel
-marketing executives
2 external source:
-customers - competitors
-middlemen - private research organizations
-inventor - trade associations<br>
slide12. Methods of generating new ideas Involve everyone in the search for Ideas
Involve Customers in Your Process
Seek Ideas from New Customer Groups
Involve Suppliers in Product Ideation<br>
slide13. Developing and using a business plan Information needs

Executive Summary: overview of business

Marketing Strategy: mtds to reach target mkt

Financial Information: income & expense

Operational Information: steps in production<br>
slide14. Writing the business plan A business plan is a comprehensive set of guidelines for a new venture
also called a feasibility plan that encompasses the full range of business planning activities

describe where you are, where you want to go, and how you propose to go there.<br>
slide15. Importance of the Business plan help the owner/manager crystallize and focus his ideas
help the owner/manager set objectives
benchmark against which to monitor performance
attract any external finance needed
emphasizes the strengths and recognizes the weaknesses of the proposed venture<br>
slide16. Using and implementing business plan When
At the start up of a new business
Business Purchase
Ongoing
Major decisions<br>
slide17. Who Managers
Owners
Lenders

Why
-Assessing the feasibility and viability of the business or project
-Setting objectives and budgets
-Calculating how much money is needed<br>
slide18. The Format of a Business Plan Executive Summary
Company Description
Promoters, shareholders and Board
Advisors
Products and services
Long Term Aim of Business
Objectives
S.W.O.T. Analysis<br>
slide19. 3 Market Analysis
Target market
Total market valuation
Targeted share
Market trends
Profile of competitors
Competitive advantage
Benefits to clients
4 Marketing/Sales Strategy
Income sources
Marketing strategy
Pricing
Advertising and Promotion
Sales Strategy<br>
slide20. 5 Research & Development
- Patents, copyrights and brands - Product/Service Development - R&D

6 Staffing and Operations
Management Organization Charts
Staffing
Training Plans
Operations<br>
slide21. 7 Financial Projections
Key Assumptions
Profit and Loss Accounts
Balance Sheets
Cash flow Projections

8 Sales channel

9 Funding Requirements

10 Appendices<br>
slide22. Chapter fourLegal issues for entrepreneurs - Any business in country is regulated by law
- needs to be aware of rules that affect it.

Intellectual property

Includes patents, trademarks, copyrights, and trade secrets represent important assets of entrepreneur
refers to products that come from the creative mind
Any Innovation, Commercial or Artistic, or any Unique Name, Symbol, Logo etc<br>
slide23. There are four ways to protect these assets: 1. Patents on Inventions
2. Trademarks on Branding Devices
3. Copyrights on Music, Videos, Patterns, Forms of Expression
4.Trade Secrets for Methods /Formulas with Economic Value<br>
slide24. 1 Patents -A contract between government & inventor in exchange for disclosure of invention to make, use & sell it alone for certain period of time

Utility Patents:
Protect Processes, Machines, etc
Design Patents
designs for Articles of Manufacture
Plant Patents: plant varieties<br>
slide25. 2 Copyright Laws protects the form of expression of a creator against copying
protects works of authorship, such as writings, dramatic, music, and works of art
To stop others from printing, copying, or publishing<br>
slide26. 3 Trade Secrets
Trade secrets are information that companies keep secret to give them an advantage over their competitors
4 Trademark Laws
protect words, names, symbols, sounds, or colors that distinguish goods and services
A great trademark can help with the sales of goods and services<br>
slide27. Product Safety & Liability must not Breach Legal Specifications of a Product
must follow the Prescribed Specification

Product Liability Claims Types:

1. Negligence: in Production & Marketing Process
2. Warranty: Exaggerating the Benefits
3. Strict Liability: Defective Products for Sale
4. Misrepresentation: material facts on Labels<br>
slide28. Business Insurance is the transfer of risk from the business owner to an insurance provider
 
It is a contract (policy) in which an individual or entity receives financial protection against losses from an insurance company.
- It is a cover against any unexpected risk<br>
slide29. Buying Insurance

Price
Coverage Offered
Specialization of the Company
Reputation of the Insurance Company<br>
slide30. Chapter fiveInstitutional set up for the promotion of small scale industry Office space
Office equipment
Checking account
Business ledger<br>
slide31. Financing the small scale industry Step 1
Write a business plan; Include management, marketing, operations and financial strategy
Step 2
Contact the Small Business Administration: collect information on the micro-lending program and a listing of micro-lenders
Step 3
Contact a participating lender<br>
slide32. Management concepts “it is a social process entailing responsibility for the effective and economical planning and regulation of the operations of an enterprise, in fulfillment of a given purpose or task.”

“it is a process by which a cooperative group directs action towards a common goal”. Joseph Massie<br>
slide33. Features of Management group effort for achieving common goal
Planning and effective use of resources.
It is a problem solving effort
It is a process consisting of planning, organizing, staffing, directing and controlling
getting things done through and by others.
It is an Art as well as Science<br>
slide34. Managing business ventures Venture management is a business management discipline which is focused on the skills and practices required to manage the rapid growth of new business in highly dynamic environments. These environments are often characterized by rapid technology change.<br>
slide35. Functions of management Planning
predetermining the activities to be performed and prescribing the means and methods of achieving
 
Organizing
determining the activities needed to achieve the objectives, dividing and distributing the work and delegating<br>
slide36. Staffing
manning the positions created in the organizational structure
Directing
guiding and leading the subordinates
ensure that all groups and persons work together harmoniously, efficiently and economically towards the common objectives
Controlling
ensures that performance according to pre-determined standards and plans<br>
slide37. Major functional areas of mgmt 1 Marketing management
Marketing management is the planning and implementation of a company's production, pricing, distribution and promotional strategies<br>
slide38. 2 Financial management
To collect finance for the company at a low cost
To use it for earning maximum profits.
It is concerned with raising financial resources and their effective utilization towards achieving the organizational goals."
It means the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization.<br>
slide39. 3 Human resource management
conducting job analyses,
planning personnel needs,
recruiting the right people for the job,
orienting and training,
managing wages and providing benefits and incentives,
evaluating performance,
resolving disputes, and
communicating with all employees at all levels<br>
slide40. 4 Production management
deals with converting raw materials into finished products
Its objective is to produce goods and services of the right quality, right quantity, at the right time and at minimum cost
deals with decision-making related to production processes so that the resulting goods or service is produced according to specification, in the amount and by the schedule demanded and at minimum cost."<br>
slide41. Chapter SixForms of Business Ownership Types of business ownership

There are forms currently in wide use by business. Their forms are shown in the following figure as
 
Sole proprietorship
Partnership
Corporations.
Cooperatives<br>
slide42. The Sole proprietorship Option
a business owned by just one person
it may have many employees.
the easiest form of business
receives all profits
assume all losses
bear all risks
pay all debts of the business<br>
slide43. Advantages of sole proprietorship
Easy and low cost
Ownership of all profits and personal incentives
Freedom and quickness of action
Business secrecy
distribution of wealth
Pride of ownership
Single tax or tax break<br>
slide44. Disadvantages of sole proprietorship
-Unlimited liability
-Limited financial resources
-Limitations in managerial ability and other special skills
-Lack of continuity
-Demands time commitment
-Difficulty in hiring and keeping high achievement employees
-Few extra benefits from working for others.<br>
slide45. 2. The Partnership Option a business run by two or more persons where their relationship is based on agreement participating in the profits and losses arising out of it

Formation
requires the existence of two or more persons
entering into contractual relationships (memorandum of association)<br>
slide46. according to the 1960 commercial code of Ethiopia article 284, the memorandum of association containing the following.
 
Date.
name, address and nationality
fact of partnership
business purposes
contribution of each partner
services required from persons
Duration of the business
Name and location of business
Amount invested by each partner
Sharing ratio for profits and losses
managers and agents
Partners’ rights, if any for withdrawals of funds for personal use
accounting records and their accessibility to partners
Specific duties of each partner
dissolution and for sharing the net assets
protection of surviving partners<br>
slide47. Qualifications of Partners
Any person capable of contracting

Capital contribution
Every partner shall make contribution

Management
make an agreement how to share the responsibility
 
Duration
when any of the general partners withdraws, dies or becomes no longer to be a partner.
if the remaining partners agree to continue under the original name of the firm and style, they can continue<br>
slide48. Other Legal Characters

Unlimited Liability
 
Greatest good faith & trust between partners
 
No Separate Entity apart from persons
 Restriction on transfer of interest 
A partner cannot transfer his share or give his ownership to outsiders without the consent of other partners.

No change may be made in the nature of business without the consent or agreement of all partners<br>
slide49. Advantage of partnership
 
Ease of starting
Increased sources of capital credit
Combined managerial skills
Personal supervision
Shared risk

Disadvantages of partnership
 
Unlimited liability
Risk of implied authority
Lack of harmony
Lack of continuity<br>
slide50. 3. The corporation option

artificial person, authorized and recognized by law,
with distinctive name, a common seal,
comprising of transferable shares of fixed values,
carrying limited liability
having continuous succession life<br>
slide51. The Corporate Charter

A corporation charter typically provides for the following:
Name of the company
Formal statement of its formation
type of business
Location of office
Number and value of shares.
Voting privileges of each share
Names and addresses of incorporators
Names and addresses
Statement of limited liability<br>
slide52. Characteristics of corporations

Separate legal entity
Limited liability
Transferability of shares
Death and withdrawal of shareholders
Common seal
Separation of ownership from management<br>
slide53. The decision makers in a corporation are: 
1. Stockholders
 
-are the owners of the corporation
- rarely take an active role in the company
- They buy and sell stock
-they may vote on major issues
-elect the members of the board of directors

2. Board of director 
-is elected by the stockholders to oversee the management
-establishing all business policies
-approve major contracts
-elect the president.<br>
slide54. 3. Corporate officers/Managers/Executives
-perform ordinary business practices of the corporation are carried out
- work under the directives and supervision of the board of directors
Advantages of a corporation

Financial strength
Limited personal liability
High Scope of Expansion
Better Decision Making
Easy Transfer of shares/ownership
Separate Legal Entity<br>
slide55. Disadvantages of a corporation
 
process of incorporation requires more time and money
Lack of Owner’s Personal Interest
Slow Decision Making
Lack of Secrecy
Double taxation<br>
slide56. 4. Cooperatives option -an autonomous association of persons
-united voluntarily
-to meet their common economic, social and cultural needs and aspirations
-through a jointly owned and democratically controlled enterprise.<br>
slide57. Cooperative principles:

1 Open & voluntary membership
2 Political & religious autonomy
3 Member economic participation
4 Democratic control
5 Education & information to members
6 Cooperation among cooperatives
7 Concern for community<br>
slide58. Values:
-self-help, -self-responsibility,
-democracy, -equality,
-equity, - solidarity
-honesty, -openness,
-social responsibility, -Caring for others.

Three principles distinguish cooperatives from general corporations:
-User-owner,
-User-control, and
-User-benefits.<br>
slide59. Criteria for Choosing the Ownership Form

Organizational costs to establish
Limited versus unlimited liability
Continuity
Transferability of ownership
Control
Raising new equity capital
Income taxes<br>
slide60. Chapter Seven: Financing Money needed by your new start-up range from rent, to equipment, to production of your product, to hiring employees, to paying for needed licenses and permits.<br>
slide61. (1)what assets are required
(2) what expenses will be required;
(3) which expenses cannot be changed and must be paid,
(4) knowing how these costs will be financed. initial capital requirements.<br>
slide62. The Five “Cs” of Credit 1. Capacity. ability to repay the loan.
2. Capital. personal financial strength.
3. Collateral. security for the repayment
4. Character. willingness to repay the loan.
5. Conditions. general economic climate<br>
slide63. 6.2 Methods of Financing
owner-provided funds (equity) or borrowed funds (liabilities). 1. Equity Financing
supplied by investors in exchange for an ownership position in the business.
does not have to be repaid.
no interest to be paid on the funds.
are generally interested in (1) getting dividends,
(2) benefiting from the increased value of the business
(3) having a voice in the management<br>
slide64. Sources of Equity Financing i. Personal Funds
ii. Family and Friends
iii. Partners<br>
slide65. 2. Debt Financing are borrowed from a creditor
must be repaid.
important parameters associated
amount of principal
the loan’s interest rate,
loan’s length of maturity<br>
slide66. A short-term loan must be repaid within one year, an intermediate-term loan must be repaid within one to ten years, and a long-term loan must be repaid within ten or more years

i. Commercial Banks
methods include group lending and liability, pre-loan savings requirements, gradually increasing loan sizes
for low-income clients
taking little or no collateral
ii. Microfinance Institutions<br>