Beruflich Dokumente
Kultur Dokumente
ENTREPRENUERSHIP
CODE: BAB 07306
LECTURER: MS. BURRA
ROOM: B2-9
ASSESSMENT GUIDELINES
ENTREPRENUERSHIP-PRESENTATION SCHEDULE
CLASS (TFC) DATE
TIME
CLASS
(TNC)
DATE
TIME
BACC II
BICT II
TUESDAY,6TH 7-9 AM
DEC 2016
BBA II A &
B
MONDAY,
5TH DEC
2016
7-9 PM
BBSE II
BMET II
BMK II
WEDNESDA
Y 7TH DEC
2016
7-9 AM
BBSE II
BICT II
BMK II
TUESDAY
6TH DEC
2016
5-7 PM
BPS I & II
THURSDAY
8TH DEC
2016
11-1 PM
BACC II
TUESDAY
6TH DEC
2016
7-9 PM
BBA II
WEDNESDA
Y 7TH DEC
2016
9-11 AM
BPS II B
BPS II A
THUR 8TH
DEC
FRID 2ND
DEC
7-9 PM
7-9 PM
CONT.
The intertwining notions of entrepreneur, investor and risk is
evident from the start.
Entrepreneurs are individuals who recognizes opportunities where
others see chaos or confusion
They are also individuals who recognizes opportunities where
others see chaos or confusion
Can you think of any more definitions?
ENTREPRENEURSH IP
Simply defined as what an entrepreneur does!
Defines characteristics of seeking opportunities, taking risks beyond security and having the
tenacity to push an idea through to reality
It is also a mind-set that have revolutionized the way businesses are conducted at every level in
every country
Can be taught and learnt unlike many myths contrary to!
COMMON FOLKLORES
Entrepreneurs are doers and not thinkers : modern day
entrenuership involves creation of clear and complete business
plans which is an indication of thinking ahead!
Entrepreneurs are born and not made : modern educational
institutions teach models, traits, processes, case studies which
generate knowledge to those aspiring entrepreneurs. It has now
become a discipline
Entrepreneurs are always investors : entrepreneurship
encompasses innovation, not necessarily investing!
Entrepreneurs are educational and social misfits : The world
has changed!
Can you think of more myths?
CONT.
Founding new organisations : a very common belief that
individuals who have established new businesses are
entrepreneurs
Entrepreneur is recognised as the person who undertakes the task
of bringing together the different elements of organisation (people,
property, productive resources)
Some buy into what has been established, develop them more
and extends them or absorbing them into existing organisations
Contrary to many managers who get on with what has been
already established and bring only incremental changes to them
CONT.
Bring innovation on into the market : very crucial to
entrepreneurial process
entrepreneurial adjective describing how the entrepreneur
undertakes what they do
Entrepreneurial process a process of creating or adding
value a result of a new project or venture
Entrepreneurs must do something new or else there will be no
point in entering a market
Innovating creating something new, product or technology,
new way of doing things? New way of delivering products? New
methods of informing the consumer about a product and
promoting it to them? New approaches to managing
relationships?
What is important is there has to be value added! Or else it is
CONT.
J.A Schumpeter, an Austrian radical economist developed
a process called Creative destruction in the 19th
century
He believed that once entrepreneurial monopoly was
established, a new generation monopolist entrepreneurs
will come along with new innovations which will supersede
previous ones
Entrepreneurs = self-interested individuals who sort short
term monopoly (dominance) based on some innovations
N:B : no matter how important innovation has been
stressed it still remains not unique to entrepreneurial
process. Managers also nowadays are encouraged to be
innovative
CONT.
Identifies market opportunities: opportunity is defined as a gap
in market where the potential to do something of value exists. It is the
other side of the coin of innovation!
New opportunities exists all the time but not necessarily presenting
themselves
If they are to be exploited they must be actively sought
out.(Wickham, 1988)
This is a key task of an entrepreneur!
Entrepreneurs should always scan the environment/business
landscape to identify gaps left by existing market player including
them. They should not stop at scanning but go as far as pursuing
these gaps with suitable innovations
C O N T.
Apply expertise: expertise comes in various forms e.g.: spotting
new opportunities, deciding how to allocate scarce resources in
situations where information is limited which makes them very
valuable to investors!
How distinct are entrepreneurial investment decisions apart
from acquired managerial skills via confidence, market knowledge,
decisiveness and leadership skills?
Can we separate the attributes?
CONT.
Provision of leadership : an indeed special skill!
Entrepreneurs can rarely drive innovations to markets.
They need support from various individuals: investors,
customers, suppliers etc people from both within and
outside organisations
If these are to pull in one direction for value to be created
the task of unifying these agents lies heavily on the
shoulders of entrepreneurs since they must be supported
and motivated as well as directed.
However, this factor is not unique to entrepreneurs, it is
rather a general management skill
CONT.
Africans participation in business was restricted to very small
firms, such as dukawalas (tiny shops).
Offspring of chiefs, the few Africans who went to colonial schools
received only elementary education to enable them to understand
clerical and other very low duties in the public and private sector.
Economic and social marginalization of Africans was part of a
deliberate colonial policy of disempowering the indigenous
population and hence making it easy to rule.
Africans were made to believe that they were naturally inferior
to other races and everything African was backward. Naturally,
this environment had a negative effect on development of
entrepreneurial values and competencies, including self-esteem, a
belief in the ability to make things happen, confidence, initiative,
aggressiveness, etc.
CONT.
However, the social and economic context created in various
parts of the country presented different opportunities for the
development of entrepreneurship.
For example, European missionaries and farmers settled in
some mountain areas of the country (Kilimanjaro, Tukuyu,
Bukoba, Songea etc), where they introduced Christianity,
education and commercial agriculture.
They also encouraged the local population to cultivate
commercial crops and to establish cooperatives. This
development not only inspired the local population and
exposed to new desires and opportunities, but it also led to
land shortages which forced them to think and act in nontraditional ways in pursuing of livelihoods and success.
CONT.
In 1967, the government officially adopted a radical
transformation to a socialist development strategy, through the
Arusha Declaration.
Activities categorized as constituting the commanding
heights of the economy, including banking, import-export,
insurance, large houses, farms, schools, hospitals, etc were
also nationalized.
The government invested heavily in the nationalized entities
as well as new ones.
Consistent with the socialist policy, private business
entrepreneurship was actively discouraged in favour of
government,
community-based
or
co-operative-owned
ventures.
Theoretically the socialist policy encouraged peoples
CONT.
Regulations were introduced to bar civil servants and leaders of
the ruling party from engaging in business activities. Since all
educated Africans were civil servants, this means that, business
activities were left to Asians and those indigenous people who had
no job opportunities, and these tended to be people who had no
substantial education.
However, in practice, the government embraced a centralized;
mainly top-down decision-making approach. It made a whole range
of decisions, from who should go to which school or college, where
one had to live, crops to be grown, their prices and where they
should be sold, salary levels, etc. a culture of dependency on the
state and unquestioning obedience took root in all walks of life.
This must have contributed to stifling development of
entrepreneurial values such as initiative, willingness to take risks,
need for achievement and related competencies.
CONT.
The break-up of East African Community in 1977 coincided with
a combination of other unfortunate events heralding a long
economic crisis in Tanzania.
The events included the international oil crisis of the early 1970s
and a costly war between Tanzania and Uganda in 1978/79.
The economic crisis was manifested by a serious shortage of
foreign exchange and consumer products, industrial capacity
under-utilization, inflation and decline in real purchasing power
among wage earners, forcing them to undertake petty business
activities to supplement their meagre earnings.
Similarly, real crop prices dropped compelling peasants and their
dependants to diversify income sources by engaging in small
ventures within the rural areas or in urban centres.
CON T.
The response of the citizen to the crisis demonstrated that
even the socialist policy had not completely subdued the
entrepreneurial agility of the society.
Tanzanians from all walks of the life responded to the challenge
by establishing makeshift backyard factories, smuggling goods
from neighbouring countries or hoarding whatever little was
available from the local industries and selling the same at
exorbitant prices.
Others established informal agricultural activities, animal
husbandry, retail and other projects to supplement the
dwindling formal incomes and take advantage of the failure of
state companies to meet the basic needs.
However, this second economy met strong resistance from
the state which only saw its dysfunctional role.
C O N T.
The informal private business activities were seen as being in
conflict with countrys resolve to build an egalitarian society, as
it created a class which owned no allegiance to the goals of the
society (Maliyamkono and Bagachwa, 1990).
In 1983, the government implemented a ruthless campaign
against economic saboteurs, confiscating property and
arresting business operators of different kinds.
As Maliyamkono and Bagachwa (1990) noted, the dysfunctional
approach to the second economy failed to distinguish elements
within the second economy which constituted potential assets
and those which were socially and economically detrimental to
the development of healthy economy.
The crackdown on economic players in 1983 delayed the social
and political legitimization of entrepreneurial activities in
Tanzania.
CONT.
The reforms did not fully ease the problem of low salaries. On the
contrary, the retrenchments, freezing of employment, privatization of
state enterprises and disengagement of the government from some
activities led to substantial job losses and limited openings for school
and college graduates.
Their most pronounced effect has been a substantial net increase in
the number of people whose only means of survival is selfemployment. Most of those who cannot find jobs as well as salaried
workers have, out of necessity, started micro and informal
businesses to enable them to eke out a living.
Aware of its limitation to help out in the situation, the government
started encouraging workers to do so. For example, in 1992, the
government deliberately reduced the working week by half a day to
give employees more time to engage in income generating projects
to supplement their official incomes. This played a significant role in
enhancing the legitimacy of entrepreneurship activities.
CONT.
Since the mid-1990s, entrepreneurship as a career has been
acquiring increasing legitimization.
The proportion of individuals consciously choosing self-employment,
even among the highly educated, has been increasing. For example,
while a 1991 survey of the informal sector (URT, 1991) did not record
any University graduate, a 1995 study (URT, 1995) recorded 1582
graduates in the sector.
In a 1997 survey of University of Dar es Salaam (UDSM) students by
the Faculty of Commerce and Management (FCM,1998), 81% of
students indicated that they were interested in setting up their own
enterprises. In a tracer study of the FCM Alumni (Kaijage, 2000)
entrepreneurship was rated second (next only to computer-related
courses) among aspects that were very important but not
significantly covered in the BCom programme.
REVISION QUESTIONS
What are the recent trends of entrepreneurship in
Tanzania?
Essential entrepreneurial components of Tanzania
economy?
Identify
government
and
non-governmental
organisations or agencies responsible for promoting
(and which have promoted) entrepreneurship in
Tanzania.
What incentives are being offered by the government of
Tanzania to encourage new ventures?
What are the barriers to entrepreneurship in Tanzania?
Why and how do people become entrepreneurs?
Why is entrepreneurship beneficial to an economy?
ASPECTS OF ENTREPRENEURSHIP
Venture
Financing
Corporate
Entrepreneurship
Entrepreneurial
Cognition
Global
Entrepreneurial
Movement
Social
Entrepreneurship
Trends in
Entrepreneurship
Research
Women
and Minority
Entrepreneurs
Entrepreneurial
Education
Family
Businesses
THEORIES OF ENTREPRENEURSHIP
Richard Cantillon (17th century)
Views entrepreneur as an economic agent that
combines means of production
Jean Baptiste Say (17th Century)
Made an improvement to Cantillons theory by adding
that entrepreneur formulates ventures team to carry
through production
Frank Knights theory (17th century)
Introduced risk taking and associated it with
entrepreneurs
Entrepreneurs accepts risks for rewards
THEORIES CONT.
Alfred Marshal (18th century)
Recognized four factors of production as land, labour, capital and organization
Entrepreneurs were the leaders that would combine these factors to produce
through good market knowledge, industry knowledge, leadership skills, ability
to forecast demand and supply changes and act on the risks
Success of entrepreneurs were not based on skills possession but economic
conditions which they were operating
Max Webers Sociological theory
religion is the major driver of entrepreneurship stressed
spirit of capitalism highlights economic freedom and private enterprise.
Capitalism thrives under the protestant work ethic that harps on these values.
The right combination of discipline and an adventurous free-spirit define the
successful entrepreneur.
ETHNICITY CONT.
E.g. Igbos in Nigeria, Kikuyus in Kenya, Chinese at home country,
Indians etc
Intergenerational Inheritance of enterprise culture (role
modelling)
Theory argues that entrepreneurial practise is largely inherited
Offspring's are more likely to engage in entrepreneurial activities if
parents were entrepreneurial
Strong grounding in business and ownership ethic at an early age is a
useful driving force for children as they choose their future carriers
Mark Cassons Theory (19th century)
Conducive economic conditions promotes entrepreneurial activities
Demand for entrepreneurship comes as a result for demand for
change
THEORIES CONT.
Joseph Schumpeter Innovation theory (19th century)
Innovation, foresight , creativity
Ignored risk taking and capitalized on innovation
Applicable to large scale firms and small firms owners were
considered as imitators
Israel Kirtzners Theory of Entrepreneurship (19th century)
Learning and alertness
Alertness ability to perceive new economic opportunities that prior
economic actor has yet recognized
Arbitrage opportunities on the market
Harvey Leibensteins Theory of Entrepreneurship (19th century)
Entrepreneurs = gap fillers
L E I B E N S T E I N S T H E O R Y O F E N T R E P R E N E U R S H I P C O N T.
THEORIES CONT.
Psychological theories of entrepreneurship
Attitudes and psychological attributes differentiate entrepreneurs
from non-entreprenuers and successful ones from non-successful
entrepreneurs
Theories include: N-Ach theorem (McClelland), Locus of control (Rotter,
1954), psychodynamic model by Kets de Vries and risk taking
propensity.
Locus of Control theorem
Degree to which one believe that he/she is in control of ones destiny
Internals believe that what happens to them is a result of their
internal efforts whether good or bad
Externals believe whatever happens to them is a result of external
factors (factors beyond ones control) whether good or bad
TYPES OF ENTREPRENEURS
Innovative entrepreneur
Introduces something new in the society
Imitative entrepreneurs
Observe an existing system and replicate it in a better manner. They could
improve on an existing product, production process, technology and through
their vision create something similar but better.
Fabians
Very careful and cautious in adopting any changes. Apart from this, they are
lazy and shy away from innovations
Drone
Entrepreneurs that are resistant to change. They are considered as old
school. They prefer to stick to their traditional or orthodox methods of
production and systems.
Nascent entrepreneurs
Those planning to start new ventures
TYPES CONT.
Singular entrepreneurs
Run single businesses
Novice Entrepreneurs
Already running singly owned business but are still actively learning about
the business
Opportunist entrepreneur
Interested in maximising their returns from short term deals
Craftsmen
Make a living by privately selling what they produced
Growth oriented entrepreneurs
Pursue opportunities to maximise potential of their venture
TYPES CONT.
Income oriented
Securing steady income
Expansion oriented
Take risks of expanding business and face the challenge of
changing their role from crafts operators to managers of
craftsmen
Intraprenuers
Administrative
entrepreneurs
(operating
firms
in
entrepreneurial manner
Independence oriented entrepreneurs
They work for themselves
LANDAUS APPROACH
High
Gambler
True Entrepreneur
Risk
Bearing
Consolidator
Dreamer
Low
Low
Innovativeness
High
CLASSICAL APPROACH
Craftsmen
Income oriented
Expansion oriented
Opportunist Entrepreneurs
Growth-oriented Independence-oriented
WEBSTERS APPROACH
The Cantillon Entrepreneur (classic type)
brings people, money and materials
together to create an entirely new
organisation
The Industry Maker goes beyond merely
creating a new firm; their innovation is such
important that a whole industry is created on
the back of it
Administrative Entrepreneur
(Intraprenuers) a manager who operates
within an established firm but does so in an
entrepreneurial manner
REVISION QUESTIONS
1) Briefly discuss the evolution of
entrepreneurship.
2) Discuss any five myths associated with
entrepreneurship
3) Discuss the characteristics of
entrepreneur
4) Differentiate Websters classification of
entrepreneurs from classical approach.
5) Discuss any ten entrepreneurial types
of your choice
ENVIRONMENTAL RESPONSIBILITY
The bottom line referred to as the "planet" represents
the implementation of sustainable practices and the
reduction of environmental impact.
These measures range in scope from green initiatives
such as recycling programs within corporations to
companies dedicated to manufacturing products using
only sustainable materials.
For example, using recycled plastic bottles and
industrial waste to make items that pollute the planet
instead of using standard materials such as wood,
steel and cement.
ENVIRONMENTAL AWARENESS
Key Steps in an Environmental Strategy
1. Eliminate the concept of waste.
2. Restore accountability.
3. Make prices reflect costs.
4. Promote diversity.
5. Make conservation profitable.
6. Insist on accountability of nations.
CLASSIC
ENTREPRENUER
Maximise personal wealth
Commercial
Traditional business
hierarchy taking
leadership role
Focused on competition
and maximising return to
entrepreneur/investors
Relationship with investors
considered critical,
relationship with
customers seen as means
to an end
Aspires to no wider social
legitimacy
Ethical reflections
Self-interested not
Personal Motivation
Sector of activity
Organisation form
created
Strategies adopted
Relationship with
stakeholders
SOCIAL ENTREPRENUER
Maximise social value
Not-for profit
Non-traditional,
emphasizes egalitarian
Avoids competition,
focused on creating and
delivering value
Stake holders defined over
wide and broadly defined
groups
Pollution control
Restoration or protection of environment
Conservation of natural resources
Recycling efforts
Energy
Fair Business
Practices
Community
Involvement
Products
INTELLECTUAL PROPERTY
Trademarks, copyright, patents, trade secrets etc
TRADE AND SERVICE MARKS
A Trade or Service Mark is a distinctive sign; be it a name, signature, drawing
or anything, which is used to distinguish similar goods or Services of various
manufacturers or of such services providers.
Trade or Service Marks besides serving the owner or Services providers or
products manufacturers to market their products or Services, they on the
other hand help the consumers to identify, choose and finally purchase a
product or service because of its quality as it has been displayed by the Trade
or Service Mark owner over the years.
THE BENEFITS OF REGISTRATION OF A TRADE OR SERVICE MARK
Registration of a mark gives an exclusive right to the use of that Mark by its
proprietor or licensee also known as registered user, assignee and any other
beneficiaries. This exclusive right is extended for the first/initial period of
seven years and renewable for ten years consecutively.
A person using an unregistered mark will most likely infringe a registered
mark and is at a risk of facing legal action which in the final analysis can make
him/her bankrupt due to heavy penalties imposed against him/her. So, the
PATENTS
A Patent is a legal right granted by the Government to an inventor for an
invention. An invention is a solution to a technical problem existing in a
particular field of technology.
The entire contents of a patent description of an invention that form the basis
for an application for Patent right is referred to as a patent document.
WHAT ARE THE PRIMARY CONTENTS OF A PATENT DOCUMENT?
A patent document contains:
The title of an invention
General description of the invention
The claim(s)
An Abstract
Technical Drawings (if any)
The term of grant of a patent application is twenty (20) years counted from its
filing date. After the expiry of 20 years a patent falls into the public domain
upon which anyone who is interested can use it freely.
PATENTS CONT.
WHERE AND TO WHOM POWERS TO GRANT PATENTS ARE VESTED?
A Patent application is filed with the Competent Authority designated as
such by the relevant Sovereign State. It is usually a Government department
or an Agency as the case may be. In other words powers to grant patents
are vested upon the Registrar of Patents or such name as preferred by the
Government of the respective Sovereign State.
In Tanzania application for Patent rights is done through filing form No. P. 2
accompanied by a patent document in triplicate and submitted to the
Registrar of Patents with Business Registrations and Licensing Agency
(BRELA).
Criteria for patent grant namely:
Novelty an invention must be new to be patentable
Inventive Step an invention is patentable if it is beyond obvious
Industrial Applicability an invention shall be capable of being industrially
workable to be patented.
An Applicant for patent rights may be a natural or legal person who shall file
such an application with the Registrar of Patents with BRELA.
REVISION QUESTIONS
1. Define the following terms:
a. Entrepreneur
b. Entrepreneurship
c. Creative Destruction
d. Social Entrepreneur
e. Business Plan
2. List the advantages and dis advantages of the following:
f.
Sole Proprietor
g. Partnership
h. Corporative
i.
Company
CREATIVE THINKING
The terms creativity and innovation are often used to mean the
same thing, but each has a unique connotation. Creativity is the
ability to bring something new into existence.
This emphasizes the ability, not the activity, of bringing
something new into existence
According to Holt (1992), the creative process comprises the following five
stages
1. Idea germination: Exactly how an idea is germinated is a mystery; it is
not something that can be examined under the microscope. For most
entrepreneurs, ideas begin with interest in a subject or curiosity about
finding a solution to a particular problem.
2. Preparation: Once a seed of curiosity has taken form as a focused idea,
creative people embark on a conscious search for answers. If it is a problem
they are trying to solve, then they begin an intellectual journey, seeking
information about the problem and how others have tried to resolve it.
Inventors will set up laboratory experiments, designers will begin
engineering new product ideas, and marketers will study consumer buying
behaviour.
CREATIVE THINKING
3. Incubation: The idea, once seeded and given substance through
preparation, is put on a back burner, the subconscious mind is allowed time
to assimilate information. Incubation is a stage of mulling it over. When an
individual has consciously worked to resolve a problem without success,
allowing it to incubate in the subconscious will often lead to a resolution.
4. Illumination: Illumination occurs when the idea surfaces as a realistic
creation. This stage is critical for entrepreneurs because ideas, by
themselves, have little meaning. Reaching the illumination stage separates
daydreamers and tinkerers from creative people who find a way to
transmute values.
5. Verification: An idea once illuminated in the mind of an individual still has
little meaning until verified as realistic and useful. Thus, verification is the
development stage of refining knowledge into application.
INNOVATION TYPES
Forms of Innovations
According to Hamel (1997) in Dess and Lumpkin (2005), innovations come in different
forms:
i.
ii.
Modular Innovation: This kind of innovation changes the core design of one or
more components but does not change the entire product architecture. This type
of innovation requires new knowledge for one or more components, but the
Is it legal?
2.
Is it balanced/fair/win-win?
3.
Experiences
Personal Code of
Ethics
Peer
Group
MANAGERIAL ETHICS
Ethical behaviour conforms to individual beliefs and social
norms
Behaviour toward employees
Firing, hiring, wages, privacy, etc.
Some decisions not illegal but still unethical
Make an ethical
judgment based on
the rightness or
wrongness of the
proposed activity
or policy
Organizational Objectives
Changed Infrequently
Core Principles
Organizational Values
Unchanging
SOCIAL RESPONSIBILITY
A businesss collective code of ethics towards its
stakeholders
the environment
its customers
its employees
its investors
its suppliers
its community
Social
Responsibilit
y
Responsibili
ty
Towards
Investors
Responsibili
ty Towards
Employees
AIR POLLUTION
Climate change, global warming & greenhouse gases
Created by chemical emissions in product manufacturing
& the operation of motor vehicles
Legislation has been directed to controlling or eliminating
polluting practices
WATER POLLUTION
Water contamination due to years of releasing toxic chemicals into
lakes, rivers, and streams
Chief offenders are businesses such as pulp and paper plants, and
municipalities who dump raw sewage
Practices are being curbed by legislation, education, and affordable
new technology
LAND POLLUTION
Contamination of grounds and soil due to dumping of toxic
waste and mishandling of landfills
Key issues today include curbing polluting practices and
restoring contaminated lands
New developments include
emphasis on recycling
biomass turning waste into energy
new forms of solid waste disposal
changes in forestry practices
Consumers rights
social movement
that seeks to
protect and expand
the rights of
consumers in their
dealings with
businesses
ETHICS IN ADVERTISING
Truth in Advertising Claims
Advertising of Counterfeit Brands
Stealth (Undercover) Advertising
Paying individuals to speak well of a product, but
not admit they are being paid to do so
Morally Objectionable Advertising
IRRESPONSIBILITY TOWARDS
INVESTORS
Improper Financial Management
Kiting Cheques
Insider Trading
Misrepresentation of Finances
CHEQUE KITING
Illegal practice of writing cheques against money that has not
yet arrived in the bank account
A creative cheque kiter can write cheques from account to
account with very little money to back it up
The assumption is that the money will arrive before the cheque
needs to clear
Becoming difficult to do with modern-day computerized banking
INSIDER TRADING
Using confidential (non-public) information to gain from the
sale of stock
Involves gaining knowledge of inside information about the
company prior to making the purchase
Can involve the collusion of investors buying and selling stock
at the appropriate time to make huge profits
MISREPRESENTING FINANCIAL
INFORMATION
Companies must conform to accounting guidelines called
Generally Accepted Accounting Principles (GAAP)
Failure to follow GAAP in order to inflate expected profit figures
can mislead investors
INTERNATIONAL ENTREPRENUERSHP
MEANING
International entrepreneurship is the process of an entrepreneur
conducting business activity across national boundaries. It may
consist of exporting, licensing, opening sales office in another country
etc.
International entrepreneurship is also defined as development of
international new ventures or start ups that from their inception
engage in international business, thus viewing their operation domain as
international from the initial stages of international operations.
Entrepreneur
can
improve
their
competitiveness and enhance reputation.
entrepreneurial
Social framework improves as citizens than being bonded with family focus on
moving to places for career growth and development.
Political stability in country indirectly leads to growth in industrial sector in
country creating favourable condition for trade in country.
Reinvestment of profit
Increase in demand for products by consumers in market.
Technical development
income.
More power : country in this stage starts spending more on military forces.
Welfare state : standard of living in country increases as result of development
of facilities in country.
Increase in consumption : consumption level increases in this stage as
consumers other then daily consumption products prefers purchasing durable
products.
Indirect exporting : when the exporting company does not posses the necessary
infrastructure to involve itself in direct exporting, indirect exporting takes place. It takes
place when the export company sells its to intermediaries who in turn sell the same
products to the end users in foreign markets.
Licensing : involves an entrepreneur who is a manufacturer ( licensor ) giving a foreign
manufacturer ( licensee ) the right to use patent, trade mark, technology, production
process, or product in return for the payment of royalty.
Management
contractis an arrangement under which operational control of
anenterpriseis vested by contract in a separate enterprise which performs the necessary
managerial functions in return for a fee. Management contracts involve not just selling a
method of doing things (as withfranchisingorlicensing) but also doing them. A
management contract involves a wide range of functions, such as technical operation of a
production facility, management of personnel, accounting, marketing services and training.
Foreign direct investment(FDI) is direct investment into one country by a company in
production located in another country either by buying a company in the country or by
expanding operations of an existing business in the country
BUSINESS ENVIRONMENT
The concept business has been defined in different ways
by various authors.
It has been viewed as an economic system in which goods
and services are exchanged for one another for money, on
the basis of their perceived worth (BusinessDictionary.com,
2010).
A business is also conceived as a legally recognized
organization.
It is also referred to as: enterprise, business enterprise,
commercial enterprise, company, firm, profession or trade
operated for the purpose of earning a profit by providing
goods or services, or both to consumers, businesses and
governmental entities (Sullivan and Sheffrin, 2003;
AllBusiness.com., 2010).
ENVIRONMENT
The concept environment literally means the surroundings, internal,
intermediate and external objects, influences or circumstances under which
someone or something exists (Kazmi, 1999).
The environment within which something exists exhibits certain
characteristics which have been identified by Kazmi (1999) to be:
complexity, dynamism, multifaceted and far-reaching impact. These are
apart from the simple and stable environmental conditions.
Characteristics
Multifaceted: The business environment is many-sided. It can be viewed
from many angles by the parties involved. Hence, an occurrence that is
viewed as strength to an organization may be perceived as a weakness by
another.
Far-reaching impact: The happenings in the business environment can
have enormous impact on the organization. It could have the ripple effect.
This is because the business environment can be conceived as a system,
specifically an open system made up of different components that interact
and interrelate with one another.
CONT.
Stable Condition: This environment is highly predictable, thus
permitting a great deal of standardization (work process, skills and
output) to take place within the organization.
Simple Condition: This environment is one where knowledge can
be broken down into easily comprehended components (Minzberg,
1979).
Dynamism: The business environment is not static. It is dynamic
and as such changes continuously. This is because of the interactions
of the various factors that make up the business environment.
Complexity: The business environment is not simple; it is complex
by virtue of the various components that comprise it and the
interactions and interrelationships among these factors.
Dimensions of Environment
SPECTACLES Social, Political, Economic, Cultural, Technological, Aesthetic,
Customer, Legal, Environmental and Sectorial
PEETS Political,
demographical
Economic,
Ecological,
Technological
and
Socio
CONT.
Competitive Environment: These are those firms that market
products that are similar to, or can be substituted for, a business
product(s) in the same geographical area. The four general types of
competitive structure are monopoly, oligopoly, monopolistic
competition, and perfect competition.
Other Factors: The other factors making up the external business
environment are:
(1) Suppliers, which are other firms and individuals that provide the
input resources needed by the organization to produce goods and/or
services.
(2) Intermediaries, who are independent businesses that perform all the
activities necessary to direct the flow of goods and services from
manufacturers/marketers to ultimate consumers/customers. They
include wholesalers, retailers, agents and distributors, and
(3) Customers who constitute a portion of the target market of the
business; they are the ones the business strives to satisfy.
SWOT ANALYSIS
Assess the internal environment of the business by critically looking
at the internal factors in terms of the 5s, namely: Skills, Strategy,
Staff, Structure, Systems and Shared Values (Dibb, Simkin,
Pride, & Ferrell, 1991; Aluko, Odugbesan, Gbadamosi & Osuagwu,
1998; Business-Plan, 2010).
To do this effectively the entrepreneur needs to ask him/herself and
answer questions pertaining to the 5s (five s) in terms of their
strengths and weaknesses by developing questionnaires to ask
questions pertaining to major internal environmental factors such as:
Skills: What skills do the organizational members possess?
What are the distinctive competencies of the organization?
Strategy: Does your business have a clear vision and mission?
Are your business objectives/goals derived from its mission?
Does your business have plans?
Do you follow the laid down plans of the business as scheduled?
CONT.
What skills do the organizational members possess?
Does your business have clear strategies to operationalize its
policies?
What are the distinctive competencies of the organization?
Staff: Does the business have qualified staff for the relevant
positions? Are the staff rightly placed?
Does the business have adequate number of personnel to man the
various positions?
Structure: Does the business have an organizational structure or
organogram? What type of organization structure does your business
adopt?
Are there clear lines of reporting and communication?
Systems: Does your organization have a system?
What kind of systems (e.g. MIS, Accounting, Quality Control, and
Inventory) does your business have in place? (Business-Plan, 2010).
CONT.
CONT.
CONT.
The information obtained will enable the entrepreneur know
if the business is ideal (i.e. it is high in major opportunities
and low in major threats);
is speculative (i.e. it is high in both major opportunities and
threats);
mature business (i.e. it is low in major opportunities and
threats) and troubled (i.e. it is low in opportunities and high
in threats).
An effective opportunity and threat analysis is advantageous
to the entrepreneur; it will enable the entrepreneur make
decisions on whether the business should limit itself to those
opportunities where it now possesses the required strengths
or should consider better opportunities where it might have
to acquire or develop certain strengths (Dibb et al., 1991;
Aluko et al, 1998; Dixon-Ogbechi, 2003; Business-Plan, 2010)
Vision evokes pictures in the mind; it suggests a future orientation. Vision is vital
to human existence.
A form of non- specific guidance normally produced for an organization by its
CEO (Haggins & Vineze). It gives an imaginary picture of a preferred future which
the leader must carefully guide the organization to reach.
Vision is also a picture of your company in the future. It is your inspiration, the
framework for all your strategic planning and it is also articulating your dreams
and hopes for your business (Ward, 2010).
Vision again is short, succinct, and inspiring statement of what the organization
intends to become and achieve in the future, often stated in competitive terms.
Vision refers to the category of intentions that are broad, all-inclusive and
forward-thinking. It is the image that a business must have of its goals before it
sets out to reach them. It describes aspirations for the future, without specifying
the means that will be used to achieve these desired needs.
Vision can also be defined as the mental images or picture of a preferred future
either for the individual or for an organization; such future is in the realm of
imagination which the visioner must bring into reality with the support of others.
COMPONENTS OF VISION
Core ideology is described as enduring character of an organization-i.e. a
consistent identity that transcends product or market life cycle, technological
breakthroughs and the likes. It is what the organization stands for, the very
purpose for which the organization is created. The core ideology can be further
sub-divided into two namely:
Core value i.e. core tenet of the organization, guiding principles, what the
organization stands for. It is a state of belief that is very difficult or impossible to
change. It has to do with the foundation on which the business relationship both
to the society and the entire stakeholders is built. It is the extent of integrity the
organization is ready to maintain.
Core purpose: the reason for the organizations existence, a clear description of
the activities of the organization. Any organization or individual that misses its
purpose is not fit to live; the core purpose must be seen to be achieved. If the
purpose is to create an enduring financial system such organization must be seen
to fulfil such purpose.
Envisioned future. It is creative, looking to a future of greatness; it keeps the
organization as well as individual motivated even if the founders are no longer in
existence.
VISIONING PROCESS
Initiate and provide constant vigilance: Vision must emanate from the
leader(s) within the organization and appropriate vigilance must be ensured
to bring the vision to reality.
Vision should be original because if copied from other persons, it may not
last particularly when challenges arise in the process of actualizing the
vision.
Set high goals but be realistic: Vision must be challenging in the sense that
it must call for attention such that it will be worth pursuing.
Vision must inspire the owner of the vision as well as those that will be
involved in actualizing the vision. Unrealistic goals will result in frustration;
hence vision must be realistic to the extent that those involved will believe
its accomplishment.
Seek significant early involvement by other members of the organization:
The sharing of vision with others give room for criticism so as to make the
vision better and robust. The inputs of others will allow a well conceived
vision. If resources have been committed before involving others it may
lead to waste; if the vision could be better actualized with minor
amendments
CONT.
Encourage widespread review and comments: Subject your vision to a
critical evaluation by others, allow both positive and negative comments
but be careful of destructive comments.
Keep communications flowing: Give room for both vertical and horizontal
communication. All the members of the organization or family members
must have something to offer.
No one is the absolute custodian of knowledge Allow time for the process to
work; do not be in a haste to quit your vision. Sleep over your vision before
you get started.
Demonstrate commitment, follow through: Vision is lonely; demonstrate
your commitment and encourage the commitment of the organization
members. You must lead others to follow your vision through.
If you abandon it no one can revive it but you. So do not quit your vision, a
quitter never wins and winners never quit. Maintain harmony of sub-units:
Ensure the different units of the organization work in harmony. No unit is
allowed to work at variance with one another, that is, it must be a unified
vision.
W AYS O F K E E P I N G V I S I O N A L I V E H O N O U R A N D L I V E T H E V I S I O N A S T H E O R G A N I Z A TI O N S C O N S T I T U T I O N .
The vision is not a document prepared and hung in the office. The culture
and value of the organization must take its root from the vision.
EVALUATION OF VISION
The following are some of the evaluation criteria:
Foresight
Broadness of vision
Uniqueness of vision
Consensus of vision
Practicality of vision
Accessibility of vision
MISSION STATEMENT
Mission on the other hand is what an organization is and the reason for its
existence. A meaningful mission must specifically state the fundamental
and unique reason for its being and how it is different from other corporate
organizations.
Pearce II & Robinson Jr., (2004) defined mission as the fundamental, unique
purpose that sets a business apart from other firms of its type and identifies
the scope of its operations in product and market terms.
Mission gives specific direction and focus to the organization.
ORGANISATIONAL GOALS
Kazim (2004) defined goals as what an organization hopes to
accomplish in a future period of time. They represent a
future state or an outcome of the effort put in now.
A broad category of financial and non-financial issues are
addressed by the goals that an organization sets for itself.
Goals and objectives are often used interchangeably; the
major difference has to do with the fact that goals are
considered broader than objectives.
Goals can be stated in broad terms such as marketing goals,
financial goals, and production goals.
When these goals are broken down to reflect specific,
measurable and timing of their accomplishment, they then
become objectives.
ORGANISATIONAL OBJECTIVES
Objective is described in Olayiwola (2007) as specific intended results of
organization activities. Kazim (2004) sees objective as the ends that state
specifically how the goals shall be achieved.
Objectives are concrete and specific in contrast to goals which are
generalized; objectives make the goals operational. While goals may be
qualitative, objectives tend to be mainly quantitative in specification, thus
making objectives measurable and comparable.
IMPORTANCE
To provide directions for the organization.
It allows the organization to relate effectively and efficiently with its
environment
It aids decision making
It allows the organization to pursue its vision and mission
It allows resources to be effectively and efficiently allocated among
competing needs.
It provides the standard for performance evaluation.
To establish a basis for control.
Steps towards
buying a business
BUYING OR ACQUIRING
AN EXISTING BUSINESS?
Before buying an existing business, you must weigh the pros and cons
of doing so.
Why and what are the reasons for the business being sold?
Who are the employees, how many are there and will they stay?
When deciding to buy a business, start by asking what may seem obvious questions. Answers
to these will help you decide about taking the plunge and about how to formulate your
purchase agreement later on.
Figures provided under a disclaimer are a tell-tale sign that the seller
or the accountant/auditor preparing them is either unwilling or unable
to vouch for their accuracy.
He/she
6. NEGOTIATION
After having conducted the due diligence steps mentioned
above, you will be able to enter into preliminary discussions
about issues such as price negotiation, valuation techniques,
obtaining any relevant government approvals, handling any
licensing issues, identifying key value preservation issues like
employee retention, transition planning and any other matters
that will be documented in the contract documentation stage.
7. Contract documentation
Details relating to any transaction for the sale or
purchase of a business should be documented
identifying the subject of transaction, the consideration
involved and the expected obligations of the parties.
for
As a buyer, you become the beneficial owner of any individual asset of the
target business only after all necessary formalities for completing the
transfer of that asset have been complied with.
Although many assets may transfer upon completion, you may need to take
the risk that some may not transfer until sometime afterwards, or at all.
The purchase agreement drafted by your legal adviser will be able identify
those matters required to be dealt with or waived at completion, including
payment of any part of the price then due.
Be aware that a number of matters also need to be attended to postcompletion, including:
FRANCHISING
DEFINITION
A franchise operation is a contractual relationship between
the franchisor and franchisee in which the franchisor offers or
is obliged to maintain a continuing interest in the business of
the franchisee in such areas as know-how and training;
wherein the franchisee operates under a common trade
name, format and/or procedure owned or controlled by the
franchisor, and in which the franchisee has or will make a
substantial capital investment in his business from his own
resources.
Trust
TYPES OF FRANCHISE
1. Product distribution franchise
2. Business format franchise
3. Management franchise
MANAGEMENT FRANCHISE
A form of service agreement.
The franchisee provides the management expertise, format
and/or procedure for conducting the business.
e.g.; Marriott Hotels, Hilton Hotels, UPS stores
Financial
Marketing
License Agreements
Territory Management
Engagement
Conflict Resolution
Principles of Continuity
FINANCE
Financial Model: Win-Win And not that of squeezing the
franchisee profits Risk vs. reward balance
Cost of Franchise: Uniform and consistent across
franchisees Initial fee Royalty fee / Management fee
Capital required
MARKETING
Branding Centralised, Local Marketing Standard designs /
messages
Understanding Customer needs & environmental trends
Technology Customer needs, requirements Customer profile
Competition (familiar, unfamiliar) Feedback from Franchisees
Inputs from independent sources
Advertising and Branding
Trademark Usage
Product / Price: Being competitive Meeting customer needs
Introduction of new products and phasing out of existing products
LICENSE AGREEMENTS
Contains details of the relationship like:
IPRs
Fee to be paid: Initial and ongoing
Duration of the Agreement
What Franchisor is expected to do
What Franchisee is expected to do
What none is expected to do
What is that we exist for
What are the conditions under which we would not continue
with this relationship
ENGAGEMENT
Training of Franchisee & their Employees
Ongoing support
Franchisee Meets
Recognition & Awards for Franchisees & their Employees
Do not treat Franchisee & their Employees as subordinates:
Strong tendency among front end executives of the
franchisor to do so.
CONFLICT RESOLUTION
Three levels of conflicts: Operational Resolve at field
level Policy matters Resolve at corporate level Major
disputes Address at appropriate level
Transactional conflicts are likely to arise. Resolve them
proactively Dont let them come in the way of long term
relationship
Remedy non-conformances speedily Corrective actions
matching with the degree of non-compliance.
WAY FORWARD
Win-Win relationship
Business sense to each other
Alignment of Values & Business Ethics
BUSINESS PLAN
DEFINITION
CONT.
Enterprises use plan in two main ways:
Firstly to help you to track progress and provide guidance for decision-making
and secondly to help you raise money. From a funders perspective your plan will
need to demonstrate that their investment of money will have a significant
impact, that there is a good market for your product or service and that you are
able to manage the enterprise.
In order to do this, you must bring out what is exciting about the enterprise,
combined with a thoroughly prepared presentation of the back-up figures and
research. It is quite possible that you will want to have different versions of your
plan available one for yourselves and others for funders or external partners.
COVER PAGE
The cover page should include:
its address
EXECUTIVE SUMMARY
This is an overall summary of your plan. Ideally it should be
around one page long. It should give a reader a general feel
for your organisation overall objectives, brief description of
activities, services or products, what resources are required
and where they will come from and who will benefit. It should
make them want to read more. Write this bit last
BUSINESS DESCRIPTION
General description
Industry background
Goals & Potentials of business, milestones if any
Uniqueness of product or service
MARKETING
RESEARCH & ANAYSIS
Target Market
Market size & trends
Competition
Estimated market share
MARKETING PLAN
Market strategy- sales & distribution
Pricing
Advertising & promotions
OPERATIONS
Identify location : advantages
Specific Operational procedures
Personnel needs & uses
Proximity to suppliers
MANAGEMENT
Management team- key personnel
Legal structures- stock agreements, employment
agreements, ownership
Board of directors
FINANCIAL FORECAST
P & L statement
Balance sheet
Cash flow statement
Accounting ratios
CRITICAL RISKS
Potential problems
Obstacles & risks
Alternative course of action
HARVEST STRATEGY
Liquidity event ( IPOs or sale?)
Continuity of business
Identify successor
MILESTONE SCHEDULE
Timing & objectives
Deadlines & milestones
Relationship of events
EXAMPLE OF AFANOUS
BUSINESS PLAN
EXECUTIVE SUMMARY
The Company
Afanous java and Bakery (AJB) is a start-up coffee and bakery retail
establishment located in Oyster bay, DSM. AJB expects to catch the
interest of a regular loyal customer base with its broad variety of
coffee and fresh pastry products. The company plans to build a
strong market position in oyster bay's area, due to the partners'
industry experience and mild competitive climate in the area.
AJB aims to offer its products at a competitive price to meet the
demand of the middle-to higher-income local market area residents
and Diplomats.
CONT.
AJB is incorporated in DSM by BRELA on .., certificate no... It is
equally owned and managed by its two partners: Mr. Yaovi Mawulolo
Afanou and Ms. Joan Marco Urio. Mr. Afanou has extensive experience
in sales, marketing, and management and was vice president of
marketing with Serena Group of hotels T ltd . Ms. Joan Marco brings
experience in the area of finance and administration, including a stint
as chief financial officer with both Commercial Bank Of Africa and the
Tanzania Coffee board.
The company intends to hire two full-time pastry bakers and six parttime baristas to handle customer service and day to day operations.
CONT.
AJB offers a broad range of coffee and espresso products, all from
high quality Columbian grown imported coffee beans. AJB caters
to all of its customers by providing each customer coffee and
espresso products made to suit the customer, down to the
smallest detail.
The bakery provides freshly prepared bakery and pastry products
at all times during business operations. Six to eight moderate
batches of bakery and pastry products are prepared during the
day to assure fresh baked goods are always available.
CONT.
The retail coffee industry in the Tanzania has recently experienced rapid
growth. The nature of customer base who are mostly foreign nationals
diplomats & international guests and cool oceanic climate in Oyster bay
area stimulates consumption of hot beverages throughout the year.
AJB wants to establish a large regular customer base and will therefore
concentrate its business and marketing on local residents, which will be
the dominant target market. This will establish a healthy, consistent
revenue
base
demographic
to
ensure
dynamics
in
stability
of
the
oyster
bay
is
business.
expected
In
addition,
to
comprise
FINANCIAL CONSIDERATIONS
AJB expects to raise of its own capital of . and to
borrow guaranteed by the AKIBA bank as a ten-year loan.
This provides the bulk of the current financing required.
AJB anticipates sales of about in the first year,.. in the
second year, and .. in the third year of the plan. AJB should
break even by the fourth month of its operation as it steadily
increases its sales. Profits for this time period are expected to
be approximately .. in year 1, by year 2, and .by
year 3. The company does not anticipate any cash flow
problems.
VISION
To b e e s t a b l i s h e d a n d b e c o m e a t r u s t e d p e r f e c t
c o ff e e b u s i n e s s p a r t n e r a n d l e a d e r f o r l o c a l a n d
i n t e rn a t i o n a l g u e s t s .
MISSION
To p r o v i d e p e r f e c t , d e l i c i o u s c o ff e e
products and excellent, reliable services to
our customers
CORE VALUES
Honesty, Integrity, Reliability,
Excellence
To b e o p e n m i n d e d , t o l i s t e n , t o c a r e
and to be pro-active
To b e i n n o v a t i v e a n d r e a s o n a b l e
OBJECTIVES
Become selected as the "Best New Coffee Bar in the area" by the local
restaurant guide.
COMPANY SUMMARY
AJB P.LTD, a Tanzania limited liability company, sells coffee,
other beverages and snacks in its 50 square meter floor
area premium coffee bar located along Chole road.AJBs
major investors are Mrs. Patra Gandhi and Mr. James Polk
who cumulatively own over 70% of the company. The startup loss of the company is assumed in the amount of ...
COMPANY OWNERSHIP
Company Ownership
AJB is incorporated in DSM city through BRELA. It is equally
owned by its two partners.
Start-up Summary
AJB is a start-up company. Financing will come from the
partners' capital and a ten -year Akiba loan. The following
tables illustrate the company's projected initial start-up costs.
START UP FUNDING
START-UP FUNDING
PRODUCTS
AJB offers a broad range of coffee and espresso products, all
from high quality Columbian grown imported coffee beans.
AJB caters to all of its customers by providing each customer
coffee and espresso products made to suit the customer,
down to the smallest detail.
The bakery provides freshly prepared bakery and pastry
products at all times during business operations. Six to eight
moderate batches of bakery and pastry products are prepared
during the day to assure fresh baked goods are always
available.
MARKET ANALYSIS
Market Analysis Summary
AJB's focus is on meeting the demand of a regular local resident customer base, as well as a
significant level of diplomats from nearby residencies and passers and international guests.
Market Segmentation
AJB focuses on the middle- and upper-income markets.These marketsegmentsconsume
the majority of coffee and espresso products.
Local Residents
AJB wants to establish a large regularcustomer base. This will establish a healthy,
consistent revenue base to ensure stability of the business.
International diplomats
Diplomats and international guests comprises approximately 35% of the revenues.High
visibility and competitive products and service are critical to capture this segment of the
market.
Market Analysis
The chart and table below outline the total market potential of the above described
customer segments.
Target Market Segment Strategy
The dominant target market for AJB is a regular stream of local residents. Personal and
expedient customer service at a competitive price is key to maintaining the local market
share of this target market.
Competition in the local area is somewhat sparse and does not provide nearly the level of product
quality and customer service as AJB.Local customers are looking for a high quality product in a
relaxing atmosphere.They desire a unique, classy experience.
Leadingcompetitorspurchase and roast high quality, whole-bean coffees and, along with Italian-style
espresso beverages, cold-blended beverages, a variety of pastries and confections, coffee-related
accessories and equipment, and a line of premium teas, sell these items primarily through companyoperated retail stores. In addition to sales through company-operated retail stores, leading
competitors sell coffee and tea products through other channels of distribution (specialty operations).
Larger chainsvary theirproduct mix depending upon the size of each store andits location. Larger
stores carry a broad selection ofwhole bean coffees in various sizes and types of packaging, as well
as an assortment of coffee- and espresso-making equipment and accessories such as coffee grinders,
coffee makers, espresso machines, coffee filters, storage containers, travel tumblers and mugs.
Smallerstores and kiosks typically sell a full line of coffee beverages, a more limited selection of
whole-bean coffees, and a few accessories such as travel tumblers and logo mugs.
Technologically savvy competitorsmake freshcoffee and coffee-related products conveniently
available via mail order and online.
10
11
12
SALES FORECAST
SALES FORECAST
YEAR 1
Unit Sales
Espresso Drinks
Pastry Items
Other
TOTAL UNIT SALES
Unit Prices
Espresso Drinks
Pastry Items
Other
Sales
Espresso Drinks
Pastry Items
Other
TOTAL SALES
Direct Unit Costs
Espresso Drinks
YEAR 2
YEAR 3
PERSONNEL PLAN
YEAR 1
Managers
Pastry Bakers
Baristas
Other
TOTAL PEOPLE
Total Payroll
YEAR 2
YEAR 3
FINANCIAL PLAN
Financial Plan
AJB expects to raise ..of its own capital, and to borrow
guaranteed by AKIBA bank as a five-year loan.This provides
the bulk of the current financing required.
Break-even Analysis
AJB's Break-even Analysis is based on the average of the firstyearfigures for total sales by units and by operating
expenses. These are presented as per-unit revenue, per-unit
cost, and fixed costs.These conservative assumptions make
for a more accurate estimate of real risk. AJB should break
even by thefourth month of its operation as it
steadilyincreases its sales.
TRADING ACCOUNT
PRO FORMA PROFIT AND LOSS
YEAR 1
Sales
Direct Cost of Sales
Other
TOTAL COST OF SALES
Gross Margin
Gross Margin %
Expenses
Payroll
Sales and Marketing and Other Expenses
Depreciation
Utilities
Payroll Taxes
Other
Total Operating Expenses
YEAR 2
YEAR 3
Balance sheet
PRO FORMA BALANCE SHEET
YEAR 1
Assets
Current Assets
Cash
Other Current Assets
TOTAL CURRENT ASSETS
Long-term Assets
Long-term Assets
Accumulated Depreciation
TOTAL LONG-TERM ASSETS
TOTAL ASSETS
Liabilities and Capital
Current Liabilities
Accounts Payable
Current Borrowing
Other Current Liabilities
YEAR 2
YEAR 3
RATIO ANALYSIS
Sales Growth
Percent of Total Assets
Other Current Assets
Total Current Assets
Long-term Assets
TOTAL ASSETS
Current Liabilities
Long-term Liabilities
Total Liabilities
NET WORTH
Percent of Sales
Sales
Gross Margin
Selling, General & Administrative Expenses
Advertising Expenses
Profit Before Interest and Taxes
Main Ratios
Current
Quick
Total Debt to Total Assets
Pre-tax Return on Net Worth
Pre-tax Return on Assets
Additional Ratios
Net Profit Margin
Return on Equity
Activity Ratios
Accounts Payable Turnover
Payment Days
Total Asset Turnover
Debt Ratios
Debt to Net Worth
Current Liab. to Liab.
Liquidity Ratios
Additional Ratios
Assets to Sales
Acid Test
Sales/Net Worth
Dividend Payout
APPENDIX
Fit in any other left out necessary information such as tables,
diagrams
SOURCE OF FINANCING
Personal Funds
Equity Capital
Debt Financing
Creative Sources
Personal Funds
The vast majority of founders contribute personal funds,
along with sweat equity, to their ventures.
Sweat equity represents the value of the time and effort that a
founder puts into a new venture.
Bootstrapping
A third source of seed money for a new venture is referred to
as bootstrapping.
Bootstrapping is finding ways to avoid the need for external
financing or funding through creativity, ingenuity, thriftiness,
cost-cutting, or any means necessary.
Many entrepreneurs bootstrap out of necessity.
EXAMPLES OF BOOTSTRAPPING
METHODS
Buying used instead of
new equipment.
Coordinate purchases
with other businesses.
Leasing equipment
instead of buying.
Obtaining payments in
advance from
customers.
Minimizing personal
expenses.
Avoiding unnecessary
Expenses.
Hiring interns.
Debt Financing
getting a loan.
Purpose
Elevator
Speech
Step 1
20 seconds
Step 2
20 seconds
Step 3
10 seconds
Step 4
10 seconds
Total
60 seconds
Venture Capital
Business Angels
Initial Public
Offerings
BUSINESS ANGELS
1 OF 2
Business Angels
Are individuals who invest their personal capital directly in start-ups.
The prototypical business angel is about 50 years old, has high income and
wealth, is well educated, has succeeded as an entrepreneur, and is interested
in the startup process.
BUSINESS ANGELS
2 OF 2
VENTURE CAPITAL
1 OF 3
Venture Capital
Is money that is invested by venture-capital firms in start-ups and small
businesses with exceptional growth potential.
Venture-capital firms are limited partnerships of money managers who raise
money in funds to invest in start-ups and growing firms.
The funds, or pool of money, are raised from wealthy individuals, pension
plans, university endowments, foreign investors, and similar sources.
VENTURE CAPITAL
2 OF 3
VENTURE CAPITAL
3 OF 3
Reason 2
Reason 4
Creates a form of
currency that can be
used to grow the
company via
acquisitions.
Commercial
Banks
Guaranteed
Loans
COMMERCIAL BANKS
Banks
Historically, commercial banks have not been viewed as a practical sources
of financing for start-up firms.
This sentiment is not a knock against banks; it is just that banks are risk
adverse, and financing start-ups is a risky business.
Banks are interested in firms that have a strong cash flow, low leverage, audited
financials, good management, and a healthy balance sheet.
CREATIVE SOURCES OF
FINANCING OR FUNDING
Leasing
Small Business
Innovation
Research Grants
Strategic Partners
10-280
CORPORATE
ENTREPRENUERSHIP
CORPORATE ENTREPRENEURSHIP
Concept is based on many definitions:
Generation, development and implementation of new ideas, or
behaviours in organisation setting in order to re-energize and
enhance the firms ability to acquire innovative skills
and
capabilities.
It may also be formal or informal set of activities aimed at
creating new businesses in established companies through
product and process innovations and market developments.
These activities may take place at corporate, functional or project
levels with the unifying objective of improving companys
competitive position and financial performance.
Other authors have emphasized two major components of
corporate entrepreneurship : new venture creation within existing
organizations and transformation of organizations through
strategic renewal.
INTRAPRENUER
Pinchot (1985), defined an Intraprenuer as an entrepreneur
who works within confines of an established organisation.
He/she would be responsible for the following duties:
a) developing and communicating organisational vision;
b) identifying new opportunities for the organisation;
c) generating innovative strategic options;
d) creating and offering an organisation-wide perspective;
e) facilitating
and
encouraging
change
within
the
organisation;
f) challenging existing ways of doing things and breaking
down bureaucracies.
International competition
Downsizing of major corporations
Overall need for improvement in efficiency and productivity
Exodus of some other best and brightest people to
other corporations: A result of two reasons: rise of need
for status, publicity and economic development mostly
among young entrepreneurs; secondly, capital ventures has
grown into large industries capable of financing more and
new ventures than ever before enabling new entrepreneurs
to launch their ideas
Sense of distrust in traditional methods of corporate
C.E OBSTACLES/CHALLENGES
The obstacles to corporate entrepreneurship usually reflect ineffectiveness
of traditional management techniques as applied to innovation
development.
Trad.
E:gMgt
: practices
Adverse effects
Recommended actions
Compensating uniformly
Enforce standards
procedures to avoid
mistakes
Innovative solutions
blocked, funds misspent
Missed opportunities
Strategic
Strategic
Renewal
Renewal
Innovation
Innovation
Corporate
Corporate Entrepreneurship
Entrepreneurship
Corporate
Corporate
Venturing
Venturing
Incremental Innovation
The systematic evolution of a product or service into newer
or larger markets.
Many times the incremental innovation will take over after
a radical innovation introduces a breakthrough.
Encourage action.
2.
3.
4.
5.
6.
7.
8.
9.
CONCEPTUALIZING CORPORATE
ENTREPRENEURSHIP STRATEGY
Corporate Entrepreneurship Strategy
A vision-directed, organization-wide reliance on entrepreneurial
behavior that purposefully and continuously rejuvenates the
organization and shapes the scope of its operations through the
recognition and exploitation of entrepreneurial opportunity.
It requires the creation of congruence between the
entrepreneurial vision of the organizations leaders and the
entrepreneurial actions of those throughout the organization .
CORPORATE VENTURING
CORPORATE VENTURING
Reestablishing the drive to innovate:
Invest heavily in entrepreneurial activities that allow new ideas to
flourish in an innovative environment.
Provide nurturing and information-sharing activities.
Employee perception of an innovative environment is critical.
Corporate Venturing
Institutionalizing the process of embracing the goal of growth through
development of innovative products, processes, and technologies with
an emphasis on long-term prosperity.
SUCCESSFUL CORPORATE
ENTREPRENEURSHIP