Notesale: Turn your study into money

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My pocket revision book
ENTREPRENEURSHIP
By the end of the topic, the learner should be able to;
i
...

iii
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v
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vii
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ix
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Explain the meaning of entrepreneurship
Discuss the importance of entrepreneurship to an economy
Describe characteristics of an entrepreneur
Generate business ideas
Identify a business opportunity
Evaluate a business opportunity
Explain the need for a business plan
Discuss factors that influence entrepreneurship practices in Kenya
Discuss the causes of business success
Recognize the need for ethical practices in business
Meaning of entrepreneurship
This is the process of identifying business opportunities and gathering the necessary
resources to start and run a business
...
The entrepreneur therefore creates new businesses
or transform the existing ones in the face of risks and uncertainties in order to make
profits
...
Creation of employment-Through entrepreneurship, jobs are created which help
in absorbing people who would otherwise have been jobless e
...
people
employed in the jua kali sector
...

Formation of capital-Profit earned by entrepreneurs may be used to expand the
business or even to start other businesses
...

iii
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Entrepreneurs also provide a wide variety of goods and
services to consumers hence leading to improved living standards
...


v
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vii
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ix
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xi
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Encourages the use of local resources-Entrepreneurship makes it possible to
use/exploit local resources
...

Improving infrastructure-The existence of businesses in the economy makes the
government establish or improve infrastructure such as roads, communication
facilities and water
...

Savings on imports-Local entrepreneurs are able to produce goods and services
that are a substitute to imports
...

Reducing foreign dominance of the economy-Participation of local
entrepreneurs in various business activities helps in reducing investments by
foreigners in the particular area
...
Most of the inventions and innovations in our society have
been developed by entrepreneurs
...

It contributes to government revenue-Taxes and fees paid by entrepreneurial
ventures constitute part of government revenue/income that helps it to facilitate
its operations
...
This
increases the volume of goods and services in the economy leading to expansion
of the economy
...


Characteristics of an entrepreneur
A good entrepreneur should have the following characteristics;
a) Desire to achieve-An entrepreneur is a person who wishes to excel and
has the drive to succeed while competing with others
...


b) Ability to solve problems-An entrepreneur is expected to struggle with
determination to get solutions even under difficult situation so that the
business can succeed
...
They assess situations and take calculated
risks
...

e) Time consciousness-An entrepreneur should be able to use time wisely
and avoid wasting it
...

f) Creativity and innovation-An entrepreneur should be able to generate
new ideas as well as think of the best ways of putting them into practice
...

h) Persistence and patience-An entrepreneur should not give up when
challenges arise
...
The business environment is such that decision has to be
made quickly to respond to any situation that may arise
...

They continually monitor progress to determine whether they are
achieving the goals they have set and where improvements need to be
made
...

m) Concern for high quality products-An entrepreneur should strive to cope
or beat the existing standards of quality
...

n) Commitment to work-An entrepreneur places priority on getting tasks
accomplished
...
g
...


o) Concern for customer satisfaction-An entrepreneur should ensure that
customers are satisfied so as to continue being/remain loyal to the
business
...

Generating Business Ideas
For an entrepreneur, the first step in starting a business begins with an idea (business idea)
Business ideas are all about thoughts on possible businesses an entrepreneur can start or
improve
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ii
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iv
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vi
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t
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Shows and exhibition-Visiting shows and exhibitions organized by
manufactures and distributors and asking questions from the sales
persons
...

Magazines and journals-Reading magazines and journals with business
information may equip an entrepreneur with new business ideas
...
g
...

Vocational training and experience-A business idea may be developed
from one’s own area of training or experience e
...
a teacher may use
ideas from his/her training to start a private school
...


vii
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ix
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xi
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Recycling/using waste products-Some waste products could be
converted into useful products e
...
scrap metal for making jikos,old
tyres for making sandals e
...
c
Listening to what people say-By listening keenly to what people say,
one can identify unsatisfied needs e
...
complaints about goods and
services in the market
...

Identifying a market gap (niche)-An entrepreneur may try to
identify/spot the needs of consumers which are not being met by the
existing goods and services
...

Listing attributes of a product-By listing the attributes of a product that
is already existing in the market, one can find new use for the product
...


Business Opportunity

A good business plan is not necessarily a business opportunity
...
e
...
It
exists where there is a gap to be filled in the needs of the market
...

b) Poor quality products-A business opportunity exists if one offers better
quality goods and services than those of the existing businesses
...

d) Unaffordable prices-A business opportunity exists where one would
charge affordable prices
...


Evaluating a business opportunity
This means assessing whether the identified opportunity is viable or not
...
Evaluation is
necessary even where there is only one business idea
...


Factors to consider when evaluating a business opportunity
The following are the factors to consider when evaluating a business opportunity
...
Personal consideration-These are the abilities and expectations of an entrepreneur
...

 Skills-Where a business requires certain specialized skills and those skills are lacking
the idea may be dropped
...

 Interest-It is necessary to check whether the intended business will interest the
entrepreneur or not
...

b
...
Availability of market for the product-An entrepreneur should assess the
availability of customers before starting a business
...

ii
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Factors to
be looked into include;
a
...
-The cost of the technology

iii
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v
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vii
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ix
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xi
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c
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Availability of raw materials and other resources-The raw materials and
resources required should be within the reach and affordable to the
entrepreneur
...
g
...

Amount of capital required-The capital required to run and maintain the
business should be considered i
...

Profitability of the business-Within a certain duration of time
...

Possibility of expansion i
...
the potential for growth of the business
...

Security-Availability of security should be considered
...

The risks that the business will face
...
It indicates where the business is, where it wants
to move to, how and when
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2
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4
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6
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8
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Need for the business plan
i
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iii
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v
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vii
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ix
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A business plan is necessary to an entrepreneur for the following reasons:
Avoiding mistakes-in the process of drawing a plan; mistakes that would take place in
the business are identified and corrected in the plan
...

Identifying strength and weaknesses-A business plan helps in identifying strengths or
weaknesses and where weaknesses are detected, remedial actions may be taken early
enough
...

Allocation of resources-It helps to determine the resources required and plan on how
and where to use them
...

Facilitates business evaluation-A business plan helps an entrepreneur to assess the
progress of the business and any deviation (difference) from the intended plan can be
corrected in good time
...
This information aids the
entrepreneur to develop products that are better than those of the competitors
...

This makes them aware of the direction to be taken by the business
...

Adaptability-Normally, not all events occur as predicted in the business plan
...

Tool for control-Planning involves setting of standards against which performances can
be assessed
...


Factors that influence entrepreneurship practices
...

Some of these factors are:
i
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iii
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v
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vii
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ix
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unfavourable and will discourage people from going into business
...
g
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Infrastructure-infrastructure includes transport and communication
networks,water,security e
...
c
...
These are acquired through education, training
or experience
...

Availability of resources-Appropriate resources are necessary for starting and smooth
running of a business
...

Cultural and social beliefs and attitudes-These are norms, values and beliefs of a given
community
...
this inturn, dictates the type of businesses to be established in such
communities
...
g Muslims do not take pork thereforebusinesses selling pork will not do
well in such communities
...
Others will
avoid competition by establishing businesses where there is no competition
...

Natural factors-natural factors such as rainfall, temperatures, earthquakes, pests,
drought e
...
c may influence the type of businesses that are carried out in an area,
especially agricultural businesses
...


Causes of Business success

A business is considered as being successful if it makes consistent profit and experiences
progressive growth in the scale of its operations
...
Making the right choice of a
business or product ultimately contributes to the success of a business
...
A good manager will carry out roles such as;
a) Hiring staff-The process of acquiring new employees to take up
new positions or to replace employees who have left the
business
...

c) Supervising-Ensuring that employees carry out tasks that are
assigned to them
d) Training-Enabling employees to acquire knowledge and skills
necessary to perform duties assigned to them
...

Proper location/availability of customers-The business should be situated in a
place convenient for its operations e
...
where customers are easily available
...
A business that has adequate capital is likely to do well
as it is able to finance all its operations
...
Therefore, a business operating in an area where there is little or no
competition is likely to succeed
...
It ensures that money is available and is used for the
intended purpose
...
This can be done through a variety of ways
such as loans from financial institutions and owner’s
contributions
...

c) Proper record keeping-This involves having a record of finances
raised and how they are used
...
Debt collection should also be carefully planned to
ensure that they are collected when due
...
Good relations are necessary for
attracting and retention of customers
...
This enables the
entrepreneur to be ahead of others
...
This makes it necessary for an entrepreneur to study his/her customer’s
preferences, tastes, spending patterns, income levels, competitions, and
behavior and substitute products
...

Proper skills and attitudes of employees-Employing qualified staff results in
work being done in a professional manner
...

Proper pricing of goods and services-Pricing should be done appropriately
...
Very low
prices may attract customers but kill the business
...


ETHICAL ISSUES IN BUSINESS
Ethics-refers to a set of values, principles and rules of acceptable behavior which influence how
individuals, groups of people and the society in general behave
...

Business ethics helps businesses in deciding what actions are right or wrong depending on
circumstances
...


Need for Ethical issues in Business
The need for ethical issues in business includes the following;

i
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iii
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These processes should be objective and
based on merit, qualification, experience and ability
...
t
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Ensures protection of the environment/Helps in avoiding environmental pollutionBusiness ethics prohibits business units from carrying out activities that may cause
pollution and degradation of the environment
...
Pollution may
be caused by activities such as:
a) Damping effluents from production units into water
masses thereby causing water pollution
...

b) Emitting carbon dioxide and other gases into the
atmosphere causing air pollution
...
This creates terrible sites to watch
and also breeding places for dangerous insects such as
flies
...
These practices may include:
Destroying a competitor’s product or promotional tools such as billboards
Buying and destroying competitor’s products before they reach the market
Giving false information about a competitor’s product
...
Such activities may include:
 Deforestation through logging
 Unplanned cultivation
...
Such pollution can be harmful to human health and
aquatic animals
...

 Producing too loud noise which might be harmful to human beings
hearings
 Emitting too strong light that may be harmful to our eyesight
...
Such rights include payment of dues in time
...
g
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Similarly, it is not ethical
to hoard goods awaiting their prices to go up
...
Consumers may be exploited through practices such as:
a) Overcharging them
b) False advertisement
c) Selling poor quality goods and services
d) Selling wrong quantities
e) Selling harmful commodities


iv
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vi

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