CHAPTER ONE

INTRODUCTION The ultimate measure of a man Is not where he stands In moments of comfort and convenience But where he stands At times of challenge and controversy. - Martin Luther King. The words entrepreneur, intrapreneur and entrepreneurship have acquired special significance in the context of economic growth in a rapidly changing socio-economic and socio-cultural climates, particularly in industry, both in developed and developing countries. Entrepreneurial development is a complex phenomenon. Productive activity undertaken by him and constant endeavor to sustain and improve it are the outward expression of this process of development of his personality. WHO IS AN ENTREPRENEUR? An entrepreneur is a person with a dream, originality and daring, who acts as the boss, who decides as to how the commercial organization shall run, who coordinates all activities or other factors of production, who anticipates the future trend of demand and prices of products. An entrepreneur is one of the important segments of economic growth. Basically he is a person responsible for setting up a business or an enterprise. Infact, he is one who has the initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of change and works for the good of people.

He puts up new green-field projects that create wealth, open up many employment opportunities and leads to the growth of other sectors. The entrepreneur displays courage to take risk of putting his money into an idea, courage to face the competition and courage to take a leap into unknown future and create new enterprises/ business. This creative process is the life blood of the strong enterprise that leads to the growth and contributes to the national development. The entrepreneur will always work towards the creation and enhancement of entrepreneurial society. The best entrepreneur in any developing country is not the one who uses much capital but an individual who knows how to organize the employment and training of his employees. We can define entrepreneur as one who innovates, raises money, assembles inputs, choose managers and sets the organization going with his ability to identify them. ENTREPRENEURSHIP DEFINED: Entrepreneurship is an elusive concept. Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent businessman but also company directors and managers who actually carry out innovative functions. Schumpeter In the above definition, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship may be regarded as what entrepreneurs do. In other words, entrepreneurship is the act of being an entrepreneur. Entrepreneurship is a process involving various actions to be undertaken to establish an enterprise. It is thus, process of giving birth to a new enterprise. Entrepreneurship is composite skill, the resultant of a mix of many qualities and traits- these include tangible factors as imagination, readiness to take risks, ability to bring together and put to use other factors of production, capital, labour, land, as

also tangible factors such as the ability to mobilize scientific and technological advances. A practical approach is necessary to implement and mange a project by securing the required licenses, approvals and finance from governmental and financial agencies. The personal incentive is to make profits from the successful management of the project. A sense of cost consciousness is even more necessary for the longterm success of the enterprise. However, both are different sides of the same coin. Entrepreneurship lies more in the ability to minimize the use of resources and put them to maximum advantage. Without any awareness of quality and desire for excellence, consumer acceptance cannot be achieved and sustained. Above all, entrepreneurship today is the product of teamwork and the ability to create, build and work as a team. The entrepreneur is the maestro of the business orchestra, wielding his baton to which the band is played. The basic two elements involved in entrepreneurship are as follows;-

INNOVATION Innovation, i.e. doing something new or something different is a necessary condition to be called a person as an entrepreneur. The entrepreneurs are constantly on the look out to do something different and unique to meet the requirements of the customers. They may or may not be inventors of new products or new methods f production but they possess the ability to foresee the possibility of making use of the inventions for their enterprises. In order to satisfy the

changing preference of customers nowadays many enterprises have adopted the technique of innovation. RISK- BEARING Entrepreneurship is the propensity of mind to take calculated risks with confidence to achieve a predetermined business or Industrial objective. The capacity to take risk independently and individually with a view to making profits and seizing the opportunity to make more earnings in the market-oriented economy is the dominant characteristic of modern entrepreneurship. In fact he needs to be a risk taker, not risk avoider. His risk bearing ability enables him even if he fails in one succeed. The Japanese proverb says Fall seven times, stand up eight. Though the term entrepreneur is often used interchangeably with entrepreneurship, yet they are conceptually different. The relationship between the two is just like the two sides of the same coin. Thus, entrepreneurship is concerned with the performance and co-ordination of the entrepreneurial functions. This also means that entrepreneur precedes entrepreneurship. NEED FOR ENTREPRENEURSHIP Entrepreneurship promotes small business in the society. Government has accepted the fact that small firms have a crucial role to play in the economic development of the country. Small businesses are an essential part of our future economic prosperity because of the following reasonsEMPLOYMENT GENERATION: Entrepreneurial development is looked at as a vehicle for employment generation through promotion of small business. India, being far more developed and forward looking country than some of the third world countries, can provide lead to entrepreneurial development activities.

However, India can benefit from the well- documented success experiences of developed countries like USA, Japan and UK in the field of employment generation and small business promotion. Steady growth in consumer spending, expanding retail sales, a strong housing market, continued expansion of the service sector, low rates of inflation and of labour cost increases and failing interest rates contributed to a healthy environment for small business. In India, the government policies, political and economic environment greatly encourage the establishment of new and small enterprises. Self- employment and small scale industry schemes have been further liberalized during the last decade. The employment in the small-sector increased from 9.00 million people in 198485 to 13.9 million people in 1994-95. This indicates an increase of 5.4% p.a in employment in this sector. SMALL BUSINESS DYNAMISM: Great dynamism is one of the qualities of the small and medium enterprises. This quality of dynamism originates in the inherent nature of the small business. The structure of small and medium enterprises is less complex than that of large enterprises and therefore facilitates quicker and smoother communication and decision- making. This allows for the greater flexibility and mobility of small business management. Also, small enterprises, more often make it possible for owners, who have a stronger entrepreneurial spirit than employed mangers, to undertake risk and challenges. BALANCED ECONOMIC DEVELOPMENT: Small business promotion needs relatively low investment and therefore can be easily undertaken in rural and semi-urban areas. This in turn creates additional employment in these areas and prevents migration of people from rural to urban areas. Since majority of the people are living in the rural areas, therefore, more of our development efforts should be directed towards this

sector. Small enterprises use local resources and are best suited to rural and underdeveloped sector. This in turn will also lead to dispersal of industries, reduction in concentration of economic power and balanced regional development. INNOVATIONS IN ENTERPRISES: Business enterprises need to be innovative for survival and better performance. It is believed that smaller firms have a relatively higher necessity and capability to innovate. The smaller firms do not face th e constraints imposed by large investment in existing technology. Thus they are both free and compelled to innovate. FACTORS INFLUENCING ENTERPRENURESHIP The emergence of entrepreneurs in a society depends upon closely interlinked social, religious, cultural, psychological, and political and economic factors. FAMILY TRADITION: Individuals who for some reason, initiate, establish maintain and expand new enterprises generate entrepreneurship in society. It is observed that entrepreneurs grow in the tradition of their families and society and accept certain values and norms from these sources. RELIGIOUS, SOCIAL AND CULTURAL FACTORS: Religious, social and cultural factors also influence the individual taking up an entrepreneurial career, in some countries there is religious and cultural belief that high profit is unethical. This type of belief inhibits growth of entrepreneurship. PSYCHOLOGICAL FACTORS: The psychological factors like high need for achievement, determination of unique accomplishment, self confidence, creativity, vision, leadership etc, promote entrepreneurship among individuals. On the other hand psychological factors like

security, conformity and compliance, need for affiliation etc restrict promotion of entrepreneurship. POLITICAL FACTORS: The political and also the political stability of country influence the growth of entrepreneurship. The political system, which promotes free market, individual freedom and private enterprise, will promote entrepreneurship. ECONOMIC POLICIES: The economic policies of the government and other financial institutions and the opportunities available in a society as a result of such policies play a crucial role in exerting direct influence on entrepreneurship. In view of the haphazard development of economic zones, Government is encouraging the entrepreneurs to establish their business in backward and tribal areas. This is primarily to arrest the migration of people from the villages to cities and to create employment opportunities locally. Government is promoting such development by giving incentives like tax holidays (both sales and income), subsidized power tariff, raw materials, transportation cost etc. QUALITIES OF AN ENTREPRENEUR The skills required by entrepreneurs can be classified in to three main areas: 1. Technical skills involve such things as writing, listening, oral presentations, coaching, and technical know-how. 2. Business management skills include those areas involved in starting, developing and managing any enterprise. 3. Personal entrepreneurial skills differentiate an entrepreneur from a manager and include inner control (discipline), risk taking, innovativeness, persistence, visionary leadership, and being change oriented.

The qualities that contribute to the success of an entrepreneur are as follows: 1. Risk Taking: - Entrepreneurs are moderate risk takers. They enjoy he excitement of a challenge, but they do not gamble. Entrepreneurs avoid low- risk situations because there is a lack of challenge. They avoid high risk situations because they want to succeed. They like achievable challenges. They do not tend to like situations where the outcome of a quest depends upon a chance and not on their efforts. They like to influence the outcome of their quest by putting in more efforts and then experiencing a sense of accomplishment. A risk situation occurs when an entrepreneur is required to make a choice between two or more alternatives whose potential outcomes are not known and must be evaluated in advance, with limited information. A risk situation involves potential gain and potential loss. As the size of the business expands the problems and opportunities become more numerous and complex. Business growth and development require an entrepreneur not to be afraid of taking decisions and certain risks. Most people are afraid to take risks because they want to be safe and avoid failure. An entrepreneur always takes a calculated risk and is not afraid of failure. 2. Self- Confidence: - A man with self confidence has clear thoughts and welldefined goals to achieve in his life. An entrepreneur gets into business or industry with a high level of self- confidence. He is able to evaluate his competencies and capabilities in a realistic manner. He can set realistic and challenging goals. He is confident of achieving these goals. He possesses a sense of effectiveness, which ultimately contributes to success of his venture. He puts forward his case confidently and gets needed help from concerned agencies/ authorities. 3. Optimist: - An entrepreneur is able to visualize the hidden opportunities in the environment and translate them into business realities. An entrepreneur exhibits a positive and optimistic attitude towards such opportunities. The entrepreneur approaches his task with the hope of success and not with a fear of failure. In the process of accomplishing his task he may also fail but the failure experience does

not change his thinking. He is always an optimist in his outlook. The positive outlook develops a drive in the entrepreneur to attempt new things and innovate. 4. Need for achievement: - The need to excel known as achievement is a critical factor in the personality of an entrepreneur. People with high need for achievement have desire for success in competition with others or with a self imposed standard of excellence. They try to accomplish something new and try to innovate themselves in long term goals. They try to accomplish challenging tasks. They know their own strengths and weaknesses, the facilitating factors and constraints in the environment and the resources needed to accomplish their tasks. If the objectives are accomplished they feel elated. 5. Need for independence: - The need for independence is the prime characteristic that has driven the entrepreneurs to start their own business. These entrepreneurs do not like to be controlled by others. They do not wait for direction from others and choose their own course of action. They set their own challenging goals and put efforts to achieve this goal. The independence provides opportunity for trying out new ideas and helps them achieve their goals. 6. Creativity: - Entrepreneurs are highly creative people. They always try to develop new products, processes or markets. They are innovative, flexible and are willing to adopt changes. They are not satisfied with conventional and routine way of doing things. They involve themselves in finding new ways of doing the things for the better. 7. Imaginative: - Successful entrepreneurs possess a high degree of imagination and foresightedness. Entrepreneurs have a great vision. Knowing the present and the past the entrepreneur is able to predict the future events the business more accurately than others. It is because of their visionary nature and power of imagination that helps them in anticipating problems and evolving actions strategies for such problems. 8. Administrative ability: - A successful entrepreneur is always a good administrator. He knows the art of getting things done by other people without

hurting their feelings of self- respect. He has strong motivation towards the achievement of a task and puts in necessary efforts in getting things done by others. 9. Communication ability: - Communication ability is the ability to communicate effectively. Good communications also means that both the sender and the receiver understand each other and are being understood. An entrepreneur who can effectively communicate with customers, employees, suppliers and bankers will always succeed in their business. 10. Clear objectives: - An entrepreneur has clear objectives as to the exact nature of the business, the nature of the goods to be produced and the subsidiary activities to be undertaken. A successful entrepreneur has the objective to establish the product to make profit or to render social service. 11. Business Secrecy: - An entrepreneur who is successful always guards his business secrets. Leakage of business secrets to trade competitors is a serious matter; therefore an entrepreneur should carefully guard it. An entrepreneur must be able to make a proper selection of his assistant since most of the time it is the assistant who leaks the trade secret. 12. Emotional stability: - The most important personality factors contributing to the success of an entrepreneur are emotional stability, personal relations, consideration and tactfulness. An entrepreneur must maintain good relations with the customers if he wishes to enjoy their continued patronage. He must also maintain good relation with his employees, whom he shall motivate to perform their jobs at a high level of efficiency. An entrepreneur who maintains good human relations with customers, employees, suppliers and the community has a better chance to succeed in his/ her business. 13. Open-mindedness: - Open- mindedness means a free and frank approach in accepting ones own errors and change for the better. An entrepreneur must be willing to learn from his past experience, mistakes and moulds himself for better.

14. Technical knowledge: - Technical knowledge implies knowledge about the product, process or technology used in manufacturing. An entrepreneur who has reasonable level of technical knowledge will always be successful. Technical knowledge is easy to acquire if the entrepreneur tries hard to acquire it. 15. Patience: - Patience means ability to wait. Patience also means doing the work and waiting for the result. A certain amount of patience is necessary in any type of vocation. An entrepreneur should not wait for actions but can certainly wait for result for his efforts. 16. Hard working and energetic: - Ability and willingness to work hard is an important quality of an entrepreneur. A person having physical and mental stamina to cope with the hard work and human relation is fit to become a successful entrepreneur. By carrying out well- planned and systematic work, success is always the end result. 17. Good organizer: - Entrepreneurs are good organizers of resources like men, machines, materials and money needed to start and run the business smoothly. They can convince the employees, investors, customers and co- ordinate the activities of individuals and groups in the accomplishment of business objectives. An entrepreneur works like a coordinating force among the resources, mould and manages them effectively. ENTREPRENEURIAL FUNCTIONS An entrepreneur is said to perform the following functions: 1. Assumption of risk: - Risk bearing or uncertainty bearing is the most important function of an entrepreneur which he tries to reduce by his initiative, skill and good judgment. 2. Business decisions: - The entrepreneur has to decide a. To enter the industry this offers him the best prospects b. To produce goods that he thinks will pay him the most c. To employ those methods of production which seem to him the most profitable.

d. To effect suitable changes in the size of the business , its location that are needed for the development of his business. 3. Managerial Functions: - The entrepreneur performs the managerial functions such as a. Formulating production plans b. Overseeing finances c. Dealing with the purchases of raw materials d. Providing production facilities e. Organizing sales In large establishments these management functions are delegated to professional managers an entrepreneur performs many useful functions such as Undertakes a venture Assumes risk and Earns profits Identifies opportunities to start business either as a manufacturer or a distributor. The entrepreneurship exists in every field of economic endeavor. Entrepreneurship has also been developed in the trading sector. A manufacturing entrepreneur demonstrates his entrepreneurial talents by bringing out new products while a trading entrepreneur performs his entrepreneurial functions in creating demand for the business he deals.

CHAPTER TWO
ENVIRONMENTAL SCANNING AND SECTORAL STUDIES SWOT ANALYSIS The business environment keeps changing. Government policies and regulations, economic conditions, social conditions, technological factors, competitive situation etc. Undergo changes. The environmental changes may open up new opportunities or pose new threats. Constant monitoring of the environment is therefore, necessary to identify the emerging opportunities and threats. In order to understand to what extent a firm will be able to exploit the opportunities and fight the threats, it is necessary to evaluate the strengths and weaknesses of the firm. Thus, an analysis of the strengths and weaknesses of the firm and the opportunities and threats in the environment that is the SWOT analysis is essential for framing the business strategies. S- Strengths. W- Weaknesses. O- Opportunities. T- Threats. STRENGTHS AND WEAKNESSES: Strengths and weakness analysis is a real test for management. The strength and weaknesses would decide whether a company should continue in a business, take up new lines of business, as well as the strategy to be employed in doing so. For e.g. in case of some products, small scale units have definite advantage over large- scale units in costs. If a large scale unit were not able to compete with the small- scale units, in such a case, it would be wise on the part of the large unit to give up the business of such products. The strengths and weakness analysis is done by functional audit of different areas like marketing, finance, design/ engineering, operations etc. The audit is to be done on the basis of the quantity and quality of skills and the infrastructures

support 3 available facilities in terms of physical facilities, resource available, speed and flexibility in arranging them. OPPORTUNITIES AND THREATS: Monitoring of the environmental changes is necessary to reshape the companys business and products, if needed, to ensure survival and growth. Certain changes in the environment may bring about new opportunities for some companies while they pose new threats for some others. For e.g. the new industrial policy of Nigeria has brought about enormous new business opportunities but at the same time it poses new threats or challenges to many existing firms because of the increase in competition. The existing firms should therefore, frame strategies to effectively fight the increasing competition. The primary reason of the environmental analysis is to identify the threats as well as the opportunities developing in the business environment. The search for opportunities may start on account of increased aspiration for performance of the organization. While ,the analysis of threat is to examine the development in the environment that may affect the current strategies ineffective and irrelevant and thus, affect the survival of the organization. The threats or opportunities for any business developed because the needs of the customer keep on changing. For e.g. a customer who was happy with the product now wants another because of change in his needs. In view of the above, many companies have to reframe their objectives and strategies in order to survive in the changing business environment. ENTREPRENEURIAL ENVIRONMENT Entrepreneurship environment refers to the various facets within which enterprises- big, medium and small and others have to operate. The environment therefore, influences the enterprise. By and large, an environment created by political, social, economic, national, legal forces etc influences entrepreneurship. INTERNAL ENVIRONMENT (Micro Environment)

A) PRODUCT: The business has to produce a product that people want to buy. They have to decide which market segment they are aiming at age, income, geographical location etc. They then have to differentiate their product so that it is slightly different from what is on offer at present so that people can be persuaded to give them a try. In other words product is a bundle of satisfaction that a costumer buys. It represent solution to a customers problem .It is in this context that marketing definition of a product is more than just what the manufacturer understand it. B) PRICE: To a manufacturer, price represent quantity of money received by the firm or seller .To customer, it represent sacrifice and hence his perception of the value of product. The price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies. The most commonly used are:

 PENETRATION PRICING charging a low price, possibly not quite covering costs, to gain a position in the market. This is quite popular with new businesses trying to get a toehold. CREAMING the opposite to penetration pricing, this involves charging a deliberately high price to persuade people that the product is of high quality. Luxury car makers often use this strategy COST PLUS PRICING this is the most common form of pricing. Costs are totaled and a margin is added on for profit to make the total price. C) PLACE: The business must have a location that it can afford, and that is convenient and suitable for customers and any supplier. D) PROMOTION: Promotion means moving from one end to another. Promotion means all those tools that a marketer uses to take his product from the factory to the customer and hence involves advertising, sales promotion, personal selling, public relations publicity and merchandising. Customers have to be made aware of the product. The two main considerations are target market and cost. A new business will not be able to afford to advertise on national television, for instance and would not wish to because its market will be local to start with. Leaflets, billboards, advertisements in local newspapers, Yellow Pages and word of mouth would be more appropriate. EXTERNAL ENVIRONMENT (Macro Environment) External Environment: Also known as Macro Environment, are the uncontrollable factors which a company must monitor and respond to. They consist of economic, political, technological, social-cultural and legal.

Economic Environment: It consists of factors that affect consumer purchasing power and spending patterns. Markets require purchasing power as well as people. Economic conditions, economic policies and economic systems are the important external factors that constitute the economic environment of a business. For example, the economic conditions of a country, the nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets etc. are among very important determinants of business strategies. Technological Environment: Technology is the most dramatic force shaping peoples lives. Factors such as technological development, stages of development, change and rate of change in technology and research and development affect marketing strategies. Also the cost of technology acquisition, impact of technology on human beings and the environmental effects of technology affect marketing decisions. Political environment: Political environment is composed of laws, government agencies and pressure groups that influence and limit various organizations and individuals in a society. The main political trends are: (a) Substantial amount of legislation regulating business. (b) Growth of public interest groups and (c) Changing government agency enforcement. Socio-cultural environment: The basic beliefs, values and norms shape the society and its people. Even when people of different cultures use the same basic product, the mode of consumption, condition of use, purpose of use or the perception of the product attributes may vary so much so that the product attributes, method of promoting the product may have to be varied to suit the characteristics of different markets. Even the value and beliefs associated with colour vary significantly between different cultures.

Legal environment: Government all over the world are an important aspects of their economy and even in the so called free economy, viz.US, government intervention in industry is a reality. The extent of intervention varies, while in US this is relatively low; in developing countries this is quite high. Nigeria , for example, has had a history of a controlled economy with the government deciding the rules of the game ,be it the extent of foreign private investment ,or goods to be exported or imported or even whether a unit can be allowed to produce a product Regulation in advertising ,like ban on advertising a specific product like cigarettes, liquor and distribution of goods as in the case of kerosene and earlier in case of food product too, is the reality of Nigeria scenario. ENVIRONMENTAL ANALYSIS This integrated approach which is the key to the development of backward areas implies a very careful environment analysis or research study of the target groups of beneficiaries, their activities and differential needs and the practical modes of operation by which their activities can be linked with the covering enterprise. Unless these studies are made meticulously, the entire planning will only give unproductive results. Most of the development schemes fail to benefit the target clientele because elaborate linkages are not identified and built up. An imaginative study should 1. Identify the beneficiaries or target groups. 2. Analyze the environment for immediate feasible enterprises in an integrated manner. 3. Delineate the linkages and institutional arrangements. 4. Recommend appropriate organizational structures to provide necessary promotional support.

Unfortunately, in most of the studies on backward areas, there is a tendency to make generalizations and ignore the specific details of feasible projects. As a result, immediate perception of concrete opportunities by interested entrepreneurs is left in confusion. Sometime! Area studies make a general statement of demand and resources and recommend certain enterprises, which are not immediately feasible due to important reasons unaccounted for in such studies. It is also not seriously contemplated whether the recommended enterprises are feasible within the capabilities and investment capacity of the target- group. In short, most of the studies fail to disconcern the real issues of growth in the target area and fail to identify the concrete and specific needs of these endowments like resource skill etc. to flourish. Enunciation of general objectives, generic beneficiaries tend to blur the distinct contours of one homogeneous group from the other. Also, the extension of certain standard facilities or services does not serve their actual needs. All this possibly happens because in such basic studies we fail to identify clearly the target groups and their specific problems, and make theoretical studies on resources and demand in an impersonal manner, as a result of which even the schemes devised on the basis of such studies tend to become too impersonal and rigid. Sometimes, the scheme become so flexible on account of a standardized petrified approach that in some most genuine cases demanding a certain departure from the fixed framework, the scheme is incapable of giving requisite help. It is therefore, absolutely necessary that any action plan for a backward area must first identify the target- group, identify the specific services they need for monitoring their enterprises and devise an appropriate structural support for comprehensive coverage of their needs.

CHAPTER THREE
SCOPE FOR ENTREPRENEURSHIP IN SMALL BUSINESS SECTOR Small- scale business provides good scope for the growth of entrepreneurial activities .An entrepreneur has good opportunity and vast scope in selling service rather than manufacturing a product. The entrepreneur can achieve better results if the size of the business is small. It is for this reason that small firms have higher productivity, greater efficiency and low labour turnover. The scope for entrepreneurial activities in small business sector can broadly be classified into: 1. Industrial sector 2. Agricultural and allied industrial sector 3. Service sector INDUSTRIAL SECTOR Small scale industries occupy an important place in the industrial sector. They have contributed over 40% in the gross industrial production in 1998. Small- scale industries: The basic objectives underlying the development of small- scale are the increase in the supply of manufactured goods, promotion of capital information the development of indigenous entrepreneurial talents and skills and the creation of broader employment opportunities. This sector provides a wider scope for the potential entrepreneur to develop his or her own industry. There is a good scope and enormous potential to use technology based products in the small- scale sector. An entrepreneur can exploit a profitable venture in any of the industries reserved for exclusive department under the small- scale sector. There are as many at 384 items for exclusive purchase from the small- scale industries.

Small- scale industries play an important role in increasing the national income, in meeting the shortage of consumers goods, in promoting balanced regional development, in reducing inequalities in the distribution of income and wealth and in relieving the economic pressure on land and over crowding in urban areas. Outdated technology, shortage of finance, shortage of raw material and inadequate marketing facilities are some of the problems faced by small entrepreneurs.

AGRICULTURAL AND ALLIED INDUSTRIAL SECTOR There is a vast cope for entrepreneurial activities in the agricultural sector. By establishing a link between agriculture and allied industries, the rural entrepreneur can exploit opportunities in areas of farming, agricultural processing and marketing. The government has given priority to IRDP programme and ensured adequate flow of credit to small and marginal farmers through re-financing facilities and by establishing national bank for agriculture and small development. Trade: Trading takes place in wholesaling and retailing. It may be in domestic or overseas market. The retailer entrepreneur makes the goods available at the time and places the consumer wants them. He may decide to start single line store, specialty shop, departmental store etc. trade in overseas market is in wholesale. The business environment directly influences the growth of entrepreneurship in a particular line of trade. The trade policy of India has been directed to promote export. Hence incentives and facilities have been provided to the entrepreneurs to motivate them to develop export. SERVICE SECTOR The service sector has gained importance for the entrepreneurs because of its rapid expansion. Service sector includes all kinds of business and provides opportunities to the entrepreneurs in business such as hotels, tourist services, personal services such as dry cleaning, beauty shops, photographic studies, auto repair, electric repair shops, wielding repair etc.

Transport: They provide time and place utilities in urban and rural areas to both men and material. The different modes or transport are of immense importance in the areas, which are not served by roads and railways. There is a scope for entrepreneur to design prototypes of new carts with the application of indigenous technology so that they may have better mobility and greater carrying capacity. The primary need in the rural area is an efficient system of road transport. The rural economy has a good opportunity for an entrepreneur to develop some business. They can exploit possibilities for a venture in some shops or services. Entrepreneurship flourishes in small business sector for they have enormous opportunities in manufacturing and non- manufacturing activities. The government is keen in encouraging the competitive strength of the small scale producers and it has taken a number of measures such as:The establishment of a network of industrial estates through ought the country where work sheds equipped with the necessary facilities made available to prospective entrepreneurs on subsidized rental basis. The reservation of a number of products for the exclusive production to small sector The introduction of ancillarization programme under which large and small industries are to be linked in a harmonious productive relationship The supply of machines on hire purchase basis to the small entrepreneurs on easy terms of payment Technical counseling to small units so as to improve their efficiency and viability These are golden opportunities for the prospective entrepreneurs to self employed independent businessman. The future is very bright. ENTREPRENEURSHIP AND PROCESS OF LIBERALIZATION

The process of liberalization and privatization initiated since 1991 is trying to make environment more conducive to growth of entrepreneurship. Many areas like telecommunication, power, generation, oil and natural gas, coal and steel, civil aviation, banking etc. which were earlier reserved for public sector are now made open to private participation also. The process of liberalization has opened the floodgates of entrepreneurial opportunities. Private initiative and funds have started flowing into these sectors. Reforms have swept all major sectors of the economy, opening up the country for the easier movement of the population and material across the national boundaries. Foreign trade and investment regime points to liberal order, which is welcome to domestic and foreign private sector entrepreneurs. The opening up has been substantial and going by the ratio of foreign trade turnover to GDP and flows of market based foreign capital. The world is shrinking into a global village due to economic interdependence and the revolution in communication technology. Globalization has become the password. Today changes are taking place at a greater pace and the world is passing through an exciting stage of technological progress on several fronts. Technology is perhaps the most important resource for any nation. Invention, innovation, adoption of new technologies, processes and their commercialization are the major factors in wealth creation and making the country technologically superior, which in turn, leads to economic supremacy. Nigeria has a large reservoir of qualified science and technology manpower and the necessary infrastructure for indigenous R&D and industrial development. Now we face the implication of a new international economy, which is less energy- intensive and more knowledge - intensive. New materials are reducing the demand for ferrous and non- ferrous materials; transportation costs are falling as products become lighter and smaller; international communication is instantaneous. It is a new order in which central planning by large institutions is

becoming less effective, and small- scale enterprises are becoming more efficient and effective. Entrepreneurs and new enterprises, rather than governments and major corporations are the instruments of change. The relative growth of the information/service sector in the new international economy that is emerging is removing many of the traditional barriers. In this sector, geography access to capital and access to resources is of less importance. CHANGING ROLE OF ENTREPRENEURSHIP IN THE ERA OF LIBERALIZATION, PRIVATIZATION AND GLOBALIZATION Challenges of liberalization, privatization and globalization call upon the entrepreneurship to play amore creative and dynamic role than ever before. Entrepreneurship can now set the goal of making Nigeria a developing country. They need not just aspire but make it a mission take it up and accomplish it. Ignited mind of entrepreneurs can be powerful resources, which can help Nigeria, become a big economic power in the years to come. It is indeed characteristic of entrepreneurs to have foresight, a vision and skill to see an opportunity and exploit it. Globalization, which means integration with the world economy, brings the influence of external sources into our society. Experts have pointed out that these are economic of trade or market forces and they have a beneficial influence in developing our core competencies in area which have a competitive advantage. As already discussed we have a good scope for developing our services. Entrepreneurs have to exploit this opportunity and with their sense of efficiency help the service sector to start, grow and develop perfectly. Direct linkages of technology to the nations strategic strengths are becoming clear since the last decade. Entrepreneurs have to realize that technology is the core strength of our nation and therefore help it get on the path of technological development.

By core strength and competency it is meant that in certain areas we have inherent strength and therefore show better result in a shorter period of time. Nigerian human resource based is one of the greatest core competencies. Changing role of entrepreneurs may be summed up as follows: In the era of liberalization, privatization and globalization, an entrepreneur will have to Explore and exploit opportunities for trade in the world economy Discover, utilize, and develop the core strength of the economy. Conduct R&D activities to meet the global standards Improve the quality of technology and quality of manufacture to be able to complete well with foreign competition. Reduction of cost of production to make the product/service available at a competitive price. Undertake advertising, sales promotion, marketing, packaging effectively for capturing foreign markets. Develop new products, new areas of production for widening the countries trade Search new markets and capture more and more markets. Expanding the geographical base of the marketing. Increase production to accelerate economic growth rate Come up with innovative ideas to solve financial, economic and other problems of the countries. Play the role of imitating entrepreneurs i.e. study the latest changes in the advanced countries- and use them gainfully.

 Utilize the underutilized/ unutilized capacity so that full benefits can be enjoyed e.g. Hydropower capacities are still unutilized. ENTREPRENEURSHIP AS A CATALYST FOR MEETING GLOBAL CHANGES AND CHALLENGES The relationship between entrepreneurship and economic growth development has already been analyzed. The later is the result of entrepreneurship. Every process of economic growth/ development is the outcome of changes that occur in various spheres. Infact, one cannot imagine either of them without a change. Change is therefore the essence of growth and development. Entrepreneurs are some times called carriers or agents of change. It is in this context that entrepreneurs are known as catalysts of change. In the capacity of catalyst an entrepreneur reaches for opportunities and areas- where changes can be expected and are necessary. An innovative entrepreneur is instrumental in bringing about a change. He introduces new ideas, new techniques, new combinations, discovers new sources of supplies etc. An imitating entrepreneur on the other hand uses the changes launched by others. Changes and entrepreneurship go together. Drucker says, Entrepreneurs see as the norm and all healthy. Usually they do not bring about the changes themselves. But the entrepreneur always searches for change, responds to it and exploits it as an opportunity. Entrepreneurs have to play an important role- the role of catalysts in the new international scenario that is going to open the economy to new areas and prospects. Entrepreneurs are supposed to visualize and utilize the opportunities that are going to occur. The world trade is going to open doors to new challenges. New and changed approaches will have to be adopted for meeting these challenges successfully. As a catalyst an entrepreneur will have to:Foresee prospect changes in the global economic and social environment. He will also have to be instrumental in bringing about changes.

Absorb new inventions and innovations in the technological sphere as technology plays an important role in the world of trade and commerce. Initiate new activities in both business and non- business spheres. In capacity of an innovative entrepreneur. He has to introduce new combination of resources, come up with bright ideas to utilize underutilized resources, to put them to multiple uses and apply them to new and unknown activities. Bring about an attitudinal change in the minds of the people and the society in general. A conservative and religious society or a society that is bound by customs and traditions cannot take full advantage of entrepreneurial opportunities. An entrepreneur may have to strive to convert the society into a dynamic, rational and a progressive one. He may have to influence the government into bringing about economic reforms of various types for exploiting global opportunities. Exploit change and use it not only for his and for the benefit of his organization but also for the benefit of his economy. Entrepreneurs play a crucial role in the development of an economy. They play the role of catalysts of change and are capable of converting an underdeveloped economy into a developing one and a developing economy into a developed one. Global changes and challenges may be compared to a knife. A knife when used properly brings benefits or serves as a tool for work. The same knife can cut and harm if used wrongly. Entrepreneurs have to convert global changes and challenges into opportunities, exploit them effectively and intelligently so that the economy emerges a winner, a beneficiary of globalization and not as its victim. CREATIVITY Creativity implies conceptualizing, visualizing or bringing into being something that does not yet exist. It is about curiosity and observation. In the history of science, there are interesting examples of creativity occurring at the same time with no contact between the individuals involved. Newton and Leibritz created the

mathematics of calculus in the seventeenth century quite independently of each other, despite their allegations of plagiarism. Creativity seems to come out of the blue triggered by a problem to be solved or an idea to be expressed. Its roots and origins are mysterious and unknown but its existence cannot be denied. This meta- physical aspect has meant that science has shied away from the topic though it is now becoming a subject of serious study among cognitive scientists and experimental psychologists. Entrepreneurs are familiar with ideas that suddenly come to mind and are not too concerned with their origins. This is the starting point of the entrepreneurial process. We see creativity as a talent, an innate ability, though we recognize that it can be developed and that there are techniques that promote creativity and problem solving. Creativity is also a function of how people feel. Some are more creative under pressure whilst others need complete relaxation. Some use divergent thinking in their creativity whilst others prefer convergent thinking. One thing that seems common to all forms of creativity is joy. Einstein comments that the idea that the gravitational field has only a relative existence was the happiest thought of my life. His creative genius had come up with the idea of relativity and it made him happy. There is an intense personal satisfaction in having come up with something new and novel. This is one reason why entrepreneurs see their activities as fun. There is the joy of creativity all around them. For the entrepreneur, creativity is both the starting point and the reason for continued success. It is the secret formula by which he or she overcomes obstacles and outsmarts the competition. Arguably every one of us has the ability to be creative but do we all use and exploit this ability? Many of us simply do not act creatively much of the time.

Possibly we are not motivated and encouraged perhaps we do not believe in ourselves and the contribution and difference we could make. There is certainly a skills and technique element to creativity- in a business context, for example, we can be taught creative thinking and behaviour in the context of decision making but this is clearly only part of the explanation. The issue of making is also a critical element. Many people have the ability to play a musical instrument. They have a skill and possibly natural talent and they can be taught more skills and techniques whilst they are willing to persevere and practice. Furthermore, some people who play music naturally appreciate the meaning the composer was trying to convey when the work was written. Others have to be taught this interpretation. Some people simply see things that others cannot until they are given a detailed explanation. The same implies to opportunity spotting. People who miss the valuable opportunities that others see first often have access to the same information but it means something different to them. Discovery consists of looking at the same thing as everyone else and thinking something different. In just the same way many young people can dribble, head and pass a football, and their skills can be improved with coaching. But when they watch a football match or play in one are they able to see the whole game? Can they spot goal scoring opportunities and positions and get there ahead of a defender? Most people who watch team sports such as football simply follow the movement of the ball exactly as the television camera tends to do. They ignore or miss
the emerging patterns as the other players move of the ball in search of good positions. This partially explains why we do not all seem to see the same game evolve, even though we are present at the same match.

INNOVATION Innovation builds creativity when something new, tangible and value creating is developed from the ideas, innovation can be focused on the theme of being better-

incremental improvements-as well as the theme of being radically different. The former will often form the world of the entrepreneur, who us attempting to make his or her organization d stronger than his rivals .The later is often, but certainly not always, reserved for the true entrepreneur, who is more concerned with doing something genuinely new and different rather than improving on ideas that have gone before. Innovation is about seeing the creative new idea through to completion, to final application but, of course, this will not necessarily be a business. It is the entrepreneur who builds a business around the idea and innovation. Both can be difficult roads and require courage and perseverance as well as creativity and imagination. These are attributes that the entrepreneur brings and his or her role in innovation is crucial. There are the basic approaches with innovation, which are not mutually exclusive. First, it is possible to have a problem and to be seeking solution, or at least a resolution. Edwin Land invented Polaroid camera because his young daughter could not understand why she had to wait for the pictures to be printed when he took photograph. Second, we might have an idea in effect a solution and be searching for a problem to which it can be applied. 3Ms Post- it notes happened when a 3m employee created a glue with only loose sticking properties, and a college applied it to a need he had for making page in a manuscript. Third, we might identify a need and design something that fits. James Dysons dual cyclone cleaner came about because of his frustration with his existing machine, which was providing inadequate for cleaning upthe dirt and dust he generated when he converted an old property.

Generating opportunities form ideas requires us to attribute meaning to the ideas. Ideas from in our minds and at this stage they mean something to us, personally. Typically, they became a real opportunity when we expose the ideas and share them with other people, who may well have different perceptions, attribute different meanings and see something we miss initially. This process of exploration is fundamental for determining where the opportunities for building new values are. In other words, innovation comes from the way we use our ideas. Crucially the person with the initial idea may not be the person who realizes where the real opportunity lies. An inventor is not always an opportunity spotter and often not a natural project champion. Picasso claimed that great people steal ideas and create opportunities where others cannot see the potential. Creativity is the talent of the inventor and innovation is the talent of the project champion who turns ideas into reality. Entrepreneurs do both these things but they do more. They do not just complete the successful application of an idea; they build something of value in the process. The Sony walkman provides an excellent illustration of what happens. The idea came to Sony co- founder Akio Morita when he was questioning why he was finding it difficult to listen to music when he was in public places or walking round a golf course. The idea became an innovative new product and a valuable opportunity when Morita shared his idea with other colleagues in Sony, and existing technologies and competencies were used to develop the compact personal radio with adequate playing time from its batteries and individual headphones. The project was championed, resourced and implemented. Personal cassette and CD players have systematically joined the original radio. It was simply a great idea that rejuvenated Sony at the time it was conceived; and it has brought value and affected the lives of millions of people around the world.

This endeavors to pull the stand together. Creativity (the idea) is the starting point whether it is associated with invention or opportunity spotting. This creativity is turned to a practical reality (a product, for example) through innovation. Entrepreneurship then sets that innovation in the context of an enterprise (the actual business), which is something of recognized value. To be exploited fully and effectively, creativity and innovation need to be supported by certain talents and aspects of temperament. We also need a base of knowledge, which we use to help generate and develop our new ideas. In part of this is developed through our experiences but it also needs to be supplemented further by certain key skills. In very simple terms, talent and temperament combined with knowledge helps us find out and discover new possibilities. Key skills can enhance the discovery process, whilst other skills help us design and craft new opportunities from the ideas. KEY SECTORS FOR THE NEWAGE ENTREPRENEURS Cyber Cafes Bio Tech Apparels Rural Products like Handicrafts etc Beauty Parlours

CHAPTER FOUR BUSSINESS ORGANISATION Everyone has wants some are for things like food or clothes, others are for entertainment, leisure, travel etc. In order to satisfy these wants we have to consume goods and services. It is through
business activity that goods and services are provided.

Business activity is any kind of activity that results in goods or services being provided that satisfy consumers wants . Goods are tangible while services are intangible. Goods sold to the public are consumer goods things like cars, sports equipment and games consoles, which are durable. Consumer goods can also be non-durable like newspapers, magazines and chocolate. You use durable goods over a long period of time, whereas you use up non-durable goods quickly. Services are things like facilities to the public such as hairdressing, window cleaning, and receiving loans from banks. Business activity creates wealth the more goods that are produced, the greater amount of wealth. Wealth is not simply

money, but the total of goods and services that can be given a monetary value. Goods and services are the outputs of business activity. In order to produce an output, the business has to use resources, or inputs people, buildings, machinery etc. These resources can also be called factors of production. These factors fall into four categories: Land All the natural resources mineral deposits, the site of the factory, water, timber etc. Labour All the human resources employees. Capital Tools, machinery and equipment, finance that the owner invested in the business. Enterprise The business ideas the entrepreneur has on how to use the above resources in order to produce a good. Sectors of Business Businesses are grouped into sectors, according to the types of products and services that they provide. Primary sector businesses These grow products or extract resources from the ground. Examples are mining, farming, forestry. Secondary sector businesses These manufacture products from raw materials. Examples are construction of new buildings, factories and ships, as well as products ranging from tinned food to TV sets.

Tertiary sector businesses These do not produce a product they provide a service instead. Examples are shops, hotels, banks, insurance companies. Private Sector Organisations There are many different types of organizations operating in the world . A definition of an organisation is a group of people who come together and use their resources and knowledge to achieve a common goal. Private sector organisations are sole traders, partnerships, limited companies and franchises. Sole Proprietorships (traders) These are one-owner businesses (owned and controlled by the one person). There are bound to be many examples of sole traders in your local area like retail stores or corner shops, hairdressers, workshops, bakeries, restaurants, laundries, tailoring and draper shops, dry-cleaners and dyers and other enterprises requiring small capital, catering to local markets, involving limited risks and the use of personal knowledge and skills , etc. Advantages The owner retains all the profits. You have complete control over all the decisions that have to be made. You can choose your own hours of work and vacation time. There is a greater personal service offered to your customers. This type of organisation is very cheap to set up.

Disadvantages You have unlimited liability you carry all the businesss debts if it fails, even if this involves selling all your personal possessions in order to pay it off. Restricted sources of finance banks will charge you high rates of interest if they will commit to a loan at all. You have no one to share decisions with and you cannot share your workload with other people. The business has to shut down when you are on vacation or ill. Possible Sources of Finance Your own personal savings. Retained profits (profit kept back from the previous trading period and ploughed back into the business). Bank loans. Overdrafts. Government grants. Trade credit. Debt factoring. Objectives Survival Profit maximisation Create a good image. Improve your personal circumstances. Satisfying (generating a sufficient level of profit to satisfy the owner, while not making a high level of profit). Partnerships

Partnerships are businesses with 2 to 20 partners people who own and control the business together. A Partnership Agreement is drawn up, stating the rights of partners and procedures to be followed upon the death of a partner, a new partner joining the business or a partner leaving. Allowances are made for solicitors, accountants and members of the Stock Exchange, meaning they can have more than 20 partners. You could also have sleeping partners people who invest in the business but have no control over the way it is run, the advantage being that they usually have limited liability, and will only lose their investment in the business if it fails (although sometimes this may not be the case if these people have been regular partners before becoming sleeping partners, as any decisions made by them beforehand may still have an impact). These include medium sized service and trading concerns, like wholesalers, hotels, transporters, hire-purchase firms, confectioners, and professionals like attorney, lawyers, chartered accountants, architects, consultants, etc. Also, small manufacturing firms requiring simple techniques and processes. Advantages Partners may have different areas of expertise operations, finance, human resources, marketing etc. More finance is available to the business you can pool capital from all the partners. You can share the workload with other partners. You can raise finance from lenders more easily than sole traders can there is less risk involved.

Disadvantages Unlimited Liability (possibly even for sleeping partners). Profits need to be shared (or appropriated) between partners. Disagreement may occur, with people having different methods and ideas. A new Partnership Agreement has to be drawn up every time a partner joins, leaves or dies due to the change in circumstances. Sources of Finance Personal savings. Retained profits. Inviting new partners to join (increases investment). Bank loans. Overdrafts. Government grants. Trade credit. Debt factoring where a specialist factor provides finance against any invoices which have not been paid (around 80% of the total amount due), the balance (20%) being paid back when the customers settle the invoices. An administrative charge and service fee is payable by the business to the factor. Objectives These are the same as a sole traders objectives. Sole traders and partners are often referred to as being self-employed, as they own the business that they also work for.

Private Limited Companies

Private limited companies are companies whose shares are owned privately not available to the public on the Stock Market. There is a minimum of one shareholder (owner) in a private limited company, and a director or most commonly, a board of directors runs the business. A shareholder can be a director, and there must be at least one director and one company secretary (who keep all the company records). The company must produce a Memorandum of Association and Articles of Association that state the details of the company, responsibilities of its directors and the rights of its shareholders. Private limited companies tend to be family businesses, although this is not always the case Advantages Shareholders have limited liability they only lose their invested capital if the business fails. More finance can be raised from shareholders and other sources. Control of the business is not lost to outsiders who have no knowledge of it (like public limited companies). Disadvantages Profits are shared among more people. A legal process has to be adhered to when setting the company up. Shares cannot be sold to outsiders it might be more difficult to raise finance. You have to abide by the Companies Act requirements. Annual accounts have to be published for the business, although these do not have to be made available to the general public.

Sources of Finance Company profits. New shareholders joining the company. Bank loans. Overdrafts. Government grants. Trade credit. Debt factoring. Objectives Profit maximisation. Growth. Status. Sales maximisation. Public Limited Companies A public limited company, or plc, is a company whose shares are available to be purchased on the Stock Market. You need to have at least two shareholders and 50,000 of share capital to start one up. The same legal documents as a private limited company have to be drawn up. A board of directors appointed by shareholders controls the company. Public limited companies can also be called corporations. Examples of public limited companies include the mobile phone giants Vodafone and TMobile.

Advantages You can raise immense amounts of finance. Plcs are usually market leaders. You can borrow money from lenders easily due to the size of the business. Disadvantages There are a lot of set-up costs involved prospectuses and underwriting (an insurance against some shares remaining unsold, meaning fees have to be paid to the underwriter who must buy these unsold shares) need to be set up before gaining the interest of investors. The Companies Act must be adhered to. The business has no control over who buys the shares on the Stock Exchange in the long term, although they can choose whom they wish to sell to when trading begins. You must publish annual accounts and make them available to the general public upon request. Sources of Finance Retained profits. Selling shares to the public. Bank loans. Overdrafts. Debentures. Government grants. Trade credit. Debt factoring.

Objectives Profit maximisation. Growth. Maximise sales. To be dominant in their market. Image. Plcs may be global companies, or multinationals (having manufacturing plants in more than one country. In doing so, they can: Take advantage of economies of scale buying more products at a lower unit cost. Avoid legislation in the home country that might have a negative effect on the businesss profitability. Avoid restrictions on quotas (number of imports brought into the country). Receive tax benefits and government grants from more than one country. Franchises A franchise is an agreement that allows an individual or group to use another businesss name and sell their products and services. The individual is called the franchisee, and the business selling their name is called the franchiser. A small percentage or fixed sum is given to the franchiser in return for using their name and products/services. Examples of franchises are the Mr. Biggs and MTN.

Advantages (to the Franchiser) You can increase your market share without a great deal of investment. Revenue is reliable (you get a set payment or a percentage of profits each year). Risks are shared between the franchiser and franchisee. Advantages (to the Franchisee) The franchiser will undertake its own marketing strategy; therefore you will not have to carry out much advertising on your own. The franchiser may train you in the operation of machinery or the routine that you must follow. The risk of failing will be reduced because the business already has a good reputation. Disadvantages (to the Franchisee) You have to pay the franchiser a percentage of profits or a royalty payment. The franchiser might not renew the franchise after a certain period of time, leaving you without the backing and permission to continue. The products you sell, the price you sell them at, and the layout of the shop may be dictated by the franchiser, meaning you will be less able to make your own decisions. Voluntary Organisations

Charities A Register of Charities is kept by the government, which also regulates the activities of charities. Professionals working for them often run charities, and the charity is usually exempt from paying some taxes. Examples of charities include old peoples home, motherless babies home, etc. Sources of Finance Public and private donations. Government grants. Lottery grants. Profits from sales in charity shops, raffles, jumble sales and mail order goods. +-Objectives To be recognised as a charity they must have one of the following aims: To relieve poverty. To advance education. To advance religion. To carry out activities beneficial to the local community. Voluntary Organisations These are usually run and staffed by volunteers. Examples include the Scouts, local youth clubs and some sports clubs. Voluntary organisations bring together people with similar interests, and are run by a committee of elected volunteers.

Sources of Finance Grants from the Lottery, sports councils or local authorities. Fees payable upon joining or for use of facilities. Public Sector Organisations Public sector organisations are owned and controlled by either local or central government (State and Federal) Local Government Organisations Local authorities/councils provide services including: Education. Recreation. Housing. Refuse collection They are set up by central government and are run by locally elected councillors. The day to- day running of the services are organised by council employees. A local council aims to meet the needs of the local community and provides services that might be considered unprofitable if handled by private firms, for example libraries and archives. Sources of Finance Central government. Business rates. Council tax. Charges for using services, e.g. leisure centres and parking. Objectives To meet the needs of the local community.

To make cost-savings. To stick to budgets set down by central government and at local level. Central Government Organisations The House of Senate and National House Assembly provide important services nationally from departments such as the Treasury, Trade and Industry, Health, Transport and Defence. Politicians are elected to be overall in charge of the departments in line with the best interests of thepopulation; however employed civil servants run them. Sources of Finance Taxation Objectives To improve society. To make best use of the funds available to them. To manage taxation to protect people who are in a less favourable position. Public Corporations Corporations are companies that are owned by central government. A government minister appoints a chairperson and board of directors, or governors, to run them on the behalf of the government. The Post Office and the BBC are examples of public corporations. Sources of Finance Central government.

The public TV licensing, merchandise etc. Objectives To provide a quality service. To manage their funds efficiently to make the best use of them. To serve the interests of the public. Privatisation The last 10 years has seen the government selling off key public corporations as a cost cutting measure. The government has sold these companies off because: The Treasury can receive a huge amount of income from the selling of these corporations. They were very poorly managed and did not make a profit; they could be profitable if someone else managed them. They wanted to increase share ownership and let the public have a chance to benefit from the success of the economy by buying into these businesses.

CHOICE OF FORM OF ORGANISATION As explained earlier, a business enterprise can be organised into several forms. Every form of organisation has its own merits and demerits. A businessman has to keep in view these merits and demerits while selecting an appropriate form of organisation. The choice has to be made both at the time of setting up a new enterprise and at the time of expansion and growth of an existing concern. At the time of launching a new business enterprise, the choice of the form of ownership is dictated by several factors as given below : 1. Nature of business Service, trade, manufacturing. 2. Size and of operations Volume of business (large, medium, small) and size of the market area (local, national, international) served. 3. Degree of direct control desired by owners. 4. Amount of capital required initially and for expansion. 5. Degree of risk and liability and the willingness of owners to assume personal liability for debts of business. 6. Division of profits among the owners. 7. Duration of Business (Length of life desired by the business). 8. Government Regulation and Control 9. Managerial Requirement (Scope and plan of internal organization) . 10.Flexibility Operation 11Tax Burden

It must be noted that these factors are interrelated and interdependent. For instance, the amount of capital required and the degree of risk involved depend upon the nature and volume of business operations. The degree of control and the division of profits are both related to risk and liability. Therefore, an entrepreneur division of profits are both related to risk and liability. Therefore, an entrepreneur should not consider these factors in isolation. The interrelationship between these factors should be duly considered. The impact of each one of these factors on the choice of a suitable form of ownership is described as follows. Nature of Business The nature of business has an important bearing on the choice of the form of ownership. Business providing direct services, e.g., small retailers, hair-dressing saloons, tailors, restaurants, etc., and professional services, e.g., doctors, lawyers, etc., depend for their success upon personal attention to customers and the personal knowledge or skill of the owner and are, therefore, generally organised as proprietary concerns. Business activities requiring pooling of skills and funds, e.g., wholesale trade, accounting firms, tax consultants, stock brokers, etc., are better organised as partnerships. Manufacturing organisations of large size are more commonly set up as private and public companies. 2. Size and area of operations Large scale enterprises catering to national and international market can be organised more successfully as private or public

companies. The reason is that large sized enterprises require large financial and managerial resources which are beyond the capacity of a single person or a few partners. On the other hand, small and medium scale firms are generally set up a partnership and proprietorship. Small scale enterprises like generally hairdressers, bakeries, laundries, workshops, etc. cater to a limited market and require small capital. The risk and liability are not heavy and the management problems can easily be handled by the owner himself. Therefore, the owner likes to be his own master by organising as a sole proprietor. He can maintain factto-face relationship with his customers which is important in small service enterprises like painters, decorators, repair shops, beauty parlours, etc. Medium-sized enterprises and professional firms, e.g., health clinics, chartered accountants, etc. are predominantly partnerships. They pool their capital and expertise to operate on a larger scale and to avail of the benefits of specialisation. Large scale enterprises and enterprises involving heavy risks, e.g., engineering firms, departmental stores, five star hotels, chain stores, etc., are normally organised as companies. These enterprises require huge capital, heavy risks and expert managers. Proprietary and partnership forms are unable to provide these resources. The company form is, therefore, best suited to large scale enterprises. Similarly, where the area of operations is widespread (national or international), company ownership is appropriate. But if the area of operations is confined to a particular locality, sole proprietorship or partnership will be a more suitable choice.

3. Degree of Control Desired A person who desires direct control of business prefers proprietorship rather than the company because there is a separation of ownership and management in the latter case. In case the owner is not interested in direct personal control but in large scale operation, it would be desirable to adopt the company form of ownership. 4. Amount of Capital Required The funds required for the establishment and operation of a business have an important impact on the choice. Enterprises requiring heavy investment, i.e., iron and steel plants, etc., should be organised as joint stock companies. A partnership has to be converted into a company when it grows beyond the capacity and resources of a fewpersons. Requirements of growth and expansion should also be considered in makingthe choice. There is maximum scope for expansion in case of a public company. Where the funds required initially are small and scope for expansion in case of public company. Where the funds required initially are small and scope for expansion is not desired, proprietorship or partnership is a better choice. 5. Degree of risk and liability The volume of risk and the willingness of owners to bear it, is an important consideration. A single individual may have large financial resources sufficient for a medium scale enterprise but due to unlimited personal liability he may not like to organise as a proprietor or a partnership. Due to limited liability and a large

number of shareholders, there is maximum diffusion of risk in a public company. But an enterprising individual not afraid of unlimited liability may go in for sole proprietorship. 6. Division of Profits A sole trader receives all the profits of his business but be also bears all the risks. If a person is ready to bear unlimited personal liability and desires maximum share of profits, proprietorship and partnership are preferable to company form of organisation.

7. Duration of Business Temporary and a hoe ventures can be organised as proprietorships and partnerships as they are easy to form and dissolve. But they lack continuity and stability. Enterprises of a permanent nature can be better organised as joint stock companies and co-operative because they enjoy perpetual succession. A business requiring a long period for establishment and constitution should be organised as a corporate body. 8. Government regulation and control Proprietorships and partnerships are subject to little regulation and control by the Government. Companies and co-operatives are, on the other hand, subject to several restrictions and have to undergo several legal formalities. But this face is not very important and it can be helpful in making the choice only when all other factors are unable to indicate a clear-cut choice. 9. Managerial Requirement Organisational and administrative requirements depend upon the size and nature of business. Small businesses using simple

processes of production and distribution can be managed effectively as proprietorships and partnerships. On the other hand, giant enterprises involving the use of complex, techniques and procedures require professional management. Such enterprises can be managed efficiently only as joint stock companies. Due to identity of ownership and management, motivation is very high in proprietorships and partnerships. Such motivation is lacking in a company due to separation of ownership from management. 10. Flexibility of Operations Business which require a high degree of administrative flexibility should better be organised as proprietorships or partnerships. Flexibility of operations is linked with the internal organisation of a business. The internal organisation of sole proprietorship and partnership is much more simple and less elaborate than the internal organisation of a joint stock company. Moreover, the objectives and powers of a company cannot be changed easily or without legal formalities. 11. Tax burden Various forms of ownership are taxed differently under the Income-tax Act in Nigeria. If the expected volume of profit is very high it may be profitable to start a company. A company is taxed at a uniform rate, i.e., the rate of tax remains the same irrespective of the volume of taxable income.

CHAPTER FIVE
SMALL AND MEDIUM ENTERPRISES DEFINITION, CHARACTERISTICS AND BENEFITS OF SMEs Definition: The concept of SMEs is relative and dynamic. The definitions change over a period of time and depend, to a large extent, on a countrys level of development. Prior to 1992, different government agencies in Nigeria such as the Central Bank of Nigeria tended to adopt various definitions to reflect differences in policy focus. However, in 1992, the National Council on Industry streamlined the various definitions in order to remove ambiguities and agreed to revise them every four years. Small Scale Enterprises were defined as those with fixed assets above N1 million but not exceeding N10 million, excluding land but including working capital, while Medium Scale Enterprises are those with fixed assets, excluding land but including working capital, of over N10 million but not exceeding N40 million. The definitions were revised in 1996 with Small Scale Industry defined as those with total cost, including working capital but excluding cost of land above N1 million but not exceeding N40 million with a labour size of between 11 and 35 workers; while Medium Scale Industry was defined as those with total cost, including working capital but excluding cost of land, above N40 million, but not

exceeding N150 million with a labour size of between 36 and 100 workers. And at the 13th Council meeting of the National Council on Industry held in July, 2001 Micro, Small and Medium Enterprises (MSMEs) were defined by the Council as follows: Micro/Cottage Industry

An industry with a labour size of not more than 10 workers, or total cost of not more than N1.50 million, including working capital butexcluding cost of land. Small-Scale Industry An industry with a labour size of 11-100 workers or a total cost of not more thanN50 million, including working capital but excluding cost of land. Medium Scale Industry: An industry with a labour size of between 101-300 workers or a total cost of over N50 million but not more than N200 million, including working capital but excluding cost of land. Large Scale An industry with a labour size of over 300 workers or a total cost of over N200 million, including working capital but excluding cost of land. Characteristics: The SMEs are characterized by limited access to financial capital, simple management structure resulting from the fusion of ownership and management by one person or very few individuals. SMEs tend to strongly revolve around the owner-managers, rather than as a separate corporate entity. There is often greater subjectivity in decision taking, and prevalence of largely informal employer employee relationships. As a result of their greater use of local resources, they are widely dispersed throughout the country. They are also closely attached to the

products that launched them; many are labour-intensive although modern SMEs are increasingly employing reasonably high technology

Sources of Information for Entrepreneurship Development 1. The Library is a primary resource for information. Government agencies have a variety of publications which may be useful. Some colleges and universities have reference libraries which may have a circulation section available to the public. Also research institutes and some large corporations have libraries with sections on specific topics. Libraries are the storehouse of information which may be useful in operating a small business. Books, periodicals, reports and newspapers may contain information which can be of help in solving some of the problems in operating a business. 2. Internet can be used to carry out research and to find useful information and data. Examples of these search engines are Google, Bing, Ask etc Also E-mail can be used to communicate with providers of information who have websites on the internet. 3. Subscribing to Trade Papers and Magazines. Desirable entrepreneurs should have time to read articles especially in understanding new trends and developments relating to business. It is advisable to keep a file of pertinent articles for future reference. Example of such is the page 4 of punch news papers (Nigerian Newspaper) which carries articles that are related to entrepreneurship and business. 4. Industrial Data is helpful in comparing a business to other similar businesses. The data is available from trade associations or government agencies and includes ratios such as; stock turnover, cash discounts percentage mark-up etc.

5. Membership-Based Organisations can provide services such as conducting research, organizing education and training programmes, implementing new technology, responding to members questions and concerns and disseminating information through newsletters, magazines and special reports. Example of such membership-based organization is MAN (Manufacturers Association of Nigeria) 6. Training Programmes can help entrepreneurs to develop formal plans for improving their managerial skills and ability. Training courses and adult education programmes are designed by many institutions, agencies and associations. Entrepreneurs should be aware of these personal development possibilities and take full advantage of them. One of such institution is (CMD) Centre for Management Development at Magodo area in Lagos (Nigeria). 7. Employees. The people who work for a business can provide answers to specific problems in a business. For example, entrepreneurs might ask employees for their advice and assistance about stock display or customer attitudes. Employees are in a good position to give valuable advice providing they know that their opinions and suggestions are valued. Also customers can supply very special information about the products and services they buy. Customers should be asked about their opinions because they are an excellent source of information about the relative strength and weaknesses of a business operation. 8. Other Business Owners. Most businesses have common problems and owners are generally willing to discuss their problems with one another. Occasionally, the competitive nature of business may discourage this frank exchange, but if business are unrelated and do not compete for the same customers, entrepreneurs may be willing to share ideas concerning solutions to a common problem. In this way, all business owners can benefit from this interaction and improve their business operations.

Apart from the membership-based organisations and training programmes, the government of Nigeria, like its counterparts, the world over, has realized the importance of entrepreneurship development and has over the years formulated various public policies to encourage, support and fund the promotion and development of entrepreneurship. Development in small and medium enterprise are what give a developing nation like ours the base for employment creation, solid base for creating a middle class and encouragement for the use of local raw materials and technology. Among these establishment for the promotion and development of entrepreneurship are: The Nigerian Export Promotion Council (NEPC): It was established in 1976 and formally management in March, 1977 to minimize the bureaucratic bottlenecks and increase autonomy in dealing with members of the organized private sector. Its goal and mission me to make the non-oil export sector a significant contributor to Nigerias GDP and to facilitate opportunities for exporters to promote sustainable economic development. The Raw Materials Research and Development Council (RMRDC) is also an agency of the Federal Government of Nigeria which is vested with the mandate to promote the development and utilization of Nigerias industrial raw materials. It is today, Nigerias focal point for the development and utilization of the nations vast industrial raw materials. It is hoped that RMRDC through its numerous programmes, will promote new investments in the other local resources and encourage industries to substitute local raw materials for currently imported ones. The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) was established in 2003 to promote the development of the MSME sector of the Nigerian Economy. The agency positions itself as a one stop shop

for micro, small and medium Enterprises Development. The mission is to facilitate the access of micro, small and medium entrepreneurs and investors to all resources required for their development. It compiles, reviews and updates all existing economic policies, regulations, incentives and legislation affecting MSME operation within the state. Other institution established was the Industrial Development Centers (IDCs) which is to provide extension service to SMEs in such areas as project appraisal for loan application, training of entrepreneurs, managerial assistance, product development as well as other extension services. In conclusion, we all need information to operate successfully, and with the internet, much is available. Some of these information will come to you automatically, e.g. company annual reports, membership newsletters, press briefings by ministers and heads of agencies and departmental brochures, etc. Finding and subscribing to good newsletters (free or subscription based) can ensure that quality, relevant and up to data information regularly comes to you. In this age of e-government, it has become much easier to source information from government, ministries, and agencies. You can receive updated news or updated web pages or both. Newsletters and services like these can assure a quality, regular inward flow of information.

Various Sources of Information for Entrepreneurship Development Entrepreneurs need to be reminded from time to time about the basic functional areas, regarding their enterprises so that they can be up to date and for them to be efficient and effective managers. In the light of this, we have to recognize information as a veritable resource of entrepreneurship development. Nature and Types of Information Required By Entrepreneurs (a) Marketing Information

Whoever engages in a business, whoever embarks on entrepreneurial tasks willknowingly or unknowingly engage in marketing. We can state that whenever people engaged in business, they also engage in marketing. Some aspects of marketing have over the years changed dramatically. Selling alone was considered to be the actual marketing activity. Quality products and services in the historical sense were no longer all that customers were looking for. More manufacturers, more distributors and increasing buying power changed the market-place. Globalization of markets set in, and new and more sophisticated management instruments were needed to help manufacturers, distributors and entrepreneurs 10 stay in business and grow with growing markets and all of this despite over-increasing competition and fighting over market shares. Any market primary consists of people and entrepreneurs need to concentrate his/her efforts on one of the segment of the market in which the products have the greatest potential appeal. Good market segmentation is a must for any successful marketing approach. (b) Technical Information In developing a business idea there is a need for potential entrepreneur to adopt a carefully moderated and intelligent technical approach. Planning is a process that never ends for business. It is extremely important in the early stages of any venture when the entrepreneur will need technical information to prepare a preliminary business plan. There are different types of technical information that may be part of any business operation. This may includedesigning of premises, products others may include nature of products/services you will like to engage in. it may also includes tools and equipment you require or materials needed for your production process. It may also be technology choice or advice on location and premises.

(c) Information and Communication Technology (ICT) Information and communication technology is very important source of information for Entrepreneurship development as we know that the whole world is now a global village where information about a product/service can be easily sourced. One can source through the internet and find out the kind of hardware, software for the kind of business one want to venture into. It may be packages on accounting and production or databases appropriate for the business. (d) Technology Is Constantly Changing the Demands of Consumers Businesses use new technologies to produce new products and services. Entrepreneurs should realize that new technological developments such as the internet and cell phones increase the exchange of information and may have an effect on the operations of their business, Entrepreneurs may not be aware of the nature and effects of all new technologies, yet, they must try to determine technical developments which are likely to have the greatest impact on their business operations. (e) Financial Information Whether a business is small or large, owners and executives-must have financial information relating to the type of business they want to establish. One of the most often overlooked areas of information for entrepreneurship development is the financial information. Often regarded as a back-office aspect of the business, the financial information plays a critical role for decision making. Because decisions are only as good as the information on which they are based, establishing a reliable data from business: environment must be a priority for all businesses regardless of size and industry. It is only when you have proper financial information than an entrepreneur will know the amount of capital require for the kind of business he is going into and ways of sourcing fat it. Money plays a major role in an enterprise. At the beginning of any business, money is needed to purchase the necessary tools/equipment, materials/supplies and other needs. To be

competitive, small business owners must prepare for all future events and market changes. One of the most important aspects of such preparation is the cash flow planning. Failure to properly plan cash flow is one of the leading causes for small business failure. Knowing some basic accounting will help you better manager of your cash flow. (e) Legal Information Business is the totality of the economic and commercial life of any nation. Business could be carried on as a small, medium or large scale enterprise. It could also be carried on as domestic or international business but you have to know the legal implication on each one of them. This is where the legal information is very important. For example, if one wants to establish a private company in Nigeria, it has to be a minimum of two (2) persons and maximum of fifty (50) members and there are other documents required by the Corporate Affairs Commission (CAC) Registrars of Companies before incorporation of any company. One also needs to know about the copyright and Trade Mark Laws and also compliance with legal requirement with regard to Environmental Impact Analysis (EIA).

How to Identify and Evaluate Business Ideas and Opportunities Generating a Business Idea Every business comes out of an idea. Businesses are started by men and women who see that people want to buy a particular product or service. When you have a first vague thought about a business opportunity you need to develop it into a business idea. A good business idea is essential, or even a prerequisite, for a successful business venture.

However, good business ideas do not usually just occur to an entrepreneur. Rather, they are the result of hard work and effort on the part of the entrepreneur in generating, identifying and evaluating opportunities. What is a Business Idea? A business idea is the response of a person or persons, or an organization to solving an identified problem or to meeting perceived needs in the environment (markets, community, etc). Finding a good idea is the first step in transforming the entrepreneurs desire and creativity into a business opportunity. Creativity, as used here, refers to the ability enterprising individuals or potentially enterprising individuals to design, form, make or do something in a new or different way. The ability to come up with creative solutions to needs/problems and to market them often marks the difference between success and failure in business. It also distinguishes high-growth or dynamic businesses from ordinary, average firms. Real, successful entrepreneurs are creative in identifying a new product, service or business opportunities. To be creative, you need to keep your mind and eyes open as you work through the principles of generating and assessing business ideas and opportunities explained below, and apply the techniques. Two things should however be noted; (a) although it is a prerequisite, a business idea is only a tool (b) an idea by itself , however good, is not sufficient for success. In other words, notwithstanding its importance, an idea is only a tool that needs to be developed and transformed into a viable business opportunity. In other words, a business idea is a short and precise description of the basic operations of the business. Your business idea will tell you:

 What product or service your business will sell. Who your business is going to sell to. How your business is going to sell its products or services Which need your business will fulfill for the customers. What? What product or service will your business sell? Your business idea should be based on what you are good at. Maybe you have experience in a specific line of business or have been trained in a skill. The business idea will help you to focus on what you could do. Who? Who will buy your product or service? Your customers can be individual or other businesses. They may all be within a small area or they can be spread over a large area, maybe the whole country. Will you only try to sell to a specific type of customer or to everyone in an area? It is important to be clear who you intend to sell to. How? How are you going to sell your product or service? If you plan to open a shop this is clear, but a manufacturer or service operator can sell in many different ways. A manufacturer can, for example, sell either direct to customers or to retailers. Which? Which need will your product or service fulfill for customers? Your business idea should always have the customer and the customers needs in mind. It is important to find out what the customers want and to listen to your future customers when you work out your business idea.

It is difficult to attract customers to a new business. Your products or services must offer something special for the customers to come to your new business. If you offer many different products or services to many different kinds of customers, it is almost impossible to stand out and be noticed by new customers. If you specialize in one or a few similar products or services that you sell to a specific group of customers, it is easier to be special and attract customers. . Many new entrepreneurs make the same mistake when they develop their business idea. They think because their business is introducing a new product or service, there must be a demand for it. But just because the product or service is new does not mean that there is demand for it. Make sure that there is a demand for your product or service.

SOURCES OF PRODUCT / PROJECT IDEA An entrepreneur can get idea of new product from the following sources. 1. Unsatisfied Demand The Success of Maggi noodles is an example of unsatisfied demand for fast foods. Surf catered to the upper segment of the market. Later Nirma entered to satisfy the lower strata of the market. The acceptance of SINTEX water tanks is another example. 2. End / by Product End products and by products can throw light on new project ideas. For example mini steel plants have been started, using steel scrap which was endproduct large steel plants. Liquor industries are started, using molasses which was a by product in sugar industry.

3. Imports and Exports The Government of India is now encouraging exports. There is now great scope for import substitution and export of various items. AVT group of companies are successfully exporting tissue culture plants. 4. Emerging Technologies Commercial exploitation of indigenous or imported technologies is another source of project idea. One best example is Xerox. Till Xerox Corporation adopted the idea in 1960, it remained as an unexploited invention. 5. Social and Economic Trends Social and economic status of people always change and offer vast opportunities. For example, there is now a shift towards ready-made garments; possessing consumer durables on hirepurchase basis, etc. 6. Revival of Sick Units A dynamic entrepreneur, can revitalize and turn a sick unit into a profitable one. 7. Chance Factors An entrepreneur may come across a chance factor which may trun out to be a good project idea. eg : Imported mixies were not suitable to the ingredients used in India. Satya Prakash Mathurs wife complained to him about the non-suitability of imported mixies. So Mathur manufactured Sumeet mixie to suit Indian conditions. Thus he become a great entrepreneur. 8. Trade Fairs

Trade fairs are organized by Industries Department of the Central and State Governments and Trade Organizations. Machinery and tools for the small scale units, and ancilliary products required by the major industries are displayed at the national. State and district level fairs. Dynamic entrepreneur can get lots of ideas by visiting these fairs. 9. Trade and Professional Journals
Trade and professional journals / magazines are also sources of ideas. These journals/magazines give information relating to products manufactured and spares, component required by various industrial units belonging to a particular trade.

CHAPTER SIX Entrepreneurship in Nigeria History Entrepreneurship started when people produced more products than they needed, as such, they had to exchange these surpluses. For instance, if a blacksmith produced more hoes than he needed, he exchanges the surplus he had with what he had not but needed; maybe he needed some yams or goat etc, he would look for someone who needed his products to exchange with. By this way, producers came to realize that they can concentrate in their areas of production to produce more and then exchange with what they needed.

So through this exchange of products, entrepreneurship started. A typical Nigerian entrepreneur is a self made man who might be said to have strong will to succeed, he might engage the services of others like; friends, mates, in-laws etc to help him in his work or production. Through this way, Nigerians in the olden days were engaged in entrepreneurship. Early entrepreneurship is characterized with production or manufacturing in which case the producer most often started with a small capital, most of it from his own savings. Early entrepreneurship stared with trade by barter even before the advent of any form of money.

Modern entrepreneurship in Nigeria started with the coming of the colonial masters, who brought in their wears and made Nigerians their middle men. In this way, modern entrepreneurship was conceived. Most of the modern entrepreneurs were engaged in retail trade or sole proprietorship.

` One of the major factors that have in many ways discouraged this flow of entrepreneurship development in Nigeria is the value system brought about by formal education. For many decades, formal education has been the preserve of the privilege. With formal education people had the opportunity of being employed in the civil service, because in those days the economy was large enough to absorb into the prestigious occupation all Nigerians their goods. As such, the system made Nigerians to be dependent on the colonial masters. Again the contrast between Nigerian and foreign entrepreneurs during the colonial era was very detrimental and the competitive business strategy of the foreign entrepreneurs was ruinous and against moral standards established by society. They did not adhere to the theory of live and lets live. For instance, the United

African Company (UAC) that was responsible for a substantial percentage of the import and export trade of Nigeria, had the policy of dealing directly with producers and refused to make use of the services of Nigerian entrepreneurs. The refusal of the expatriates to utilize the services of local businessmen inhibited their expansion and acquisition of necessary skills and attitude. Because of this, many eventually folded up. Those that folded up built up resentment against business which became very demoralizing to other prospective entrepreneurs. As a result, the flow of entrepreneurship in the country was slowed down. But, with more people being educated and the fact that government could no longer employ most school leavers, economic programs to encourage individuals to go into private business and be self reliant were initiated. Such economic policy programs that are geared towards self reliance for individuals are programs as Open Apprenticeship Scheme, Graduate Employment Programs etc and other policies that encourage or make it easy for entrepreneurs to acquire the needed funds e.g.; Peoples Bank of Nigeria, Funds for Small-Scale Industries(FUSSI), co-operative societies etc were established to assist entrepreneurs in Nigeria.

ENTERPRENEURIAL DEVELOPMENT IN NIGERIA While these statistics bide well for the country's economic prospects, they also serve to reaffirm the vital importance of entrepreneurial development in achieving that potential. Past Entrepreneurship Developments People of the Ibo community in Nigeria are considered one of the oldest entrepreneurs in history, their expertise stretching back to times before modern currency and trade models had developed elsewhere on the planet. In the more

recent past, Nigerians adapted their natural talents to evolve traditional businesses and crafts that have sustained most of the country's rural and urban poor for the better part of the last half century. While the oil boom of the '70s brought in billions of petrodollars, most of the country's population remained untouched by the new-found prosperity, thanks to widespread political corruption and catastrophic economic mismanagement. Because of these and other factors, the World Bank estimates that 80% of oil revenues benefited just 1% of the population. Most of Nigeria's current woes trace back to a historic overdependence on oil to the negligence of all other sectors, including customary trades and agriculture. Decades of non-inclusive policies alienated the vast majority of Nigerians, plunging the country into a miasma of extreme poverty and ravaging civil and political strife. The climate of economic stagnation spawned a mammoth informal economy that continues to sustain the bulk of Nigeria's 148 million people. It is a measure of Nigeria's inherent entrepreneurial capacity that this informal, unorganised sector presently accounts for 65% of Gross National Product and accounts for 90% of all new jobs. All these factors have tremendous relevance for Nigeria's future prospects, even more so considering the extent of official neglect and lack of assistance and infrastructure that the country's indigenous entrepreneurs have had to overcome. Harnessing the informal economy and leveraging its full potential is a prerequisite for Nigeria to emerge from the shackles of its Third World legacy. Role And Importance Of Entrepreneurship In Society

Economists and businessmen have no doubts that private sector is in a lot of ways much more efficient and effective than the public one, but few common

people share this opinion. They generally believe that their greedy neighbours embark on business enterprises driven mostly by insatiable passion for money and other selfish aspirations and they refuse to see the role business plays in modern society the role that makes business not selfish at all. First and foremost, business produces and distributes goods and services to satisfy certain public needs. To fulfill this task, business has to be very flexible and constantly research consumer demands: whats the point producing something that nobody wants to buy? Second , business creates job opportunities. More than that, most jobs business helps create are productive jobs, i.e., people employed by business ventures produce real goods and services. Third , business provides income - here we come at last to the money matter But dont forget: income that business provides is by no means restricted to the profit its owners get. It pays salaries and wages to its employees, and this way, makes the whole business world go round: they spend the money they earn buying all kinds of goods and favour further development of business ventures. Forth , business contributes to national well-being. It does it in several ways: by means of taxes it pays which make it possible for the government to maintain all kinds of public and social institutions and services; by investing money in developing science and technology and constructing new enterprises; by full use of local recourses, including those located in remote rural areas, and in a number of other ways. Fifth , business helps enlighten and educate people and encourages their further personal growth. High level of competition makes it vital for both businessmen and their employees to be involved in the constant process of learning and

developing their personal qualities such as creativity, determination, communication skills and vision for new business opportunities. So you see, that despite public opinion on this matter, business is not all that selfish. In fact, it is much more unselfish than a lot of public institutions not exist to satisfy its own needs that is a way to business failure. On the contrary, its function is to satisfy in the long run the consumer demands our demands, and to make our life comfortable. So, when you make this crucial decision to embark on a business enterprise, bear it in mind that it is a way to serve society Goals Of Individuals And Society Setting goals, and then working to achieve them, is a sign of maturity and responsibility in a society, just as it is a sign of maturity in an individual. What goals have people set for themselves in their economic life? And how well are these goals being achieved? These are the questions discussed in this handout. One important goal that the people have set for their economy is FULL PRODUCTION in order to achieve full employment. We want to make full use of the productive resources that are available -labour, capital and natural resources -and use these resources efficiently. How well are we achieving the goal of full employment and full production? The nation cant realistically expect to provide jobs continuously for 100% of the-men and women who are able and willing to work. There will always be some unemployment roughly 2 to 5% of the labour force. But when millions of people are unnecessarily unemployed, it means they are not making a productive contribution to the country and they are not earning an income. For this reason, the goal of full production -which requires both full employment and efficiency is one of the most important in our economy. It does

A second major goal is STABLE GROWTH. We want the economy to become bigger and better through the years. We measure the amount of our national output of goods and services by looking at statistics of Gross National Product. Economic growth is a steady increase in GNP per person (total GNP divided by the nations population). We want GNP to increase more or less at a steady rate about 4 or 5% each year (informal sector estimate) without having business recessions or rapidly rising prices (inflation), or increases in unemployment. Production, employment and growth of GNP are all pretty easy to measure. When we come to certain other economic goals, however, we have to talk about them in more general terms. FREEDOM OF CHOICE is a goal that practically everyone would include high on the list. But what does it mean in concrete terms? Economists have pointed out that freedom of choice is important for consumers, for workers, and for business. Freedom of consumer choice means that consumers will be able to select the goods they want to buy from a fairly wide range of alternatives, according to individual needs and preferences. We are not satisfied with a system where the consumer is told: You can have any size and colour hat you want as long as its medium and black! Freedom of occupational choice is an important area of economic freedom. Men and women want to be able to choose the kind of work they will enjoy doing and that will provide adequate wages and personal satisfaction. Finally, there is much talk about the importance of free enterprise. This is important aspect of freedom of choice. It gives people the freedom to start their business and use the factors of production in such a way as to make a profit. Much of the current economic system is built on the foundation of this particular freedom. EQUALITY OF OPPORTUNITY for men and women in the society is another goal. It is closely related to freedom of choice, because it says that all people

should approximately the same degree of freedom to exercise their rights as consul workers and enterprises. The goal of ECONOMIC SECURITY means that we want the members of economic society to have enough money to be able to buy adequate food, clothing, shelter and other necessities. Widespread poverty not only means failure to achieve the goal of economic security for these people, but it also raises serious questions about whether we are achieving the goal of ECONOMIC JUSTICE in society. Not everyone agrees on the meaning of fairness and justice in economic life, but it goal that nearly everyone feels is important to define and work toward. Finally, there is one economic goal that is not limited to the boundaries of the country, but spreads overseas to other countries. This is the goal of INTERNATIONAL BALANCE. We want to maintain a strong and balanced relationship in foreign trade and international payments. Failure to achieve this goal not only causes serious economic problems at home and abroad, but also increases international tensions threaten world peace.

Activities of Different Industrial Association In Relation To Entrepreneurship An Industrial association can be defined as an association that supports andprotects the rights of a particular industry and the people who work in that industry. Industrial associations lobby and urge governments or its agencies to take stronger action on things affecting their members or their line of interests. Modern industrial associations were formed to provide the needed supports and enabling environment to promote the growth of entrepreneurship culture.

Industrial Associations These include: 1. Nigerian Association of Small Scale Industrialists (NASSI) This association was established in 1978 to cater for the needs of the Small Scale business industrialist through the provision of Socio-politico economic support for the members. It has numerous functions as follows:

The body organizes workshops, conferences, exhibitions, trade-fairs, study tours and also provides advisory services to the members. It was to provide information on sources of raw materials, market situations, plants and equipments and the required manufacturing standard. The body grants micro credit facilities to members and sometimes stands as sureties for bonafide small and medium enterprise (SME) in their relationship with development finance institutions.

The association links up its members with various opportunities and development assistance both at home and abroad. The body serves as the mouthpiece of members in advocacy capacity against unfavorable public policies.

2. National Association of Small and Medium Enterprises (NASME) NASME is a private sector organization in Nigeria which brings together Small and Medium Scale enterprises (NASME) across the country. It was registered in 1996 as a Business Membership Organization (BMO) to coordinate and foster the promotion of Micro Small and Medium Enterprises (MSMEs) in Nigeria. It is devoted to networking, capacity building; policy advocacy and promotion of the performance of its member firms and operators. It works consistently to improve the welfare of its members. 3. Nigerian Association of Chambers Of Commerce, Industry, Mines And Agriculture (NACCIMA)

NACCIMA was founded in 1960 as a voluntary association of manufacturers, merchants, mines, farmers, financers, industrialists, trade groups who network together for the principal objectives of promoting, protecting and improving business environment for micro and macro benefits. The body performs many functions.

It provides a network of national and international business contacts and opportunities. It promotes, protects and develops all matters affecting commerce, industry, mines and agriculture and other form of private economic activities by all lawful means.

It promotes, support and oppose legislative and other measures affecting commerce, industry, mines and agriculture in Nigeria. It contributes to the overall economic stability of the community. It encourages an orderly expansion and development of all segments of community. It contributes to the social, political and economic development of Nigeria.

4. Manufacturers Association of Nigeria (MAN) This was formed as a company limited by guarantee to perform important roles on behalf of its members as well as the development of the country. It sectoral groups include food, beverages, and tobacco, chemicals and pharmaceuticals, domestic and industrial plastic, rubber and foam, basic metal, iron and steel and fabricated metal products, pulp, paper and paper products, printing and publishing, electrical and electronics, textile, wearing apparel, carpet, leather and leather footwear, et cetera. The Manufacturers Association of Nigeria (MAN) performs so many functions.

It encourages a high standard of quality for members products through the collection and circulation of useful information and the provision of advice.

It encourages the patronage of Nigerian made products by Nigerians and by consumers in foreign countries. It develops and promotes the contribution of manufacturers to the national economy through government. It provides the manufacturers in the country with information on industrial, labour, social, legal, training and technical matters.

5. Nigerian Employers Consultative Association (NECA) It is the umbrella organization for employers association of Nigeria and was founded in 1959 with its memberships drawn from the private and public sector employers associations. It performs many roles in Nigeria.

It promotes and encourages any technical or other forms of education for the development of employees. It assists in the maintenance and promotion of good relations between members and their employees. It encourages the payment of equitable rates of wages and salaries to the employees. It promotes influences, modifies or seeks the appeal of legislative and other resources affecting or likely to affect the employers.

Small and Medium Enterprises Agencies of Nigeria (SMEDAN) This is a One stop shop for micro small and medium enterprises development. SMEDAN was established by the SMEDAN Act of 2003 to promote the development of the MSME Sector of the Nigeria economy. Its mission is to facilitate the access of micro, small and medium entrepreneurs/investors to all the resources required for their development. These industrial associations provide increased support for entrepreneurial development in the forms of training, logistics and funding for their members.

Emerging entrepreneurs are therefore encouraged to join any of these associations in order to access the numerous benefits they provide. Entrepreneurship Supportive Agencies In Nigeria Manufacturer Association of Nigeria (MAN) MAN was formed as a company limited by guarantee to perform important roles on behalf of its members. It was established as a national industrial association in 1971. The activities of MAN are focused on sectoral group interactions. The list of sectoral groups includes:

Food, Beverages and Tobacco . Chemicals and pharmaceutical Domestic and industrial plastic, rubber and foam. Basic metal, iron and steel, and fabricated metal products. Pulp, paper and paper products, printing and publishing. Electrical and electronics. Textile, weaving, apparel, carpet, leather and leather footwear. Wood and wood products including furniture. Non-metallic mineral products. Motor vehicle and miscellaneous Assembly. MAN export group.

Functions of Manufacturer Association of Nigeria (MAN) This industrial association perform the following functions among many;

It encourages the patronage of Nigerian made products by Nigerians and foreigners.

It encourages high standard of quality for members products through the collation and the provision of advice. It provides for manufacturers venue for formulating and influencing general policy, in regard to industrial matters.

National Association of Small And Medium Enterprises (NASME) It is a private sector organization in Nigeria. Its membership is drawn from small and medium scale enterprises. It is devoted to networking capacity building, policy advocacy and promotion of the performance of its members firms and operators. NASME works to improve the welfare of its members and make input in industrial policy. Analysis and publications from NAMSE on business environment, competitive enlightenment and policy making are useful to Nigerian entrepreneurs. Member firms of NASME face the daily challenge of unsupported macroeconomic environment. Nigerian Association of Chambers Of Commerce, Industry, Mines and Agriculture (NACCIMA) This body is a voluntary association of manufacturers, merchants, mines, farmers, financiers, industrialists, trade groups who network together for the principal objectives of promoting, protecting and improving business environment for micro and macro benefits. The first Chamber of Commerce in Nigeria, the Lagos Chamber of Commence was founded in 1988 while NACCIMA, the umbrella organization for all chambers of Commerce in Nigeria was established in 1960. Roles of NACCIMA

It contributes to the socio-politico-economic development of Nigeria.

It provides a network of national and international business contacts and opportunities. It promotes and develops all matters affecting commerce, industry, mines and agriculture and other forms of private economic activities. It considers legislative and other measures affecting commerce, industry, mines and agriculture in Nigeria.

Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) This body was established to promote the development of micro, small and medium Enterprises (MSME). Its mission is to facilitate the access of micro, small and medium entrepreneurs/investors to all resources required for their development. Its vision is to establish a structured and efficient micro, small and medium enterprises sector that will enhance sustainable development of Nigeria. If SMEDAN functions optimally it will be one of the most veritable channels to combat poverty. Like any other agency of its kind, harsh economic condition couple with week government institutions does not help its performance. National Poverty Eradication Programme (NAPEP) This programme aimed at poverty eradication and empowerment. There are four major intervention schemes in Nigerias current poverty eradication programme. One is Youth Empowerment Scheme (YES), it is targeted at youth. YES is more than employment scheme as it is aimed at the provision of training opportunities, skills acquisition, employment opportunities, wealth creation through enhanced income generation, improved social status and rural development. It is primarily aimed at the economic empowerment of Nigerian youths. Its impact is still below expectation.

Micro Finance Institutions (MFIS) These financial institutions are set up to meet the credit needs of the rural and urban poor, artisans, farmers, petty traders, vulcaniser, etc. CBN gave a directive to all erstwhile community Banks to convert to MFls by recapitalizing to meet the new guidelines for the setting up of MFls. One of the challenges microfinance face in Nigeria is that they do not reach to great number of poor Nigerians. The effect of not appropriately addressing this situation would further accentuate poverty and slow down economic growth and development. Small and Medium Industries Equity Investment Scheme (SMIEIS) The Scheme requires all banks in Nigeria to set aside ten (10) percent of their Profit After Tax (PAT) for equity investment and promotion of small and medium enterprises. The 10% of the profit After Tax (PAT) to be set aside annually shall be invested in small and medium enterprises as the banking industrys contribution to the federal governments efforts towards stimulating economic growth, developing local technology and generating employment. Activities covered by the scheme include all legal business activity with the exception of trading/merchandising and financial services. Beneficiaries are expected to comply with guidelines of the scheme and ensure prudent utilization of fund. Like its other counterparts its performance is still below expectation. Functions Of Support Agencies In Small And Medium Scale Industrial Development What are the functions of support agencies in small and medium scale industrial development in Nigeria?

Some supportive agencies are established by the government at all levels to facilitate the promotion of entrepreneurship in Nigeria. These agencies are

established to cope with the dynamics of the economy at a particular time. Their basic functions can be discussed under these roles.
1. Participatory 2. Regulatory 3. Facilitating

Participatory Agencies The agencies in this category aid in providing goods and services which are best produced by the government. They provide goods and services that are highly subsidized or goods produced below the average cost. The services provided by these agencies are essentially to encourage entrepreneurship. Examples are FERMA, Federal Road Maintenance Agency, public corporations such as PHCN, NEMA, FAAN etc. Regulatory Agencies These are agencies established for regulating business. They are involved in inspection of facilities, laboratory test of products, approval of facilities and product etc. They include the following:

Standards Organization of Nigeria (SON) National Agency for Food and Drugs Administration and Control (NAFDAC). National Drug Law Enforcement Agency (NDLEA). Federal Environmental Protection Agency (FEPA) State Environmental Protection Agency (SEPA).

Facilitative Agencies

These are agencies set up to facilitate the establishment and successful existence of small scale industries. They are saddled with the responsibility of ensuring conducive environment for SMEs. Their function may include specialized fund for SMEs or otherwise. In this category we have such institutions as:

The Industrial Training Fund (ITF) Federal Institute of Industrial Research Oshodi (FIIRO) Bank of Industry (BOI) The Industrial Development Centre (IDC) Universities and Polytechnics Nigerian Export Promotion Council (NEPC) The National Directorate of Employment (NDE) National Poverty Eradication Programme. (NAPEP) Small and Medium Enterprise Development Agency of Nigeria (SMEDAN)

Industrial Association Government has also established some industrial association to foster industrial harmony. These associations were created by law or decree at different times. They include:
1. The Manufacturers Association of Nigeria (MAN) 2. The National Association of Small Scale industrialists (NASSI) 3. The Nigerian Employers Consultative Association (NECA). 4. The Nigerian Association of Chambers of Commerce, Industry, Mines

and Agriculture (NACCIMA). Others

Federal Government especially is in collaboration with some international bodies to promote small and medium scale industries, Just as they do in other sectors, their functions cover funding, research and development etc. these bodies include:

The World Bank United Nations Childrens Fund (UNICEF) United Nations Industrial Organization (UNIDO) African Development Bank (ADB).

Roles of Commercial and Development Banks in the Promotion of Small and Medium Enterprises The Commercial and Development Banks are contributing a lot towards the promotion of small and medium enterprises especially in the various functions they carry out in their day to day operations. The potential entrepreneurs are therefore to benefit from the functions and assistance rendered by these financial institutions. Financial Institutions Involved In Entrepreneurship Development The Nigerian Industrial Development Bank (NIDB), the National Economic Reconstruction Fund (NERFUND) and the Nigerian Bank for Commerce and Industry (NBIC) have been brought together to form the Bank of Industry (BOI). On the other hand, the Family Economic Advancement Programme (FEAP), Peoples Bank of Nigeria (PBN) and the Nigerian Agricultural and Cooperative Bank (NACB) have become a single Bank, the Nigerian Agricultural, Cooperative and Rural Development Bank (NACRDB). Bank of Industry (BOI)

The Bank of Industry (BOI) is owned by the Federal Government of Nigeria. This bank emerged from the governments rationalization of some development Finance Institutions (DFIs) namely the Nigerian Bank for Commerce (NBCI), Nigerian Industrial Development Bank (NIDB) and the Nigerian Economic Reconstruction Fund (NERFUND). The Bank of Industry has four subsidiaries from its merger:

Leasing Company of Nigeria (LECON) NIDB Trustees Limited (NTL) NIDB Consultancy and Finance Limited (NIDB Consult) Industrial and Development Insurance Brokers (IDIB)

Types of Projects Financed by BOI

Projects in the areas where Nigeria has comparative advantage Projects that engage in the efficient conversion of local raw materials into finished products Ventures that can be least cost producers of good quality products that could be successfully marketed locally and/or internationally.

Products and Services Deliverable by BOI

Medium and Long-term loans. Working Capital Finance Equity Financing Management of dedicated funds Loan guarantees Co-financing Investments in Corporate Boards Business Development Services

Lease financing Trusteeship Stock Brokerage Foreign Exchange Dealership Insurance Brokerage

The huge SMIEIS funds currently accumulated by the Banks will help BOI fulfill its mandate. It is expected that the banks contribution to the economy will grow stronger as the implementation of the economic reforms progresses to widen the scope of needs for economic/business development financing. Role of Personal Savings And Portfolio Investment

What Are The Role of Personal Savings And Portfolio Investment in National Economic Development? The contribution of entrepreneurship in the promotion of economic development can not be underestimated. The entrepreneurs are the change agents and the prime movers of the economy. Entrepreneurs use human and economic resources to help them to implement their ideas. Economic resources include money and equipment.

When you have estimated how much start-up capital you need for your new business, the next questions is; where do you get that capital from? You will need the full amount at the start because the money is for initial investments and working capital for the first months of operation. It is therefore important that you do not start setting up your business until you have all the start-up capital you need.

In terms of personal finance, saving refer to preserving money for future usetypically by putting it on deposit this is distinct from investment where there is an element of risk. Savings can be described as substantial part of income kept for future use by an individual, households a firm and government. In other words savings is the portion of the income that is set aside for further investment or for future use. Reasons For Savings Savings is not a new phenomenon in economic circle. There are a number of reasons for savings depending on the circumstantial problems/issues surrounding it. Such reasons include:

Investment purposes For family up-keeping To acquire assets For special needs For old age

Methods of Savings 1. Banks a. Current b. Savings c. Deposit 2. Thrift and Cooperatives 3. Financial institutions 4. Buying of shares

Saving differs from savings in that the first refers to the act of putting aside money for future use, whereas the second refers to the money itself one saved. Portfolio investment is strictly connected with a portfolio diversification process. It is part of the capital account on the balance of payments statistics. Some examples of portfolio investment are: (Government) bonds Shares and stocks Debentures and Acquisition of assets Brokerage firms are most commonly thought of in relationship to the sales and purchase of stock/shares. Stock can help your money grow in two ways. If the share price of your stock goes up, you can draw a profit also known as a capital gain when you sell your shares. Some stocks pay investors a dividend, which is a portion of the companys profits, on a regular basis. Stock prices are driven by supply and demand. If a company is doing well or its shares are selling at a fair price, many investors may buy its stock, creating demand. Demand drives up the price. If the company is not doing well-or the share price has been driven too high-investors may stop buying or begin selling. Stocks are bought and sold at the stock market. This is where public companies seeking capital meet investors who seek profits. At the stock market, each stock is registered with a particular exchange. Today there are stock markets allover the world. Stocks are bought and sold on a daily auction conducted by stock traders and specialists.

When a stock market does well and prices rise over a period of time, its called a bull market. When prices decline for a period of time, its called a bear market. Differences between Shares and Debentures Shareholders are effectively owners debenture-holders are creditors. Shareholders may vote for Annual General Meetings (AGMs) and be elected as directors; debenture-holders may not vote at AGMs or be elected as directors. Shareholders receive profit in form of dividends; debenture holders receive a fixed rate of interest. If there is no profit, the shareholder does not receive a dividend; interest is paid to debenture-holders regardless of whether or not a profit has been made.

AN OVERVIEW OF POLICIES AND INCENTIVES FOR PROMOTING SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA In order to realise the benefits of promoting small and medium scale enterprises, the Federal Government has employed monetary, fiscal and industrial policy measures to achieve its desired goals, which included: (i) Employment generation, (ii) Industrialization particularly of rural areas and even development through industrial dispersal. Accordingly, it has enunciated policies through national development plans, annual budgets and its agencies to provide financial assistance, training and some infrastructural support to SMEs. Specifically, the government has been active in the following areas: (i) Funding and setting up industrial areas and estates (to reduce overhead costs); (ii) Providing local finance through its agencies - the Central Bank of

Nigeria Federal Ministry of Industries (Small-Scale Industry Credit Scheme - SSICS), Nigerian Industrial Development Bank (NIDB), Nigerian Bank for Commerce and Industry (NBCI); (iii) facilitating and guaranteeing external finance through the World Bank, African Development Bank and other international institutions willing to, and capable of assisting SMEs; (iv) Facilitating the establishment of the National Directorate of Employment (NDE) which also initiates the setting up of new SMEs; (v) Setting up of the erstwhile National Economic Reconstruction Fund (NERFUND) which is a source of medium to long-term local and foreign loans for small and medium scale businesses, particularly those located in the rural areas; (vi) initiating the them Family Economic Advancement Programme (FEAP); and (vii) provision of technical, training and advisory assistance programmes through establishment of Industrial Development Centres, etc.

1. Industrial Development Centres (IDCs) Essentially, IDCs are established to provide extension services to SMEs in areas such as technical appraisal of loan application, training of entrepreneurs, managerial assistance, product development, production planning and control as well as other extension services. The first IDC was established in Owerri in 1962 by the then Eastern Nigeria Government and taken over in 1970 by the Federal Government. Subsequently, in the Second National Development Plan (1970 1975), the Federal Government initiated the setting up of more IDCs at Zaria, Oshogbo, Maiduguri, Abeokuta, Sokoto, Benin City, Uyo, Bauchi, Akure, Ilorin, Port Harcourt, Kano and Ikorodu.

2. Small Scale Industries Credit Scheme (SSICS) A basic thrust of governments financial policy with respect to SMEs is the provision of credit facilities to ensure their development and sustenance. Accordingly, the Federal Government set up in 1971, a Small Industries Development Programme to provide technical and financial support for SMEs. This led to the setting up of the Small Industries Credit Committee (SICC) to administer the Small Industries Credit Fund (SICF) throughout the country. The SICF was formally launched as the Small Scale Industries Credit Scheme (SSICS) in the Third National Development Plan, 1975-1980. The scheme, which operated as a matching grant between the Federal and State Governments, was designed to make credit available in liberal terms to SMEs and was managed by the states Ministries of Industry, Trade and Co-operatives through the Loan Management Committees (LMCs). However, the SSICS which was meant to be a revolving loan scheme became increasingly starved of funds arising from massive loan repayment defaults, such that the Federal Government, by 1979 extricated itself from the scheme and introduced a new policy of using the Nigerian Bank for Commerce and Industry (NBCI) as an apex financial body for funding SMEs. The rationale was that banking discipline and prudence would not only ensure the flow of financial assistance tobankable projects, it would also facilitate loan recovery. 3. The Nigerian Bank for Commerce and Industry (NBCI) The NBCI was set up by the Federal Government through Decree 22 of 1973 to provide, among other things, financial services to indigenous business community, particularly SMEs. The NBCI operated as the apex financial institutional body for SMEs. It also administered the SME I World Bank Loan Scheme of US$41 million secured in 1984. The scheme had maturities period ranging from 4 to 10 years, including a moratorium of 2 to 4 years, and the foreign exchange risk was

borne by the Federal Government. NBCI has been merged with NIDB and NERFUND to form the new Bank of Industry. 4. The Nigerian Industrial Development Bank (NIDB) The NIDB, which was set up in 1964, provided credit and other facilities to industrial enterprises especially medium and large scale ones. Some small-scale enterprises also come under its scope of financing whose terms are relatively soft. An attractive feature of NIDBs financing is its policy of equity participation in the paid up share capital of some of the projects financed. 5. Central Bank of Nigeria (CBN) The Central Bank of Nigeria has since 1970 been instrumental to the promotion and development of enterprises particularly in the small and medium scale subsector. The CBN credit guidelines required that the commercial and merchant banks allocate a minimum stipulated credit to sectors classified as preferred, including the SMEs. The CBN also stipulated differential interest rates for sectoral credit allocations with varying moratorium on the repayment of loans and advances. For instance, the CBN in 1979/80 directed that at least 10 per cent of the loans advanced to indigenous borrowers should be allocated to SMEs. This was subsequently raised to 16 and minimum of 20 per cent of total loans and advances from April 1980 and 1990, respectively. However, given the uneconomic nature and cumbersome administration of such loans, banks preferred to pay prescribed penalties rather than channel credit to the SMEs. The failure of the banks to meet the prescribed credit allocation led the CBN to mandate such defaulting banks as from 1987, to make such lending shortfalls available to it for onward transfer to the relevant sector or sub-sector. This brought about a remarkable improvement in credit to the SMEs as banks continued to meet this minimum sectoral credit requirement while it lasted.

6. World Bank SME II Loan Scheme In order to promote the establishment of a new generation of viable investments and services as well as improve the quality and range of financial and extension services available to SMEs, the Federal Government negotiated for a financial assistance package from the World Bank from 1987. The loan package was approved in 1989 and the SME Apex Unit located in the CBN executed it. The total project cost was estimated at $418 million, including $264.4 million (63%) in foreign exchange. The World Bank provided a loan of $270.0 million or 65% of the total project cost (100% of the foreign exchange requirements and 4% of local costs). The balance of $148 million was to be financed by the beneficiary enterprises and the participating banks (Pbs) from their own resources. The Pbs are to bear the credit risk while the foreign exchange risk is to be borne by the Federal Government. The loan was sub divided into five components, namely, line of credit ($200 million), pilot financial restructuring ($20 million), pilot mutualist credit guarantee scheme ($45 million), equipment leasing ($25 million) and others ($20 million). Pilot financial restructuring and pilot mutualist credit guarantee scheme were cancelled and replaced with the urban mass transit scheme. Term loans provided under the programme have a maturity period of 15 years, including a grace period of 3 years. The scheme also provided working capital to the beneficiaries with maturity period of 3 years and 1-year grace period. When the programme began, approval of projects and disbursement of funds were very slow because of inadequate publicity, lengthy and cumbersome approval processes, assumption of all credit risks by the Pbs and he floating of the naira, which affected the viability of many projects. 7. National Economic Reconstruction Fund (NERFUND) The Federal Government, through Decree No. 2 of 26th January 1989 established the National Economic Reconstruction Fund (NERFUND). The main focus of NERFUND is the provision of soft, medium to long term funds for wholly

Nigerian owned SMEs in manufacturing and agro-allied enterprises, mining, quarrying, industrial support services, equipment leasing and other ancillary projects. The NERFUND decree provides for eligible enterprises under the scheme, as SMEs, with fixed assets plus cost of new investment (land excluded), not exceeding N36 million and sourcing not less than 60 per cent of their raw materials locally in the case of manufacturing projects. The interest rates payable on funds obtained from NERFUND are expected to be slightly lower than the market rates and shall be fixed during the duration of the loan. Furthermore, the rates payable by the participating banks (Pbs) are limited to 1.0 per cent above NERFUNDs cost of borrowing the particular fund. Pbs are allowed a spread of not more than 4.0 per cent over their cost of funds. For all types of facilities, and irrespective of the ability of the beneficiary to pay maturing obligations, it is required that a Pb repays NERFUND, failing which the CBN will automatically debit the banks accounts with it. Thus, Pbs are expected to bear the full credit risk involved in financing SMEs under the scheme. The fund has granted loan approvals to a number of projects spread across the country. The number rose significantly from 5 in 1989 to 75 in 1990 after which it maintained a downward trend. NERFUNDs investments in the projects have been substantial, the total naira component was N774.2 million, while the counterpart approval in foreign exchange was $97.5 million. 8. State Governments State Governments, through their Ministries of Commerce and Industries also promote the development of SMEs. In this connection, some State Governments promote the SMEs through state-owned Finance and Investment companies which provide technical and financial assistance to SMEs. However, owing to numerous constraints, some were less active than others. 9. The National Directorate of Employment (NDE)

Established in 1986, the NDE is another channel through which government has promoted the development of SMEs. In January 1987, NDE launched a number of programmes to generate selfemployment. These were (i) Small Scale Industries (SSI), (ii) Agriculture, (iii) Youth Employment and Vocational Skills Development and (iv) Special Public Works. The programme operates two credit guarantee schemes complemented by an entrepreneur development programme to assist the SMEs. The two credit schemes are the Graduate Job Creation Loan Scheme (GJLS) and the Matured Peoples Scheme (MPS). Facilities under the two schemes are repaid over a five-year period at a concessionary interest rate with varying periods of moratorium. SME projects covered included soap making, food processing, flour milling. 10. International Financial Assistance Government has continued to approach international financial agencies to source needed foreign capital for the SMEs. Such international agencies include the World Bank and its affiliates and the African Development Bank (ADB). The Federal Government often guarantees and agrees to monitor or co-finance the SMEs receiving such external financial support. For example, in 1988, the African Development Bank granted an export stimulation loan of US$252 million for SMEs in Nigeria. The loan is repayable in 20 years with a concessionary interest rate of 7.3 per cent. 11. Banks Equity Holding in Companies In its 1988 Budget, the Government amended the Banking Act Section 73(f) of 1969, which restricted banks from holding equity shares in non-banking related enterprises. The Government thus provided opportunities for Banks to participate in the ownership of business. The policy objectives are to stimulate increased availability of equity capital to SMEs and help in restructuring their capital bases for survival and growth. 12. The Second Tier Securities Market (SSM)

In order to deal with the bias of the capital market in favour of large enterprises, the Second Tier Securities Market (SSM) was established in 1985 to assist small and medium sized indigenous enterprises in accessing funds from the capital market for expansion and modernisation. 13. Other Technical Training and Extension Services Programmes This includes activities of Industrial Training Fund (ITF), Raw Materials Research and Development Council (RMRDC), Federal Institute of Industrial Research, Oshodi (FIIRO), Project Development Agency (PRODA), and Centre for Management Development (CMD). An Appraisal of Policy Measures and Incentives An appraisal of the various policies and incentives aimed at promoting the development of the SMEs showed various degree of success. The implementation of the IDCs was poor and their performance devoid of luster. This is because many of them were inadequately equipped and funded. The SSICs was largely unsuccessful because of the dearth of executive capacity to appraise, supervise and monitor projects. As a result many unviable projects were funded which led to massive loan repayment default. Consequently, the scheme, which was expected to be revolving, had to be stopped. As the main Federal Government instrument for SME credit provision, the NBCI approved a total of 797 projects, amounting to N965.5 million between 1973 and 1989 and disbursed N141.82 million between 1981 and 1988. These covered various sub-groups such as textiles, paper products etc. The Bank financed a total of 126 projects under the World Bank Loan Scheme 1 and many others were cancelled for failure of project sponsors to contribute their counterpart funding. The NBCI has however, suffered major problems culminating in a state of insolvency in 1989. The NIDB has played a major role in SMEs financing, its assistance covers 17 sub-sectors of industry. The NIDB disbursed a total of N

174.6 million to the SMEs between 1980 and 1988. The level of NIDBs direct project sanctions and disbursement to the SMEs since 1989, however, has tended to fluctuate downwards due to the establishment of NERFUND, the SME II Loan Scheme, amongst other reasons. The CBN has continued to play a leading and catalytic role in channeling credit to the SMEs through its guidelines to the banks. This has resulted in expanded credit to the SME sub-sector. For example, hanks loans and advances to the SMEs rose from N113.4 million in 1980 to N1,454.3 million, N5,900 million, N20.400 million and N42,302.1 million in 1986, 1990, 1992, and 1996, respectively. Loans and advances to the SMEs as a percentage of total loans rose from 1.8 per cent to 9.3, 22.9, 40.0 and 26.8 per cent in 1980, 1986, 1990, 1992 and 1996, respectively. NERFUND since its inception, and up to 1994, approved 373 projects with disbursements initiated on 200 and commitment of US$80.9 million and N333 million. About 70 of the sub-projects have been fully disbursed while 21 of them have fully amortized the total loan value. Despite these successes, NERFUND was confronted by a number of problems. Evidence in this regards suggest poor and untimely loan recovery rate, while demand for loans have plummeted after 1990 because of concern for foreign exchange risk which was borne by the borrower. Furthermore, the SME Apex Office approved a total of 211 projects for US$132.8 million between 1990 and end March 1994 when projects approval closed. Total disbursements of $107.1 million as at June 1996 resulted in the establishment of 85 new SMEs and the expansion, diversification and modernization of 102 existing ones. Also, the number of SMEs listed on the Second Tier Market (SSM) has risen to 16, 19 and stood at 20 in 1990, 1991 and 1995, respectively. While at least 4 SMEs have moved to the Main List of the market. This shows increasing use of the capital market by the SMEs to raise funds for expansion and modernisation.

CHAPTER SEVEN
GROWTH STRATEGY Strategy means a deliberate and well planned course of action designed to achieve specific objectives. Growth Strategy It defined as a strategic plan formulated & implemented to expand the operations of a business firm. The main strategies for growth are as follows: Expansion

Diversification Internal Growth Mergers Subcontracting External Growth Joint Venture Expansion Expansion and diversification are in the form of internal growth. Internal growth implies to increase in scale of operations without joining hands with other firms. Market Penetration It increases the sales of existing product in the existing markets for eg. LML launched a scheme of exchanging old scooter for new to increase its sales, Titan Company now recently announced a scheme as exchange offer.

Market Development It involves exploring new markets for existing products. Eg.: Reliance Product Development It implies developing new or modified products for sale in the existing markets for eg LG recently launched a 5 categories as toothpaste, soap, shampoo, daspers etc. Advantages of Expansion It provides economics of large scale operation. It face better competition in the market.

Expansion can be done by his own funds. Limitation of Expansion Sometimes Growth will take show. It is not always possible to grow in the present product market. Problem in Expansion Technology often necessary to upgrade technology. Marketing Expansion is possible & profitable only when increasing the output. Risk : It involves additional risk. DIVERSIFICATION The firms introduce or add a new products or markets to its existing business line. This approach is called as diversification. It is a process of entry into a field of business which is new to an enterprise several companies business houses both in private & public sectors have adopted it. For eg ITC Ltd, originally agaretle company but it hasdiversified in to hotel, finance, agri business , paper & deep sea fishing. It has four types Horizontal Integration Vertical Integration Concentric Integration Conglomerate Integration

Horizontal Integration In this type of diversification a company adds up same type of products at the same level of production or marketing process. Two or more competing firms are brought together under single ownership. Vertical Integration In this type of growth strategy new product or services are added which are complementary to the existing product or service line. It involves backward or forward integration from the product. Concentric Diversification When a firm enter unto some business which is related with its present business in terms of technology, marketing or both it is called as concentric diversification. For eg. In Technology side Nestle has added Tomato Ketchup Maggi Noodles to it range of baty food. Conglomerate Diversification When a firm enter into business which is unrelated to its existing business in both technology as well as in marketing.

CHAPTER EIGHT INTRODUCTION TO BUSINESS PLAN The business plan is written document prepared by the entrepreneur that describes all the relevant external and internal involved in starting a venture. Entrepreneur should consult with many other sources in its preparation like lawyers, accountants, marketing consultants and engineers. Business plan could take more than 200 hrs to prepare but varies from person to person according to their knowledge and experience, with purpose about a new venture to a potential investor.

CONTENTS OF A BUSINESS PLAN I. INTRODUCTORY PAGE A. Name and address of business. B. Name(s) and address (es) of principals. C. Nature of business. D. Statement of financing method. E. Statement of confidentiality of report. II. EXECUTIVE SUMMARY Three to four pages summarizing the complete business Plan. III. INDUSTRY ANALYSIS A. Future outlook and trends. B. Analysis of competitors. C. Market Segmentation. D. Industry forecasts. IV. DESCRIPTION OF VENTURE A. Product(s) B. Service(s) C. Size of business. D. Office equipment and personnel. E. Background of entrepreneurs. V. PRODUCTION PLAN A. Manufacturing process (amount subcontracted) B. Physical Plant. C. Machinery and Equipment. D. Names of Suppliers of raw materials.

VI. MARKETING PLAN A. Pricing. B. Distribution. C. Promotion. D. Product forecasts. E. Controls. VII. ORGANIZATIONAL PLAN A. Form of ownership. B. Identification of partners or principal shareholders. C. Authority of principals. D. Management- team background. E. Roles and responsibilities of members of organization. VIII. ASSESSMENT OF RISK A. Evaluate weakness of business. B. New technologies. C. Contingency Plans. IX. FINANCIAL PLAN A. Proforma income statement. B. Cash Flow Projections. C. Proforma balance sheet D. Break-Even analysis. E. Sources and application of funds. X. APPENDIX (contains backup material) A. Letters. B. Market Research Data. C. Leases or contracts. D. Price lists from suppliers.

HOWTO WRITE A BUSINESS PLAN The business plan can take more than 200 hours to prepare, depending on the experience and knowledge of the entrepreneur as well as the purpose it is intended to serve. It should be comprehensive enough to give any potential investor a complete picture and understanding of the new venture and will help the entrepreneur clarify his or her thinking about the business. Many entrepreneurs incorrectly estimate the length of time that an effective plan will take to prepare. Once the process has begun, however, the entrepreneur will realize that it is invaluable in sorting out the business functions of a new venture. Each of the items in the contents of the business plan is explained in detail as follows. INTRODUCTORY PAGE: This is the title page or cover that provides a brief summary of the venture and should include the following things: Name and address of the company. Name of the entrepreneur(s) and telephone number. Description about the company and also stating nature of business. Stating their financial requirements. A statement of the confidentiality of the report. EXECUTIVE SUMMARY:

This is prepared after total plan is written. This about 3 to 4pages in length, this summary should stimulate the interest of the potential investor. This highlight concise and convincing manner the key point in the business plan stating the nature of the venture, financing needed, market potential, and supports to why it will succeed. INDUSTRIAL ANALYSIS: This reviews industry trends and competitive strategies. The industry outlook ,including future trends and historical achievements, insight of new product developments in this industry. Competitor should be identified, with appropriate strengths and weakness described and how will it affect the new ventures potential success in the market. DESCRIPTION OF VENTURE: It states the product produced by venture which includes patent, copyright, or trademark status. It also gives a brief idea where the business will be located including the construction of building, leased or owned. In description of venture the type of office equipment will be required whether it will be purchased or leased. He (entrepreneur) should also look at the management experience, stating their education, age, special abilities and interest. PRODUCTION PLAN: This includes details of manufacturing process a product, which is very necessary. If the manufacturing is to be carried out in whole

or in part by the entrepreneur, he or she will need to describe to physical plan layout: the machinery and equipment needed to perform the manufacturing operations: raw material and suppliers names, addresses, and the terms; costs of manufacturing and any future capital equipment needs. It should also include state subcontractors name and addresses; costs of subcontracted manufacturing; raw material required for manufacturing. MARKETING PLAN: The marketing plan represents a significant element in the business plan for a new venture. Marketing planning should be an annual activity that focuses on implementing decisions related to the marketing mix variables (product, price, distribution, and promotion). Like the annual budgeting cycle, market planning has also become an annual activity and should be incorporated by all the entrepreneurs, regardless of the size or type of the business. These marketing plans must be monitored frequently, especially in the early stages of start up.

ORGANIZATIONAL PLAN: The organizational plan describes the venture form of ownership i.e. whether it is proprietorship, partnership or a corporation. If the venture is a partnership, the term of partnership should be included, name of partners, term of agreement, specimen

signatures of the partners etc. If it is a corporation venture than it is important to detail the shares of the stock authorized, share options, names and address, resumes of the directors and officers of the corporation. If it is an incorporation venture than it should state the principal shareholders and shares owned by them; type and number of shares stating voting or non-voting stocks have been issued, members of board of directors, check signing authority or control. The plan also states how many members are there in management team and their background, their roles and responsibilities stating their salaries, bonuses or other forms of payment for each members of the management team. This is also helpful to provide an organization chart indicating the line of authority and responsibilities of the members of the organization. This information provides the potential investor with a clear understanding of who controls the organization and how other members will interact in performing their management functions. ASSESSMENT OF RISK: All ventures face some potential hazards, given the particular industry and competitive environment. An entrepreneur should make assessment of risk and prepare an effective strategy to deal with them. Even if these factors present no risks to the new venture, the business plan should discuss why that is the case. Contingency plans and strategies illustrate to the potential investor that the entrepreneur is sensitive to important risks and is prepared should any occur.

FINANCIAL PLAN: The financial plan should include proforma income statements, break even analysis, proforma cash flow, proforma balance sheet, and proforma sources and uses of funds. APPENDIX: It generally contains business plan generally back up material that is not necessary in the text of the document. Reference to any of the documents in the appendix should be made in the plan itself. Letters from customers, distributors or sub- contractors are examples of information that should be included in the appendix. Any documentation of information that is secondary data or primary research data used to support plan decisions should also be included. Leases, contracts or any others types of agreement that have been initiated may also are included in the appendix. It should also include price lists from suppliers and competitors may be added. CONCLUSION A business plan is a crucial component for an entrepreneur. A business plan is presented to a bank to obtain funds in the initial stage of a project. It is a monetary rule that a business plan has to be presented to a bank before the release of funds by the financial institutions. Hence, business plan is a stepping- stone for an entrepreneur in the commencement of a project. WHY BUSINESS PLANS FAIL?

Generally a poorly prepared business plan can be blamed on one or more of the following factors: Goals set by the entrepreneur are unreasonable. Goals are not measurable. The entrepreneur has not made a total commitment to the business or to the family. The entrepreneur has no experience in the planned business. The entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service. Setting goals requires the entrepreneur to be well informed about the type of business and the competitive environment. Goals should be specific and not so mundane as to lack any basis of control. For example, the entrepreneur may target a specific market share, units sold, or revenue. These goals are measurable and be monitored overtime. In addition, the entrepreneur and his or her family must make a total commitment to the business in order to be able to meet the demands of a new venture. For example, it is difficult to operate a new venture on a part- time basis while still holding on to a fulltime position. And it is difficult to operate a business without an understanding from family members as to the time and resources that will be needed. Lenders or investors will not be favorably inclined toward a venture that does not have full- time commitment. Moreover, lenders or investors will expect the entrepreneur to make a significant financial commitment to the

business even if it means a second mortgage or a depletion of savings. Generally, a lack of experience will result in failure unless the entrepreneur can either attain the necessary knowledge or team up with someone who already has it. For example, an entrepreneur trying to start a new restaurant without any experience or knowledge of the restaurant business would be disastrous. The entrepreneur should also document customer needs before preparing the plan. Customer needs can be identified from direct experience, letters from customers, or from marketing research. A clear understanding of these needs and how the entrepreneurs business will effectively meet them is vital to the success of the new venture.