TOPIC TWO

BUSINESS IDEAS AND ENTREPRENEURSHIP

INNTRODUCTION
This module unit is intended to equip the trainee with necessary knowledge, skills, values and
attitudes that will enable him/her to implement business ideas and have an entrepreneurial mind-
set. It is also intended to instil in the trainee the drive necessary to venture into profit making
activities.
EXPECTED LEARNING OUTCOMES
a) Explain the meaning of business opportunity
b) Explain ways of generating ideas for business opportunities
c) Evaluation of business opportunities for viability
d) Application of entrepreneurial knowledge
REFERENCES

i) William Allen Wood (2009); Modern Business Corporations, Including The

Organization And Management; Bibliolife
ii) Graffin R. W and Ronald (2002); Business Studies; Prentice Hall
iii) Lomash (2008); Business Policy And Strategic Management; Vikas Publishing
House Pvt Ltd

iv) Kibera Francis N(1996); Introduction to Business A Kenyan Perspective;

Nairobi;Kenya Literature Bureau
An idea is a plan for action i.e. response to a person or organization to solving an identified
problem.
A business idea is a concept for a product or service that has the potential to be profitable. It is
the foundation of a business plan and outlines how a business will generate revenue and create
value for customers. Business ideas can come from solving a problem, filling a need in the
market, or creating an innovative product or service. The success of a business idea often
depends on how well it is developed and executed.
TYPES OF START UP IDEAS.
1. TYPE A IDEAS-New markets-A concern centered around providing customers with an
existing product not available in their market but exists somewhere else.

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 An existing product taken to another market. Examples Human milk bank and electric
motorbikes and vehicles.
2. TYPE B IDEAS-New technology-Start up ideas involving technology and centered on
providing customers with a new product. This can be a high risk area because there is usually
no model of success to follow, but it can have tremendous potential. Usually the products are
totally new. Example Kenya latest election management kits.KEMS
3. TYPE C IDEAS-New benefit-They are centered on providing customers with an improved
product.Eg Arimis.

SOURCES OF BUSINESS IDEAS

Ideas can be generated from:
1. Personal skills/experience-Baking,swimming,teaching,stiching
2. Hobbies/personal interests and talents-e.g. dancing. What one is best at and is usually an in-
born trait.
3. Copying or improving an existing business e.g.SQNY
4. Deliberate search
5. Listening to complains or what people say e.g.
“If only there was a better/cheaper…….”
“If only I could buy somewhere nearer…………..”
6. Finding new uses of commodities.
7. Recognizing needs and emerging trends
This concept is well understood using the concept of the Abraham Maslow’s hierarchy of needs
which is a triangular representation.

i) Self-actualization needs; self-development-personalized computers, inventions of drugs

to solve problems.

ii) Esteem needs; self-esteem; need for recognition; status-high tech

products,phones,vehicles and aero planes for campaigns

iii) Social needs; sense of belonging, love-clubs, salon and gym

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 iv) Safety needs; security protection-detectors, locks, CCTV, insurance, karate, watchman,
G4s, perimeter walls.

v) Physiological /Basic needs; hunger, thirst.-shelter, food, clothing, hostels and hotels.

According to Maslow; human needs are arranged in a hierarchy. Starving people will take little
interest in latest happenings in the art world. A person tries to satisfy the most important need
first when that need is satisfied, it will stop being a motivator and the person will then try to
satisfy the next most important need.

8. Franchising – An agreement where manufacturers or sole traders of a trade mark,

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

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13. Identifying market gap/niche
14. Changes in society
15. Brainstorming
16. Being creative
17. Day dreaming.

EVALUATING ENTREPRENEURIAL OPPORTUNITIES

Opportunity recognition –This is the identification of potential new products or services that may
lead to promising business.
ALTERNATIVES TO OPERATING A BUSINES/WAYS OF CREATING A BUSINESS
OPPORTUNITY.
1. Creating a new business from scratch (totally new business).
2. Franchising/franchises.
3. Buying an existing business.
4. Joining the family business (inheriting).
1. CREATING A NEW BUSINESS FROM SCRATCH.
The following motivations may lead you to start a business from scratch rather than pursuing
other alternatives.
i) Desire to develop commercial market for a recently invented or newly developed product or
service.
ii) Hoping to tap into unique resources available such as an ideal location, new equipment’s,
technology, exceptional employees, suppliers and bankers.
iii) Avoiding undesirable features of existing business such as unfavorable cultures, policies,
procedures;’ and legal commitments.
iv) Challenge to succeed or fail on your own.
2. FRANCHISING
This is a marketing system involving a legal agreement whereby the franchisee conducts
business according to terms specified by the franchiser.

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A franchisee is an entrepreneur whose power is limited by a contractual relationship with a
franchiser.
Franchisor (owner) e.g. Total/Caltex,Bata,Mpesa,Chain stores, Supermarkets –A party in a
franchise contract that specifies the methods to be followed and terms to be met by the other
party.
ADVANTAGES OF FRANCHISING.
1. Training-training compensates small entrepreneurs from weaknesses in their managerial skills.
It permits individuals who have had little training or education to start and succeed businesses of
their own, they also give manuals and other printed materials that provide guidance in operating
the business.
2. Financial assistance-the costs of starting an independent business are often high and sources of
capital are limited for the entrepreneur. By teaming up with a franchising organization, the
aspiring franchisee may enhance his/her likelihood of obtaining financial assistance.
3. Operating benefits. Most franchised products are widely known and accepted.
3. BUYING AN EXISTING BUSINESS.
The following are the main reasons;

i. Reduction of uncertainties
ii. Acquisition of ongoing operations(personnel,inventories,physical facilities, banking
connections) and relationships(trade suppliers and customers)
iii. One can bargain the buying price of the facility easily especially when the seller is in a
hurry or eager to sell than the buyer.
iv. Quick start-This favors most of the entrepreneurs who shy away from bureaucratic
procedures.
4 JOINING THE FAMILY BUSINESS.
A family business is a company that two or more members of the same family own or operate
together in succession.
ADVANTAGES OF A FAMILY BUSINESS.
1. Strength of family relationships.
2. Business success is equal to family success. The family members may sacrifice income to
keep the business going.

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 3. Knowledge is passed from one generation to another.
4. Shared social networks.eg Lawyers help in legal suit.
5. Future oriented
6. Preservation of business reputation-Mainly through offering products and services of
high quality, taking into account ethics, professionalism and maintaining integrity
7. Reduced costs of control-The business spends less on systems designed to reduce theft
and to monitor employee work habits as members are related and trust one another.

BUSINESS OPPORTUNITY
A business opportunity is an attractive idea which provides the possibility of a return for the
entrepreneur taking the risk.
CHARACTERISTICS OF A GOOD BUSINESS OPPORTUNITY
A good business opportunity must fulfil or be capable of meeting the following:
1) Real demand i.e. it should respond to unsatisfied needs or requirements of customers who
have ability to purchase and are willing to exercise that choice.
2) Return on investment – provide durable, timely and acceptable returns or rewards for the
risk and effort required.
3) Competitive – Equal to or better – from the viewpoint of the customer – than other
available products or services.
4) Meet objectives – meet the goals and aspirations of the person taking the risk
5) Available resources and competencies – be within the reach of the entrepreneur in terms of
resource, competency, legal requirements etc.

FACTORS TO CONSIDER WHEN DECIDING WHETHER A NEW BUSINESS IDEA

CAN LEAD TO A PROMISING BUSINESS OPPORTUNITY.
1. Industry/market.
Is there a need for the product/service? It is also important to know the size of the market.
2. Length of the ‘window of opportunity
Opportunities do not exist forever. The entrepreneur has to assess how long this window will be
opened in order to make an investment decision.Scenario-Everready, napkins.

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3. Personal goals and competencies of an entrepreneur.
It is important for an entrepreneur to possess competencies, knowledge, skills and abilities before
starting a business where these competencies are lacking, it’s vital to develop or bring in
others/managers that compliment what is already available.
4. Management skills.
Those businesses that require high level of capital injection, require proper management
skills.POSDCL
5. Competition
Check out whether the business has a competitive edge over other competitor’s e.g. potential
constraints and if the industry faces existing entry barriers.
6. Capital technology and other resource requirement-employ capital intensive techniques as
opposed to labour intensive technique
7. Environment
This refers to political, economic, geographical, legal, regulatory and also
Physical environment within which a business operates.SCLEPT/PESTLE/PESTLND.
8 Business planning
The process of examining the factors discussed above is often the initial step in developing a
business plan. Investors and lenders may require these issues to be considered and set out in form
of a business plan.

MEANING OF AN INDUSTRY
An industry is a sector of the economy that focuses on the production and sale of goods or services.
Industries can vary widely in terms of size, scope, and complexity, and can be classified into
different categories based on the types of products or services they provide. Industries play a
crucial role in the economy by creating jobs, generating revenue, and driving innovation and
growth.
TYPES OF INDUSTRIAL ACTIVITIES
1. Manufacturing and Allied
2. Technology,
3. Healthcare,
4. Banking and Finance

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 5. Agriculture e.g. Sasini Ltd,Kakuzi
6. Telecommunication And Technology
7. Automobile And Accessories Car And General
8. Commercial Services E.g. Eveready,Homeboyz Uchumi NMG, KQ
9. Construction And Allied e.g. Bamburi Cement, Crown Paints
10. Energy And Petroleum e.g. Total,Kengen,Kplc,Umeme Ltd
11. Insurance
12. Investment e.g. Centum
13. Investment Services e.g. NSE

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