Develop Understanding of Entrepreneurship

Ethiopian TVET-System
Basic apparel production

LEVEL I
Learning Guide - 18
Unit of Competence IND BAP1 18 0918
DEVELOP UNDERSTANDING OFENTREPRENEURSHIP
Module Number & Title IND BAP1 18 0918
DEVELOP UNDERSTANDING OFENTREPRENEURSHIP
Prepared and compiled by :- Page 1

LO1- Describe and explain the principles , concept and
Information Sheet-1
scope of entrepreneurship
Economy is the system by which the production and consumption of goods and services is
organized in a country or community.
Employmentis the state of being employed or having a job; the occupation for which you are paid.
Enterpriseis any activity which provides customers with a product (goods/services) with a view to
making a profit.
Entrepreneurshipis the practice of starting new organizations, particularly new business, generally
in response to identified opportunities.
Small businessis one that is independently owned and operated by the owner.
Definition of Terms
One of the current issues under consideration at the moment is “the problem of unemployment”. As
you can understand, the importance of getting work for all citizens has become a priority concern for
the government.
Entrepreneurship and Socio-Economic Development
Transforming ideas into economic opportunities is the index of entrepreneurship. You only have to be
a keen observer of what is happening in your environment. There and then you can formulate what
business you can later on engage in.
Entrepreneurship is the capacity for innovation, investment and creation and expansion in new
markets, products and techniques. It has an extra ordinary feature which is the creation of
something new or something unique. It is also a new way of making something out of something
that already exists thus, creating new markets.
Economically, entrepreneurship invigorates markets. The formation of new business leads to job
creation and has a multiplying effect on economy.
Socially, entrepreneurship empowers citizens, generates innovation and changes mindsets. These
changes have the potential to integrate developing countries into the global economy.
Entrepreneurship is an important factor in economic development. This means that a country or

society with a lot of entrepreneurs would tend to be a productive community and thus produce
wealth and spur economic development.

The following benefits that result from entrepreneurship explain why development takes place when
a society becomes entrepreneurial:
1. Entrepreneurship creates employment
When entrepreneurs put up a business, they often need to hire at least one or two other people in
order to get things done. In fact, some businesses employ hundreds and even thousands of workers.
2. Entrepreneurship improves the quality of life
Entrepreneurs continuously innovate and develop new products and services based on what they
perceive to be the needs of the society. They also look for ways by which these goods and services
could be more efficiently produced. Such innovative efforts lead to better machines and a more
efficient production system. The development of new products and the delivery of needed services
make life easier and comfortable for society.
3. Entrepreneurship contributes to a more equitable distribution of income and therefore eases

social unrest.
By putting up an enterprise in the locality, entrepreneurs are actually dispersing the benefits of
development to other parts of the country.
When income is evenly distributed, entrepreneurship flourishes. People have more money to buy the
products and services they need, thereby bringing in more profits to entrepreneurs. At the same
time, people may also have enough to invest on enterprises of their own, thus increasing the supply
of entrepreneurs.
The eradication of poverty will help solve social problems like crime, juvenile delinquency, and
malnutrition.
4. Entrepreneurship utilizes resources for national productivity.
Our country will develop faster economically if all its resources are maximized. For example, in the
rural areas we have vast agricultural areas for the production of cereals and vegetables. If these areas
are developed and used to the maximum, the government need not to import rice and other cereal
products and other agricultural products, thus, it saves much for the country.
5. Entrepreneurship brings social benefits through government.
With the revenues the government collects from taxes, duties, and licenses paid by the
entrepreneurs, the government allocate the money to different services to the communities. These
services come in the form of infrastructure facilities such as roads and bridges, educational and
medical services and facilities, and maintenance of peace and order.

INFORMATION SHEET-2 LO2- Discuss who to become entrepreneur
CHARACTERISTICS AND QUALITIES OF A SUCCESSFUL ENTREPRENEUR
1. Integrity - someone once said, “Right is right even if no one is doing it, and wrong is
wrong even if everyone is doing it” We all hear stories about corporate greed and
corruption. However, the truth is, successful entrepreneurs are rated “being honest
with everyone” the number one factor of their success.
2. Self –discipline – to become a successful entrepreneur you have to be highly disciplined.
If you are trying to build a business from the ground up, you will be faced with doing all
the job functions of a company, such as accounting, marketing and customer service.
You have to develop the ability to get things done, even when you don’t feel like it.
Luckily, you learn self-discipline with the right information and conscious effort.
3. People skills - another critical factor among successful entrepreneurs is having good
people skills. You should make an effort to genuinely like, respect, and appreciate other
people. The ability to win people over will carry you far in all walks of life, especially
your own business.
4. Strong work ethics – there’s no substitute for hard work when it comes to becoming a
successful entrepreneur. Most people want to do the fastest and easiest solution when
it comes to work. To be successful, dedicate yourself to persistent, productive, and old
fashioned hard work.
5. Passion – you need to be passionate about your business. This doesn’t necessarily mean
you have to build a business around something you love. You should identify a
profitable market and then build your business.
Loving your business will also make it easier to get through the start-up phase, and
other future obstacles.
6. Strong leadership qualities- being able to communicate effectively, motivate others, sell
your ideas, and be decisive, are just a few qualities of a good leader. In order to become
a successful entrepreneur you must dedicate yourself of improving your leadership and
abilities.
7. Competitiveness – competition is everywhere. In business, it is the survival of the fittest.
If you can out market and outperform your competitors, your chance of being a
successful entrepreneur will be much better. Play to win, but never sacrifice your
integrity for the sake of a few bucks.
8. Well-organized – One of the main reason why small businesses fail is lack of
organization. Everyone can learn organization skills with enough hard work, practice and
persistence.

9. Sales ability- The ability to convince others to make a conscious decision is a key of
becoming a successful entrepreneur “People don’t buy for logical reasons. They buy for
emotional reasons”. Being able to appeal to other people emotions is the key to selling
your ideas, products or services.
PERSONAL ENTREPRENEURIAL CHARACTERISTICS CLUSTERS AND BEHAVIORAL INDICATORS
Behavioral scientists and psychologists who have been studying entrepreneurs found that
successful entrepreneurs all over the world have some characteristics in common. They were
able to identify ten personal entrepreneurial characteristics (PECs) under the following clusters:
I. Achievement Cluster
Successful entrepreneurs are people who accomplish things. They have what psychologists call
the “need to achieve” They want to perform tasks excellently not only for prestige or money
but for the sake of excellence itself. When entrepreneurial individual work on something, they
like to know afterwards that it was a job well done and this alone is enough to make them
happy.
Achievers rate high in the following PECs

1. Opportunity-Seeking.
An entrepreneur is said to be a good opportunity- seeker if he sees and acts on new
business opportunities and seizes unusual opportunities to acquire financing,
equipment, land and work space or assistance.
2. Persistence.
A persistent individual is one who:
a. takes different actions to overcome an obstacle
b. makes personal sacrifice or spends extraordinary efforts to complete a job
c. sticks to his judgments in the face of opposition or early lack of success
3. Commitment to the Work Contract.

The true-blue entrepreneur is committed to the work that he has agreed to do. When
he accepts a job, he takes full responsibility for its completion. No job is too small, too
dirty or too difficult to be done. When necessary, he pitches in for workers to get things
done. He exerts extra effort to satisfy the costumer. In the end, if he fails he would take
full measure of the blame. But if he succeeds, he expects to get full credit.

4. Risk Taking.
A gambler is a person who takes high risks and so he tends to lose all his money and
even his shirts in the end. An entrepreneur is not a gambler. A successful entrepreneur
takes calculated, moderate, or reasonable risks where he perceives the chances for
winning to be good. In other words, he states a preference for situations that involve
moderate risks.
5. Demand for Quality and Efficiency.

A true entrepreneur is not satisfied with mediocre work. He sets a high standard of
performance. The high standard of performance makes him act to meet or exceed
existing standards of excellence or improve on past performance. He strives to do things
better, faster, or cheaper.
II. Planning Cluster

Going into business is the result of deliberate goal-setting, tireless information-seeking and
systematic planning and monitoring by the entrepreneur.
a. Goal-Setting.
An entrepreneur always thinks not only of what he wants to accomplish day-to-day
but also in one, two, or five years from now. In other words, he sets clear and specific
short-and-long term objectives. He thinks of today’s activity as a small step towards
that which he eventually wants to accomplish.
b. Information-Seeking.
As a careful planner, the successful entrepreneur always makes it a point to seek
information that is relevant and useful to his present or future business. He obtains
information from clients, suppliers, experts, competitors, contacts, and information
networks. He also consults experts for business or technical advice.
c. Systematic Planning and Monitoring.

The successful entrepreneur does not only set short-and-long –term goals. He does
not only seek information regularly. He also systematically plans and monitors his
activities and performance. He develops and uses alternatives and monitors his
progress. He is ready to switch to alternative strategies when necessary to achieve his
goals.

III. Power Cluster
The personal motto of a successful entrepreneur is “I can”. He thinks that he can achieve things;
he can convince people to his way of thinking; he can influence the outcome of events. He is a
natural leader. He is decisive and he believes in his power.
a. Persuasion and networking.

A persuasive person who readily establishes a network or personal business contracts
around him usually makes a good entrepreneur. In order to persuade others, the
entrepreneur uses deliberate strategies. In order to accomplish his business
objectives he uses his network of useful friends and acquaintances.
b. Self-Confidence.
The entrepreneur exudes self-confidence. He strongly believes in himself and his own
abilities. No challenge is too difficult nor is a task too big that the entrepreneur would
indulge in self-doubt. When he enters a business, it is because he is confident that
the business would be successful and profitable.

Self-Check 1
Directions:
Multiple Choice. Choose the best answer from the options given. Encircle the letter of your
answer. You have fifteen (15) minutes to complete this Self-Check.
1. Which of the following is the index of entrepreneurship?

a. Developing a small elite class
b. transforming ideas into economic opportunities
c. searching, identifying and developing raw materials
d. innovating and developing new products and services
2. Which of the following is NOT closely associated with entrepreneurship?

a. flexibility factors
b. change and creativity
c. knowledge and innovation
d. none of these
3. What happens when entrepreneurial activities slow down?

a. Income is evenly distributed
b. Tax revenues are increased
c. Quality of life is improved
d. Country’s unemployment rate goes up
4. Which of the following is NOT true about entrepreneurship?

a. Entrepreneurship contributes significantly to the continuous
improvement of living standards
b. Entrepreneurship helps the development of a
handful of people getting rich through enterprise
c. Entrepreneurship activities slow down the country’s unemployment rates
d. Entrepreneurship provides an opportunity for making
unproductive use of capital resources
5. An entrepreneur is aware of _______________.

a. his family’s activities
b. his business competitors
c. the way he carries himself in public
d. the present demand for certain products or services in his community

1. Self discipline is important in putting up a business. Which statements below contributes
to the success of an entrepreneur?
a. Develop the ability to get things done, even when you don’t feel like it
b. Dedicate yourself in improving your leadership, skills and abilities
c. Being able to appeal to other people’s emotions in
selling your ideas, products or services
d. Identify a profitable market and then build your business
2. To communicate effectively is one quality of a good entrepreneur.

Which of the options below is the most important quality?
a. Sales ability
b.Self-discipline
c. Strong work ethics
d. Strong leadership qualities
8. In business, it is the survival of the fittest that counts, Which of the statements below
best describes competitiveness?
a. Identify a profitable market and build your business
b. Make an effort to genuinely like, respect and appreciate other people
c. Learn self discipline with the right information and conscious efforts
d. Play to win, but never to sacrifice your integrity for the sake of a few pesos.
9. Which PECs behavioral indicator meets or beats existing standards of excellence to

improve performance?
a. Opportunity seeking
b. Persuasion and networking
c. Demand for quality and efficiency
d. Commitment to the work contract
10. Which of the statements below is NOT a good indicator of the PECs?
a. Developing and using alternatives to monitor progress
b. Ready to adopt to alternatives or strategies when necessary
c. Developing systematic plans and monitoring activities and performance
d. Accomplish business objectives and use of network of friends and acquaintances

LO3- Discus who to organize an enterprise
Information Sheet-3
A business first exists in your mind is an idea. When this idea is developed and put into writing, it
becomes a plan. As you gather your resources be it material or human resources, you are making your
plan into a reality. And when you register it, it becomes a legal entity, with appropriate rights and
responsibilities
Once you have identified your project or business, you are ready to organize and set up your own
enterprise. This means that you have to decide on its forms of ownership then later the location, hire
and train personnel, raise funds, acquire machinery and equipment, and finally register the business.
The term legal form refers to the form of ownership of a business. You may decide to share ownership
with other people if you are not the only source of project ideas or if you do not have enough capital
and experience to start the business on your own.
TYPES OF BUSINESS OWNERSHIP
Sole proprietorship.A sole proprietorship is a business unit owned and managed by only one person. It is
the simplest and most common form.
Most small businesses start as sole proprietorships. Here, you and the business are essentially one. You,
as the sole proprietor own all the assets.
As such, you will exclusively enjoy the benefits to be derived from the business. If you decide to become
a sole proprietor, you do not need to consult anyone on matters related to setting or running the
business.
Advantages of a Sole Proprietorship Disadvantages of a Sole Proprietorship
 Relatively low start-up costs  Unlimited liability

 Greatest freedom from regulation  Lack of continuity in business organization
 Owner in direct control of decision-making  Difficulty in raising capital
 Minimal working capital required  All the risks are of the owner
 Tax advantages to owner  Owner shoulders any liability incurred in the
 Owner is the boss business
 All profits to owner
 In cases of death, the business may be
passed on to another by virtue of a will.

Partnership.Under this business form, two or more persons are owners of the business. The owners
define their rights and duties as partners in the business through a partnership agreement.
Advantages of a Partnership Disadvantages of a Partnership
 The partners decide as to who shall be  Any action of one partner within the scope of
responsible for paying debts in case the business binds the other partner as well. Thus,
business is unable to pay its liabilities later. if one partner commits a mistake, the other
 They agree as to how much will be the share of has to suffer the consequences as well.
each one in the profits of the business and what  Partners also have to be consulted each time a
business responsibilities will be assigned to decision or action concerning the business
each. needs to be made. This means taking more
 The partners agree as to when the partnership time to get things done.
ends such as when one partner agrees to a buy-
out offer or when one of the partner dies.
 No income tax is levied on the partnership itself
but on the owners as individuals.
Corporation: This business form is initiated by individuals called incorporators, numbering from a
minimum of five to a maximum of fifteen.
Advantages of a Corporation Disadvantages of a Corporation
 The incorporators put up the initial or starting capital of  The corporation is subject to more
the business. To get additional capital, shares of stocks government control.
are sold to interested parties called the stockholders.  The corporation is relatively
 Each stockholder shares in the ownership of the complicated in form and
company, together with the incorporators. management. It needs high cost of
 The right of the stockholder to vote on matters affecting formation and operation.
the corporation depends on the number of shares he or  Its credit is weakened by the limited
she holds. liability of the stockholder.
 The number of shareholders in the corporation is used as  It is subject to a heavier taxation.
basis for computing the share of each one in the profits  The stockholders’ voting rights have
of the corporation. This share is called the dividend. become theoretical especially in a
 The life of the business does not depend on the big corporation because of the use
stockholders of proxies.
 It has continuity in existence for a maximum of 50 years.  The stockholders have little voice in
 Continuity is not affected by death of a stock holder or the conduct of the business of the
by the transfer of shares of stocks from one stockholder corporation.
to another.
 In case of losses, liabilities are settled through the sale of
the assets of the corporation.

Cooperative: A cooperative is owned by twenty-five or more individuals who, like in a corporation buy
shares in the business. However, unlike a corporation, each member of the cooperative is entitled to
only one vote on matters regarding the business regardless of the number of shares he or she has
bought. In case of losses, responsibility for paying liabilities is also borne equally by the members.

Self-Check 1
Directions:
Multiple Choice: Choose the best answer among the options given. Write the letter
of your answer on a separate sheet. You have ten (10) minutes to complete this
Self-Check.
1. The term legal form refers to the type of business ownership.

Which type of business ownership is the simplest and most common?
a. Corporation
b. Cooperative
c. Partnership
d. Sole proprietorship
2. Partnership is a business form owned by two or more persons.

Which among the choices below is NOT an advantage of partnership?
a. Partners have to be consulted each time a decision and action is made.
b. No income tax is levied on the partnership itself but on the owners as individuals.
c. Partners decide as to who shall pay debts in case the business is unable
to pay its liabilities.
d. If one partner commits mistake, the other has to suffer the consequences.
3. Which of the following is NOT an advantage of a corporation?

a. Corporation continue to exist for a maximum of 50 years
b. Continuity of existence is not affected by death of a stockholder
c. Each stockholder shares in the ownership of the company,
together with the incorporators.
d. Subject to a more government control.
4. Which of the choices below makes sole proprietorship advantageous to the owner?
a. All profits goes to the owner
b. Unlimited liability
c. All the risk are for the owner
d. Owner shoulders any liability incurred in the business.
5. Which of the choices below is NOT true about a cooperative?
a. Each member is entitled to only one vote
b. Responsibility for paying liabilities is borne equally by the members
c. Owned by twenty-five or more individuals
d. Initiated by individuals numbering from a minimum of five to a maximum of fifteen

LO4- Discuss who to operate an enterprise
Information Sheet-4
After identifying the different business opportunities in your community, you will now try to
examine which opportunity to undertake. The SWOT Analysis will help you select the
appropriate business opportunities based on the needs of your community.
SWOT stands for Strengths, Weaknesses, Opportunities and Threats
Strengths are the capital, knowledge, skill or other advantage that a firm has or can
acquire over its competitors in meeting the needs of its customers.
Weakness is a defect or shortcoming which increases the risk of a failure.
Opportunity means a good position, chance, or prospect, as for advancement or success.
Threat is an indication or warning of probable trouble.
What is SWOT Analysis?
SWOT Analysis is a planning tool used to understand the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business.
i. It helps you develop your career in a way that takes best advantage of your
talents, abilities and opportunities in your community.
ii. It helps you to focus on your strengths, minimize threats, and take the greatest
possible advantage of opportunities available in your community.

SWOT Analysis
Strengths Weaknesses Opportunities Threats
Is the business in What could you What obstacles
Where are the good opportunities do you face?
facing you?
demand in your improve? What are the interesting trends you are aware of? doing that you sh
What is your competitor
community? What should you Could any of your weakness seriously thre
Is the product new avoid?
in your What factors would
community? cause the loss of
Is it accessible to your sales?
all?
Will your
community
patronize it?
Self-Check 1
Directions:
Choose the correct answer from the options under each item. Write the letter of the correct
answer in a sheet of paper.
1. When there is competition, then there is a___________ in business.

a. opportunity
b. strength
c. threat
d. weakness
2. The acronym for SWOT is _________.

a. Style, Wear, Operation, Tool
b. Strengths, Weaknesses, Opportunities, Threats
c. Store, Warehouse, On – line, Technology
d. all of the above
3. If the people in the community patronize your product, then your

business has ______________.

a. Operation
b. Strength
c. Threats
d. Weakness
4. Which of the following questions can be categorized as an opportunity?

a. What could you improve?
b. What are the interesting trends you are aware of?
c. What obstacles do you face?
d. Is it accessible to all?
5. You encounter difficulty in hiring workers due to low salary. This is
classified as ________________.
a. opportunity
b. strength
c. threat
d. weakness

IDENTIFY NEEDS OF THE COMMUNITY
Definition of Terms:
Environmental Scanningis any of the various techniques through which

images/information are recorded or gathered from conditions, situations and materials
in the particular environment.
Demography is the statistical study of human population and its distribution.
Individual Interest is the skill or expertise of a person
Technology means improved products or services.
Resources are available money, equipment and facilities.
Trend is a practice or interest that is very popular for a short period of time
Goods are products that are brought and sold in the business.
Services are work done for others as an occupation or business.
Technology is the system by which a society provides its members with those things
needed or desired.
Industrial is anything having to do with the business of manufacturing products; excludes

utility, transportation, and financial companies.

The initial step in identifying the needs of the community is through environmental scanning.
This can be done through:
o Interviews
o Sharing ideas with others
o Reading
o Observations
o Advertisement
Factors that can help identify the needs in the community
1. Industrial Information -are newspapers, technical and business journals that provide
techniques and information on business.
2. Local Specialized Skills -traditional skills of the people in the community
3. Evaluation of development plans -developed plans which are still possible in the community
4. Technology -are modern gadgets which can be utilized to identify business opportunities
5. Review of old projects in the community -old projects may become attractive when market
or related production factors have changed
“The needs and problems in the community are identified through environmental scanning
where there are business opportunities. “

Self-Check 2
Directions:
Choose the correct answer from the options under each item. Write the letter of the correct
answer in a sheet of paper.
1. The following statements tell how environmental scanning is done. Choose from the options
the correct arrangement of the steps in conducting environmental scanning.
1. Note down the needs of the people in the community.
2. For things and services needed, find out what are not available and plan how to
develop these into entrepreneurial ventures.
3. Communicate with people through interviews, observations and advertisements
on what is new.
4. Check those items which are already available and think how they may improve
the packaging and quality.
a. 4,1,2,3 b. 3,1,4,2 c. 2,4,1,3 d. 1,4,2,3
2. The statistical study of human population and its distribution is called _________.
a. demography
b. ecology
c. photography
d. psychology
3. Environmental scanning is the acquisition and use of information about events, trends and
relationships in an organization’s external environment. New products or materials and new
processes in doing things are vital aspects of_______________.
a. ecological environment
b. educational environment
c. political environment
d. technological environment
4. As an entrepreneur, the first thing that you should find out are the demands of the
community. This refers to___________.
a. community needs
b. evaluation
c. industrial information
d. technology

5. How will you determine the needs of the people in your community?
a. conduct an environmental scanning
b. make use of observations
c. make use of surveys and referrals
d. all of the choices
MANAGEMENT FUNCTIONS OF ENTREPRENEURS

Management functions are the same to all organizations regardless of size or type. The only
difference is the amount of emphasis given to each level. But in general, managers have to do
the planning, organizing, staffing, directing, and controlling.
A. PLANNING
Planning is the most basic management function that tells you where to go and how to get
there. It is like preparing a blueprint of what is to be done, when, how, and by whom it should
be done.
Classification of Plans:
1. Standing plans.
These plans are used repeatedly and cover policies, procedures, and rules.
2. Single-used or single-purpose plans.
These plans are essentially one-shot or non-repetitious. This is used within a relatively
short period of time, they comprise programs, projects, and budgets. Programs are
complicated; they are made up of objectives, goals, strategies, policies, rules, job
assignments, financial resources and other pertinent items.
Another way to classify plans is according to whether they are short, (to be from a day to a
year), intermediate range plans (to be from a few months to three years); and long-range plans
(to be up to 25 years)
Steps Involved in the Strategic Planning
1) Formulate organization objectives.

This serves as the basis where the efforts and services will be used.
2) Analyze present resources.

This refers to the availability of money, staff, machines, materials, space and time to
help you realize your plans.

3) Determine alternative courses of action.
Reduce number of alternatives. Remove those do not look promising, and retain those
sound ones for further analysis.
4) Examine the alternatives.

You need to do some statistical and quantitative analysis of factors involved in each
alternative.
5) Select the best course of action.

Choosing alternative most likely to be effective in achieving your objectives.
6) Develop support plans.

Smaller plans aims to establish coordination among other levels of the organization so
that the enterprise goal can be easily achieve.
7) Implement the plan.

Plans only come into reality when it is implemented. In implementing the plans, it
require the exercise of other management functions, such as organizing, staffing,
directing, and controlling.
B. ORGANIZING
Organizing involves identifying the specific activities necessary to achieve the enterprise goals,
clustering the activities into departments or job positions, and designating the personnel to
head and compose each department.
An example of the organizing function is the owner-manager of a small factory who establishes
three departments - production department, sales department, and administrative
department. He assigns manager to head each department and clearly delineates
responsibilities among them. Thus, he give the production manager the responsibility for
manufacturing, packing, and shipping, while he delegates to the sales manager the
responsibility for advertising and costumerservice. Then he assigns the administrative head to
look after personnel, purchasing, and accounting.
Below is the diagram showing the organizational relationships of the positions and their
corresponding authority, responsibility, and accountability.

a. LINE ORGANIZATION
The manager has direct command over workers who accomplish the tasks. Below is an example
of a line organization
MANAGER
SUPERVISOR
LINE LEADER
WORKERS
b. LINE AND STAFF ORGANIZATION

Any activities that a line officer cannot do are delegated to a staff officer to render these services. For
example, in a small manufacturing enterprise, the president, production manager, and sales manager
perform line functions, while legal counsel who helps and advices the president has no authority over
line employee. Below is an example of this type.
President
Legal Counsel
Administrative Manager Production Manager Sales Manager
c. FUNCTIONAL STAFF ORGANIZATION

In this setup, the worker has more than one immediate superior or as many as the types of
activities assigned to him. An example of this type is shown below.
MANAGER
SUPERVISOR
LINE LEADER
Quality Control Product Specialist
WORKERS

C. STAFFING
This process involves proper and effective selection, appraisal and development of personnel to
do the jobs and fulfill the roles in the structure.
A. Asses your workload.

The officers manning the operating units can determine what exactly they are
responsible for. This information can be used as basis for defining the organizational
structure, and the quantity and quality of personnel needed to handle the workload.
B. Study jobs in the company.

This refers to the process of determining the duties, responsibilities of each job. The
analysis can tell you whether or not the present workers have the required skills and
abilities. You can also find out who else among the presents employees fit in each job.
C. Examine your present personnel.

Assess the skills, strengths, weaknesses, and potentials. Compare your inventory against
your forecasted manpower needs. Your findings will tell you whether:
a) Your company has just the right quantity and quality of people;
b) You have an excess in quantity but are short in quality; or
c) Both quantity and quality of skills of your personnel are insufficient.
D. Design an improvement plan.

If you find out that there is a problem in quantity or quality of skills among your present
personnel, you may adopt any of the following solutions:
a) If your workers are not enough, consider recruiting from inside or outside the
organization.
b) If your workers do not posses the required skills, you may resort to training and
development.
D. DIRECTING
Directing involves putting your plans into effect. How to influence your subordinates who have
distinct needs and a unique personality, to contribute to the attainment of the firm’s objectives
is the principal concern of directing.
Understanding certain principles will help you direct the actions of your subordinates towards
the successful implementation of your plans. Directing includes the following;
A. Motivation is the process of encouraging the subordinates to act in a desired manner. When
an employee joins a company they bring with them certain needs which they hope to be able to
satisfy.
a. Physiological needs these are needs for air, food, water, for survival
b. Safety needs to be protected from danger, threat, or deprivation
c. Esteem needs such as those for self-confidence, achievement, competence,
knowledge, self-respect freedom and independence. It also includes the needs for status,
recognition, importance, and respect.
d. Self- realization needs represent the needs for full development of potentials and of
being creative.
B. Leadershipis the ability of an individual to persuade the subordinates to follow. As a leader

you need a mixture of skills to be effective. These skills may be required in varying degrees by
managers in different situations. These skills include the following;
a. Conceptual skills refer to the mental capacity of an individual to grasp the relationship of
different parts into an integrated whole. They need these skills in planning, and analyzing.
b. Human relation skills is the ability to deal effectively with people
c. Technical skills incorporate the capabilities to perform the mechanics of a certain job which
the operative employees perform, like producing goods that the company manufactures.
E. CONTROLLING
The function of controlling is to make sure that what is done in the enterprise conforms to what
has been planned. The two main activities involved here are comparing actual performance
with desired performance and making necessary connections where there is deviation from the
plans.
Steps in the controlling process:
A. Establish standards. Standards are sets of measurements against which you can evaluate
actual results.
Three common types of standards:

 Physical standards include quantity of products or services, number of customers or
clients, and quantity of clients or services.
 Monetary standards are indicated in terms of peso values and include labor cost,
selling cost, material cost, sales revenue, and gross profit.
 Time standards refer to the speed with which job should be done or the deadlines for
their completion.

B. Set performance measurements. It is also necessary to determine how often should you
measure performance, who will do the measurement, and what form will the measurement
take. An important consideration in determining appraisal is that it must be easy to do and easy
to explain to your people.
C. Measure actual performance. This step can be easy for you if the standards are spelled out
clearly and if what your personnel are doing can be determined clearly. It Includes observation,
oral and written reports, automatic methods, inspections, tests, and samples.
D. Compare performance with standards and analyze deviations. Control does not stop after
measuring performance. Data about actual performance can be meaningless unless they are
compared with desired performance. Then you should analyze the reasons for the failure to
meet the standards so that you can deal with the roots of the performance problems.
Depending on the nature of the shortfalls in performance, you may correct these shortfalls by
resorting to any of the following remedies.
a) Revising your plans
b) Modifying your goals
c) Reassigning workers
d) Clarifying duties and responsibilities
e) Hiring additional staff
f) Firing problems workers
g) Stronger leadership

Controls can be classified as either organizational or operational. Organizational controls are
those that measure the overall performance of the organization. Operational controls evaluate
day to day activities and spot areas where you may need to take corrective actions.
Effective controls have the following characteristics

a) They control the proper activities.
People will naturally be conscious about meeting standards if they are aware that
those activities will be monitored. However, you should take care not to cause an
imbalance but concentrating to much control on one group of activities and easing up
on another.
b) Control should be timely.
“A stitch in time saves nine” a popular saying goes. Control must report deviation in
time to enable you to deal with the problem before it is too late.
c) Controls should be cost effective.
Controlling entails costs. You pay for the processing and monitoring that you use, like
registers and computers, you pay for the personnel like the inspector, accountants,
and inventory controllers. You also pay for the line personnel who work on the data
on scrap, production costs, and personnel report. But are all these practical and
economical?
d) Controls must be accurate.
Control measures must be accurate to have a good basis for corrective actions.
e) Controls must be accepted.
It is important that your people understand the purpose and benefits of control so
that they will not feel that you have installed controls just because you don’t trust
your men.

Self-Check 3
Directions:
Multiple Choice. Choose the best answer from the given options. Write your answer on a
separate sheet of paper. You have fifteen (15) minutes to complete this Self-Check.
1. The most basic management functions of an entrepreneur, which tells you where you are
going and how to get there?
a. controlling
b. organizing
c. planning
d. staffing
2. Plans are categorized in different ways. Which plan is used repeatedly as it covers policies,
procedures, and rules in management functions?
a. organizational plan
b. staffing plans
c. standing plans
d. single-purpose plans
3. This plan is essentially non-repetitious. Since it is usually used within a short period of time.It
comprises programs, projects and budgets
a. improvement plan
b. organizational plan
c. single purpose plan
d. standing plan
4. A management function that clusters the activities into departments or job positions, and
designating the personnel to head and compose each department is called ______.
a. directing
b. organizing
c. planning
d. staffing
5. A diagram that shows the relationships of the position and their corresponding authority,
responsibility, and accountability is ______.
a. functional type organization
b. line and staff organization
c. line organization
d. organizational chart

6. Directing is a challenging task. The principal concern of directing as a management function is
to ______.
a. assess the skills, strengths, weaknesses and potentials of personnel
b. discover the problem in quantity or quality of skills of personnel
c. influence subordinate to contribute to the attainment of the firm objectives
d. make sure that what is done in the enterprise conforms with what had been planned
7. Which among the choices below is necessary to determine how often you should measure
performance in the controlling process?
a. compare performance with standards and analyze deviations
b. establish standards
c. measure actual performance
d. set performance measurements
8. A type of organization chart where officers have staffs to assists them but who do not have
any authority over line personnel is .
a. line and staff organization
b. line organization
c. functional staff organization
d. organizational chart
9. Assessing the skills, strengths, weaknesses and potentials of your personnel will tell you
whether_______.
a. your company has just the right quantity and quality of men
b. you have an excess in quantity but are short in quality
c. both quantity and quality of skills of your personnel are insufficient
d. a b & c
10. If you find out that there is a problem in quantity and quality of skills among your present
personnel. What solution should you adopt to solve the problem?
a. consider recruiting from inside or outside the organization
b. undertake training and skills development
c. advise the person to look for another job
d. a & b

What is a product?
A product is anything that can be offered to a market that might satisfy a want or need.
Five Ingredients that Define a Product:

o Tangible Elements – physical and technical characteristics of the product
o Presumed Benefits – the expected experience that customers seek
if they use the product
o Delivery Processes – the service consideration and applications of the product
o Brand Promises – the reputation, assurances, and uniqueness of the
product of the manufacturer
o Product Context – the relationship of the product with its use in the environment
What are the components of a product?
Physical Properties
Brand (Name)
Product
Description and
Features
Product Idea
Quality Level
Package
Service (Warranty)
Example of a Product and Its Components

Brand Name: Palmolive Natural Shampoo
Product Idea
Physical Properties: Liquid
Description: Aromatic Shampoo
Quality Level: Export Quality
Service/Warranty: Manufacturing,/Expiry date, etc.
Package: Plastic bottle with flip-top cover

Product Life Cycle
The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is
planted (introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as
it becomes an adult (maturity); after a long period as an adult the plant begins to shrink and die
out (decline).
DESIGNING A NEW PRODUCT

An effective design process:
 Matches products or service characteristics with customer requirements
 Ensures that customer requirements are met in the simplest and least costly manner
 Reduces the time required to design a new product or service and
 Minimizes the revisions necessary to make a design
PRODUCT DEVELOPMENT STAGES
1. Idea Generation
2. Feasibility Study
3. Development and Testing of Product Design
4. Final Design and Process Plan
Internal Sources External Sources

Idea
Generation
Analysis of customers needs Market surveys

Suggestions coming from Suggestions coming from
customers contact staff customers
Ideas from research and Actions of competitors
development

Product Development Process
Research &
Development
Suppliers Customers
Idea
Marketing Competitors
Generation
Product Concept
Sample of a Product Concept
Product Concept
Boy’s Trouser
MicaelaEsturas
Mekelle, Tigray

Target Market?
The target market for the product:
- Households and schools with

pre-school children within and
around Mekelle
Who are Capable of Doing it?
- Sewers
- Dressmakers
- Tailors
When does the product sells best?
- The product can be sold all year-

round but start of school year and
holiday seasons will be considered as
the peak seasons
What are the resources needed?
- Cotton twill fabric, zipper, elastic,

buttons, thread
- Scissors and marking tools
- Lockstitch and overlock sewing
machines.
How much does it costs?
Small = 70 Birr
Medium = 75 Birr
Large = 80 Birr
Value Added Features
- The elastic waistband at the back

easily fits at the waist which prolongs
the use of the trouser.
- The trouser is very versatile and
functional which adapts to child’s
movement

Self-Check 4
Directions:
Multiple Choice. Choose the best answer from the given options. Write the letter of your
answer on a separate sheet. You have ten (10) minutes to complete this Self-Check.
1. Which of the following is not an ingredient that defines a product?

a. brand promises
b. delivery processes
c. description and features
d. tangible elements
2. Anything that can be offered to a market that might satisfy a want or need is called
________.
a. package
b. product
c. service
d. technology
3. It is a business term which describes the complete process of bringing a new product to
market.
a. business environment
b. new product development
c. product design
d. product development process
4. The producer’s view of a product is called__________.

a. feature of the product
b. product formulation
c. product concept
d. all of the choices
5. The following are the factors to consider in preparing a product concept EXCEPT:
a. the costs
b. the market
c. the goods and services
d. the people

To start a small enterprise , you must have a foresight. Anticipate what may happen to your
business. Any endeavor, particularly the desired form or type of business, sets the direction of
the enterprise.
The Benefits Derived from Planning a Business.

 Making a business a plan can minimize or eliminate risks . It involves a careful study of the
competence, interest and resources of the entrepreneur against the needs of the
consumers. A feasibility study is necessary because through this, an entrepreneur can
determine whether his/her choice is profitable or not
 A business plan can also minimize the cost of production . This includes how each of the
resources of production such as manpower, money, materials and machines are used.
Every aspect of the business operations is monitored and controlled which prevents
unnecessary waste of resources that will result to economy and efficiency.
 A business plan can also identify the defects of the business operations . Goals and
objectives are formulated. Procedure, strategies and techniques are planned. Reevaluation
may be done to avoid encountering the same problem.
The Basic Principles in Running a Small Enterprise
1. Planning must be realistic.

It must be based on available human, financial and physical resources. Planning
without enough resources may result to the failure fail of an enterprise.
2. Planning must be based on the needs of the community.

It should fit the needs of the people in a community which can be known through
observations, personal interviews and questionnaires.
3. Planning must be flexible.

You, as the entrepreneur should be able to adjust and to plan if development
changes occur or changes in government laws or policies happen. Planning should
respond to the trends in consumer’s tastes and preferences.
4. Planning must start with simple projects.

This requires simple management and technology, thus, the micro business is
advised.

Self-Check 1
Directions:
Fill-in the Blanks. Fill the blanks with the correct word/s. Choose from the given words in the
box. Write your answer on a separate sheet. You have ten (10) minutes to accomplish this Self-
Check.
time management micro business plan

what to expect projects strengths
1. _______eliminates risks.
2. The positive factors of planning is called _____.
3. Planning is what to do it, how to do it, when to do it and ______in the future.
4. Planning must start with simple _____.
5. In business, time is gold. For this reason, an Entrepreneur must be efficient in _____.

INFORMATION SHEET5 LO5- Develop one’s own business plan
After having learned about the importance of business planning, you must know the different
types of business plan.
1. Feasibility study
– It is created in order to minimize risk and to ascertain the viability of a project.

- It is not merely an investigation but a frame work on how the operation of a business project
shall be accomplished.
- It is used to determine the potential success of a proposed business venture.
A feasibility study has a project summary which deals with the introductory statement of the
problem, the business name, the business logo, the business location, descriptive definition of
the project and objectives.
Major Components of a Feasibility Study:

a. Marketing study
– The sufficient demands for the product as well as the competitive position of the firm
in the industry must be determined.
b. Technical study
– In this study, you must consider the manufacturing process, plant size, production
schedule, machinery, plant location and layout structure, raw materials, utilities and
waste disposal.
c. Management study
- This involves on how the project shall be managed such as the business organization
including the organization chart and function of each unit management personnel,
skills and numbers of labor required.
d. Financial study
- You should include the assessment of total capital requirements break-even outputs,
sales and prices, amount of sales required to earn a certain amount of profit and the
cash payback period.

d. Social desirability
- This is measured by economic benefits to the people living in the community and its
vicinities.
2. Concept Paper
It is a written plan for a business on how it will be managed. It is a tool to represent a certain
venture anticipating its future.
Parts of a Concept Paper:
a. Introduction – This is the part that discusses the significant details of the
product/service and why the product/service is needed by the community.
b. Objectives - This part gives the details of the business both specific and general.
c. Rationale – This part focuses on the advantages of putting a certain business.
d. Terms & conditions - In this part, specific agreement from particular to general things
are clarified.
e. Recommendations – This part is very important because it helps to improve the

project in the future.
3. Business Plan
A business plan describes the nature of the business, the sales and marketing strategy, the
financial background, containing a projected profit and loss statement.
Components of Business Plan:

a. The environment –The needs of the people in the community should be identified.
b. Behavior of the product – You should know the market trends, product demand in
the community, the resources, quantity and quality goods in buying,
c. Location of the business – You should consider the place where customers prefer to
buy.

d. Organizational plan – The needed workers in the business must be listed in the
organizational chart.
e. Production plan – This involves the manpower, money, machinery, materials and
methods to be able to produce the desired output based on anticipated profit.
f. Financial plan – You as an entrepreneur need to determine the fiscal needs of the
business and the sources of needed funds.
4. Project Proposal
This is the initial document that converts an idea or policy into the details of a potential project.
The Essential Parts of a Business Proposal.
a. Executive Summary
The overview of the proposal from beginning to end should be stated in the project
proposal.
b. Justification
This emphasizes the need of the proposal.
c. Procedure
The steps are being explained where to start and to end.
d. Objectives
The goals or targets of the business are defined.
e. Project Organization and Management

The manpower and function of each are clearly stated.
f. Budget
You should determine the source for the input and output, the profits and the loss of
the business.

Self-Check 1
Directions:
Multiple Choice: Choose the best answer among the given options. Write your answer on a
separate sheet. You have ten (10) minutes to complete this Self-Check.
1. The component of a business plan which identifies the available raw materials in your
community.
a. behavior of the product
b. environment
c. location of the business
d. organizational plan
2. Why is an organizational plan needed in planning a business?

a. To find out what products and services are available and
which of these can be improved
b. To coordinate the activities of the work force towards the company’s goals
c. To determine the needs of the community
d. To identify the market trends in the community
3. It is the process of setting up goals for a particular business endeavor and taking up steps to
achieve these.
a. business enterprise
b. business planning
c. business operation
d. business expertise
4. The component of a business plan which identifies the available raw materials in your
community.
a. behavior of the product
b. environment
c. location of the business
d. organizational plan
5. There are several factors to consider in selecting the location of your business. Which of
these factors is not included?
a. the cost and availability of land
b. the quality of the product
c. the availability of transportation facilities, communication,
water, electricity and labor
d. behavior of the product

LO5. OPERATION SHEET1 PREPARING A BUSINESS PLAN
If you already know the type of business you are planning to engage into, the following are the
steps which can help you in preparing a business plan that you must follow:
1. Make an evaluation of your personal resources, interests, available raw materials and
available specialized technical skills in your community. Create a name of your business. Does it
tell well about what you are selling? Is it easy to spell and remember?
These are guide questions to help you evaluate your personal resources:
 Are you interested in the business?
 Do you have sufficient funds?
 Do you possess management skills?
 Are raw materials available?
 Does the government give financial and technical assistance?
 Do you have good personal relations with other people?
2. Conduct an analysis or survey of your market.

 Who are your customers?
 What product or service will you offer?
 Is there a good demand for your product or service?
 Are the customers interested in the existing product or services?
 How many competitors are there in the market?
 How much is your estimated share in the market?
 Could you possibly offer a better quality product or service at a lower price?
 Is there a reasonable profit?
3. Select a proper business location.
 Is the location clean, decent and peaceful?
 Are there customers in the place?
 Are facilities such as electricity, water, transportation and communication available?
 Is the place accessible to raw materials and other supplies?
 In case your first choice is not available, do you have a good alternative?
4. Make a financial plan.
 Determine your objective.
 How much money will you need?
 What are your sources of funds?
 Does your budget determine how you will spend your money?
 How soon can you recover your investment?
5. Make a production plan.
 Determine whether to buy or lease the production equipment
 Will you improve the quality of an existing product?
 Can your production scheme meet market demand?
 Do you have a proper scheduling of production?
6. Make an organizational plan.

 Find out what type of organization is most suitable
 Are you acquainted with the laws, policies and requirement of your business
organization?
 Who will be your workers?
 What will be the duties and responsibilities of each?
7. Make a management plan.

 Write down your goals and objectives.
 Determine your strategies.
 What customer policies will you adapt?
 What human resource development program will you undertake?
 What will be your program of social responsibility?
Being an entrepreneur, you must have an effective business plan. You should follow the
steps in preparing a business so that the data must be accurate and adequate. This will
help you to choose the appropriate and effective strategies to ensure success in your
business venture.
SAMPLE FORMAT of BUSINESS PLAN
Business Name : __________________________________________________________

Location : __________________________________________________________
Name of Owner : __________________________________________________________
Introduction :
_______________________is a registered business engaged in __________________
owned by ____________________________________________ .
Business goals are as follows:
a. The operation started on ___________________________________________
b. The location could be reached by ___________________________________
c. The business could be expanded by _________________________________
Table of Contents

Section I : The Business
1. Description of the Business
The business is engaged in the distribution of or production, or of servicing customers.

_________________________________________________________________________
2. Product/Service
The product/service is _________________________________________________.
3. Market
Production will be distributed in ____________________________(mention primary and

secondary market) The clients belong to ________________________________ (description of
the socio-economic level). The product is bought by clients for the following reasons:
__________________________________________________________
__________________________________________________________
4. Location of the Business
The business is located at __________________________________________________

It can easily be reached by ________________________________________________
5. Competitors are as follows:
(State the name of the company and other relevant facts such as size and possible sales.A
competitor’s profile includes price, quality, location, image projected, strategies of selling and
operations. )
6. Price
The current price is _________. It is derived from the following factors:

____________________________________(production cost and marked up costs) .
7. Marketing strategies

The product will be distributed in the following manner:
_______________________________________________________________
_______________________________________________________________
8. Management
The management group is composed of the following (name, position, responsibility and
qualification)
9. Personnel
The personnel needed are the following (enumerate the type of work and their qualifications)
Section II: Financial Data
1. Sources and Application of Funding:
Secure financial assistance from _____________________________________________

For the following purposes __________________________________________________
Using the following collaterals _______________________________________________
2. Capital Equipment List
The capital and equipment lists are the following:
(Briefly describe the equipment and their uses. Include processes employed in the production)
3. Balance Sheet
This is a statement of the financial condition of an enterprise at a given point in time usually
only a focus, quarterly, semi-annually or annually. It shows the owner how money has been
invested and the accrued profit or losses.
4. Break-even Analysis

(It is a tool used by an entrepreneur in solving managerial problems). It compares the total
resources (TR) with the total cost (TC)
TR represents income while TC represents expenses of the enterprise.
When TR is greater than TC, there is profit.
But when TR equals TC it is break even. There is no profit, nor loss.
5. Income Projection (Profit-Loss Statement)
a. Detailed by month(for the first year)

b. Detailed by quarter (for the 2nd, 3rd, 4th,)

II. SOCIAL IMPACT
This part should enumerate the impact of the business activity to its employees, consumer
and the community as well. Social impact should also emphasize social responsibility to
sound environment and sanitation practices.

Develop Understanding of Entrepreneurship

Uploaded by

Copyright:

Available Formats

Develop Understanding of Entrepreneurship

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Develop Understanding of Entrepreneurship

Uploaded by

Copyright:

Available Formats

Ethiopian TVET-System

Basic apparel production

DEVELOP UNDERSTANDING OFENTREPRENEURSHIP

Prepared and compiled by :- Page 1

Entrepreneurship and Socio-Economic Development

Entrepreneurship is an important factor in economic development. This means that a country or

Prepared and compiled by :- Page 3

1. Entrepreneurship creates employment

2. Entrepreneurship improves the quality of life

3. Entrepreneurship contributes to a more equitable distribution of income and therefore eases

Prepared and compiled by :- Page 4

CHARACTERISTICS AND QUALITIES OF A SUCCESSFUL ENTREPRENEUR

Prepared and compiled by :- Page 5

PERSONAL ENTREPRENEURIAL CHARACTERISTICS CLUSTERS AND BEHAVIORAL INDICATORS

Achievers rate high in the following PECs

3. Commitment to the Work Contract.

Prepared and compiled by :- Page 6

5. Demand for Quality and Efficiency.

II. Planning Cluster

c. Systematic Planning and Monitoring.

Prepared and compiled by :- Page 7

a. Persuasion and networking.

Prepared and compiled by :- Page 8

1. Which of the following is the index of entrepreneurship?

2. Which of the following is NOT closely associated with entrepreneurship?

3. What happens when entrepreneurial activities slow down?

4. Which of the following is NOT true about entrepreneurship?

5. An entrepreneur is aware of _______________.

Prepared and compiled by :- Page 9

2. To communicate effectively is one quality of a good entrepreneur.

9. Which PECs behavioral indicator meets or beats existing standards of excellence to

Prepared and compiled by :- Page 10

TYPES OF BUSINESS OWNERSHIP

Advantages of a Sole Proprietorship Disadvantages of a Sole Proprietorship

 Relatively low start-up costs  Unlimited liability

Prepared and compiled by :- Page 11

Advantages of a Partnership Disadvantages of a Partnership

Advantages of a Corporation Disadvantages of a Corporation

Prepared and compiled by :- Page 12

Prepared and compiled by :- Page 13

1. The term legal form refers to the type of business ownership.

2. Partnership is a business form owned by two or more persons.

3. Which of the following is NOT an advantage of a corporation?

Prepared and compiled by :- Page 14

SWOT stands for Strengths, Weaknesses, Opportunities and Threats

Prepared and compiled by :- Page 15

1. When there is competition, then there is a___________ in business.

2. The acronym for SWOT is _________.

3. If the people in the community patronize your product, then your

Prepared and compiled by :- Page 16

4. Which of the following questions can be categorized as an opportunity?

Prepared and compiled by :- Page 17

Environmental Scanningis any of the various techniques through which

Demography is the statistical study of human population and its distribution.

Individual Interest is the skill or expertise of a person

Technology means improved products or services.

Resources are available money, equipment and facilities.

Services are work done for others as an occupation or business.

Industrial is anything having to do with the business of manufacturing products; excludes

Prepared and compiled by :- Page 18