MBA GENERAL, MBA PSM, MBA ITM & MBA LG PROGRAMS

ENTREPRENEURSHIP AND INNOVATION (PSG 09104, ITG 09202, BAG

09202)
MANAGING INNOVATION AND ENTREPRENEURSHIP (LGG 09102)
REVIEW QUESTIONS
Question one
a. What is entrepreneurship?
Is the process of creating something new with value by devoting the
necessary time and effort? Assuming the financial and social risk and
receiving the resulting reward of monetary, personal satisfaction and
independency

Four Aspect
 Entrepreneurship involves the cereation process
 Requires devotion of necessary time and effort
 Assuming necessary risk
 Reward of being and entrepreneurship

b. Entrepreneurship is usually done by a person known as the

entrepreneur, what qualities or characteristics do you need to see in a
person so as to refer them as entrepreneurs?
 Creative and innovative
 Leaders and team builder
 Moderate risk takers (calculated risk)
 They are optimistic
 High degree of commitment
 They exercise maximum responsibility and accountability
 They seek out and use feedback to learn their mistake
 They tolerate failures and ambiguous
Question Two
Give a detailed explanation on what entrepreneurship means to you.

Question three
You are a government employee with a lot of knowledge and willingness to do
things with extra effort. After attending this course, you got a clear
understanding of entrepreneurship and Intrapreneurship. It then gets you
thinking on how best you should use your extra efforts, meaning keeping you
in a dilemma of become an entrepreneur or Intrapreneur. What do you think
will be your final decision? What will be the base of your choice? Discuss
Answer
Definition
Entrepreneurship

Intrapreneurship

X’tics for Each

Conclusion and decision

Question Four
Entrepreneurship is the process of creating something new with value by
devoting the necessary time and effort, assuming the financial and social risk
and receiving the resulting rewards of monetary and personal satisfaction and
independence. Based on your understanding of the subject, why do people
become entrepreneurs?
Answer
 Design the life you love
o Need of a lifestyle and not to be bound to a 9/5 hour job
 Chance to leave a lasting legacy
 Being through school of hard knocks
 Ones Innovation and creativity does not fit in corporate environment
 Get to be your own boss
 Potentially unlimited income
 Unemployment
 Wanting to make the world the better place

Question four
Sometime entrepreneurship is not well understood in the community. This has
created a lot of myths around it. Explain any five myths of entrepreneurship
that you do not agree with.

DR. MLE BIA

(Doers, Risk, Money, luck, Experience, Born, Inventor, Academic)
 Are doers not thinkers
 Are born, not made (
 Are always innovators (are both innovators and inventors)
 Are academic and social misfits
 Need for Money
 Need is Luck
  Are extremely risk takers
 Experience high failure rate


Question Five
“Failing to plan is always seen as planning to fail”.
 What is a business plan?
Is a written document describes the objective of the proposed business venturethat
shows the steps/roadmap necessary to be taken to achieve those objectives
 How does it assist an entrepreneur in the planning process?

 Gives directions and helps the business succeed

 Helps the organization to learn the market and industry
(environmental scan)
o After learning it enables the organization to get competitive
advantage
 Constant monitoring of the business to ensure we meet the set
objectives
 Helps in securing finance for the business (Finance from Banks,
investors
 Give credibility of the business to its stakeholder
 Minimize risk of failure


 What should it contain, that will make it a good business plan?

CEBRM-ECMFA - Cover
 Cover page (Name of business, address and directors name)
 Executive summary
 Business description
 Resources needed
  Management plan
 Environmental and marketing analysis
 Competitor analysis
 Marketing plan
 Financial information
 Appendix

Question Six
A business plan is a document that every entrepreneur should have, what do
you think is the benefit of having such a plan. Critically discuss
 Gives directions and helps the business succeed
 Helps the organization to learn the market and industry
(environmental scan)
o After learning it enables the organization to get competitive
advantage
 Constant monitoring of the business to ensure we meet the set
objectives
 Helps in securing finance for the business (Finance from Banks,
investors
 Give credibility of the business to its stakeholder
 Minimize risk of failure

Question Seven
Give a detailed explanation on what is written on the following parts of a business
plan
a. Business description
b. Resources needed
 c. Marketing plan
d. Executive summary
Question eight (Topic Marketing Plan)
Give a detailed elaboration of the following terms
a. Market segmentation
b. Target market
c. Market positioning
d. Marketing tools

This are instruments used to develop and promote goods and services such
as (radio, brochures, TV, magazine, social media)
Question nine
For the past ten years, I have been training youth on various
entrepreneurship and innovation aspects. Most of the time when it come to the
question of why don’t they have any of these activities, the biggest challenge
that many youths present is source of capital. As we have learned of how
entrepreneurship and innovation activities can be funded, explain to them
how they can raise funds.
 Love Money (Friends, Siblings
 Angel investment
 Venture capital
 Business Incubators (SAHARA Sparks, Ndoto Hub, SIDO)
 Grants and Subsidies
 Personal investment

Question Ten
Financing is the process of providing funds for business activities, making
purchases, or investing. Various sources of business financing are available in
the world. Financial institutions, such as banks, are in the business of
providing capital to businesses, consumers, and investors to help them achieve
their goals. For this case, the different forms of business financing can be
grouped into two types which are equity financing and dept financing. With
examples explain the two types of financing.
Equity Financing

What is Equity Financing?

Equity financing refers to the sale of company shares in order to raise capital. Investors who purchase the shares are also
purchasing ownership rights to the company. Equity financing can refer to the sale of all equity instruments, such as common
stock, preferred shares, share warrants, etc.

Equity financing is especially important during a company’s start-up stage to finance plant assets and initial operating expenses.
Investors make gains by receiving dividends or when their shares increase in price.

Major Sources of Equity Financing

When a company is still private, equity financing can be raised from angel investors, crowdfunding platforms, venture capital
firms, or corporate investors. Ultimately, shares can be sold to the public in the form of an IPO.

1. Angel investors

Angel investors are wealthy individuals who purchase stakes in businesses that they believe possess the potential to generate
higher returns in the future. The individuals usually bring their business skills, experience, and connections to the table, which
helps the company in the long term.

2. Crowdfunding platforms

Crowdfunding platforms allow for a number of people in the public to invest in the company in small amounts. Members of the
public decide to invest in the companies because they believe in their ideas and hope to earn their money back with returns in
the future. The contributions from the public are summed up to reach a target total.

3. Venture capital firms

Venture capital firms are a group of investors who invest in businesses they think will grow at a rapid pace and will appear on
stock exchanges in the future. They invest a larger sum of money into businesses and receive a larger stake in the company
compared to angel investors. The method is also referred to as private equity financing.

4. Corporate investors

Corporate investors are large companies that invest in private companies to provide them with the necessary funding. The
investment is usually created to establish a strategic partnership between the two businesses.

5. Initial public offerings (IPOs)

Companies that are more well-established can raise funding with an initial public offering (IPO). The IPO allows companies to
raise funds by offering its shares to the public for trading in the capital markets.
Advantages of Equity Financing
1. Alternative funding source

The main advantage of equity financing is that it offers companies an alternative funding source to debt. Startups that may not
qualify for large bank loans can acquire funding from angel investors, venture capitalists, or crowdfunding platforms to cover their
costs. In this case, equity financing is viewed as less risky than debt financing because the company does not have to pay back
its shareholders.

Investors typically focus on the long term without expecting an immediate return on their investment. It allows the company to
reinvest the cash flow from its operations to grow the business rather than focusing on debt repayment and interest.

2. Access to business contacts, management expertise, and other sources of capital

Equity financing also provides certain advantages to company management. Some investors wish to be involved in company
operations and are personally motivated to contribute to a company’s growth.

Their successful backgrounds allow them to provide invaluable assistance in the form of business contacts, management
expertise, and access to other sources of capital. Many angel investors or venture capitalists will assist companies in this
manner. It is crucial in the startup period of a company.

Disadvantages of Equity Financing

1. Dilution of ownership and operational control

The main disadvantage to equity financing is that company owners must give up a portion of their ownership and dilute their
control. If the company becomes profitable and successful in the future, a certain percentage of company profits must also be
given to shareholders in the form of dividends.

Many venture capitalists request an equity stake of 30%-50%, especially for startups that lack a strong financial background.
Many company founders and owners are unwilling to dilute such an amount of their corporate power, which limits their options
for equity financing.

2. Lack of tax shields

Compared to debt, equity investments offer no tax shield. Dividends distributed to shareholders are not a tax-deductible
expense, whereas interest payments are eligible for tax benefits. It adds to the cost of equity financing.

In the long term, equity financing is considered to be a more costly form of financing than debt. It is because investors require a
higher rate of return than lenders. Investors incur a high risk when funding a company, and therefore expect a higher return.

3. Cost

Equity investors expect to receive a return on their money. The business owner must be willing to share some of the company's
profit with his equity partners. The amount of money paid to the partners could be higher than the interest rates on debt
financing.

4. Loss of Control

The owner has to give up some control of his company when he takes on additional investors. Equity partners want to have a
voice in making the decisions of the business, especially the big decisions.
5. Potential for Conflict

All the partners will not always agree when making decisions. These conflicts can erupt from different visions for the company
and disagreements on management styles. An owner must be willing to deal with these differences of opinions.

Debt Financing

When a company raises money by selling debt instruments, most commonly in the form of bank loans or bonds

Debt financing occurs when a company raises money by selling debt instruments, most commonly in the form of bank loans or
bonds. Such a type of financing is often referred to as financial leverage.

As a result of taking on additional debt, the company makes the promise to repay the loan and incurs the cost of interest. It can
then use the borrowed money to pay for large capital expenditures or fund its working capital. In general, well-established
businesses that demonstrate constant sales, solid collateral, and are profitable will rely on debt financing.

On the other hand, newly launched businesses that face uncertainty in the future or businesses with high profitability but lower
credit ratings will more likely rely on equity financing.

Debt Financing Options

1. Bank loan

A common form of debt financing is a bank loan. Banks will often assess the individual financial situation of each company and
offer loan sizes and interest rates accordingly.

2. Bond issues

Another form of debt financing is bond issues. A traditional bond certificate includes a principal value, a term by which repayment
must be completed, and an interest rate. Individuals or entities that purchase the bond then become creditors by loaning money
to the business.

3. Family and credit card loans

Other means of debt financing include taking loans from family and friends and borrowing through a credit card. They are
common with start-ups and small businesses.

Debt Financing Over the Short-Term

Businesses use short-term debt financing to fund their working capital for day-to-day operations. It can include paying wages,
buying inventory, or costs incurred for supplies and maintenance. The scheduled repayment for the loans is usually within a year.

A common type of short-term financing is a line of credit, which is secured with collateral. It is typically used with businesses
struggling to keep a positive cash flow (expenses are higher than current revenues), such as start-ups.

Debt Financing Over the Long-Term

Businesses seek long-term debt financing to purchase assets, such as buildings, equipment, and machinery. The assets that will
be purchased are usually also used to secure the loan as collateral. The scheduled repayment for the loans is usually up to 10
years, with fixed interest rates and predictable monthly payments.
Advantages of Debt Financing
1. Preserve company ownership

The main reason that companies choose to finance through debt rather than equity is to preserve company ownership. In equity
financing, such as selling common and preferred shares, the investor retains an equity position in the business. The investor
then gains shareholder voting rights, and business owners dilute their ownership.

Debt capital is provided by a lender, who is only entitled to their repayment of capital plus interest. Hence, business owners are
able to retain maximum ownership of their company and end obligations to the lender once the debt is paid off.

2. Tax-deductible interest payments

Another benefit of debt financing is that the interest paid is tax-deductible. It decreases the company’s tax obligations.
Furthermore, the principal payment and interest expense are fixed and known, assuming the loan is paid back at a constant rate.
It allows for accurate forecasting, which makes budgeting and financial planning easier.

3. Once you payback the load the relationship with the lender ends

4. Monthly payments as well as the breakdown of the payments, is a known expense that can be accurately included in your
forecasting model

Disadvantages of Debt Financing

1. The need for regular income

The repayment of debt can become a struggle for some business owners. They need to ensure the business generates enough
income to pay for regular installments of principal and interest.

Many lending institutions also require assets of the business to be posted as collateral for the loan, which can be seized if the
business is unable to make certain payments.

2. Adverse impact on credit ratings

If borrowers lack a solid plan to pay back their debt, they face the consequences. Late or skipped payments will negatively affect
their credit ratings, making it more difficult to borrow money in the future.

3. Small businesses lending can be slowly substantially in recession periods. Since its more difficult to receive finance due to
economic conditions

3. Potential bankruptcy

Agreeing to provide collateral to the lender puts their business assets at risk, and sometimes even their personal assets. Above
all, they risk potential bankruptcy. If the business should fail, the debt must still be repaid.

Additional Resources

CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)® certification program, designed to transform
anyone into a world-class financial analyst.
In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional
resources will be very helpful:

 Leverage Ratios
 Debt Restructuring

 Quality of Collateral

Debt vs Equity Financin

Question Eleven
Give a brief description of the big four financial statements.

 Statement of comprehensive income (Income statement or Financial

Performance)
i. Revenue
ii. Expenses
iii. Net Income
 Statement of financial Position (Balance Sheet)
i. Assets
ii. Liabilities
iii. Owners Equity
 Statement of Changes in Equity
i. Net Income
ii. Dividends
 Statement of Cash Flows

Question Twelve
In Tanzania we have a group of people working in the street commonly
known as “wajasiriamali wadogo wadogo”. If you translate the Swahili word
“ujasiriamali” to English it literally means entrepreneurship. In your opinion,
how do you consider “wajasiriamali wadogo wadogo” are they running
business activities or entrepreneurship activities? Discuss
Business – Is an organization entity that sells goods or services for profit
Enterpre
Business Entrepreneurship
1 Less Risk Higher Risk
2 Traditional procedures Unconventional Procedure
3 Focus on profit Focus
4 Market player Market leader
5 Extremely Competitive Low Competition
6 Minimum Failure (Follow footsteps of Making path (Failures very
others) possible)
7 Adopts path from entrepreneurs Creates path to be followed
by businessmen

Question thirteen
With examples, explain how the government of the United Republic of
Tanzania supports entrepreneurship and innovation.
 SME Policy (Govt Policy, Trade Policy, Agricultural Policy
 Govt Ministry (State and Presidents office; Local Government, Finance and planning;
Foreign affairs and E.A Cooperation)
 Loans
 Support
 Govt Investment support schemes
 Govt Financial support schemes (PASS - Private Agricultural Sector Support Trust)
 Regulatory framework and support institutions
 Research institute
 Institution set by central government (COSTECH, SIDO ETC)

Question fourteen
The success of entrepreneurs or innovators anywhere in the world including
Tanzania very much depends on various factors. These factors grouped
together are well known as the entrepreneurship and innovation ecosystem.
Based on your understanding, give a detailed explanation of the ecosystem.
Entrepreneurship Ecosystem - Is a social and economic environment affecting
the local or regional entrepreneurship.
Question fifteen
The entrepreneurship and innovation ecosystem are made up of six players,
out of these players
a. Giving reasons, explain any three of these players that you think are
important.
i. Policy
ii. Human Capital
iii. Markets

b. Giving reasons, explain any three of these players that you think are not
important.
i. Finance
ii. Culture
iii. Support