Entrepreneurship Lecture Slide

By: Birtukan.A
.
 Chapter One

Introduction
to
Entrepreneurship
Chapter Outline
1. Historical Origin of Entrepreneurship
2. Definition of Entrepreneurship & Entrepreneur
3. Types of Entrepreneurs
4. Roles of Entrepreneurs in Economic Development
5. Entrepreneurial Competence & Environment
6. Creativity, Innovation & Entrepreneurship
1. Historical Origin of Entrepreneurship

• During the ancient period, the word entrepreneur was

used to refer to a person managing large commercial
projects through the resources provided to him.
• In the 17th Century a person who has signed a
contractual agreement with the government to
provide stipulated products or to perform service was
considered as entrepreneur.
Cont’d (Historical Origin)
• In the 18th Century the first theory of
entrepreneur has been developed by
Richard Cantillon. He said that an
entrepreneur is a risk taker. If we
consider the merchant, farmers and /or
the professionals they all operate at risk.

• The other development during the 18th

Century is the differentiation of the
entrepreneurial role from capital
providing role. The later role is the
base for today’s venture capitalist.
Cont’d (Historical Origin)
• In the late 19th and early 20th Century an
entrepreneur was viewed from economic
perspectives. The entrepreneur
organizes and operates an enterprise
for personal gain.
• “The function of the entrepreneur is to
reform or revolutionize the pattern of
production by exploiting an invention or
more generally untried technological
possibility for producing new commodities
or producing an old one in a new way or
opening a new outlet for products by
reorganizing a new industry.”
Cont’d (Historical Origin)

• From the historical development, it

is possible to understand the fact
that the perception of the word
entrepreneur was evolved from
managing commercial project
to the application of innovation
(creativity) in the business
idea.
2. Definition of Entrepreneurship
& Entrepreneur
Brainstorming

• What is entrepreneurship?
• What is entrepreneur?
• Why do you think that entrepreneurship is
becoming hot issue in our country,
Ethiopia?
Cont’d (Definition)
• The origin of entrepreneurship lies in 17th century
France, a French words “entre” meaning “between”
and “Prendre” meaning “to take”: the word was
originally used to describe people who “take on the
risk” between buyers and sellers or who undertake a
task such as starting a new venture.
Cont’d (Definition)
• The term “entrepreneur” is defined in a
variety of ways.
• Yet no consensus has been arrived at one
precise skills and abilities that make a
person a successful entrepreneur.
• The concept of entrepreneur varies from
country to country, as well as from
period to period and the level of
development thoughts and perceptions.
Cont’d (Definition)
• Entrepreneurship is the process of
identifying opportunities in the
market place, arranging the
resources required to pursue
these opportunities and
investing the resources to
exploit the opportunities for
long term gains.
Cont’d (Definition)
• Entrepreneurship can also be defined as
the process of creating something
different and better with value by
devoting the necessary time and effort
by assuming the accompanying financial,
psychic and social risks and receiving the
resulting monetary reward and personal
satisfaction.
• In this case an individual should come up
with something different and better in
order to the named as entrepreneur.
Cont’d (Definition)
• Entrepreneurship is the art of identifying viable
business opportunities and mobilizing resources to
convert those opportunities into a successful
enterprise through creativity, innovation, risk taking
and progressive imagination.
• Entrepreneurship is a practice and a process
that results in creativity, innovation and
enterprise development & growth.
Cont’d (Definition)
• In general, the process of entrepreneurship
includes five critical elements:
• The ability to perceive an opportunity.
• The ability to commercialize the
perceived opportunity, i.e. innovation
• The ability to pursue it on a sustainable
basis.
• The ability to pursue it through
systematic means.
• The acceptance of risk or failure.
Cont’d (Definition)
• An entrepreneur is any person who
creates and develops a business idea
and takes the risk of setting up an
enterprise to produce a product or
service which satisfies customer needs.
• An entrepreneur can also be defined as a
professional who discovers a business
opportunity to produce improved or new
goods and services and identifies a way
in which resources required can be
mobilized.
Cont’d (Definition)
• An entrepreneur is an individual who: has
the ability to identify and pursue a
business opportunity; undertakes a
business venture; raises the capital to
finance it; gathers the necessary
physical, financial and human resources
needed to operate the business venture;
sets goals for him/herself and others;
initiates appropriate action to ensure
success; and assumes all or a major
portion of the risk!
3. Types of Entrepreneurs
Entrepreneurs could take two main forms:

1. Individual Entrepreneur
2. Intrapreneur/ Corporate
Entrepreneur
 Cont’d (Types)

Discussion

• What is the difference between

individual entrepreneur & corporate
entrepreneur?
 Cont’d (Types)

Individual Entrepreneur:

• An individual entrepreneur is someone who started;

acquired or franchised his/her own independent
organization.
Cont’d (Types)
Intrapreneur/ Corporate Entrepreneur:
An established firm with an orientation
to acting entrepreneurial is called
corporate entrepreneurship.
Entrepreneurial firms are typically
proactive innovators and are not averse
to taking calculated risks.
A corporate entrepreneur/Intrapreneur
is a person who does entrepreneurial
work within large organization.
 Cont’d (Types)

• An organization can create an environment in which all

of its members can contribute in some function to the
entrepreneurial function.

• An organization that creates such an internal

environment is defined as entrepreneurial organization.
 4. Roles of Entrepreneurs in
Economic Development
• Improvement in per Capita Income/Wealth
Generation
• Generation of Employment Opportunities
• Inspire others Towards Entrepreneurship
• Balanced Regional Development
• Provide Diversity in Firms
• Economic Independence
 Cont’d (Roles)

• Combine Economic Factors

• Provide Market Efficiency
• Accepting Risk
• Maximize Investor’s Return
5. Entrepreneurial Competence &
Env’t

Brainstorming

• Who becomes an entrepreneur?

Who Becomes an Entrepreneur?

Young Professionals
An Inventor
The Excluded
Qualities of an Entrepreneur
• Successful entrepreneurs majorly produce the
following qualities:
• Opportunity-seeking
• Persevering
• Risk Taking
• Demanding for efficiency & quality
• Information-seeking
• Goal Setting
Qualities of an Entrepreneur

• Planning
• Persuasion & networking
• Building self-confidence
• Listening to others
• Demonstrating leadership
Entrepreneurial Skills

• Turning an idea into reality calls

upon two sorts of skills, these are:

1. General Management Skills &

2. People Management Skills
1. General Management Skills
• Some of the most important
general management business
skills are:
• Strategy Skills
• Planning Skills
• Marketing Skills
• Financial Skills
• Project Management Skills
• Time Management Skills
2. People Management Skills
• Businesses are made by people.
• A business can only be successful if the
people who make it up are properly
directed and are committed to make an
effort on their behalf.
• An entrepreneurial venture also needs the
support of people from outside the
organization such as customers, suppliers
& investors.
• To be effective, an entrepreneur needs to
demonstrate a wide variety of skills on
how he/she deals with other people.
Cont’d (PM Skills)
• The following are the major people management skills:
• Communication Skills
• Leadership Skills
• Motivation Skills
• Delegation Skills
• Negotiation Skills
 Cont’d (Skills)

• Entrepreneurial performance results from a

combination of industry knowledge, general
management skills; people management skills and
personal motivation (see the figure below).
Cont’d (Skills Summary)
Entrepreneurial Tasks
• We recognize entrepreneurs first and foremost, by
what they actually do, by the tasks they undertake.
Some of the important tasks are:
• Owning Organization
• Founding New Organizations
• Bringing Innovations to Market
• Identification of Market
Opportunity
• Application of Expertise
• Provision of Leadership
• Entrepreneur as Manager
Wealth of Entrepreneurs

• Wealth is money and anything that money can buy.

• It includes money, knowledge and assets of the
entrepreneur.
Who Benefits from Entrepreneur’s Wealth?

• The major beneficiaries are:

• Employees
• Investors
• Supplier
• Customers
• Local Community
• Government
Entrepreneurship & Environment
• No business concern can ignore the environment
around it except at its own peril.
• The penalty of environmental disregard is heavy.
• It not only reduces profit margins and makes
opportunities for expansion slip, but it also arouses
social hostility and makes social environment
growingly inhospitable to business operations.
 Cont’d (Env’t)
External Internal
Environment Environment
Economic • Raw Material
Environment • Production/
Legal Environment Operation
Political • Finance
Environment • Human Resource
Socio-Cultural
Environment
Demographic
Environment
Environmental Factors Affecting
Entrepreneurship
The major ones are:
• Sudden changes in government policy.
• Sudden political upsurge.
• Outbreak of war or regional conflicts.
• Political instability or hostile government
attitude towards industry.
• Excessive red-tapism & corruption
among government agencies.
 Cont’d (Factors)

• Ideological and social conflicts.

• Unreliable supply of power, materials, finance, labor &
other inputs.
• Rise in the cost of inputs.
• Unfavorable market fluctuations.
• Non-cooperative attitude of banks & financial
institutions.
Cont’d (Factors)
• Entrepreneurship is environmentally
determined.
• The most important essential for
entrepreneurial growth is the presence of
a favorable business environment.
• A healthy business environment requires
active social and cultural behavior of the
people, efficient economic conditions,
helpful and motivating government
policies, etc.
• When environment mitigates
entrepreneurship, it must be modified!
 6. Creativity, Innovation &
Entrepreneurship

• Creativity, innovation and entrepreneurship have been

recognized as important contributors to a nation’s
economic growth.

• These three terminologies are chronologically

interrelated
1. Creativity
• Creativity is defined as the tendency to generate or
recognize ideas, alternatives, or possibilities that may
be useful in solving problems, communicating with
others, and entertaining ourselves and others.
• It is an ability to come up with new idea and to identify
new and different ways of looking at a problem and
opportunities.
Steps in the Creative
Process
1. Opportunity or Problem Recognition
2. Immersion
3. Incubation
4. Insight
5. Verification & Application
Barriers to Creativity
• Searching for one • Becoming overly
‘right’ answer specialized
• Focusing on being • Avoiding ambiguity
logical • Fearing looking foolish
• Blindly following the • Fearing mistakes &
rules failure
• Constantly being • Believing that ‘I’m not
practical creative
• Viewing play as
frivolous
2. Innovation
• Innovation lies at the heart of the entrepreneurial
process and is a means to the exploitation of
opportunity.

• It is the implementation of new idea at the individual,

group or organizational level.
Types of Innovation
• There are four distinct types of
innovation, these are as follows:
• Invention - described as the creation of a new product,
service or process
• Extension - the expansion of a product, service or process
• Duplication - defined as replication of an already existing
product, service or process
• Synthesis - the combination of existing concepts and factors
into a new formulation
Innovation Process
Majorly four:

1. Analytical Planning
2. Resources Organization
3. Implementation
4. Commercial Application
Areas of Innovation
New product (Goods & Services)
New Production Techniques
New Way of Delivering the Product
to the Customer
New Operating Practices
New Means of Informing the
Customer about the Product
New Means of Managing
Relationship within the Organization
New Ways of Managing
Relationships between
Organizations
From Creativity to
Entrepreneurship
• Creativity is the ability to develop new
ideas and to discover new ways of
looking at problems and opportunities.

• Innovation is the ability to apply

creative solution to those problems and
opportunities in order to enhance
people’s lives or to enrich society.

Entrepreneurship = Creativity + Inn

ovation
Creativity Entrepreneurship
 Chapter Two

Business Planning
Chapter Outline

1. Opportunity Identification & Evaluation

2. Business Idea Development
3. Business Idea Identification
4. Methods of Generating Business Idea
5. Business Idea Screening
6. Concept of Business Plan
7. Developing a Business Plan
 1. Opportunity Identification &
Evaluation
• Most authors agree that the initial stage in the
entrepreneurial process is the identification and
refinement of a viable economic opportunity that
exists in the market.
• Without the recognition of an opportunity the
entrepreneurial process is likely to result in failure.
Cont’d
The opportunity identification and evaluation stage can
be divided into five main steps:

1. Getting the Idea/Scanning the

Environment
2. Opportunity Identification
3. Opportunity Development
4. Opportunity Evaluation/Analysis &
5. Assessment of an Entrepreneurial
Team
2. Business Idea Development
• A business idea is a short and precise
description of the basic operation of an
intended business.
• There are three types of business ideas.
They are:
• Old idea
• Old idea with modification
• New idea
3. Business Idea Identification
• Before you start a business, you need to
have a clear idea of the sort of business
you want to run.
• Your business idea should tell you:
• Which need will your business fulfill?
• What good or service will your business sell?
• Whom will your business sell to?
• How is your business going to sell its goods or
services?
• How much will your business depend upon &
impact the environment?
 4. Methods of Generating
Business Idea
 There many ways to come up with business idea.

 The information gained from one approach may

supplement another and help you to clearly describe
your business idea.
Major Approaches of Generating
Business Idea
1. Learn from Successful Business
Owners
2. Draw from Experience (self & others)
3. Survey Your Local Business Area
4. Scanning Your Environment
 Natural resources
 Characteristics & skills of people in the
local community
 Import substitution
 Waste products
 Publications/articles
 Trade fairs & exhibitions
Cont’d

5. Brainstorming
(structured/unstructured)
6. Focus Group Discussion
7. Problem Inventory Analysis
8. Free Association
9. Forced Relationships
10.Attribute Listing
5. Business Idea Screening
• Idea screening is the process to spot
good ideas and eliminate poor ones.
• To screen the business idea generated,
three approaches are discussed as
follow:
• Macro Screening (top 10)
• Micro Screening (top 3)
• Scoring the Suitability of Business
Idea (to pick one)
Cont’d
Macro Screening:
 is aimed screening down ideas to 10. The common
criteria are:
 Are my own competencies sufficient?
 Can I finance it to a large extent with
my own equity?
 Will people buy my product/service (i.e.
is it needed and can people afford it)?
Cont’d
Micro Screening:
 is aimed at screening down ideas into 3. The
common criteria used for screening are:
Solvent demand
Availability of raw materials
Availability of personal skills
Availability of financial resources
Cont’d
Scoring the Suitability of Business Idea:
This approach is most appropriate when
deciding on starting a business.
When there are more than one possible
business ideas and one needs to decide
which one to follow, we use scoring.
This is done by rating for each and the
one with the highest total score will be
selected.
6. Concept of Business Plan

• Planning is the first and the most crucial step for

starting a business.

• A carefully charted and meticulously designed

business plan can convert a simple idea/innovation
into a successful business venture.
Cont’d
• A business plan is a road map for starting and running
a business.

• A well-crafted business plan identifies opportunities,

scans the external and internal environment to assess
the feasibility of business and allocates resources in
the best possible way, which finally leads to the
success of the plan.
7. Objectives of a Business Plan
• Give directions to the vision formulated by
entrepreneur.
• Objectively evaluate the prospects of business.
• Monitor the progress after implementing the plan.
• Persuade others to join the business.
• Seek loans from financial institutions.
Cont’d (Objectives)
• Visualize the concept in terms of market availability,
organizational, operational and financial feasibility.
• Guide the entrepreneur in the actual implementation
of the plan.
• Identify the strengths and weakness of the plan.
• Identify challenges in terms of opportunities and
threats
Cont’d (Objectives)
• Clarify ideas and identify gaps in management
information about their business, competitors and the
market.
• Identify the resources that would be required to
implement the plan.
• Document ownership arrangements, future prospects
and projected growths of the business venture.
8. Business Plan Development
Process
1. Preliminary Investigation
2. Opportunity Identification & Idea Generation
3. Environmental Scanning
4. Feasibility Analysis
5. Report Preparation
9. Components of Business Plan

1. Cover Sheet

2. Executive Summary

3. The Business

4. Funding Requirement

5. Product or Services
Cont’d (Components)

6. The Plan
• Marketing Plan
• Operational Plan
• Organizational Plan
• Financial Plan
7. Critical Risks
8. Exit Strategy
9. Appendices
 Chapter Three

Business Formation
Chapter Outline
1. Introduction
2. Definition & Importance of MSEs
3. Forms of Business
4. Classification of MSEs
5. Setting Up Small Scale Business
Chapter Outline
6. Small Business Failure & Success Factors
7. Problems of Small Scale Businesses in Ethiopia
8. Organizational Structure & Entrepreneurial Team
Formation
1. Introduction
• A business formation deals with the formalization and
actual implementation of business ideas in to practice.
• In today’s economic development/transformation,
small businesses are creating new jobs even as large
businesses continue eliminating jobs and they are
more flexible than large ones in the products and
services they offer.
2. Definition & Importance of
MSE’s
• Specifying size and standard to define small business is
necessary because people adopt different standards for
different purposes.
• For example, legislators may exclude small firms from
certain regulations and specify ten employees as the cut-
off point.
Cont’d (Definitions)
• Moreover, a business may be described as “small”
when compared to larger firms, but “large” when
compared to smaller ones.
• For example, most people would classify
independently owned gasoline stations, neighborhood
restaurants, and locally owned retail stores as small
business.
Cont’d (Definitions)
• Similarly, most would agree that the major automobile
manufacturers are big businesses.
• And firms of in-between sizes would be classified as
medium on the basis of individual viewpoints.
• There are two approaches to define small business.
They are: Size Criteria, & Economic/control criteria.
Size Criteria:
• Even the criteria used to measure the size of
businesses vary; size refers to the scale of operation.
• For instance, some of the criteria used to measure size
are: number of employees; volume, and value of sales
turnover, asset size, and volume of deposits, total
capital investment, volume/value of production, and a
combination of the stated factors.
Size Criteria:
• To provide a clearer image of the small firms, the
following general criteria for defining a small business
are suggested by Small Business Administration (SBA):
• Financing of the business is supplied by one individual or a
small group. Only in a rare case would the business have
more than 15 or 20 owners.
Size Criteria:
• Except for its marketing function, the firm’s operations are
geographically localized.
• Compared to the biggest firms in the industry, the business
is small.
• The number of employees in the business is usually fewer
than 100.
• This size criteria based definition of MSEs
varies from country to country.
• All over the world, number of employees
or capital investment or both are used as
the basis for defining MSEs.
Economic/Control Criteria:
• Size does not always reflect the true nature of an
enterprise.
• In addition, qualitative characteristics may be used to
differentiate small business from other business.
• The economic/control definition majorly covers: market
share, independence, personalized management,
technology & geographical area of operation.
Importance of MSEs

• Micro and Small Enterprises (MSEs) cover a wider

spectrum of industries and play an important role in
both developed and developing economies.
• Ethiopia is no exception and MSEs occupy a prominent
position in the development of the Ethiopian economy.
Cont’d (Importance)
1. Large Employment Opportunities
2. Economical Use of Capital
3. Balanced Regional Development
4. Equitable Distribution of Wealth
and Decentralization of Economic
Power
5. Dispersal over Wide Areas
6. Higher Standard of Living
7. Mobilization of Local
Resources/Symbols of National
Identity
8. Innovative & Productive /Simple
Technology
Cont’d (Importance)
9. Less Dependence on Foreign Capital/ Export
Promotion
10. Promotion of Self Employment
11. Protection of Environment
12. Shorter Gestation Period
13. Facilitate Development of Large Scale
Enterprises
14. Individual Tastes, Fashions, and Personalized
Services
15. More Employment Creation Capacity
3. Forms of Business
• There are three basic legal forms of business formation
with some variations available depending on the
entrepreneurs’ needs. These are:
1. Proprietorship,
2. Partnership, &
3. Corporation
Cont’d (Forms)
N Forms of Description
Business
1 Proprietorship Form of business with single
owner who has unlimited liability,
controls all decisions, and
receives all profits.
2 Partnership Two or more individuals having
unlimited liability who have
pooled resources to own a
business.
3 Corporation Separate legal entity that is run
by stockholders having limited
liability.
4. Classification of MSEs

Level of Sector Huma Total Asset

Enterpri n
se Power
Industry ≤5 ≤birr100,000($6000
Micro or €4500)
Enterprise Service ≤5 ≤birr50,000($3000
or €2200)
Industry 6-30 ≤birr1.5 Mil($90,000
Small or €70,000)
Enterprise Service 6-30 ≤birr500,000($30,00
0 or €23,000)
Ethiopian MSEs
1. Manufacturing Sector
2. Construction Sector
3. Trade Sector
4. Service Sector
5. Agriculture Sector (Urban Agriculture)
Levels of MSEs in Ethiopia
1. Start-up Level
2. Growth Level
3. Maturity Level
4. Growth- Medium Level
5. Setting Up Small Business(Steps)
• Once an individual decides to take up
entrepreneurship as a career path, to be a
job provider instead of a job seeker, s/he has
to establish an enterprise.
• However, setting up of a small new
enterprise is a very challenging as well as a
rewarding task.
• Several problems are involved in this task.
• It is extremely important to take utmost care
in identifying the product or service to be
launched by the entrepreneur; otherwise it
might prove to be a costly mistake.
Steps in Setting Up SB
• The entrepreneurial process of launching a new
venture can be divided into three key stages:
Discovery, Evaluation & Implementation.
• These can be further sub-divided into seven steps as
shown below:
 Steps in Setting Up SB
Identifying Analyzing & Launching &
Opportunitie Selecting the Developing the
s Opportunity Enterprise

Discovery Opportunity Evaluation

Implementation

1. Discovering your 3. Evaluating the idea 5. Forming the enterprise

entrepreneurial as a business to create value
potential opportunity
6. Implementing the
2. Identifying a problem 4. Investigating & entrepreneurial
& potential solution gathering resources strategy

7. Planning for the future

Environmental Analysis
• Entrepreneurship does not exist in a vacuum.
• It is affected by and affects the environment.

Entrepreneurship Environment
Hierarchy of Environmental
Analysis
Macro
Environment

Sectoral
Analysis

SWOT Analysis

Product/Service
Small Business Failure Factors
• The common ones are:

• Inadequate Management,
• Inadequate Financing,
• Neglect,
• Fraud, &
• Disaster
Small Business Success Factors
• The success factors are categorized
as:

1. Conducive Environment;
2. Adequate Credit Assistance;
3. Market & Marketing Support
Point of Discussion

• What are the common problems of small businesses in

Ethiopia?
 8. Organizational Culture &
Entrepreneurial Team Formation
• The entrepreneur sometimes thinks that
he or she can do everything and is
unwilling to give up responsibility to
others or even include others in the
management team.
• In most cases when this occurs, the
entrepreneur will have difficulty of
making the transition from a start-up to a
growing, well-managed business that
maintains its success over a long period
of time.
Cont’d
• Some of the important considerations and strategies in
recruiting and assembling an effective team and hence
creating an effective and positive organization culture
are:
• First, the entrepreneur’s desired culture
must match the business strategy
• Second, the leader of the organization
must create a workplace where
employees are motivated and rewarded
for good work.
Cont’d

• Third, the entrepreneur should be

flexible enough to try different things.
• Fourth, it is necessary to spend extra
time in the hiring process.
• Lastly but not least, the
entrepreneur needs to understand the
significance of leadership in the
organization.
Cont’d

• Generally speaking, finding the most effective team

and creating a positive organization culture is a
challenge for an entrepreneur but it is just as critical
as having an innovative and marketable product. It is
an important ingredient in an organization’s success.
 Chapter Four

Product Development
Chapter Outline
1. Concept of Product
2. Product Development Process
3. Product Protection
4. Intellectual Property System in Ethiopia
1. Concept of Product
• Broadly defined, products include physical objects,
services, persons, places, organizations, ideas or mixes of
these entities.
• Services are products that consist of activities, benefits or
satisfactions that are offered for sale, such as haircuts, tax
preparation and home repairs.
• Services are essentially intangible & do not result in the
ownership of anything.
Cont’d
• Many entrepreneurs find it difficult to identify a new
product/service or a new market opportunity.

• To start and expand a small venture, an entrepreneur

needs to identify opportunities for domestic and/or
international expansion.
Cont’d
• Organization's success is dependent on customer
satisfaction and delight.
• Customer satisfaction is achieved through the
development of product and service, which have all
attributes required by the customer
• A successful product or services do not only have an
attractive package design but should be also able to
provide robust performance.
Cont’d
• A successful startup depends on its distinctive and
compelling proposition.
• This is how merchandise or service firms stand out
from the competition and are compelling to the young
company customers.
• The merchandise or service firms will succeed most if
it either eliminates an existing pain or adds significant
tangible benefits.
2. Product Development Process
• Once the opportunity is selected, and a
business model has been designed, the
next step is to develop a commercial
version of the opportunity which in most
cases is either a good or service.
• One of the essential characteristics of a
successful business is exemplified by its
ability to continuously and rapidly
develop new or improved versions of
existing products that deliver values
more than customers expect (Palgrave,
2019.)
Cont’d
• Product development is the process
through which companies react to
market signals, respond to changes in
customer demand, adopt new
technologies, foray into new areas, and
ensure continuous growth.
• It is a core process in achieving strategic
objectives, renewal of the company
business model and deterring
competition from displacing the company
from its market position.
Cont’d
• In general, there are four distinct
stages in the product development
process:

1. Idea Generation
2. Incubation
3. Implementation
4. Diffusion
Cont’d (Stages)
Cont’d (Stages)
• Detailing the above stages, product development goes
through the following eight stages:
1. New Idea Generation
2. Idea Screening
3. Concept Development &
Testing
4. Marketing Strategy
Development
5. Business Analysis
6. Product Development
7. Market Testing
8. Commercialization
3. Product Protection
• Entrepreneurs product should be protected through
intellectual property right.
• Intellectual Property which includes patents,
trademarks, copyrights, and trade secrets represents
important assets to the entrepreneur and should be
understood even before engaging the services of an
attorney.
Cont’d
• Too often entrepreneurs, because of their lack of
understanding of intellectual property, ignore
important steps that they should have taken to protect
these assets.
• Intellectual property is a legal definition of ideas,
inventions, artistic works and other commercially
viable products created out of one's own mental
processes.
1. Patent Right
• An entrepreneur who invents a new thing or improves
an existing invention needs to get legal protection for
her invention through a patent right.
• A patent is a contract between an inventor and the
government in which the government, in exchange for
disclosure of the invention, grants the inventor the
exclusive right to enjoy the benefits resulting' from the
possession of the patent.
Cont’d (Patent)
• A patent provides the owner with exclusive rights to
hold, transfer, and license the production and sale of a
product/process.
• It is an intellectual property right and It is issued by
government to the inventor.
• This exclusive property right can be granted for a
number of years depending on the countries laws and
type of property.
Cont’d (Patent)
• What can be patented?
• Processes: Methods of production,
research, testing, analysis,
technologies with new applications.
• Machines: Products, instruments,
physical objects.
• Manufactures: Combinations of
physical matter not naturally found.
• Composition of matter: Chemical
compounds, medicines, etc.
2. Trademark
• A trademark may be a word, symbol,
design, or some combination of such, or it
could be a slogan or even a particular
sound that identifies the source or
sponsorship of certain goods or services.
• Unlike patent, a trademark can last
indefinitely, as long as the mark continues
to perform its indicated function.
• Unlike patent, this is periodically renewed
unless invalidated by cancellations,
abandonment, or other technical
registration/renewal issues.
Cont’d (Trademark)
• Benefits of a Registered Trademark:

• It provides notice to everyone that you

have exclusive rights to the use of the
mark throughout the territorial limits of
the country.
• It entitles you to sue in federal court
for trademark infringement, which can
result in recovery of profits, damages,
and costs.
Cont’d (Benefits)
• It establishes incontestable rights
regarding the commercial use of the
mark.
• It establishes the right to deposit
registration with customs to prevent
importation of goods with a similar
mark.
• It entitles you to use the notice of
registration (®).
• It provides a basis for filing trademark
application in foreign countries.
3. Copyright

• Copyright is a right given to prevent others from

printing, copying, or publishing any original works of
authorship.

• Copyrights provide exclusive rights to creative

individuals for the protection of literary or artistic
productions.
Cont’d (Copyright)
• It protects original works of authorship including
literary, dramatic, musical, and artistic works, such as
poetry, novels, movies, songs, computer software, and
architecture.

• Usually copyrights are valid for the life of the inventor

plus a few decades.
4. Intellectual Property System in
Ethiopia
• The Ethiopian Government established the Ethiopian
Intellectual Property Office in the year 2003 containing
the understated Objectives:
• To facilitate the provision of adequate
legal protection for and exploitation of
intellectual property in the country;
Cont’d
• To collect, organize and disseminate
technological information contained in
patent documents and encourage its
utilization;
• To study, analyze and recommend
policies and legislation on intellectual
property to the government; and
• To promote knowledge and
understanding of intellectual property
among the general public.
Cont’d
• The existing laws and directives in Ethiopia in the field
of Intellectual Property (IP) are the patent
proclamation and the implementing regulation, the
copyright and related rights proclamation and the
trademark registration directive.
Chapter Five

Marketing
Chapter Outline
1. Definition of Marketing
2. Core Concepts of Marketing
3. Importance of Marketing
4. Marketing Philosophies
5. Marketing Information System
6. Marketing Mixes & Their Strategies
7. Customer Service
1. Definition of Marketing
• Marketing is a social and managerial
process by which an individual or group
obtain what they need and want through
creating, offering and exchanging of product
of values with others (Philip Kotler,2012).
• Marketing is the total business activity
designed to plan, price, promote and
distribute need and want satisfying products
to target market to achieve organizational
goal (William J. Stanton, 1984).
Cont’d (Definition)
• Marketing is the effort to identify and satisfy
customers’ needs and wants.
• It involves finding out who your customers are, what
they need and want, the prices, the level of
competition.
• It involves the knowledge and all the processes you
undertake to sell your product.
Cont’d (Definition)

• Marketing answers the following major questions:

• Who are my customers?
• What are my customer’s needs &
wants?
• How can I satisfy my customers’?
• How do I make a profit as I satisfy my
customers?
2. Core Concepts of Marketing
• The basic concepts include:
Need, Want & Demand
Product
Value
Cost
Exchange
Transaction
Market
3. Importance of Marketing
• A customer purchases a product because it provides
satisfaction.
• That something that makes a product capable of
satisfying want is its utility.
• It is through marketing that much of a product utility is
created.
• Then potential buyers must be informed about the
product existence and the benefits it offers through
various forms of promotion.
Cont’d (Importance)
• The major forms of utility that marketing offer are the
following:

1. Form Utility
2. Place Utility
3. Time Utility
4. Information Utility
5. Possession Utility
4. Marketing Philosophies
• There are five competing philosophies under which
organizations can choose to conduct their marketing
activities:
1. Production Philosophy
2. Product Philosophy
3. Selling Philosophy
4. Marketing Philosophy
5. Societal Marketing Philosophy
6. Relationship Marketing Philosophy
Summary of Evolution of Marketing

Producti • Consumers favor products that are available &

on highly affordable
• Improve production & distribution
• ‘Availability & affordability is what the
customer wants’
Product • Consumers favor products that offer the most
quality, performance & innovative features
• ‘A good product will sell itself’
Sales • Consumers will buy products only if the
company promotes them
• ‘Creative advertising & selling will overcome
consumers’ resistance & convince them to
buy’
Marketin • Focuses on needs/ wants of target markets &
g delivering satisfaction better than competitors
• ‘The customer is king! Find a need & fill it’
Relation • Focuses on needs/ wants of target markets &
ship delivering superior value
Marketin • ‘Long-term relationships with customers &
5. Marketing Information System
• Every firm must organize the flow of
information to its marketing managers.
• Companies are studying their manager’s
information needs and designing marketing
information system to meet these needs.
• A marketing information system consists of
people, equipment and procedure to
gather, sort, analyze, evaluate and
distribute needed timely and accurate
information to marketing decision makers.
Cont’d (MIS)
Cont’d (MIS)
• The major sources of marketing information are:
• Internal Company Records
• Marketing Research
• Marketing Intelligence
• Competitive Analysis
• Marketing Decision Support Analysis
Marketing Research

• Marketing research is the systematic and objective

identification, collection, analysis, and dissemination of
information for the purpose of assisting management
in decision making related to the identification and
solution of problems and opportunities in marketing.
Components of Marketing
Research
• The following are the major concerns of
marketing research:
Market size
Market Share
Market Penetration
Brand Equity Research
Buyer Decision Processes
Research
Customer Satisfaction Research
Marketing Research Process
• The following are the major steps of conducting
research
1. Define Research Problem & Objectives
2. Research Design Formulation
3. Gathering Secondary Data
4. Gathering Primary Data
5. Data Processing & Analysis
6. Report Preparation & Presentation
Marketing Intelligence
• Market intelligence is the systematic process
of gathering, analyzing, supplying and
applying information (both qualitative and
quantitative) about the external market
environment.
• Marketing intelligence is used to determine:
• Current and future market needs,
• Changes in the business environment that may
affect the size and nature of the market in the
future.
• Environment that may affect the size and nature
of the market in the future.
Importance of Marketing Intelligence

• Market and customer orientation – promote external

focus
• Identification of new opportunities.
• Smart segmentation
• Early warning of competitor moves.
• Minimizing investment risks
• Quicker, more efficient & cost-effective information
 Ways of Undertaking MI

• Unfocused Scanning
• Semi-focused Scanning
• Informal Search
• Formal Search
Competitive Analysis

• Competitive analysis refers to determining the

strengths and weaknesses of competitors and
designing ways to take opportunities or tackle threats
posed by competitors.
• To plan effective competitive marketing strategies, the
company needs to find out all it can about its
competitors.
 Cont’d

• It must constantly compare its products, prices,

channels and promotion with those of close
competitors.
• In this way the company can find areas of potential
competitive advantage and disadvantage.
Uses of Competitive Analysis
• It generates understanding of competitors’ past,
present (and most importantly) future strategies.
• It provides an informed basis to develop strategies to
achieve competitive advantage in the future (e.g. how
will competitors respond to a new product or pricing
strategy?)
• It helps forecast the returns that may be made from
future investments.
Steps of Competitive Analysis

1. Identify your competitors

2. Gather information about competitors
3. Gather Information on Competitors
4. Analyze the Competition
5. Develop Pricing Strategy
6. Marketing Mixes & Their Strategies
• Marketing mixes are marketing variables that the
marketing manager can manipulate as controllable
variables.
• They include:
1. Product (Customer Value)
2. Price (Customer Cost)
3. Promotion
(Communication)
4. Place (Convenience)
Marketing Mix Strategies

Pricing Strategies:
• Price Skimming
• Penetration Pricing
• Cost-plus Pricing
• Mark-up Pricing
• Competition Oriented Pricing
• Odd-even Pricing/Psychological
Pricing
Promotion Strategies
• An organization’s promotional strategy can consist:
• Advertising
• Personal Selling
• Public Relations
• Sales Promotion
Distribution Strategies
• Marketing channels are the most
important actors for the effective and
efficient distribution of products.
• Marketing channels are
individuals/organizations involved in the
process of making the product available
for use or consumption by consumers.
• Channels are used to improve exchange
efficiency.
• It is divided into Direct & Indirect
channels.
Cont’d
• The following factors should be considered to select
the best channel under the condition of using best
distribution strategy:
• Company Factors
• Market Characteristics
• Product Attributes
• Environmental Forces
7. Customer Service
• Many employees have unclear
understanding of what customer service
really is.
• There are indications everywhere that there
are customer service problems that demand
solutions.
• How service providers do their jobs, how fast
and accurately they process paper works,
how successfully they pursue accounts, and
how effective they are in taking the next
step to develop customer loyalty, will
determine an organization's success in
serving customers.
Concept of Service
• Service refers to any activity undertaken
to fulfil customer’s needs.
• It is any act or performance that one
party can offer to another that is
essentially intangible and does not result
in the ownership of anything.
• Its production may or may not be tied to
a physical product.
• Distinctive features of services include
intangibility, inseparability, variability &
perishability as opposed to goods.
Concept of Customer
• Customer is a person or organization that
buys a product or service either for use
or for resale.
• Customers can be internal (member of
the organization) or external (customers
coming from outside).
• A thorough understanding of the concept
of customer service enables
organizations to provide quality service
by using proper service management
approaches.
Customer Service Strategies
• To bring about quality service delivery, the following
specific areas should be considered:
• Establishing a clear customer service
strategy.
• Ensuring that correct people are in
place, with the correct skills to
deliver outstanding personal service.
Cont’d (Strategies)

• Establishing clear material service

delivery processes.
• Improving in terms of process
improvement, quality monitoring and
recovery continuously.
• Participatory Management.
Customer Handling &
Satisfaction
• Customer handling and satisfaction is a key for
successful organizations.
• Managers and employees should work hand-in-hand to
improve their service delivery programs.
• Existing customers must be satisfied with the existing
service.
• Existing customers are also means of attracting
potential customers.
Customer Handling Strategies

• The following are the major ways of proper

customer handling:
• Considering Customers as an
Invaluable Asset
• Reducing Customer Complaints
• Placing oneself in the
Customer’s Shoes
 Chapter Six

Business Financing