ENTREPRENEURSHIP

Entrepreneurship is the process or the act of organising resources and acceptance of risk and uncertainty
for the purpose of capitalising on opportunities with the aim of achieving profit.
Define the term entrepreneur: An entrepreneur is a person who has possession of a new enterprise,
venture or idea and is accountable for the inherent risks and the outcome.
The concept of entrepreneurship
Explain the role of an entrepreneur;
• Conceptualising: The entrepreneur must formulate ideas regarding the type of business and the
type of product that can be put on the market. He must also think of the size of the production in
order to make a profit.,
• Planning: This means that the entrepreneur will consider the future and what is to be done in the
future with regard to what has been conceptualised.
• 4. Organising: This involves bringing together the other factors of production in order to ensure
efficiency, maximum output and maximum profits.
• Evaluating the performance of a business: One of the functions of managers is evaluating. This
is done at the end of the production process to see if the entire process has been successful and to
see if the goals of the organisation have been met.
• Bearing risks: A risk is a chance. There are two types of risks: a) insurable and b) non-insurable
risks. It is the responsibility of the entrepreneur to take out policies against those risks which can
be insured, for example, the threat of theft, fire, flooding, etc. Those risks which cannot be
insured against must be borne on the shoulders of the entrepreneur. Such risks are referred to as
uncertainties, for example, a sudden change in the demand for the product
• Reaping profits or the bearing of losses: The entrepreneur's reward for organising the factors of
production and bearing risks is profit
Identify the characteristics of the the typical entrepreneur;
Personal traits and leadership qualities:
[Link]. This means being able to use the imagination to invent something different or
original.
2. Innovative. In other words, be able to find new methods or ways of doing things and to
make changes where necessary. It also involves bringing in new ideas.
3. Flexible. This means to be easily adaptable. In this rapidly changing world, the
entrepreneur must adapt to changes in technology and changes in demand. Rigidity often
results in failure.
4. Goal-oriented. Whatever the entrepreneur does should be towards achieving the goals
or objectives of the business. He or she should not be sidetracked into doing things that
have no bearing on the aims and objectives of the business.
5. Persistent. The entrepreneur should be able to continue firmly in a certain course of
action despite difficulties. This does not mean, however, that there should not be changes
where necessary. Remember, we have already said that the entrepreneur should be flexible.
However, being persistent means not giving up on an idea or project at the first sight of
problems. Efforts should be made to 'iron out' the problems and continue the projects,
resulting in the achievement of the goals and objectives of the business.
6. Highly committed. If the entrepreneur has a high degree of commitment, then hard
work and perseverance should pay off.
Outline reasons why persons may want to establish their own business;
Reasons for wanting to start a business:
Desire for financial independence
Some people set up businesses in order to gain money so that they will not have to rely on
others for money for food, clothing and shelter. Financial independence, in this case, is
realised through making a profit. Where an entrepreneur sees that a product can be sold for
more than what it costs to produce, there will be motivation to set up business, so as to not
have to depend on others.
Self-actualisation (self-fulfillment)
Often, businesses are set up because of the need to realise one's potential because of the
need to express creativity, because of the need to achieve and to be able to recognise one's
limitations or shortcomings and to be able to make improvements.
Business owners are able to achieve what is important to them. Entrepreneurs want to be
their 'own bosses', and they set up businesses to bring their desires to life. Businesses allow
for self-expression, an opportunity to do what you enjoy.
Some persons see businesses as an opportunity to contribute to society and be recognised
for their efforts. They gain trust and recognition from [Link] who have served them
faithfully over the years.
Now, revise the last two weeks' lessons in order to attempt this question.
(a) Define the terms entrepreneur and entrepreneurship. Entrepreneur is a person who has
possession of an enterprise , idea and venture and is accountable for inherent risk and
outcomes. Entrepreneurship is the process or act of organizing resources and the
acceptance of risk and uncertainty with the process of capitalizing on opportunities with the
aim of achieving a profit (4 marks)
(b) Discuss THREE roles of the entrepreneur. Conseptualizing- an entrepreneur must
formaulate ideas regarding the typr of business and the typr of product that should be put
on the market.
Organizing and entrepreneur must bring together the other factors of production to ensure
efficiency, maximum output and maximum profet.
Planning the entrepreneur must put into consideration the future and what is to be done in
the future with regards to what has been conceptualized
Evaluating the performance of the business one of the function of manager is to
evaluate . this is done at the end of the production processs to see if the goals of
the organization have been met and if the bnsuiness has been successful
Bearing of risk and loss- there are two types of risk insurable and non insurable
resk. It is the responsibility of the entrepreneur to take out policies against those
risk which are insurable such as the threat of theft, flooding and fire. Those risk
which cannot be insured are borne on the shoulders of the the entrepreneur such
as uncertainty for eg a change in the demand of a product. (6 marks)
(c) Outline THREE vital characteristics of the typical entrepreneur.
Creative ust the imagination to invent something different or original
Innovative use ne method or way of doing things and making schanges where necessary.
Flexible the entrepreneur must be adaptable. Ths rapidly changing world(6 marks)
(d) As an entrepreneur, you are thinking of establishing a business in your community.
Explain TWO reasons you may wish to do so. (4 marks)
Total marks: 20

Describe the role of key functional areas in the operation of different types of business.
Role of the production, marketing and finance, legal, Research and Development (R and D)
departments in a business.
The work of this department includes many types of research, e.g., consumer research, product
research and motivation research. Feasibility studies and pilot projects are carried out and
communication with research institutes, such as the department of statistics, takes place.
THE MARKETING FUNCTION
The marketing function includes market research, publicity, distribution, selling merchandising
and after-sales services, advertising and sales promotion.
THE PERSONNEL FUNCTION
This department is sometimes referred to as the human resource department. The functions and
duties of this department concern mainly the employees of the business. Primary concerns are:
planning and forecasting manpower requirements, recruitment and selection of employees of the
business, job analysis and job description, job specifications and employee training, etc.
THE PRODUCTION FUNCTION
In this department, raw materials are combined to produce goods and services are also provided.
Designers make specifications which are fully developed and tested. Sample products are also
made. There will be no production department however if the business is only engaged in
retailing or wholesaling, since they are buying and selling already manufactured goods or they
are in the service industry.

Identify sources of information for conducting research into the establishment of a business;
Primary and secondary sources of information for conducting research.
Sources of information
The research plan can call for the gathering of primary data, secondary data or both.
Primary data, also known as field research, is research that collects original or new data using
various techniques. These techniques include:
• Questionnaires. The questionnaire is the most common survey method. It may be written
or orally administered. It is designed specifically for the task and is normally completed
face to face, by telephone or through the post or email.
• Test marketing. A potential new product is marketed on a small scale regionally to gauge
people’s reaction to it, before committing the firm to production and national launch.
• Consumer panels. A panel consisting of a small number of consumers is set up. They
receive the product and comment on it.
 • Interviews. These may be formal or casual. They may be conducted on an individual or a
group basis.
• Observation. People’s reactions are quietly watched or noticed while they shop. This
provides information from the marketplace.
Desk or secondary research
This type of research uses existing information, such as information in the firm’s own records.
This may include:
• sales records
• official publications
• statistical and newspaper reports
• government publications
• trade association studies
• university journals
• websites
• textbooks, etc.
The major advantage of this type of research is that the information is readily available
and can be stored for the future. Among the disadvantages is the fact that it is sometimes
out of date and the research is more time consuming than the primary type of research.

 . Explain the relationship between planning and the operation of a business;

The necessity for short-term, medium-term and long-term planning in a business.

Planning and operation of a business
The link between the planning and operation of a business is that the planning stage is the first
stage and the operation stage is the last stage.
The long-term plans are the overall plans of the business.
However, in order to achieve these plans, interim or short-term plans and medium-term plans
must be established in line with the long-term or overall plans. In other words, once the interim
or short-term plans and the medium- term plans have been achieved, the long-term or overall
plans would have been achieved.
Identify regulatory practices instituted by governments for the establishment of different types of
businesses;
Local regional and global rules for conducting business, including local government (municipal,
village council, parish council regulations)
Outline the advantages and disadvantages of Opportunities and challenges encountered by
different types of business organizations; different types of organizations.

Identify sources of captial for the setting up of a business;

Sources of capital including venture capital.
Money provided by investors to startup firms and small businesses with perceived long-term growth
potential.
Now let us talk a little about the various sources of venture capital for the business. You may
recall that we defined venture capital as capital used to start the business or capital required for a
special project within the business. The various sources of capital available to the business
depend on the type of business.
The sole trader normally uses private means of raising capital. He may use his savings, his
inheritances or he may borrow from friends and relatives. Financial institutions are not normally
a source of capital for the sole-trader type business since they are normally very small and, as
such, are not competitive when it comes to qualifying for loans. However, financial assistance
may be given to them from the Small Businesses Association of Jamaica.

Explain the significance of collateral in accessing capital to Collateral:

establish a business; (a) concept;
  (b) evaluation of different
types;
(c) the value of collateral.

Collateral is anything of value that can be sold quickly and the money used to cover amounts that
a loan recipient has defaulted on
A number of items can be used as collateral, including:
• House titles
• Land titles
• Motor vehicle titles
• Titles for the businesses
• Investment documents (such as share certificates and debenture certificates)
• Antique furniture
• The cash value of insurance policies
The value of collateral

2. Collateral or guaranteed loans are cheaper, in terms of rates of interest, since there is less risk
for the financial institution.
3. A collateral loan is also easier to obtain than a non-collateral loan.
Some loans may not require collateral. A guarantor may be required to sign on behalf of the
borrower. This person signs with the intention that if the borrower defaults on the loan, he or she
will have to repay what is owing. This is another form of secured loan.

Outline the features of a business plan;

Analysis of all the elements of a business plan, including the executive summary and the
operational, marketing and financial plans.
A business plan is a written document indicating an entrepreneur’s proposed venture.
The executive summary is useful in instances where individuals are too busy to read the whole
business plan, but need some vital information about the proposed business.
Functions of the business plan
1. It guards the operations of the business by charting its future course and devising a strategy to
get to the end of that course. It gives managers and employees a sense of direction.
2. It is used to attract lenders and investors.
3. It is used as a sales tool.
The executive summary includes:
1. The name of the business
2. The type of business
3. Information about the owners, for example, their names, addresses, qualifications and work
experience
4. A description of the product (detailed)
5. A statement of the financial needs. This includes how much is needed, what the funds will be
used for and what will be the proposed means of repayment.
6. An overview of the planned strategic actions to ensure that the business is a success.
The production plan
Information that may be included in the production plan:
• The production process
• Type of production (primary, secondary, tertiary, etc)
• The level of production (subsistence, domestic or export/surplus level)
• Use of technology (state the processes that the machines will be used for (sewing, cutting,
dyeing, etc)
• Whether the fixed assets will be rented, leased or bought
• The expected life of the fixed assets if they will be bought
• Maintenance of the fixed assets (for example how much will it cost per year)
• Sources of equipment (places where they can be obtained and the costs)
 • Planned capacity (how much they will be able to produce)
• Terms of purchase of assets (cash or hire purchase)
• Location and layout of machinery (time may be lost if machines are far apart)
• A list of the raw materials needed
• Labour – number needed, cost (wages), statement of availability, skills and experiences
needed
• Overheads – all expenses
• Production cost (this plus mark-up [profit] equals final price
The marketing plan
This plan may include:
• A description of the good or service and a statement of what makes it different from
others already on the market
• Justification of the location of the business
• Market area
• Main customers
• Total demand
• Market share
• Selling price (note current price (competitors), customers’ ability to pay and advertising
costs)
• Sales forecast over a set period of time
• Promotional activities
• Marketing strategies, including advertising, sales promotions, etc.
• Potential buyers – who they are, what their motivation to buy will be, expected annual
purchase, whether the product will be seasonal and, if so, what times of the year the
product will be purchased.
The financial plan
This part of the business plan may include:
• A statement of how much capital is required, how it will be obtained and the terms of
repayment, if any
• Security for loan if one will be sought
• How the funds obtained will be used (a budget can be created)
• Cash-flow statement
• Projection of operation costs
• Profit-and-loss statement
• Balance sheet
• Break-even point (estimate about how long it will take to reach there)
 • Return on investment (percentage projected)
Identify ethical and legal issues in the establishment and operation of a business;
Ethical and legal issues, for example advertising, taxation and environmental issues.

Ethical issues
Ethics has to do with right and wrong, good and bad. The ethical issues include:
• Ensuring that if a licence, permit or registration is required for the operation of the
business, everything is taken care of. If there is no proof of the legality of the business or
if the business has not been given approval to proceed, the Government can shut it down.
• Refraining from money laundering. This is when money from illegal or underground
economy is used in the legal business, for example to purchase assets. When this is done,
it distorts the national economy.
• Steering clear of cartels, example wine and drug cartels and OPEC. These restrict
quantity and increase prices.
• Reporting extortion, which is illegal.
• Making sure there is no document falsification, in terms of figures or information
• Avoiding of poor labeling
• Resisting price gouging. This is the practice of increasing prices when the supply is low
and the demand is high, for example in times of natural disaster. At such times, the
supplier has the upper hand.
• Using standard accounting procedures.
• Paying all required taxes. Tax evasion is illegal and cheats the Government of much-
needed revenue.
• Disposing of waste properly. Dumping waste in rivers and seas causes pollution and ill-
health.
• Providing quality materials. Inferior raw materials must not be used as they can result in
poor quality and, perhaps, dangerous goods that may shorten lifespan or cause accidents.
• Adhering to business standards set by the Bureau of Standards Jamaica and the
Government
• Broadcasting misleading advertisements. They should be fair, truthful and should not
prejudice any group of persons.
• Making truthful declarations. False declarations must be avoided, for example saying
juice is 100 per cent natural, contains 100 per cent vitamin C, with no preservatives,
when this is not so.
• Avoiding double ticketing, that is, putting new, higher price tags on products already
priced.
• Falsely writing cheques for money not in the bank. These cheques will be dishonoured
and the business’ credibility will be lessened.
Explain the purposes of a feasibility study; The purpose of a feasibility study.
This is a detailed investigation to determine whether a business idea or project is technically,
financially and economically viable, and if it will be successful before committing large sums of
money to it. It is a screening exercise and is often described as a likelihood study.
Factors relating to a feasibility study
• It is done before the business plan and usually after a series of business ideas have been
discussed.
• It includes cost-benefit analysis.
• It results in the development of a feasibility report.
• Small teams of experts from marketing, production, finance and development produce
this estimate.
• Past information is used to produce trends.
Purpose of feasibility study
A feasibility study:
• Determines if a business opportunity is possible, practical and viable.
• Enables one to take a realistic look at both the positive and negative aspects of the
business opportunity.
• Identifies the reasons not to proceed; therefore saving time, money and heartache later
on.
• Ensures that the business venture chosen will generate adequate cash flow and profits,
withstand risks, remain viable in the long run and meet the objectives of the founders.
• Helps to frame and flesh out or shape specific business alternatives so they can be studied
in depth.
• Outlines and narrows down the business alternatives.
• Provides quality information for decision making.
• Helps to increase investment in the business.
• Provides documentation that the business venture was thoroughly investigated.
• Helps in securing funding from lending institutions and other sources

.
Explain the consequences of ethical and illegal practices in business.
Consequences of unethical and illegal practices in business:
(a) misleading advertisements- unfair and fraudulent practice on the population
(b) witholding of tax - cheating the government of revenue
(c) unethical disposal of waster pollution
(d) money laundering - distortions in the national economy
Liscences suspended or fign the company