Oxbridge Academy effortless excellence in education Entrepreneurship & Business Management N4 Study Guide Preview
CONTENTS TOPIC 1: THE CHALLENGES OF ENTREPRENEURSHIP 1.1 Defining the concept entrepreneur 1.2 Distinguishing between the role of the Entrepreneur and Intrapreneur 1.3 The personal qualities we are looking for in an entrepreneur. 1.4 The personal resources (KFC) of successful entrepreneurs 1.5 The economic importance of the entrepreneur with reference to the South African situation. 1.6 The merits / advantages of entrepreneurial opportunities for the entrepreneur. 1.7 Explaining the reasons why businesses fail 1.8 How to avoid the pitfalls of business failure TOPIC 2: CREATIVITY AND IDEA GENERATION 2.1 Defining the concept creativity 2.2 The difference between an idea and an opportunity. 2.3 The importance of innovation and creativity. 2.4 Creativity methods available to the entrepreneur in generating ideas and identifying opportunities 2.5 The process of generating ideas. 2.6 The various methods available for creating ideas and opportunities. 2.7 The procedures that can be used for protecting business ideas 2.8 How to determine whether you have a feasible idea that can be turned into an opportunity 2.9 Creating a Personal SWOT analysis Oxbridge Academy & Camford College. This Edition: January 2013 2
2.10 Creating a Personal Growth Programme 2.11 The SIX STEPS decision making process as applied to creativity and idea generation TOPIC 3: MARKET FEASIBILITY STUDY 3.1 Defining the concept market feasibility study 3.2 Defining the concept product 3.3 The nature of products with reference to their classification 3.4 The proposed market with reference to the following concepts: 3.4.1 Market description 3.4.2 Target market 3.4.2 Market segmentation 3.4.3 Market share 3.5 How to calculate market share potential 3.6 The difference between primary and secondary data 3.7 The methods used for collecting primary data. 3.8 Describe the type of questions that characterise a good questionnaire. 3.9 Describing what SWOT analysis refers to in terms of: 3.9.1 The Entrepreneur 3.9.2 The product / service 3.10 Defining the concept competitive advantage 3
TOPIC 4: FINANCIAL FEASIBILITY STUDY 4.1: Defining the concept financial feasibility 4.2 Explain the following financial concepts: 4.2.1 Profit 4.2.2 Sales 4.2.3 Total costs 4.2.4 Fixed costs 4.2.5 Variable costs 4.2.6 Operating costs 4.2.7 Breakeven point 4.3 The process of how to determine the start-up costs for a proposed business 4.4 The calculations required for the purchase of assets required by a business 4.5 Factors that influence a business s sales scenario 4.6 Determine the best and worst case sales scenario to determine the financial feasibility of a business TOPIC 5: INTRODUCTION TO THE BUSINESS PLAN 5.1 Describe the reasons for compiling a business plan 5.2 The simple rules that apply in selecting a name for a business 5.3 The elements of a business plan 5.4 The content of the cover page of a business plan 5.5 The content page 4
5.6 Key information contained in the executive summary of a business plan 5.7 The content of the marketing plan by including the following 5.8 The content of the management plan may include: 5.9 The content of the financial plan may include: 5.10 The content of the Operational plan may include: 5.11 The content of supporting material may include: 5.12 Where to find assistance in starting a business TOPIC 6: THE MARKETING PLAN 6.1 The elements of the marketing mix (4P s) 6.2 The nature and characteristics of products / services 6.3 The importance of packaging and packaging strategies 6.4 Types of packaging 6.5 Labelling 6.6 The importance of pricing 6.7 Factors influencing pricing 6.8 Pricing methods & techniques 6.9 Other pricing techniques 6.10 Turning slow moving inventory / stock into cash 6.11 Defining the concept promotion 6.12 Advertising for sales and goodwill 6.13 Selecting advertising media 6.14 Developing an advertising campaign 6.15 Choosing appropriate media to carry the advertisement 5
6.16 Measuring advertising results 6.17 Preparing an advertising budget 6.18 Sales Promotion 6.19 Defining the concept Personal Selling 6.20 What knowledge is essential for successful Personal Selling? 6.21 The difference steps in the Personal Selling Process 6.22 Customer Service 6.23 The use of Public Relations 6.24 Press Release 6.25 The content of a Sales Letter 6.26 The factors that influence the location / place of a business 6.27 The layout of a business TOPIC 7: THE MANAGEMENT PLAN 7.1 The types of business ownership most suitable for a proposed business 7.2 The criteria that need to be kept in mind in the process of selecting the form of ownership of a proposed business 7.3 The procedure and documents involved in the formation of the different forms of ownership of a proposed business. 7.4 The role of the owner of a business in terms of responsibilities and management 7.5 The role, duties and responsibilities of other employees in the running of a proposed business 7.6 A detailed description of the process that will be followed in the production of a proposed product, or delivery of a service or functioning of a retail concern. 7.7 The equipment required in the operation of a proposed business 6
7.8 Describing the supplier analysis in respect of: Reliability Proximity Service Number of suppliers 7.9 The requirements for the efficient administration of a proposed business TOPIC 8: THE FINANCIAL PLAN 8.1 The sources of financing of long-term and short-term financing 8.2 The methods used for obtaining equity capital 8.3 The facilities and instruments available for borrowed capital 8.4 The functions of financial statements 8.5 Budget Statements 8.6 Projected Cash Flow Statements 8.7 Projected Income and Expenditure Statement 8.8 Balance Sheet 7
TOPIC 1: THE CHALLENGES OF ENTREPRENEURSHIP IN THIS TOPIC 1: THE CHALLENGES OF THE ENTREPRENEUR WE WILL EXPLORE: 1.1 Defining the concept entrepreneur 1.2 Distinguishing between the role of the Entrepreneur and Intrapreneurs 1.3 The personal qualities we are looking for in an entrepreneur. 1.4 The personal resources (KFC) of successful entrepreneurs 1.5 The economic importance of the entrepreneur with reference to the South African situation. 1.6 The merits / advantages of entrepreneurial opportunities for the entrepreneur. 1.7 Explaining the reasons why businesses fail 1.8 How to avoid the pitfalls of business failure 8
1.1 DEFINING THE CONCEPT: ENTREPRENEUR An entrepreneur is a person with passion and purpose who uses personal innovation and creativity to start a new business sustainable or take ownership of an existing business. Entrepreneurs do this by identifying an unfulfilled need in the marketplace, utilise the opportunities to gather the necessary resources, are willing to take calculated risks and live with uncertainties in order to be rewarded with making a profit. Given this definition, the following key elements can be identified: Start a new or take ownership of an existing business Identify unfulfilled needs Utilise opportunities Gather the necessary resources Willing to take calculated risks Live with uncertainty Making a profit 9
1.2 DISTINGUISH BETWEEN THE ROLE OF THE ENTREPRENEUR AND THE INTRAPRENEUR We already have a clear understanding of the role of the Entrepreneur by means of the definition given to the concept Entrepreneur. We therefore pay our attention to the concept Intrapreneur and the distinction will become clear. Intrapreneurs Intrapreneurs are employed by large businesses and enjoy the benefits and security of earning a regular income. Intrapreneurs are directly responsible for innovative and creative thinking of new ideas and new ways of doing things Intrapreneurs are assigned to turn business ideas into profitable finished products or service through assertive risk taking because excessive risks are involved. Intrapreneurs organise and manage business resources to generate more profits and their actions are aimed at developing technologies to stay competitive in the marketplace. This may include corporate venturing when large entities start subsidiary organisations on a national, continental or even global scale. 10
1.3 THE PERSONAL QUALITIES WE ARE LOOKING FOR IN AN ENTREPRENEUR Ability to identify opportunities / opportunity seeking Entrepreneurs are able to see gaps or unfulfilled needs in the market for creating a new business for products, services, processes and applications. They seize unusual new opportunities, react in changing the situation and in the process they create a competitive advantage not only for today but also for tomorrow. They are not concerned about what was done yesterday, but concentrates on what can be done today and tomorrow. Ability to welcome feedback Entrepreneurs are continually willing to listen to what people are saying, whether it is receiving positive or negative feedback, will accept advice to improve business, want to know if they are succeeding or failing and are always looking for the tell tale signs to show if they are achieving their business objectives. Action orientated Successful entrepreneurs are action-orientated and want to start producing results immediately. They are go-getters who get off their bums and do something. They do not wait for things to happen, they make things happen and start to work on their business ideas today. Ambition Entrepreneurs have the drive and the will to succeed. Assertive Entrepreneurs are assertive in the way they talk and act. This gives entrepreneurs the confidence and respect they deserve in becoming business leaders. Commitment to work contract 11
Entrepreneurs have a commitment to the tasks and goals they set for themselves. They are determined to achieve goals no matter what mistakes they might make along the way and accepts full responsibility for problems in completing the work contract. True entrepreneurs will pitches in with workers, or even take their place to get the work contract done and satisfying the customer. Confidence in their ability to succeed Entrepreneurs have confidence and an inner certainty that it is the right thing to do and that their business will be successful. Entrepreneurs are optimistic people and look at life with a positive attitude. When they have problems or failures, they do not blame others, but analyse the situation to find the cause and take action to correct them so that the business can survive and grow. Continuous Goal setting Successful entrepreneurs continuously set themselves new goals, that are consistent with their interests, values, believes and talents. That and challenges as they accomplish them. They actively start pursuing a new goal or challenges and do this as a matter of course in accomplishing them. Entrepreneurs trust their judgement regardless of what others may think. Courage It requires guts to make the break to venture into being an entrepreneur. We all have an underlying fear of failure. But, the more we fail, the more we have an opportunity to succeed if only we try and try again. Demand for quality and efficiency It is vitally important for an entrepreneur to offer high quality products or services in an efficient way. Time is money, thus entrepreneurs understand the need to be well organised, knowing what they are doing and act to do something that meets or beats existing standards of excellence, or improves on past performance 12
Desire for responsibility Entrepreneurs want to be their own boss and in charge of their own resources and even other people s lives to achieve business objectives and in doing so the willingness to take responsibility. Energetic and motivated Entrepreneurs have the extraordinary capacity to work long hours doing a wide variety of tasks with less than a normal amount of rest or sleep. They approach their tasks with determination and single-minded thoroughness in transformation ideas into reality. They are not willing to sit and wait for something to happen, but rather make things happen because they find it both stimulating and satisfying. Good communication skills Entrepreneurs are able to communicate well with themselves, their staff and especially customers and suppliers. Independence Successful entrepreneurs join only for the tactical purpose of making contacts, for gathering useful information, seeking help in solving difficult problems or for furthering their business. Information seeking Entrepreneurs know how to use contacts or information networks to obtain useful information on clients, suppliers and competitors Knows the importance of people The most important part of any business is its employees and customers without which it will not succeed. Leadership An entrepreneur is a leader who does things before anybody else does. They lead the way in satisfying needs and wants. They provide leadership to their employees and uplift the community as a whole. 13
Long-term perspective Entrepreneurs can tolerate considerable amounts of frustration and delay. They devote a lot of time and effort to achieve goals only to be rewarded in the future. Their mission and long range time-frame enable them to overcome ever-present hurdles. Organising skills An important attribute to any entrepreneur is to know how to correctly put the right people together to do tasks. They can effectively organise people, assets, equipment, stock etc. that will allow them to achieve their business ideas and goals. Persistence Entrepreneurs will take repeated or different actions to overcome an obstacle, they will make personal sacrifices or expends extraordinary efforts to complete a job and sticks with own judgement in the face of opposition or early lack of success. Persuasion and networking Entrepreneurs Use deliberate strategies to influence or persuade others and will use business and personal contacts to accomplish own objectives. Preference for moderate risk taking Entrepreneurs take moderate calculated risks and set themselves goals that are specific, measurable, attainable, and realistic and linked to a time frame. Entrepreneurs prefer to pitch their aspirations just a notch above the level of their known capabilities to provide a feeling of comfortable challenge. Entrepreneurs weigh up the risks involved, examine a business opportunity intelligently, conduct market research and then plan towards reaching their business goals. The most commonly used methods of risk control include: o o Risk avoidance abandoning or refusing to undertake an activity in which risk is too costly Risk reduction using various methods to reduce the probability that a given event will occur, prevention through safety and protective techniques 14
o o Risk transfer shifting the consequences of a risk outside a business through insurance for prospective future loss. Risk assumption risk absorption or risk retention as planned acceptance of the risk of loss that will not produce significant financial consequences to the business. Pro-active Entrepreneurs are pro-active when setting achievable goals. They do not wait for something to happen; they create the opportunity for something to happen! Problem-solving behaviour For Entrepreneurs mapping out a strategy often requires considerable attention to detail considerable resourcefulness and persistence. They, make sure that they have all the relevant information about the conditions they are likely to encounter for creative purpose, balance and combine facts, and are not aimless in their relentless attack on problems that could impede their progress. Reality orientated Entrepreneurs are intellectually honest and are ready to confront facts squarely. Reality orientation enables entrepreneurs to better determine what is and what is not possible. Response to failure Entrepreneurs have an attitude that mistakes and setbacks are only temporary barriers along the way to their goals. They recover rapidly, come to terms with their mistakes, learn from them, correct them and use them when facing similar future problems. They take personal responsibility for both the success and failure of their businesses Self confidence Self confidence is based on the anticipation or belief that entrepreneurs will successfully master challenges, overcome obstacles and barriers and realise their wishes and desires. They never consider failure a real possibility. 15
Self reliance, self-esteem and self-faith Entrepreneurs strongly believe in their ability to achieve the goals set for themselves. They believe their own efforts, ingenuity and perseverance and are innovative and creative in meeting problems. They are hopeful and optimistic and perceive themselves as capable, strong and in charge. They have a solid and stable self-esteem that stems from a healthy feeling of self-worth and self-acceptance. They have faith in themselves when setbacks and failures occur and the ability to survive serious disappointment and defeat. Single mindedness Single minded entrepreneurs in pursuit of their goals can maintain focused concentration to attain important objectives. Single-mindedness generates persistence and dedication that do not diminish before the goals are reached. Success orientated For entrepreneurs there are no ifs or buts about succeeding. All they think about is how they are going to succeed Systematic planning and monitoring Entrepreneurs develop and use logical step-by-step plans to reach goals. They plan all their tasks carefully and in detail, know what their goals are and how and when they will achieve them. They evaluate alternatives, monitors progress and switches to alternative strategies when necessary to achieve goals Tolerance of ambiguity and uncertainty Entrepreneurs tolerate ambiguous situations well and can arrive at decisions under conditions of uncertainty even when faced with anxiety. They can relax any binding habit patterns and adhere as little as possible to stereotyped plans or solutions. Urge to achieve Entrepreneurs always aim to be special. 16
The main reason for starting a business is to develop a feeling of achievement and success, proving to themselves and others that the intensity will have an influence on whether the business will succeed. 1.4 THE PERSONAL RESOURCES (KFC) OF SUCCESSFUL ENTREPRENEURS K Knowledge and Skills Knowledge and skills enables the entrepreneur to start a business with confidence. Entrepreneurs need specialised skills as required by the type of entrepreneurial business and industry in which they function. The knowledge and skills may include that gained though obtaining a professional tertiary qualification, industry related experience, skills specific training, the application of technical skills gained through the application of specific methods and techniques, management skills, financial skills, marketing skills, human resources skills etc. F Finance (Own and Business loan) The first step in obtaining start-up capital for a business is to draw up a financial plan as part of the business plan. Entrepreneurs take on financial risks when investing money in the business. Having your own finance though personal saving is helpful and important. Entrepreneurs must possess part of the funds or assets needed before financial institutions are approached for assistance. Entrepreneurs need to consider the interest rates of banks and other financial institutions because the costs of starting a business are very high. Family and friends may also borrow money to encourage and support entrepreneurs in their business and may be more patient for money to be repaid at a low or even without interest. But, demands may increase when the business becomes successful and family and friends feel they should share in the success or when the business fails and they want their money back. 17
Rather save up money before you start, if you borrow money do so in small amounts and know how you plan to spend the money. C Contacts and Friends (Networking) Knowing them can be very helpful, as they can assist with the various complexities encountered when starting a new business. Networking requires getting to know right people in the right places. Networking gives entrepreneurs a broad range of knowledge and advice that can be used in a business through asking questions, obtaining other people s views and discovers what people are doing in the industry in which they operate. It takes time to build up customers and potentially cheaper reliable suppliers. Entrepreneurs need to keep record of people they meet who might become valuable contacts in terms of customers, potential suppliers and sources of business and professional advice. Friends may have the influence to generate additional business for the entrepreneur Take care that you do not invite friends to become too involved in your business unless that is what you intend. Friends may become potential customers thus keep business separate from pleasure. This is even more true when money is involved. Want to carry on learning about Entrepreneurship and Business Management? 18