Unit 1.

CONCEPT OF ENTREPRENEURSHIP AND ITS RELATION TO PATRIOTISM 1.1 Objectives 1.2 Definition of entrepreneurship and its relation to patriotism 1.3 Entrepreneurial characteristics 1.4 Entrepreneurship environment 1.5 Entrepreneurship strategies 1.6 Forms of business 1.7 Small and medium enterprises roles 1.8 Government entrepreneurship initiatives Activity

Unit 2.0

CUSTOMER CARE 2.1 objectives 2.2 definition of customer care 2.3 ten tips for customer care 2.4 benefits/importance of good customer care 2.5 prerequisites of meeting customers expectations 2.6 building customer trust Activity

Unit 3.0

STAFF MOTIVATION 3.1 objectives 3.2 definition of motivation 3.3 theories of motivation C Maslows hierarchy of needs, expectancy model, Herzbergs) 3.4 importance of motivation of employees Activity

Unit 4.0

ETHICS AND SOCIAL RESPONSIBILITY 4.1 objectives 4.2 definitions of ethics 4.3 ethical positions/perspectives/views 4.4 importance of ethics to the entrepreneur 4.5 definition of social responsibility 4.6 social responsibility principles 4.7 importance of social responsibility to the entrepreneur Activity

Unit 5.0

COSTING AND PRICING 5.1 objectives 5.2 definition of costing terms 5.3 costing calculations 5.4 importance of costing to the entrepreneur 5.5 definition of pricing 5.6 pricing calculations 5.7 pricing factors Activity

Unit 6.0

RECORD KEEPING AND STOCK CONTROL

6.1 objectives 6.2 importance of record keeping 6.3 source documents 6.4 appreciation of books of accounts 6.5 stock control Activity Unit 7.0 GENERATE YOUR BUSINESS IDEA 7.1 objectives 7.2 survey social needs 7.3 start your business Activity Unit 8.0 BUSINESS PLANNING 8.1 objectives 8.2 definition of a business plan 8.3 major sections of the business plan 8.4 importance of business plan Activity Unit 9.0 COMPUTERS IN BUSINESS 9.1 objectives Activity Unit 1.0 Concept Of Entrepreneurship And Its Relation To Patriotism 1.1 Objectives By the end of this unit you should be able to: Define entrepreneurship and its relation to patriotism Identify, analyze and evaluate the characteristics of an entrepreneur Analyze the macro and micro-entrepreneurship environment Discuss entrepreneurship strategies Evaluate forms of business Explain the roles played by SMEs Articulate government initiatives towards black empowerment and indigenisation 1.2 Entrepreneurship and its relation to patriotism In Zimbabwe, as elsewhere in the world, patriotic entrepreneurs play a pivotal role in stabilizing and resuscitating the economy. In other words, across the globe, nations largely depend on the entrepreneurs in both the informal and formal sectors. Statistics, in Zimbabwe, shows that 3 000 000 (three million) people are employed in the informal sector (which is about 75% of the employed people in Zimbabwe). This means that the remaining 25% is shared between the state-owned enterprises and the private enterprises in the formal sector. Apart from being the largest employer, the informal sector is the largest foreign currency earner, among other crucial roles it plays to the economy. What is an entrepreneur? An entrepreneur is the originator (initiator) of an enterprise (economic/business undertaking) in order to satisfy an identified need or want profitably. That is a person who organizes and manages a commercial undertaking especially one involving calculated commercial risks. In other words, an entrepreneur is someone who

identifies opportunities in terms of needs and wants of people and mobilizes resources such as land, capital and labor to develop profit-making projects to meet the identified needs and wants. Successful entrepreneurs are not gamblers but take calculated and moderate risks in business. It should, however, be noted that entrepreneurs believe so strongly in their business ideas that they are willing to take full responsibility for developing them and to assume most of the risks should they fail. What is entrepreneurship? Various authors define entrepreneurship differently, but their definitions somewhat amount to the same meaning. The following are some of the definitions of entrepreneurship: Appleby (1989) defines entrepreneurship as the process of bringing together creative and innovative ideas and coupling these with management and organizational skills in order to combine people, money and other resources to meet an identified need and thereby create wealth. Whereas Appleby defines entrepreneurship as such, Stoner & Freeman (1992) view entrepreneurship as seemingly a discontinuous process of combining resources to produce new goods and services. Analysis of definitions Both definitions do not fall short of the fact that entrepreneurship is a systematic and logical event as shown by the term Process. That is entrepreneurship is not a haphazard activity. However, Stoner & Freeman have moved a step further in an attempt to distinguish entrepreneurship from management as they look at entrepreneurship as a discontinuous process. That is, it is a discontinuous phenomenon appearing then disappearing until it reappears to initiate another change, unlike management which is a continuous event. The idea of creative and innovative ideas shows that the two definitions are complete. In business, entrepreneurs should be able to come up with changes or new approaches, means, processes, machinery, tools or techniques and new products in order to meet the needs of turbulent and dynamic market environments. When a new venture is being contemplated on, risks arise involving uncertainties which require initiativeness and process innovation. Whereas Appleby clearly states, the idea of management and organizational skills in his definition, Stoner & Freeman have remained silent about it. Organizational skills and management are crucial for successful entrepreneurs. These relate to the ability of the entrepreneur to plan, organize, lead and control the organizational members activities and resources in order to achieve the stated goals of the enterprise. In other words, the emphasis here is the ability to organize the other factors of production or resources into creative combination for the purpose of producing goods and services in order to satisfy human needs and wants profitably. The combination of resources is as follows:

Land

Labour

Capital

Entrepreneurship

Production of goods and services 3

For the business to be successful the needs and wants should be identified first through a feasibility study. Identification of needs and wants will indicate whether there is a potential market or not. Thus, the viability of a business largely depends on an effective feasibility study to determine the potentiality of the market. In this case, Applebys definition of entrepreneurship is clear about identifying first the needs of customers, unlike Stoner & Freemans. Thus, for Appleby, new goods and services should not just be produced for unknown customers as this is tantamount to wastage of resources. Moreover, Applebys definition appears to be more comprehensive than that of Stoner & Freeman as he mentions the idea of wealth creation. The major aim of any business entity is to create wealth or increase the owners equity by maximizing profit. Without profit maximization or creation of wealth, the business will not survive. Entrepreneurship distinguished from Entrepreneurship Investor's or entrepreneurs are innovative and creative but not all of them are able to come up with innovations, and as such they leave innovations to innovative managers or employees. An employee or manager who is innovative and creative in an existing organization is known as an entrepreneur. Managers or employees who carry out entrepreneurial roles are aware of opportunities and they initiate changes to take full advantage of them. The fundamental issue about the entrepreneur is that he/she has to have innovative ideas and transforms them to profitable activities within an existing organization. In other words, he/she is an initiator or originator of the commercial undertaking. The word entrepreneurship is attributed to Gordon Pinchott an American who founded a school for entrepreneurs to help managers from large corporations to take responsibility for creating innovations and turning ideas into profitable reality. Relationship between entrepreneurship and Patriotism Patriotism is the spirit of supporting loyally ones nation. The major thrust of patriotism in the context of entrepreneurship in an economy is to refrain from corruption and sabotage or subversion. Thus, the relationship between entrepreneurship and patriotism is reflected in the following roles that a patriotic entrepreneur plays to the nation that is the entrepreneur should have the spirit of: a) Creating jobs without oppressing fellow citizen workers i.e. the entrepreneur will be expected to provide good working conditions and be worker centered. b) Charging fair and affordable prices c) Producing quality products which compare with international standards d) Conserving natural resources e) Practicing good ethics and social responsibility in business and the community f) Generating foreign currency without externalizing it or taking it to the black or parallel market for exchange, but to the registered banks for official exchange g) Generating government revenue through paying corporate tax. h) Playing supportive role to the giant firms by being subcontracted in construction, manufacturing and distribution i) Reducing anti-social activities such as theft, robbery, murder, promiscuity by creating employment for self and other citizens j) Reducing rural to urban migration by creating employment opportunities in rural areas 1.3 Entrepreneurial characteristics In a new business, the entrepreneur is the most important person. The entrepreneur has the responsibility to initiate, manage and see the success of the business. The success of a business largely depends on the entrepreneurial or personal characteristics. The following are some of the characteristics of successful entrepreneurs.

Action oriented Successful entrepreneurs are action oriented, that is, they want to start producing results immediately. The critical ingredient is getting off business and doing something. A lot of people have ideas but they are a few who decide to do something about them now and not tomorrow. Success oriented/optimism Successful entrepreneurs are optimistic, that is successful entrepreneurs do not have ifs or buts about succeeding. All they think about is how they are going to succeed and not and not what they are going to do if they fail. Perception of opportunity or opportunity seeking Entrepreneurs should be able to see the unfilled areas or gaps in products, process and application of services. That is successful entrepreneurs are able to see and act on new business opportunities. Moderate risk taking Entrepreneurs are expected to be able to take moderate and calculated risks. This is contrary to the stereotype that entrepreneurs are gamblers or high-risk takers. Goal setting In setting a new business, entrepreneurs are expected to have the ability to set goals which are specific, measurable, achievable, realistic and time bound (SMART) basing on their strengths, weaknesses, opportunities and threats (SWOT). Moreover, their goals must be consistent with their interests, values and talents in order to achieve the. Their belief in the reality of their goals is the primary factor in the fulfillment of those goals. Their plans may seem illogical to others but they are perfectly logical in the context of their own personal values and desires. Long-term perspective Successful entrepreneurs can tolerate considerable amount of frustration and delay in need gratification and they devote a lot of time and effort in goals that often yield profits at a distant point in the future. Entrepreneurs should be able to accommodate hurdles, difficulties and temporary failures in business. Self-motivation/self esteem/self faith/self confidence Effective entrepreneurs have solid and stable self-esteem and self-motivation which stem from healthy feeling of self worth and self-acceptance. Entrepreneurs with a positive self-image are basically satisfied to be the type of people they are. This self-faith is even important than selfconfidence especially when serious setbacks and failure occur. Innovativeness/initiative ness/creativeness Effective entrepreneurs have the ability to come up with new products, methods or techniques of production and the accompanying machinery and tools. Adventuresome ness Successful entrepreneurs are adventuresome i.e. they are interested in testing out and experimenting phenomena in an endeavor to come up with solutions to the needs and wants of people. Commitment To succeed in business, you must be committed. Commitment means that you are willing to put your business before almost everything else. Some of the characteristics of an entrepreneur include; patience, friendliness, hardworking, reliability, dedicated ness, responsibility, objectivity, rationality, honesty, determination, courage, flexibility, imaginativeness and knowledge.

In a word, successful entrepreneurs must have appropriate personal characteristics, business skills where necessary. 1.4 Entrepreneurship environment Entrepreneurship environment relates to the factors or variables which directly or indirectly affect the activities of the entrepreneur either positively or negatively. The environment is split into two. That is macro and microenvironments. Macro environment This is also known as external environment. This environment consists of all those factors, which indirectly affect the business activities of the entrepreneur either positively or negatively. The external environment involves PEST analysis and natural phenomena. PEST stands for Political, Economic, Social and Technological environmental variables. Political Environment Political factors may provide initiative situations towards the success of the entrepreneur especially where the political climate is not stable. Political disturbances may result in the closure of business either permanently or temporarily. Extreme political disturbances or instability such as tribal or civil conflicts may cause permanent closure of enterprises. However, this depends on the nature of the business of the entrepreneur. Some political climates may promote the success of the entrepreneur. At first glance, it would seem that domestic politics should pose no threat and that a company should have minimal problems at home. This is often not the case. Although a companys major political problems usually derive from political conditions overseas, it must still pay close attention to political developments at home. Knowledge of the philosophies of all major political parties within the country is very important since any of them might come to power and alter prevailing attitudes. It is important to know the direction each is likely to take for example in Britain the Labour party have traditionally tended to be more restrictive on both foreign and home trade. Economic nationalism is another factor which leads to an unfavourable business climate e.g. Econet is said to be sponsoring foreign media which are said to be anti-government. If the entrepreneur is not nationalistic in his or her business activities he/she may lose his/her business license. Political sanctions form yet another crucial factor that may hinder the entrepreneurs progress in business for instance in Zimbabwe there is fuel and foreign currency crisis due to political sanctions based on the allegations by Britain and America that there is lack of rule of law, democracy and violation of human rights. South Africa also faced political sanctions based on allegations that there were apartheid , foreign currency crisis and fuel shortage can grossly affect the entrepreneurs business activities negatively. Economic environment The macroeconomics focuses on aggregate economic conditions that may affect the business either positively or negatively e.g. inflation, exchange rates, lending or interest rates, and unemployment. Macro-economic issues set the environment within which a business operates. Because of this, entrepreneurs should keep abreast with developments in the macro-economic environment to enable them make informed decisions. Thus, a full understanding of those issues enhances the ability of an entrepreneur to make sound business decisions and to avoid surprises. *For instance, inflation is the general upraise of the prices of commodities. If the prices of commodities rise it means that the entrepreneur can now afford to buy less supplies or raw materials or producer goods than he/she used to. That is, his/her business is being affected negatively. If the inflationary rate drops, it means that the entrepreneur can now buy more producer goods.

Exchange rates are yet another factor of macroeconomics which may affect the activities of the entrepreneur. Exchange rate defines the price for getting foreign currency. If the exchange rate rises, the entrepreneur will afford to buy less of the foreign currency and vice versa. Foreign currency is essential for the purchase of foreign products such as spare parts, ingredients, raw materials and fuel. Lending rates are an important aspect of macroeconomics. Lending rate is the price of borrowed funds or a loan. This is also known as interest rate. If the loan interest rises, it means that it is expensive to get a loan for investment and vice-versa. Thus, given these macro-economic issues, the entrepreneur is expected to have a predictive mind for efficient management of the enterprise. Microeconomics is another fact of the economic environment which focuses on the economic forces that influence the decisions made by individual consumers, firms and industries. These decisions are often made in an instinctive way, yet consistent economic forces underlie them. Entrepreneurs are encouraged to keep track of the trends of the behaviours of individual consumers, firms and industries in business as their (entrepreneurs) investment activities are based on them. Social environment This relates to the cultural values, beliefs and artifacts of a group of people or society. These determine the consumption patterns of consumers. Social environment also involves the religious values. Thus, the products that people buy, the attributes they value, and the opinions they have are based on culture. Food consumption, acquisition and preparation are interrelated with other aspects of culture such as religious values and beliefs. For example, Christians consider pork unclean. Thus, to the entrepreneur it is evident that customers actions in the society are shaped by their lifestyles and behaviours which stem from their societys culture. That is people of different social classes have different lifestyles and bahavioural patterns. Language is another aspect of culture which has influence on the entrepreneurs activities. Thus, a successful entrepreneur must achieve expert communication. This requires a thorough understanding of the language of the customers language as well as the ability to speak or write clearly. Technological environment Today, we are living in a global village which requires entrepreneurs to move with technological breakthroughs and changes. Entrepreneurs are expected to be well versed with Internet systems for effective communication with suppliers, customers and the publics in general. Technology relates to the processes, techniques, tools and machinery used in business to produce or offer products to customers. Poor technology results in inefficiency and ineffectiveness. Thus, the advice to the entrepreneurs is that they should keep tack of the technological trends in the business if they are afraid of being out-competed by their rivals. Natural phenomena These are the situations or conditions which can adversely or positively affect the entrepreneurs activities. These may include natural disasters such as road accidents, fire outbreaks, floods, drought, earthquakes, good rains and natural resources such as minerals. Entrepreneurs are advised to study the natural phenomenal trends as these provide threats or opportunities to the business. Microenvironment This relates to those conditions which directly affect the entrepreneurial investment activities either positively or negatively. The microenvironment is made up of employees, providers of finance, suppliers, customers and government among others. Employees These are the people who work for the entrepreneurs and those who are likely to work for him/her (potential employees). People today have wider expectations of the quality of working life

including: justice in treatment, democratic functioning of the organization and opportunities for consultation and participation, training in new skills and technologies effective personnel and industrial relations policies and practices and provision of social and leisure facilities. Entrepreneurs should give due consideration to the design of work methods and job satisfaction, make every reasonable effort to give security of employment. If employees are not treated well, the entrepreneur will lose them to his/her rivals. Providers of finance These are the financial institutions which supply financial services to the entrepreneurs. Entrepreneurs need to consider the interest or lending rates together with the accompanying finance changes fixed on them by the financial institutions as these costs of financial services have adverse effect on their investment activities. Apart from that, the entrepreneurs also need to consider return on investment in terms of the funds which they may need to invest with the financial institutions. On the other hand, the entrepreneurs are expected to prove their credit worthiness and credibility by paying back the borrowed funds (loans) within the contractual time frame as this will enable the entrepreneurs to even receive preferential treatment and favour in times of need. Customers To many entrepreneurs, responsibilities to customers may be seen as no more than a natural outcome of good business. Customers are people who make the business successful. The entrepreneurs need to understand the needs and wants of customers first before production activities take place in order to avoid wastage of resources by producing goods and services for unknown customers. Customers must be put first by providing: Good value for money The safety and durability of products Prompt and courteous attention to queries and complaints Long-term satisfaction e.g. serviceability, adequate supply of products and replacement of parts Full and unambiguous information to potential customers If customers feel that they are ill treated, the entrepreneur loses them to the customer-driven enterprises. Suppliers These are firms that supply the entrepreneur with raw materials. These can affect the entrepreneurs activities adversely or positively in terms of prices, reliability, quality, delivery services and convenience among others. Thus, a supplier of competitive prices, quality, delivery services and convenience must be chosen. On the other hand, the entrepreneur should also prove creditworthiness by settling accounts within the contractual time frame if future deferred payment business transactions are to be upheld. Government Entrepreneurs should of course, respect and obey the law even where they regard as not in their best interest. If certain laws are not followed the entrepreneurs business may be forced to closedown but what is debatable is the extent to which organizations should co-operate with actions requested by the government. Some examples are restraint from trading with certain overseas countries and the acceptance of controls over imports or exports, price controls designed to combat inflation e.g. limits on the level of wage settlement and assisting in the control of potential social problems such as advertising and display of health warnings. Competitors These are the rivals of the entrepreneurs who produce substitute products or the same products. The entrepreneur must keep track of the price levels, technology, quality, and delivery services, among others of the competitors as these may pose negative impact on the acceptability of the entrepreneurs products by customers. 1.5 Entrepreneurship Strategies

GROWTH STRATEGIES A. Intensive Growth Strategies According to Ansoffs product market expansion grid, a company is exposed to growing dimensions under intensive growth 1. Market penetration - Gaining more market share with the current company market products in their current markets. - The strategy can be implemented as follows. a) promoting more usage of the product b) attracting competitors customers c) convincing non users to use the existing product 2. Market development strategy - company efforts to find or develop new markets for its current products a) This can be done by identifying potential uses in the current sales area where interests for a product or services can be stimulated. b) Selling new products to existing or current markets. c) Seeking additional distribution channels in its present location. 3. Product development - in addition to penetrating and developing markets management should consider new product possibilities - Company develops a products new features; different quality levels and also tries to come up with a technological breakthrough a potential product. B. Integrative Growth - business sales and profits can be increased through a) Backward integration b) Forward integration c) Horizontal integration Ansoffs Growth Strategies Grid: Current products. Market penetration Strategy Market development strategy New products. Products development strategy Diversification strategy New markets.

Current markets.

Ansoffs Growth strategies 1.market penetration a) market development b) product development 2. Integrative growth a) backward integration b) forward integration c) horizontal integration 3. Diversification growth a) Concentric diversification b) Horizontal c) Conglomerate

a) Backward Integration is when a company acquires one or more of its suppliers to gain more control and generate more profit. b) Forward Integration is when a company acquires some wholesalers and retailers especially when they are they are highly profitable. c) Horizontal Integration is when a company acquires one or more competitors provided the government policies allow e.g. monopoly, oligopoly. Diversification Growth. - Is the most favourable growth strategy if good opportunities can be found outside the present business. - An opportunity is one in which the industry is highly attractive and company has the mix of business strength to be successful. Types of diversification a) Concentric diversification - Holds that the company could seek new products that have technological and or marketing synergies with the existing product lines even though the new products themselves may appeal to different groups of customers. b) Horizontal Diversification - holds that a company can produce totally unrelated products using different manufacturing methods or processes c) Conglomerate Diversification - Holds that a company seeks new business that have no relationship to the companys current technology products or market suppose a company is producing fax machines and now seeks to produce furniture Other Entrepreneurship strategies - a strategy is a method used to achieve a goal 1) Franchising - A system of distributing products/services through associated resellers. - The franchiser gives rights to the franchisee to perform or use something that is the property of the franchiser - The objective is to achieve efficiency or profitable distribution of products/services within a specific area - Both parties contribute a trademark reputation, known products, managerial know-how produces or equipment. Advantages to the franchiser increased distribution some operating costs are transferred marketing/distribution costs shared production accepted by locals when local franchise ownership is held Retains quality control of products is a franchise agreement. Advantages to the franchisee less risk with market tested products pre established promotion and advertising programs provided Financial and may be provided. Credit available in buying inventory and supplies Decision making assistance, management procedure and training.

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Disadvantages to the franchiser control of franchisees are far away expenses of training and keeping on travelling for supervisor risk in credit extensions

Disadvantages to the franchisee gives up freedom in management decisions obligatory purchases franchiser even if better prices elsewhere are available have become expensive

2) Buying an established business Advantages a business with a goodwill increases the likelihood of successful operation has a proved location for successful operation has an established clientele its inventory is already on the shelves Its equipment is already available and its resources and capabilities are known. Disadvantages - the buyer inherits any ill will of the existing firm - certain employees may be inherited which are not assets to the firm - inherited clientele may not be the most desirable and changing the firms image is usually difficult - procedures of the former may be difficult to follow - renovation expenses - purchase price may not be satisfying

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BUSINESS ETHICS Refers to the rules/principles that define right and wrong conduct in business or at work to the publics or the organisation. Publics are the interested parties e.g. existing customer or potential customers, existing workers or potential workers, pressure groups (i.e. CCZ, ZCTU, ZFTC, AAZ etc), suppliers government departments, shareholders/stockholders etc. Examples of ethical issues using telephone for personal long distance calls using company postage for personal mail showing favouritism in selection decisions/disciplinary practices playing politics in the organisation unfair business practice/transactions unfair dismissal Three different ethical positions that can provide guidance in evaluating ones own ethical standards at work or in business: i) Utilitarian View of Ethics - this relates to decisions made solely on the basis of their outcomes or consequences - The goal of utilitarianism is to provide the greatest number. - This view tends to dominate business decisions making - It is consistent with goals like efficiency, productivity and high profits - By maximising profits a business executive can argue that he is securing the greatest good for the greatest number.

ii) Rights view of Ethics - This calls upon individuals to make decisions consistent with fundamental liberties and privileges as set forth in documents like the bills of rights. The rights view of ethics is concerned with respecting and protecting the basic rights of individuals such as the right to privacy, to free speech and to take industrial action since this position will protect employs who report unethical or illegal practices by their organisation to the press or government agencies on the grounds of their rite to free speech iii) Justice View of ethics - This requires individuals to impose and enforce rules fairly and impartially so there is an equitable distribution of benefits and costs. - Union members typically favour this view. It justifies paying people the same wages for a given job regardless of performance differences and it uses seniority as the criterion in making lay off decisions. Each of these perspectives has advantages and liabilities the utilitarian view promotes efficiency and productivity, but it can result in ignoring the rights of some individuals particularly those with minority representation in the organisation the rights perspective protects individuals from injury and is consistent with freedom and privacy but it can create an overly legalistic work environment that hinders productivity and efficiency

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the justice perspective protects the interests of the underrepresented and less powerful but can encourage a sense of entitlement that reduces risktaking innovation and productivity

Codes of ethics and decisions Codes state the organisations primary values and the ethical rules it expects its employees to follow. examples of codes include the following Demonstrate courtesy, respect, honesty, fairness maintain confidentiality of records Do not propagate false or misleading information

Importance of good Ethics corporate image is built or improved efficiency and productivity is enhanced sales and profits are boosted Sound relations and mutuality between the entrepreneur and the publics are established and sustained.

Social Responsibility - is a broader concept that also covers business ethics - Social responsibility defines the obligation that the business Community or entrepreneur have for the well-being of the society - The entrepreneurs are expected to have the society at heart in all their operations - A good and patriotic entrepreneur needs to develop giving back to the community Schemes These are arrangements or programs designed to give back to the community in terms of assisting the less fortunate sponsoring social institutions e.g. schools, colleges, old peoples homes, street kids and the orphans. Social responsibility also includes taking care of harmful waste products, dangerous emissions. Social responsibility also includes paying fax to the government. The money is used utilities and consumption such as public water facilitating public toilet road construction, social welfare facilities and services etc. Social responsibilities also include taking care of harmful waste products, dangerous emissions. Social responsibilities further cover informing the publics about the size effects of products, educating customers on proper usage of products such that accidents or harm are avoided or minimised e.g. sedan Benz is designed in such a way that it minimises chances of accidents. Some critics hold the business community responsible for unemployment, crime in the streets, the ill-clothed, ill housed and ill-fed others believe that it is the responsibility to the business world to create jobs and pay taxes to the government so that it can employ express to solve social problems.

Importance of social responsibility to the entrepreneur

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Productivity and efficiency may be enhanced as workers will be motivated with fair business practices corporate image building maintenance of sound mutuality and relations with the society sales, market and profits and profits may be increased etc

N.B. Large and small firms are urged to practice honest social responsibility and business ethics and to become good community citizens expressing interest INS social problems should be concerned with the welfare of the society. Other critics encourage that the entrepreneurs should use the following social responsibility principles for social corporate integrity and image building i) Charity to Principle - The doctrine of social responsibility requiring more fortunate individuals or entrepreneurs to assist less fortunate members of the society including the unemployed the handicapped the sick, the elderly, street kids, orphans etc.

ii) Stewardship Principle - Biblical doctrine that requires businesses and wealthy individuals to view themselves as stewards or caretakers holding their property in trust for the benefit of the whole society. - The idea is that the rich hold their money in trust for the rest of the society. - The idea is that the rich hold their money in trust for the rest of the society and can use it for any purpose that society deems legitimate. Customer care - is the manner in which customers are treated by the business - Customer care creates a new orientation in an organisation with and increasing focus on improving the delivery of the needed services by the customers. - This should always be viewed as the clientele having rights and expectations that must be fulfilled. - As an entrepreneur one needs to appreciate that customer care should be part and parcel of his/her business operations if you intend to achieve success. - The customer care vision by organisation embraces employees that put its customers first and that is open transparent, accountable and responsive - The customer is king and always right as a way of doing business - The customer is always observed as having a right to demand quality services from the organisation - In the modern business world there is an increasing focus on enhancing service delivery and on ascertaining that the delivered as promised - An entrepreneur should be responsible, accessible and quick to help source problems - Should be reliable and deliver what he/she promises on time - Should be knowledgeable and courteous - Should be empathetic and should understand the needs of customers - Work area should always be clean and organized. Ten tips for customer care 1. Reliability - this refers to consistency of performance and dependability - perform the service right the first time fulfill promises - be impartial and avoid favouritism

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Be firm with friends and relatives as far as business transactions are concerned.

2. Responsiveness - this refers to the willingness as well as readiness of the entrepreneur or his employees in providing the services within reasonable time immediately if not sooner 3. Competence -This refers to the possession of the required skills and knowledge by those who deliver the services to the customer. This will create confidence. 4. Accessibility - this refers to the degree of approachability and ease of contact of the entrepreneur or his employees - drop what you are doing ignored to greet and serve customer 5. Courtesy - This refers to politeness, respect, consideration and friendliness of your organizations contact such as receptionist, secretaries, telephonist, etc, they must be polite and courteous at all times remember, a smile goes a long way. 6. Communication - keep your customer well informed in a language and style they understand - it is important to hear and understand what your customers are saying - communicate effectively with your suppliers as well 7. Credibility - this refers to being trustworthy and faithful - put customers at heart - they should feel that he/she is given priority and should have the trust that any order will be executed and received when expected 8. Security - customer should be protected from danger, risk or doubt within the premises 9. Knowledge of Customer - the entrepreneur should know the client specific requirements - be able to recognize regular clients - strive to provide individualized attention - Understand what makes them buy is it need Price? 10. Tangibles - This could include the physical evidence (i.e. building, good handling, tools, equipment, packages etc). This could also include the appearance of your personnel - employees must be neat, orderly and clean

Benefits/importance of customer care - If customers are put first, the entrepreneur will be rewarded with new business and increased profit margins and sales. - Customer care creates new customers

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Constructive consumer dialogue enables the entrepreneur to know and understand what the customers needs and wants It builds good relationships and loyalty with customers Can make passive customers become in violated participants (i.e. loyalty) Create corporate excellence Build good reputation and good image i.e. it is a tool for good corporate image building Business can become a market driven entity as you get information on what your customers need and want.

Perquisites of meeting Customers expectations 1) be courteous and tactful 2) be friendly and helpful 3) deal promptly and decisively with customers 4) rectify faults quickly and keep promises 5) listen to customers attentively and respond promptly 6) avoid being sarcastic when dealing with customers 7) present information logically and comprehensively 8) stick to your commitments 9) Always inform your customers on what happens at your business if it may affect them (i.e. sale, new product? Services 10) be fair and honest when dealing with customers 11) demonstrate the right skills at the right time 12) always give customers professional treatment 13) know the customers business and needs Who gets to decide if a customer service is good? 1. customer service is a function of your customers perceptions not your standards in other words, the customers gets to decide if he or she has received good services - even though all of your standards may have been met if the customer does not feel well served, your customer service is poor - customer satisfaction is ultimately the result of the sum total of the customers experience 2. Customer satisfaction is ultimately the result of the sum total of the customers experience at your establishment. - Customers come back to a place that has provided a pleasant experience for them. Thus owners and managers need to focus not on tangible as ends themselves but on how all the particulars combine to create a certain experience. Prime examples of poor customer care 1. poor delivery and accessibility of services 2. poor quality and state of merchandise 3. existence of long queues of customers waiting to be served Dirty environment of business Failure in meeting client expectations Dealing with unprincipled customers - never show that customer is wrong or behaving badly - always take it that he/she is right

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appreciate and understand at there should be some customers who visit your business with hidden agenda and ulterior motives (i.e. competitors of those interested in policing Ive price control monitors make very attempt to deter their bad intentions by being upright in your dealings

You can defeat unprincipled customers by taking the following steps: 1. continue to show a good image of your business 2. smile when talking to customers 3. accept blunders where you can realize them promise to improve and make an apology 4. avoid arguing with customers 5. always hold your composure and avoid losing your temper in front of your customer Building Customer Trust From a customers point of view, there is probably no concept more important than trust. How can you strengthen customer trust? 1. Keep your promises 2. Make promises that you can keep 3. do everything to keep the commitments you make 4. if you cannot fulfill the promises let the customer know 5. call back if you promise even if you dont have the information the customer is expecting 6. Following up on an order to be sure everything is okay. 7. Properly hold complaints all the time. 8. Make recommendations that are best for the customers. 9. Recommend a competitor when theres a need that you cant satisfy. 10. Make yourself available after the sale. Creating Customer Comfort Customer care is also defined as meeting needs and creating comfort. Meeting needs is a given, creating comfort is a function of enabling the customer to feel a sense of control when he/she is at your business. Customers feel in control when they know the drill i.e. when they know how things work and how to get things done Develop and maintain a customer charter - Make sure that there is availability and visibility of both a mission statement and customer charter. The customers charter will remind your workers always to abide by its contents and will assure customers of their expectations of the services and what move to take if they are not met. Your customers charter should indicate the standards of services to be delivered and the way in which the worker will perform their duties 1. telephone - number of rings before the telephone is answered are given 2. Enquires - short turn around time - follow up - courtesy options offered to caller 3. Correspondence - Correct - Shorthorn around time

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Acknowledgement of receipt

4. Delivery deadlines met Delays explained and apology given 5. Outgoing services - automatic follow up - customer feedback - be sure that your customers charter informs clients about the availability of a system of redress in case of grievances Staff motivation 6. Motivators that work - management commitment - training - Praise and recognition - Team spirit - Pride job satisfaction - Rewards incentives compensates and recognition Refer to Maslows hierarchy of needs for further details on staff motivation (apply business Admin) Stoner & Freeman Management).

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Entrepreneurship strategies. Strategy the broad program for defining and achieving an enterprises objectives; the organisations response to its environment over time. Survival strategies Star high growth Expanding business New venture Company markets Speculation Tomorrow star (its hoped) Dog No growth Potential sale High Low Market share Survival strategies for entrepreneurs may be best explained using the portfolio management mix developed by the BCG Cash cow business (low growth, high market share). Businesses in this category are often called cash cows, they throw off larger amounts of cash but the prospects for future in the field are limited. These businesses should be marketed in order to support more promoting opportunities. New investments is therefore limited to a maintenance Star performers (high growth high market share) - A star business represents a fast growing operation, which dominated market share. This is an enviable position. - The successful new venture of company will, if it is hoped, turn out to be stars, although money more generally fails than succeed. - A star business generated large amounts of cash may exceed its reinvestments depending on the market growth in the market and the capital intensity of the business. - From this optimum point of high market share and market growth a business will eventually develop into a cash cow as its market matures and growth declines Speculations (high Growth, low market share) - A speculative business is by definition one that entails high risks. - Therefore a typical company can afford to back only a limited number of such speculative ventures. The strategy is based on probabilities of one or more carefully selected ventures developing into stars/star performance and this balancing the failures or modest successes of other speculative ventures. - A firm in this category must pursue aggressive strategies designed to your market share - If the strategies succeed, the company will establish a dominant market share and move to the star performer category

High

Market Growth Low

Cash cow Low growth mature business

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Dogs (low Growth, low market share) In many large diversified companies there are usually a few businesses that can be described as dogs. - There is little to recommend their retention or further investment by company. - They are typically the businesses tagged for divestment at an early opportunity. - Management may spend considerable resources attempting to turn around a business that in the end defies all treatment. - Top managers can lose their objectivity in taking necessary action on investments they have recommend and which they are still closely identified. - Portfolio management provided a basis for resource allocation to each business. Strategy Centres (life Cycle patterns). - This was devised by the consulting firms Arthur D little. - It uses stages of developments in a typical life cycle pattern as a measure for classifying businesses and developing strategies. - Based on growth in volume, a business can be classified in one of the following 4 stages of development embryonic a highly competitive market situation where market shares are typical small and available volume is spread among many participants. Growth: Market share surviving firms have increased and the industry is more stable and the market continues to have growth potential. Maturity: A relatively small number of firms command a majority of the market, but growth of the market has declined. Decline: Very little or no growth potential excepts are situated in an industry with dim prospects - Similar to portfolio management - risk, star, cow, dogs may be situated

Strategy centres approach (life cycle patters)

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Time The entrepreneurships next task after plotting the BCG matrix is to determine whether its portfolio is health. An imbalanced portfolio would have too many dogs or question marks and/or too few stars and cash cows The task is to determine what objective strategy and budget to assign each strategic business unit (SBU) 1. Build increase SBUS market share 2. Hold preserve SBUs market share especially for strong cash low. 3. harvest the object is to increase the SBUS short cash flow regardless of long term effects It includes: Withdrawing from the business Implementing a program of continuous cost retrenchment and eliminating research and development expenses Not replacing the plan as it wears out Not replacing staff Reducing advertising expenses i.e. the hope is to reduce costs at a faster rate than any potential drop in sales thus resulting in an increase in the companys positive cash flow The hope is to reduce costs at a faster rate than any potential drop in sales thus resulting in an increase in the companys positive cash flow. 4. Divest dogs and question marks. - here the objective is to sell or liquidate the business because the resources can better used elsewhere

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the strategy is appropriate for dogs and question marks that are acting as a drag on companys profits

1.6 Forms of Business A form of business relates to the legal status of a business. The common forms of business are: Sole Proprietor : Partnership : Private Limited Company : Public Limited Company : Co-operative In setting up and running a business owners often meet liabilities. A business Liability is the personal responsibility of the owner for the business debts. The business owner may or may not be held personally responsible for paying business debts. The liability of the commonditarian partners is limited to the amount of capital they have contributed or agreed to contribute. Partnership It is a commercial undertaking set up and run by at least two people but not more than twenty, with the object of making profits and share the profits and losses equally or according to an agreed ratio Advantages Better decisions than the sole trader may be made as partners will always consult each other, hence a greater expertise Liability, losses and risks are shared unlike in sole proprietorship More capital may be contributed from partners since ownership vests in a group of persons It is easy to from since formalities are few There may be division of labour due to the diversity of expertise Disadvantages Partners have unlimited liability except for the limited partners or sleeping partners Decisions may take long before they are implemented as partners need to consult one another There may be lack of continuity if one partner dies or incapacitated Profits are shared One partner can make contracts on behalf of the others which may lead to all partners losing their money or capital There may be conflicts of interests between the partners Partnership deed It is an agreement in writing between partners setting out the following: The names of the partners The capital contributed by each partner How profits and losses will be shared amongst the partners How decisions will be made e.g. by majority vote How partnership will terminate Any other formal agreement about how the business will operate Capital contribution

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The partners who are the owners of the business contribute capital from each their personal savings or borrow from relatives, friends and banks. Partners may agree that their capitals earn interest. Management and decision-making Each partner is a manager of the business although the partners may choose a partner with managerial expertise or hire an outsider to manage the business. Each partner is expected to keep records of the business. Partners consult each other when it comes to management of business and decisionmaking. Liability The issue of liability varies according to the type of partnership. There are two types of partnership, which is ordinary and extra-ordinary partnership. Ordinary partnerships In ordinary partnerships, the liabilities of partners are unlimited. This is the most common form of partnership consisting of ordinary partners only. Each partner is liable jointly and severally for all the debts of the partnership. By jointly and severally, it meant that the creditor has the right to sue all to the partners (jointly) or to sue one of the partners (severally). Thus any one partner can be sued for all the debts of the business to the full extent of his private assets or belongings. The effect of this is that the creditor may choose to sue the partner who is most likely to be able to pay and then leave that partner to recover a proportion from the other partners. Extra ordinary partnerships These are usually called special or limited partnerships. They are of two forms: Partnership encommandite Anonymous partnership In both types of extra-ordinary partnerships the sleeping partners must not take any part in the running of the enterprise. This should be left to the disclosed partners. If the sleeping partner does take any active part in the running of the business, all protection is forfeited or lost and the sleeping partner is then liable to the same extent with the disclosed partner. Where the sleeping partner becomes known to the public, he or she does not automatically incur the liability of an ordinary partner unless he or she has acted like a partner. i) Partnership encommandite

In this case, the business is carried out by the disclosed or active partners in their own name alone and the liability of the commanditarian or undisclosed partners is limited. The undisclosed partners contribute a fixed sum of money in return for specified share of profits or losses. The disclosed partners are liable in full to the creditors but the commanditarian partners are not liable to creditors but only to the disclosed partners. In business, there are two kinds of Business liability that is unlimited liability and limited liability. Unlimited liability is where the business owner is personally responsible for business debts. Specifically, it means that if the business fails and cannot repay its debts; the

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organizations that the business owes money can take the owners personal belongings to settle those debts. Limited liability is where the business owner is not personally responsible for business debts. In real terms, this means that if the business fails, the business owner will only lose the money that he or she has invested into the business. The organizations that the business owes money can only take assets which belong to the business. Even if the business cannot repay all of its debts, they cannot take the owners personal belongings. The kind of liability that a business has will depend on the legal form of business. Most formally, registered businesses have limited liability, while most informal businesses have unlimited liability. ii) Anonymous Partnership Anonymous partners contribute their agreed shares to the business capital but take no part in the running of the business leaving that to the disclosed partners. However, the liability of the anonymous partner is not limited in the same way as the commanditarian partner. Anonymous partners are not liable to creditors but only to disclose partners. In other words, the creditors will proceed against the disclosed partners who will then have to reclaim from the anonymous partners. Formation Persons wishing to form a partnership may agree verbally or orally to form the business. However, it is a good idea to develop articles of partnership or partnership deed in case of future disputes. After the partners have agreed the partners may proceed to apply to the local authority for a business license. Once the business license is issued, the partners need to register with the relevant ministry e.g. if partners wish to form a phone shop, they need to register with the Ministry of Transport and Communication. As soon as the permission is granted by the relevant ministry the business may commence.

Sole Proprietorship This is a form of business owned and run by one person although may people may be employed by the business. Capital contribution Capital may be raised from the owners personal savings or borrowed from friends or relatives. Liability The liability is unlimited. Formation It is simple to form and there are few legal requirements. One needs to develop the mission or purpose of the business and then apply for a business license to the local authority stating the purpose of the business. Once the business license is issued, one needs to get registered with the relevant ministry e.g. if one wishes to set up and run a micro finance enterprise he/she is required to register with the ministry of finance.

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Management The business is managed by the sole trader himself or herself although he or she may hire someone. Advantages Decision making is done quickly as the sole trader does not have to consult anyone Profits are not shared, all projects accrue to the sole trader The business requires small capital to start The sole trader enjoys privacy The sole trader has personalized service or specialized product and a small market It is very simple to form as there are few legal requirements Disadvantages It may be difficult for the sole proprietor to expand because of lack of capital The sole proprietor suffers from lack of continuity due to incapacitation or death It can be difficult for the sole proprietor to leave the business e.g. to take a holiday, visit the bank or a supplier as there is no one left to run the business Decision-making and management may be inefficient and ineffective due to lack of consultations as it is a one-man band business. Private Limited Company It is one of the joint-stock companies where at least two but not more than fifty people come together to run a business with the main aim to make a profit. Capital contribution Capital is raised by selling shares privately e.g. to family and friends. Shares are not advertised for sale or traded on the Stock Exchange. The owners of the business are called shareholders. Liability Shareholders enjoy limited liability that is the liabilities of the business are limited to the amount of capital (shares) that the owners have contributed to the business. The shareholders do not pay business debts from their personal or private property if the business fails. Management Shareholders appoint directors who run the company on their behalf. The directors are responsible for making day-to-day decisions, but the shareholders may be involved in the major decisions that affect how the company operates. Directors are accountable to the shareholders so if they make bad decisions, they can be dismissed. In smaller firms, the Directors are very often the shareholders themselves. Formation To become a Private Limited Company the shareholders must undertake business name search with the registrar of companies. In order to become a legally registered private limited company, the owners must prepare the following legal documents and send them

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to the registrar of companies. If the shareholders are not informed about this, they may engage a solicitor or other expert to do the documents. The documents are Memorandum of Association and Articles of Association. i) Memorandum of Association These sets out the companys constitution that is how the firm should relate to the outside world and the document should include Company name Purpose for which the company has been formed (i.e. what activities it will carry out/objective clause) Statement of limited liability Maximum number and value of shares available ii) Articles of Association This spells out the rules for running the company. The rules will be for: Appointment of Directors Conduct of Directors Board meetings Increasing and decreasing total number of shares available Procedures for selling shares Keeping of records e.g. financial records, records of meetings Distribution of profits Registration Once the business name search (done to find out if there is no similar name) is undertaken and the memorandum of association and articles of association is developed, an application including these two documents may be made requesting a certificate of incorporation. As soon as the certificate of incorporation is issued by the registrar of companies, the shareholders need to register with the relevant ministry to start operation e.g. in mining shareholders need to register with Ministry of Mines. Advantages There is continuity of the business even if one of the owners dies, therefore a company enjoys an unlimited life More capital may be raised from the shares sold to at least two persons With limited liability the company two persons attract capital from people who would not otherwise be prepared to invest The company enjoys its independent status and hence the limited liability enjoyed by its shareholders In private company the founders of the business can usually keep control of it by holding a majority of the shares The risks of the business are spread Disadvantages A private limited company is more difficult to begin as a lot of formalities are involved The owners have less direct control over the business as professional managers may run the business and are in charge of the firms operations The shareholder can only transfer his shares to someone else with e consent of the company The company is not allowed to appeal to the public for extra capital

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The accounts of the company must be filed annually with the registrar of companies. They are then available to anyone on payment of a nominal fee.

Public Limited Company Is a joint stock company where at least two persons associate to form a common stock (capital) for profit. Unlike a private limited company which may or may not appoint an auditor, a public limited company must appoint an auditor. It must keep a register for directors shareholdings unlike the Private Company which does not. Shareholders in Public Limited Companies are free to transfer their shares unlike in Private Company where the transfer is under the control for the directors. Companies have to meet certain conditions in order to be regarded as Public Limited Company: a) It must be stated in the memorandum of association that the company is public b) The name of the company must end with the words public limited company c) The issued capital of the company must be at least 50 000pounds d) The company must have at least two persons and no upper limit Advantages like the Private Company, the Public Limited Company has the advantage of independent legal existence; limited liability; continuity of the business The Public Limited Company can raise more capital than the Private Company as it enjoys the extra benefit of being allowed to appeal to the public for funds, whereas the Private Company has to rely on friends and relatives for capital. The Public Limited Company has no restriction on the transfer of shares The Public Limited Company enjoys large-scale production and benefits from economies of scale. Disadvantages A lot of formalities are involved Management may be difficult due to large scale operations There is no secrecy or privacy about the affairs of the firm The owners are not directly in charge of the operations as professional may be hired to run the business NB: In forming the Public Limited Company, the similar procedures of Private Company are followed except that the Public Limited Company will need to further get a trading certificate to start operations. Cooperatives This is a form of business where at least ten members have a voluntary agreement to work together as equals for a common goal or objective. All members are equal owners of the business. Capital contribution Every member contributes capital; therefore it is possible to raise large amounts of capital. Membership is open to anyone prepared to buy a share in the society and he or she will receive interest on his capital.

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Liability The members enjoy limited liability. Note, however, that a cooperative remains an informal group, unless it is properly registered and as such if informal owners do not have limited liability. Management The members of the cooperative elect a committee to manage the operations of the cooperative. This committee is responsible for decision making on behalf of the group.

Formation and registration Members wishing to form a cooperative society need to carry out business name search. In Zimbabwe, the cooperative s must register with the Ministry of Youth Development Gender and Employment Creation. The registrar is interested in the following aspects: The purpose of forming the cooperative The object clause of the business Feasibility of the proposed activities That there are at least ten members who are motivated and willing to work together That the members are committed to the objectives of the business That there are committed to the objectives of the business That there are sufficient financial resources to be invested by the members The education levels of the members, including Entrepreneurial skills and other skills, especially those members who will be the leaders of the cooperative. It may be necessary for the leader to attend a special training course in cooperative management before the cooperative can be registered. Advantages Losses are shared amongst the members unlike in sole proprietorship. Cooperatives enjoy limited liability if they get registered formally Effective and efficient decisions may be made as members consult each other More capital is raised than in the sole proprietorship business Disadvantages Cooperatives often fail because the management committee lack business management knowledge and expertise There may be personal differences and conflicts of interests between committee members Profits are shared amongst members Individual members lose their independence as they are bound by the rules and decisions of the cooperative Selecting the best form of business: a) Risk level If more money is required to form the business, it means that risk level is high especially if the funds are to be borrowed. High-risk ventures require a limited

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liability clause. If none, or very little of capital is borrowed then it may be easier to start as a sole proprietor or partnership. b) Market or industry requirements Many customers prefer to deal with a formally registered company as they feel more confident that it is a serious business. c) Number of owners A small number of people may be able to form a successful partnership whereas several owners attract a private or public limited companies where owners may not be held accountable for the debts of the others. 1.7 Roles of Small and Medium Enterprises What is a small business? A small business is generally a business that has low annual sales, few assets such as buildings, equipment, vehicles, serves local markets rather than national and international markets, has small number of employees and usually the owner is solely responsible for the success or failure of the venture. There are two kinds of small businesses that is survival and growth businesses Survival businesses are small businesses which allow owners to make a living but the focus is on keeping the business alive e.g. backyard businesses/home based businesses. Growth businesses are larger and allow owners to make more money e.g. manufacturing operations in the industry. Reasons for continued survival of small firms Small businesses are able to be more flexible, innovative and can react changes much quicker Small businesses play a supportive role to the giant firms by being subcontracted in construction, distribution, service and manufacturing sectors Small businesses serve small markets (market riches) where large firms do not have interest Small firms receive government support through the Ministry of Small to Medium Enterprises, ministry of Youth Development Gender and Employment Creation and Ministry of Higher and Tertiary Education that is they receive support in form of training and funds. Small firms also pay lower taxes. Small firms supply their goods and services in smallest lots than giant firms which usually supply in bulk Small firms offer specialized and personalized services to customers e.g. electrical businesses. Small firms remain small usually during the initial phases of new technology or innovation or product introduction as the firms will be studying market reactions and modifying the products. Roles played by small firms to the economy Small businesses create employment for the business owner as well as the other fellow citizens (employment creation)

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Small businesses increase the range of goods and services available to the local community (provision of goods and services) especially in rural areas where goods and services were previously unavailable. Small businesses reduce anti-social activities such as theft, robbery, promiscuity and burglary Small businesses reduce rural-urban migration as more goods and services and employment opportunities become available in rural areas. This will help to decrease the pressures on urban in terms of sanitary problems, theft, robbery and promiscuity. Small firms contribute in the improvement of the standard of living of the community Small firms contribute in stabilizing the economy through increased employment, reduced prices and improved standard of living Small businesses help in indigenising the economy. If the economy is in the hand so indigenous people, resources are not expatriated. Small firms help in the generation of foreign currency Small firms contribute in the production of quality and affordable products by being in competition with giant businesses Small firms contribute to government revenue through payment of business and employment taxes Small businesses contribute to the national income of the country (GDP Gross Domestic Products) and to the improvement of the balance of payment

1.8 Government Entrepreneurship initiatives Government entrepreneurship initiatives are efforts by the government to promote selfsustenance, entrepreneurship and indeginisation in order to stabilize the economy. In an effort to promote entrepreneurship and self-sustenance, the government established the Ministry responsible for employment creation since 1980 i.e. Ministry of National Affairs and Employment creation now Ministry of Youth Development, Gender and Employment Creation. Moreover, the following institutions were introduced by the government to enable potential entrepreneurs to establish themselves: a) Small enterprise development corporation (SDECO) b) Development Bank of Zimbabwe c) Agricultural Finance Corporation (AFC) (Land Bank) d) Affirmative Action Group (AAG) e) Zimbabwe Cross Boarders Association f) Zimbabwe Tuck shop Association The government has recently introduced the Ministry of Small and Medium Enterprises to ensure that small businesses succeed. Black empowerment and indigenisation policy was also put in place to promote entrepreneurship. Land redistribution exercise is a good example to government entrepreneurship initiatives to promote self-sustenance and the development of the country. Activity i) ii)

Analyze the government initiatives to promote entrepreneurship in Zimbabwe since 1980. Discuss the roles of the following in promoting entrepreneurship in Zimbabwe a) AAG

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b) c) d) e) Unit 2.0

Development Bank AFC/Land Bank Ministry of Small and Medium Enterprises Zimbabwe Cross Boarders Association CUSTOMER CARE

2.1 Objectives By the end of this unit students should be able to: Define customer care Outline ten tips of good customer care Explain the importance of customer care Discuss the prerequisites of meeting customers expectations Explain how to build customer trust 2.2 Definition - Is the manner in which customers are treated by the business - Customer care creates a new orientation in an organization with and increasing focus on improving the delivery of the needed services by the customers - This should always be viewed as the clientele having rights and expectations that must be fulfilled - As an entrepreneur, one needs to appreciate that customer care should be part and parcel of his/her business operations if you intend to achieve success - The customer care vision by organisation embraces employees that put its customers first and that is open transparent, accountable and responsive - The customer is king and always right as a way of doing business - The customer is always observed as having a right to demand quality services from eh organization - In the modern business world, there is an increasing focus on enhancing service delivery and on ascertaining that they are delivered as promised - An entrepreneur should e responsible, accessible and quick to help source problems - Should be reliable and deliver what he or she promises on time - Should be knowledgeable and courteous - Should be empathetic and should understand the needs of customers - Work area should always be clean and organized 2.3 Ten tips of customer care 1. Reliability - This refers to consistency of performance and dependability. - Perform the service right the first time, fulfill promises - Be impartial and avoid favoritism - Be firm with friends and relatives as far as business transactions are concerned 2. Responsiveness This refers to the willingness as well as readiness of the entrepreneur or his employees in providing the services within reasonable time immediately if not sooner 3. Competence This refers to the possession of the required skills and knowledge by those who deliver the services to the customer. This will create confidence

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4. Accessibility This refers to the degree of approachability and ease of contact of the entrepreneur or his employees Drop what you are doing to greet and serve a customer 5. Courtesy This refers to politeness, respect, consideration and friendliness or your organisations contact such as receptionists, secretaries, telephonist, etc, they must be polite and courteous at all times remember, a smile goes a long way. 6. Communication Keep your customer well informed in language and style they understand It is important to hear and understand what your customers are saying Communicate effectively with your suppliers as well 7. Credibility This refers to being trustworthy and faithful Put customers at heart They should feel that he or she is given priority and should have the trust that any order will be executed and received when expected 8. Security Customers should be protected from danger, risk or doubt within the premises 9. Knowledge of customer The entrepreneur should know the client specific requirements Be able to recognize regular clients Strive to provide individualized attention Understand what makes them buy it is price 10. Tangibles This could include the physical evidence (i.e. building, good handling, tools, equipment, packages etc). This could also include the appearance of your personnel Employees must be neat, orderly and clean

2.4 Benefits/Importance Of Customer Care - If customers are put first, the entrepreneur will be rewarded with new business and increased profit margins and sales. - Customer care creates new customers - Constructive consumer dialogue enables the entrepreneur to know and understand what the customers needs and wants - It builds good relationships and loyalty with customers - Can make passive customers become in violated participants (i.e. loyalty) - Creates corporate excellence - Build good reputation and good image i.e. it is a tool for good corporate image building - Business can become a market driven entity as you get information on what your customers need and want Prerequisites of meeting customers expectations 1) Be courteous and tactful

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Be friendly and helpful Deal promptly and decisively with customers Rectify faults quickly and keep promises Listen to customers attentively and respond promptly Avoid being sarcastic when dealing with customers Present information logically and comprehensively Stick to your commitments Always inform your customers on what happens at your business if it may affect them (i.e. sale, new product/services) 10) Be fair and honest when dealing with customers 11) Demonstrate the right skills at the right time 12) Always give customers professional treatment 13) Know the customers business and needs Who get to decide if a customer service is good? 1. Customer service is a function of your perceptions not your standards in other words, the customers gets to decide if he or she has received good services. Even though all of your standards may have been met, if the customer does not feel well served, your customer service is poor. 2. Customer satisfaction is ultimately the result of the sum total of the customers experience at your establishment. Customers come back to a place that has provided a pleasant experience for them. Thus owners and mangers need to focus not on tangibles as ends themselves but on how all the particulars combine to create a certain experience. Prime examples of poor customer care 1. Poor delivery and accessibility of services 2. Poor quality and state of merchandise 3. Existence of long queues of customers waiting to be served Dirty environment of business Failure in meeting client expectations Dealing with unprincipled customers - Never show that customer is wrong or behaving badly - Always take it that he or she is right - Appreciate and understand at there should be some customers who visit your business with hidden agenda and ulterior motives (i.e. competitors of those interested in policing have price control monitors) - Make every attempt to deter their bead intentions by being upright in your dealings You can defeat unprincipled customers by taking the following steps: 1. Continue to show a good image of your business 2. Smile when talking to customers 3. Accept blunders where you can realize them, promise to improve and make an apology 4. Avoid arguing with customers 5. Always hold your composure and avoid losing your temper in front of your customer

2) 3) 4) 5) 6) 7) 8) 9)

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Building Customer Trust From a customers point of view, there is probably no concept more important than trust. How can you strengthen customer trust? 1. Keep your promises 2. Make promises that you can keep 3. Do everything to keep the commitments you make 4. If you cannot fulfill the promises let the customer know 5. Call back if you promise even if you dont have the information the customer is expecting 6. Following up on an order to be sure everything is okay 7. Properly hold complaints all the time 8. Make recommendations that are best for the customers 9. Recommend a competitor when theres a need that you cant satisfy 10. Make yourself available after the sale Activity Discuss the benefits of good customer care for a business you are familiar with Creating customer comfort Customer care is also defined as meeting needs and creating comfort. Meeting needs is a given, creating comfort is a function of enabling the customer to feel a sense of control when he or she is at your business. Customers feel in control when they know the drill i.e. when they know how things work and how to get things done. Develop and maintain a customer charter - Make sure that there is availability and visibility of both a mission statement and customer charter. The customers charter will remind your workers always to abide by its contents and will assure customers of their expectations of the services and what move to take if they are not met. Your customers charter should indicate the standards of services to be delivered and the way in which the worker will perform their duties. 1. Telephone - Number of rings before the telephone is answered are given 2. 3. Enquiries Short turn around time Follow up Courtesy options offered to caller Correspondence Correct Shorthorn around time Acknowledgement of receipt

4. Delivery deadlines met - Delays explained and apology given 5. Outgoing services

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Automatic follow up Customer feedback Be sure that your customers charter informs clients about the availability of a system of redress in case of grievances

UNIT 3.0 STAFF MOTIVATION 3.1 objectives By the end of this unit, you should be able to: 3.1.1 Define motivation 3.1.2 Explain the theories of motivation and show their implications on the performance of workers and the organisation as a whole 3.1.3 Explain the importance of motivation to the entrepreneur 3.2 Motivation - Definition - Managers and entrepreneurs are tasked with ensuring that things are done through people. For the work to be done efficiently and effectively, employees need to be motivated. Motivation is concerned with inducing people to work to the best of their ability. Motivation refers to those schemes designed to influence and encourage workers to perform outstandingly. It is therefore very important to take a closer look at theories of motivation and consider motivation of workers seriously. - According to Appleby (1994), motivation refers to the way urges, aspirations, drives and needs of human beings direct or control or explain their behavior. Maslow (cited in Stoner & Freeman 1989) defines motivation as those inner and outer factors which cause, channel and sustain the behaviour of a person in order to achieve specific organizational or personal goals. 3.3 Theories of Motivation and their implications to the enterprise There are many theories of motivation and any theory or study which aids an understanding of how best to motivate people at work must be useful. All entrepreneurs have a duty to motivate their employees for the success of their enterprise. Motivated workers take more pride in their jobs and work better. But many entrepreneurs do not know how to motivate their staff. Entrepreneurs must know how to apply the theories of motivation in particular work situations. There are two contrasting approaches that is the content theories and process theories (cognitive theories) - Content theories attempt to explain those specific things which actually motivate the individual at work. These theories are concerned with identifying peoples needs and their relative strengths and the goals they pursue in order to satisfy these needs. Content theories place emphasis on the nature of needs and what motivates. - Process theories attempt to identify the relationship among the dynamic variables which make up motivation. These theories are concerned more with how behaviour is initiated, directed and sustained. Process theories place emphasis on the actual process of motivation. Major content theories of motivation include Maslows hierarchy of needs model Alderfers modified need hierarchy model

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Herzbergs two-factor theory McClellands achievement motivation theory

Maslows hierarchy of needs theory Maslows theory claims that human motives develop in sequence according to five levels of need arranged in a hierarchy of importance. Maslows basic proposition is that people want beings, they always want more, and what they want depends on what they have already. The hierarchy begins with the lowest level i.e. physiological needs to the need for love (social), esteem needs to the need for self-actualization at the highest level. Below is the pyramid to show the hierarchy

Self-actualization (i.e. realizing ones potential for continued self development) Esteem (i.e. Status, respect, recognition by others)
achievement, self- confidence,

Social (love) (i.e. to belong, associate with, be accepted by Safety (i.e. protection against danger Physiological i.e. shelter, clothing, food
)

Physiological needs include homeostasis such as satisfaction of hunger, thirst, shelter deficiency, clothing deficiency and so on. In fact homeostasis relates to the bodys automatic efforts to retain normal functioning. Safety needs include safety and security, freedom from plain or threat of physical attack, protection from danger or deprivation, the need for predictability and orderliness. Love needs that is social needs which include affection, sense of belonging, friendships and both the giving and receiving of love. Esteem needs are also referred to as ego needs which relate to self-respect which involves the desire for confidence, strength, independence and freedom, and achievement. Esteem of others involves reputation or prestige, status, recognition, attention and appreciation. Self-actualization needs that is the desire to become more and more what one is capable of becoming which simply means that one wants to realize his or her potentialities and capabilities. IMPLICATIONS OF MASLOWS HIERARCHY OF NEEDS TO THE ENTREPRENEUR

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Once a lower need has been satisfied, it no longer acts as a strong motivator and only unsatisfied needs motivate a person. This hierarchy of needs implies that entrepreneurs need to consider seriously the lower level needs if workers or staff are to cooperate at work. That is the remuneration (salary, wage, fringe benefits) should meet decent or exclusive physiological needs (shelter, food, clothing). Pleasant working conditions must also be ensured. Successful entrepreneurs must consider the safety and security issues such as safe working conditions like danger warning signs, clean work environment and good healthy facilities. It is also important to employees and social security after employment i.e. pension and other related company benefits. Social needs of workers have impact on the performance. Workers need to be loved and as such entrepreneurs need to instill a sense of belonging in workers. Entrepreneurs also need to employ friendly supervision, cohesive work group, and team spirit and general sound relations with employees. Workers also need professional associations to meet their professional associations to meet their professional problems. Another area of concern is self-esteem. In this case entrepreneurs should make use of social recognition, job title, high status job and feedback from the job itself if employees are to be motivated in their work. Self actualization is one aspect that does motivate employees i.e. workers are motivated by challenging job, opportunities for creativity, achievement in work and advancement in the organisation and as such entrepreneurs should not that.

Alderfers Modified need hierarchy model This model condenses Maslows five levels of need into only three levels based on the core needs of existence, relatedness and growth (ERG theory). Existence needs are concerned with sustaining human existence and survival and cover physiological and safety needs of a material nature. Relatedness needs are concerned with relationships to the social environment and cover love, meaningful interpersonal relationship of esteem nature. Growth needs are concerned with development of potential and cover self-esteem and self-actualization. NB: Alderfers Model has the same implications with Maslows hierarchy. Herzbergs Motivation hygiene theory He presents his tow factor theory of motivation which elaborates the differences between higher and lower needs. This theory states that factors which create satisfaction at work are those stemming from the intrinsic content of job e.g. recognition and responsibility, meaning and challenge. These satisfy higher needs. These are called satisfiers or motivators or growth factors. Another set of factors which entrepreneurs must take cognizance of is dissatisfiers or hygiene factors. These factors stem from the extrinsic job context e.g. working conditions, pay, and supervision. These satisfy lower needs. An important point to note in this theory is that as dissatisfaction stems from lower needs

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not being satisfied, when these are satisfied, this only removes dissatisfaction and does not increase motivation. If hygiene factors did not reach a certain standard e.g. salary, working conditions, job security, poor supervision. They felt bad about their jobs and were unhappy. Hygiene factors are also called preventive factors. Positive motivation and a feeling of well-being could only be achieved, not by just improving these hygiene factors but by improving genuine motivators such as recognition, achievement responsibility, advancement and the work itself. Below is a representation of Herzbergs two-factor theory Hygiene or Maintenance factors Salary, job security, working conditions, Level of quality of supervision, company Policy and administration, Interpersonal relations ,The Dissatisfiers Motivation & job satisfaction The satisfiers: Sense of achievement, Recognition, Responsibility, Nature of work, Growth and advancement, Opportunity of creativity Motivators/growth factors NB: The Motivation hygiene theory of Herzberg is an extension of Maslows Hierarchy. The emphasis in this theory is that entrepreneurs must consider both the hygiene factors and the growth factors/motivators. McClellands achievement Motivation theory This theory focuses on the relationship between hunger needs and the extent to which imagery of food dominated thought processes. From the research or study that McClelland carried out in relation to the relationship between hunger needs and how food dominated thought processes, four main aroused based and socially developed motives were identified. These are The achievement motive The power motive The affiliative motives The avoidance motives The first 3 motives relate to Maslows self-actualization, esteem and love needs. The implication of this theory to the entrepreneur is that the entrepreneurs must identify the motives of workers and try to satisfy them e.g. workers with high achievement motives prefer moderate task difficulty and goals as an achievement incentive i.e. if the task is too difficult or too risky, motivation is little and it is too easy there is little satisfaction and motivation. Process Theories of Motivation The major process theories include Expectancy model Vroom, Potter and Lawler Equity theory - Adam Goal theory - Locke Attribution theory - Heider, and Kelley

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Expectancy Theories of Motivation These theories state people are influenced by the expected results of their actions. That is motivation is a function of the relationship between (i) Effort expended and perceived level of performances, and (ii) The expectation that rewards (desired outcomes) will be related to performance (iii) The expectation that rewards (desired outcomes) are available Performance depends upon the perceived expectation regarding effort expended and achieving the desired outcome e.g. the desire for promotion will result in high performance only if the person believes there is a strong expectation that this will lead to promotion. The choice of behaviour is based on the expectancy of the most favourable consequences. The proponents of the expectancy theory are Vroom and Porter and Lawler. V rooms expectancy theory Vrooms theory was based on three key variables that is valence, instrumentality and expectancy (VIE) (VIE theory or expectancy/valence theory) The theory is founded on the idea that people prefer certain outcomes from their behaviour to others. That is they anticipate feelings of satisfaction should the preferred outcome be achieved. Valence is the feeling about specific outcomes that is the anticipated satisfaction from an outcome. Vroom distinguishes valence from value that is valence is as to anticipated satisfaction and value is as to the actual satisfaction provided by an outcome e.g. money as a reward. Instrumentality - this relates to the distinction between first level and second level outcomes. The first-level outcomes are performance related which refer to the quantity of output or to the comparative level of performance. That is other people may seek to perform well for its own sake and without thought to expected consequences of their behaviour. All the same, performance outcomes acquire Valence because of the expectation that they will lead to other outcomes as an anticipated source of satisfaction i.e. second level outcomes. The second level outcomes are need related derived from achievement of first level outcomes that is through achieving high performance. Many need related outcomes are dependent upon actual performance rather than for effort alone or through trying hard e.g. salesperson (commission) Expectancy is the probability that choice of a particular action will actually lead to the desired outcome i.e. the relationship between a chosen course of action and its predicted outcome. Students exercises i) Research on The porter and Lawler expectancy model and explain its implications to the entrepreneur. ii) Discuss the implications of the Equity theory by Adams, Goal theory by Lock and Attribution theory by Heider and Kelley in the entrepreneurial world. Reward options to entrepreneurs Financial rewards Salary + bonus/commission

Non financial rewards Handling grievances/concerns

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Salary + profit sharing High salary + benefits Commission Prizes of employee of the month

Personal growth Professional growth Job security Status and public or private recognition Good working environment Participative management

3.4 Importance of motivating employees - Increased productivity - Increased efficiency and effectiveness - Good corporate image building - Increased sales and profits - Good customer relations - Promotes team spirit (team work) or cooperation and support by employees - Promotes entrepreneurship by employees that is innovativeness, creativity and initiative ness resulting in the growth or expansion of the enterprise Activity Giving examples of the theories of motivation, discuss the advantages of motivation to the entrepreneur. UNIT 4.0 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY 4.1 OBJECTIVES By the end of the unit you should be able to: Define ethics Analyze the ethical positions Explain the importance of ethics to entrepreneurs Define social responsibility Explain social responsibility principles Explain the importance of social responsibility to the entrepreneur 4.2 definitions of ethics Refers to the rules/principles that define right and wrong conduct in business or at work to the publics or the organisation. Publics ate the interested parties e.g. existing customer or potential customers, existing workers or potential workers, pressure groups (i.e. CCZ. ZCTU. ZFTC, AAZ etc), suppliers government departments, shareholders/stockholders etc. Examples of ethical issues Using telephone for personal long distance calls Using company postage for personal mail Showing favouritism in selection decisions/disciplinary practices Playing politics in the organisation Unfair business practice/transactions Unfair dismissal 4.3 ethical positions

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Three different ethical positions that can provide guidance in evaluating ones own ethical standards at work or in business: i) Utilitarian view of ethics This relates to decisions made solely on the basis of their outcomes or consequences The goal of utilitarianism is to provide the greatest number. This view tends to dominate business decisions making. It is consistent with goals like efficiency, productivity and high profits. By making profits, a business executive can argue that he is securing the greatest good for the greatest number.

ii) Rights view of ethics - This calls upon individuals to make decisions consistent with fundamental liberties and privileges as set forth I documents like the bills of rights. The rights view of ethics is concerned with respecting and protecting the basic rights of individuals such as the right to privacy, to free speech and to take industrial action since this position will protect employees who report unethical or illegal practices by their organisation to the press or government agencies on the grounds of their rite to free speech. iii) Justice view of ethics - This requires individuals to impose and enforce rules fairly and impartially so there is an equitable distribution of benefits and costs. Union members typically favour this view. It justifies paying people the same wages for a given job regardless of performance differences and it uses seniority as the criterion in making lay off decisions. Each of these perspectives has advantages and liabilities The utilitarian view promotes efficiency and productivity, but it can result in ignoring the rights of some individuals particularly those with minority representation in the organisation The rights perspective protects individuals from injury and is consistent with freedom and privacy but it can create an overly legalistic work environment that hinders productivity and efficiency The justice perspective protects the interests of the underrepresented and less powerful but can encourage an overly legalistic work environment that hinders productivity and efficiency The justice perspective protects the interests of the underrepresented and less powerful but can encourage a sense of entitlement that reduces risk-taking innovation and productivity Codes of ethics and decisions Codes state the organisations primary values and the ethical rules it expects its employees to follow Examples of codes include the following: Demonstrate courtesy, respect, honesty, and fairness Maintain confidentiality of records Do not propagate false or misleading information 4.4 importance of good ethics

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Corporate image is built or improved Efficiency and productivity is enhances Sales and profits are boosted Sound relations and mutuality between the entrepreneur and the publics are established and sustained

4.5 social responsibility - Is a broader concept that also covers business ethics. Social responsibility defines the obligation that the business community or entrepreneur has for the well being of the society. The entrepreneurs are expected to have the society at heart in all their operations. A good and patriotic entrepreneur needs to develop giving back to the community schemes - These are arrangements or programs designed to give back to the community in terms of assisting the less fortunate sponsoring social institutions e.g. schools, colleges, old peoples homes, street kids and the orphans. Social responsibility also includes taking care of harmful waste products, dangerous emissions. Social responsibility also includes paying tax to the government. The money is used utilities and consumption such as public water facilitating public toilet road construction, social welfare facilities and services etc. - Social responsibilities also include taking care of harmful waste products, dangerous emissions. Social responsibilities further cover informing the publics about the side effects of products, educating customers on proper usage of products such that accidents or harm are avoided or minimized e.g. Sedan Benz is designed in such a way that it minimizes chances of accidents. Some critics hold the business community responsible for unemployment, crime in the streets, ill clothed, ill housed and ill fed. Others believe that it is the responsibility to the business world to create jobs and pay taxes to the government so that it can employ express to solve social problems. 4.6 Importance of social responsibility to the entrepreneur - Productivity and efficiency may be enhanced, as workers will be motivated with fair business practices. - Corporate image building - Maintenance of sound mutuality and relations with the society - Sales, market and profits may be increased etc NB: Large and small firms are urged to practice honest social responsibility and business ethics and to become good community citizens expressing interest in social problems should be concerned with the welfare of the society. 4.7 social responsibility principles Other critics encourage that the entrepreneurs should use the following social responsibility principles for social corporate integrity and image building i) Charity Principle The doctrine of social responsibility requiring more fortunate individuals or entrepreneurs to assist less fortunate members of the society including the unemployed, the handicapped, the sick, the elderly, street kids, orphans etc. ii) Stewardship Principle

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Biblical doctrine that requires businesses and wealthy individuals to view themselves as stewards or caretakers holding their property in trust for the benefit of the whole society. The idea is that the rich hold their money in trust for the rest of the society and can use it for any purpose that society deems legitimate. UNIT 5.0 COSTING AND PRICING 5.1 OBJECTIVES By the end of this unit you should be able to: 5.2 Define the following costing terms 5.2.1 Costing 5.2.2 Costs 5.2.3 Direct costs 5.2.4 Direct labour 5.2.5 Direct expenses 5.2.6 Indirect costs 5.3 Calculate total costs per item 5.4 Discuss the importance of costing to the entrepreneur 5.5 Define pricing 5.6 Calculate prices of products 5.7 Discuss the pricing factors

5.2 Definition of costing terms 5.2.1 Costing This is the method or way of calculating the total costs of making or selling a product or providing a service 5.2.2 Costs These are all the money that the business spends to make and sell its products or services 5.2.3 Direct Costs These relates to all costs that are directly related to the products or services that the business makes or sells. There are two types of direct costs namely direct material costs and direct labour costs. 5.2.4 Direct Material costs - These are all the money that the business/entrepreneur spends on the parts and materials that become part of or are directly related or linked to the final product or service that it/he/she makes or sells. - NB: for a retailers or wholesalers, the costs of buying goods to resell are the direct material costs. To be considered or counted as direct material costs, the amount of material must be easy to calculate and the cost of the material must be big enough to add a considerable amount to the total direct material costs. 5.2.5 Direct labour costs

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These are all the money that the business or entrepreneurs spends on wages, salaries and benefits for the people who are directly involved in the production of its or his/her products or services The time spent on making the product must be easy to calculate and the cost of the direct labour must be big enough to add a considerable amount to the total direct labour costs. Retailers and wholesalers do not have employees working directly in making products, so they do not have any direct labour costs. For retailers and wholesalers, all salaries and wages are indirect costs.

5.2.6 Direct expenses - These are any expenses directly related to the production of the final product e.g. delivery costs which relate only to delivery or raw materials used in production of one product, hiring of a machine which is only used on one product. 5.2.7 Indirect costs - These are all other costs that the entrepreneur/business incurs in running the business e.g. rent, interest, electricity, salaries of supervisor, managers, accounts clerks, secretary and other administration expenses. Indirect costs are also known as overheads or expenses. 5.3 Calculate total cost per item - Costing for a manufacturing or service operator. When calculating the cost of producing an item, the entrepreneur should ensure that all costs are included. That is direct and indirect costs. The entrepreneur must therefore, calculate the direct maternal cost, direct labour and direct expenses of producing the item and then add a proportion of the indirect costs to find the TOTAL COST of producing the item. - Formula: Total Cost = Direct Cost + Indirect Cost - Before we calculate the total cost per item, it is important to have the costing processes: - Costing Process Where More Than One Product Is Produced STEP I

Direct Material Cost: - Add the cost of raw materials used to produce one product item

Direct labour cost: - (hrs per item x number of workers x money

Direct Expense

Direct Cost Per Item

STEP II

Indirect Cost per year Add up all the Indirect costs for the year Indirect Cost per item: Total Indirect costs per year Total number of items per year

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STEP III

Total cost per item: Direct cost per item + indirect cost per item

NB: In both costing processes, costs per item may be calculated using a month as the time factor instead of a year that is Instead of Indirect cost per year divided by Total number of items per year the Entrepreneur may use, Indirect cost per month divided by number of items per month. Costing calculations in detail (Manufacturer or service operator) Stage I: Calculate Direct Material Costs The entrepreneur should calculate the costs of all material That become part of or are directly related to the product or service That are easy to calculate and have a big enough cost to be counted Stage II: Calculate Direct Labour Costs That is work out the costs of wages, salaries and benefits for the employees who work directly in the production of the product or service Stage III: Calculate Indirect Costs These are all other costs that the business incurs per month such as rent, electricity, insurance, depreciation, water and so on. Costing calculations where not more than one product is produced. Exhibit The entrepreneur carpenter specializes in the manufacture of tables and has the following details for costing. Calculate the total cost of one table. Materials used: Timber 2 000.00 Nails 1 000.00 Varnish 500.00 Glue 500.00 One (1) worker takes 5 hours to produce one item. hour. Other costs per month: Rent Electricity Other wages Telephone Transport 100 items are produced each month Answer: Direct Materials: The carpenter is paid $1 000 per $ 5 000.00 $ 500.00 $10 000.00 $ 2 000.00 $ 2 000.00

Timber Nails

$2 000.00 $1 000.00

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Varnish Glue

$ 500.00 $ 500.00 $4 000.00 (Direct Material/Cost)

Direct Labour:

1 x 5 hours/item x $1000/hr = $5000.00

Indirect Cost/item:

Rent Electricity Other wages Telephone Transport

$ 5 000.00 $ 500.00 $10 000.00 $ 2 000.00 t $ 2 000.00 $19 500.00

$19 500.00 100 items/month = $195.00/item Total cost of one item: Direct material cost + Direct Labour Cost + Direct Expenses + Indirect Cost = $4 000.00 + $195.00 =$4 195.00 NB: There are not direct expenses Further Questions i) The entrepreneur uses the following to make a garment: Materials: Fabric $2 000.00 Thread $ 500.00 Elastic $ 500.00 A tailor takes 4 hours to produce the garment and charges $500.00 per hour. Other costs per year are as follows: Rent $100 000.00 Transport $ 20 000.00 Electricity $ 30 000.00

Indirect Cost/item:

2000 items are produced each year. Calculate the total cost per item. ii) The entrepreneur produces desks and uses the following: Materials: Timber $10 000.00 Nails $ 1 000.00 Varnish $ 500.00 Paint $ 2 000.00 Direct expenses $5 000.00 2 Workers take 3 hours to make one desk. They are each paid $1 000.00 per hour. Other costs of running the business per year are: Rent $10 000.00 Electricity $ 5 000.00 Water $ 7 000.00

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Transport Other wages

$20 000.00 $20 000.00

1000 desks are produced each year. Calculate the total cost per item. iii) The entrepreneur has the following to make a product item:

Materials $50 000/item Indirect costs $2 000 000/year 40 000 items are produced per year 3 Workers take 2 hours to produce 1 (one) item. Calculate the total cost of product item. Calculation of total cost of 1 (one) item where several different products are produced If the entrepreneur produces several different types of products, it is not appropriate to allocate the same amount of costs as in the case of one product type. This is because more time may be spent in the making of one product and little in the other. As such, one product has a greater proportion of the indirect costs than the other. This is achieved by calculating the Indirect cost per item and multiplying by the number of hours to produce one item. This enables the entrepreneur to be able to calculate a different cost for each different product which reflects the amount of time taken to produce that product. Exhibit: The entrepreneur used the following in making the dress and a trouser: Material Fabric Thread Zip Button Dress $800.00 $300.00 $100.00 $100.00 Trousers $1 000.00 $ 400.00 $ 100.00 $ 100.00

Two workers are each paid $2 000.00 per hour. Working together, they take 4 hours to produce one dress and 6 hours to produce one pair of trousers. Other costs each year: Rent $600 000.00 Electricity $240 000.00 Transport $240 000.00 The two workers each work for 40 hours a week and fifty weeks a year. Calculate total cost per each item. Answer: Direct costs:

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1st calculate direct material cost: Materials Dress Fabric Thread Zip Buttons $800.00 $300.00 $100.00 $100.00__ $1 300.00

Trousers $1 000.00 $ 400.00 $ 100.00 $ 100.00_ $1 600.00

per item

2nd calculate direct labour cost Dress: 2 workers x 4hrs x $2 000.00 = $16 000.00 per dress Trousers 2 workers x 4 hours x $2 000.00 = $24 000.00 per pair of trousers

3rd Total Direct Cost: Dress: Direct material cost + Direct Labour = $1 300.00 + $16 000.00 = $17 300.00 per dress Trousers: $1 600.00 + $24 000 = $25 600.00 per pair of trousers Rent Electricity Transport $6 000 000.00 $ 240 000.00 $ 240 000.00_ $1 080 000/year

4th calculate indirect costs:

5th calculate production hours per year 2 Workers x 40 hrs/week x 50 weeks/year = 4 000hrs/year 6th indirect cost per hour: Formula: indirect cost/year Production hrs/yr = 1 080 000/yr 4 000 hrs/yr = $270/hr 7th calculate indirect cost per item: Dress: 2 workers x 4hrs x $270/hr = $ 1 660.00/dress Trousers: 2 workers x 6 hrs x $270/hr = $ 3 240.00/pair

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8th Total cost:

Dress: $1 300.00 + $16 000.00 + $1 660.00 = $18 960.00 Trousers: $1 600.00 + $24 000.00 + $3 240.00 = $28 840.00

Further Questions The entrepreneur used the following to make a skirt and a Dress: Materials Skirt Dress Fabric Elastic Zip Lace 3 $2 000.00 $ 50.00 $ 90.00 $3 000.00 $ 80.00 $ 100.00

three)Workers take 4 hours for the skirt and 5 hours for the dress and are each paid $2 000.00 per hour.

Indirect costs per year: Rent $600 000.00 Electricity $360 000.00 Transport $240 000.00 Each worker works for 50 hours/week and 50 weeks/year. Calculate the total cost per each item.

Costing for a retailer or wholesaler Retailers and wholesalers have the same types of costs and can normally do costing in the same manner. Some costs for retailers and wholesalers are different from the costs of manufacturers and service operators. To calculate the total cost of an item for the wholesaler or retailer, 3 steps are followed that is: Step 1 Calculate Direct Material Cost Step 2 Calculate Indirect Costs Step 3 Add up Total Costs Total cost = Direct Material Cost + Indirect cost NB retailers/wholesalers do not have direct labour as they buy and sell goods made by other businesses. Their employees do not make products or manufacture, and as such all wages and salaries are indirect costs. The direct material costs of retailers and wholesalers take the form costs of buying goods. The Indirect costs of the retailers and wholesalers are rent, electricity, insurance, depreciation and so on. 5.5 Pricing

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Definition: is the process of calculating an amount of money to charge customers for goods and services produced or to be provided by the entrepreneur. 5.6 Calculations of prices of product After costing the next process is to calculate the price for which the products should be offered The two major methods of pricing calculation are mark-up and margin. Mark up is profit expressed as a fraction or percentage of cost It is calculated as: Profit (P) x 100% Cost Margin is profit expressed as a fraction or percentage of selling price It is calculated as: Profit (P)______ x 100% Selling Price (SP Note that Profit = Selling Price Cost

Example: If the selling price is $250.00 and the cost is $200, calculate profit, mark up and margin. Solution Profit = = = Mark up =

Selling Price Cost $250.00 - $200.00 $50.00

50 (Profit) 200 (Cost) = as a fraction or 25% as percentage = = 50 (Profit)______ 250 (Selling Price) 1/5 as a fraction /25% as percent

Margin

Further Questions a) The entrepreneur makes Dresses and skirts and uses the following: Material Fabric Thread Buttons Dress $2 000.00 $ 200.00 $ 30.00 Skirt $3 000.00 $ 700.00 $ 30.00

Two (2) workers take 3 hrs to make a dress and 4 hours to make a skirt and are each paid $1 000.00 per hour. The indirect costs per year are: Rent $600 000.00 Electricity $240 000.00 Other wages $ 30 000.00 The two workers each work for 40 hours a week and so weeks a year. i) Calculate the profit and selling price, if the Dress is marked up by 10%. ii) If the profit on skirt is $200, what is its selling price, mark up and margin.

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b) The entrepreneur produces two products A and B. The following are incurred by the business: Materials Materials Products: A $2 000.00 B $3 000.00

Two (2) workers take 6 hours to produce product A and 10 hours to produce product B. The workers are each paid $1 000 per hour. The indirect costs are 200 000 per year. Each worker works for 50 hours a week and 50 weeks a year. Find the profit and selling price of each product, if the products are marked up 50%. 5.7 Pricing factors When setting prices the entrepreneur must consider the following variables or factors. a) Customers The business is expected to carry out a survey to determine how much customers are prepared to pay for the product. The selling price should not be higher than what customers are prepared to pay. b) Competitors The entrepreneur should carry out competitors analysis to determine the prices of competitors. If the entrepreneur sets higher prices than its competitors, he/she will lose customers to competitors. Customers are economic beings who always choose the cheapest (or best value for money) products. As such, the highest selling price should be equal to or less than the price charged by competitors. c) Cost and Profit The entrepreneur must consider the costs incurred in producing the product or the costs that the business is going to incur in producing the product. For the business to make a profit the entrepreneur must set his/her selling price higher than the costs incurred. NB: For a successful entrepreneur the lowest price = cost + profit need and the highest price = how much competitors charge or customers will pay, which ever is lower. Pricing strategies A pricing strategy is an approach or means designed to achieve the pricing objectives. The price the entrepreneur charges will be somewhere between one that is too low to produce a profit and that is too high to produce any demand. Product costs set a floor to the price; consumer perceptions of the products value set the ceiling. The entrepreneur must consider competitors prices and other external and internal factors to find the best price between these two extremes. Entrepreneurs may opt to use the following approaches or strategies in product pricing: cost based pricing, buyer-based approach and competition-based approach. Cost based pricing includes cost-plus pricing, breakeven pricing and value-based pricing. Break even pricing and value-based pricing.

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Cost-plus pricing is adding a standard mark to the cost of the product. Break even pricing (target profit pricing) is setting price to break even on the costs of making and marketing a product or setting price to make a target profit. Value based pricing is setting price based on buyers perceptions of value rather than on the sellers cost. Value pricing is offering the right combination of quantity and good service at a fair price. Competition based pricing is setting prices based on the prices that competitors charge for similar products. Consumers naturally base their judgements of a products value on the prices that competitors charge for similar products. One form of competition based pricing is going rate pricing, in which a firm bases its price largely on competitors prices with less attention paid to its own costs or to demand. The firm might charge the, more, or less than its major competitors. Another competition based pricing form is sealed-bid pricing where the entrepreneur bases his/her price on how he/she thinks competitors will price rather than its own costs or on the demand. Skimming Pricing comes into being when the entrepreneur sets a high price for a new product to skim maximum revenues layer by buyer from the segments willing to pay the high price. The firm makes fewer but more profitable sales. Market penetration pricing is when the entrepreneur sets a low price for a new product in order to attract a large number of buyers and a large market share. Discount and allowance pricing includes cash discount, quantity discount, functional discount (trade discount) and seasonal discount. UNIT 6.0 RECORD KEEPING AND STOCK CONTROL 6.1 Objectives By the end of this unit students should be able to: Discuss the importance of record keeping Identify source documents in business Identify and explain the purpose of books of accounts Carry out effective buying and stock control procedures

6.2 Importance of record keeping - Basis of financial projections i.e. projected manufacturing, trading, profit and loss account and the balance sheet - Basis or future decisions and plans in terms of corporate growth and investment - Basis for the analysis of expenses and revenue and profit - Basis for the control of cash flow - Basis for showing who owes he business and how much, and to whom the business owes money and how much - Record keeping tells the entrepreneur how much money in the bank and how much you have in cash 6.3 Source document

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Source documents are the documents from which original information to the books of primary entry is obtained e.g. receipts, invoices, debit note, credit note and statement of account Receipts are used by the entrepreneur or supplier when the transactions involve cash e.g. where a customer tenders cash, a receipt may be written out. Below is a sample of a receipt Books of primary entry is obtained
Receipt Gobvu Manufacturing (Pvt) Ltd P O Box 22 CHEGUTU Telefax: 703301 Purchases 5 x 2l Mazoe Orange crush Amount__ $30 000.00 Sub total$30 000.00 Less discount $ 3 000.00 Total $27 000.00 0023 Date: 25/02/04

Signature Thank You

Invoice is a note given by the supplier or seller to the customer when goods are bought on credit to show that the customer has not paid for the goods. That is an invoice is used for credit sales. The invoice should have the following details: Date of purchase Invoice number Sellers name, address, telephone, fax, email (not all of this information may be applicable) Buyers name, address, telephone, fax, email (not all of this information may be applicable) Goods or services bought Amount to be paid Terms of sale Amount of discount if any Appreciation message (e.g. Thank You for doing business with us) The following is a sample of an invoice
Invoice 00214 Date: 26/02/04

Gobvu Manufacturing (Pvt) Ltd P O Box 39 KWEKWE Telefax: 055 50221 To: Makayepuva (Pvt) Ltd Chuma street MASVINGO Tel: 039 62043

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Item purchased 500ml super stick glue Quantity Unit cost 500 $100.00 Total______ $50 000.00

Debit Note is used to correct an undercharge on a customers account e.g. when the price shown on the invoice is too low or when some items have not been shown. Sometimes a second invoice is issued in this instance rather than a debit note. Below is an example of a debit note

Debit Note Suppliers name & address Supplier Ref: Date: Customers Name & Address Debit Note No Item description Quantity Unit price Total___________

Total to be debited: Reasons for debit:

Credit Note is used to correct an overcharge e.g. if 25 items are sent, but only 20 were requested on the order, then a credit note will be prepared to reduce the bill by the value of those 5 items. The extra 5 items would be returned to the supplier. A credit note can also be used where goods or services are unsatisfactory e.g. goods are damaged or wrong price charged. The following is a layout of a credit note

Credit Note Customers Name & Address Customer Ref: Date: Suppliers Name & Address Credit Note No: Item Description Quantity 54 Unit price Total to be credited Total______

Statement is a summary of all of the invoices, payments, credit and debit notes during a period of time. A running balance (total) is used to show the effect of each transaction i.e. invoices and debit notes increase the total amount which is owed, and credit notes and payments reduce the amount which is owed. This is essential as it helps the supplier and the buyer to keep a record of invoices sent and paid during a period of time. Below is the layout and a specimen of a statement

Statement From//To.// Customers Name & Address Customer Ref: Date: Suppliers Name & Address Date Details Amount Balance remaining Balance_________

Specimen Date 5/02/04 10/02/04 20/02/04 25/02/04 28/02/04

Details Invoice No. 011 Credit Note 005 Invoice No. 13 Payment Received Invoice No. 16 Balance remaining

Amount $1 000.00 $ 300.00 $ 800.00 $ 600.00 $1 200.00

Balance $1 000.00 $ 700.00 $1 500.00 $ 900.00 $2 100.00 $2 100.00

NB: The balance column shows a running total of how much is owed at each date. Invoices and Debit Notes are added to the balance as they increase the amount which is owed; credit notes and payments are subtracted from the balance as they decrease the amount which is owed.

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The other documents used by the business are enquiry, quotation, price list, delivery note and consignment note. Enquiry letter is a letter from the customer asking about prices, range of goods, specifications etc Quotation is a reply to the enquiry giving details about the specific items or services that the customer has enquired about. Price list is a list showing all of the items for sale together with their prices. Order Note is a letter requesting goods from the supplier. Below is a layout of an order note

Order Suppliers Name & Address

Customers Name & Address Customer Ref: Date: ____________________________________________________________ Item Description Quantity Unit price Total________

TOTAL_________________

NB: customer ref maybe used as a special code number given to the customer to help the supplier identify any previous dealings with that customer. If a letter is used instead of an order form, these columns should still be used as part of the body of the letter so that the order is clear and easy to understand. Delivery Note is a list of items sent and the quantities of each item. It is sent by the supplier for the customer to check carefully that the correct items and quantities have been delivered and then sign. The delivery note only shows items and quantity. The delivery note should be given a special number so that he or she can find his copy easily. Below is the layout of Delivery Note

Delivery note Customers Name & Address: Customer Ref: Date: Suppliers name & Address Delivery Note No: Item description 56 Quantity___________

Consignment Note is used with or instead of a delivery note where the goods are delivered by someone other than the supplier e.g. for goods delivered by sea or rail. Entrepreneurs should consider the following. When choosing a supplier: prices, quality, delivery, customer service, location, terms of payment, discounts and business hours. 6.4 Appreciation of Books of Accounts In business the entrepreneur should be able to appreciate books of accounts. These include the books of original entry or prime entry and the ledger book. The books of prime entry include the cashbook, purchases journal book, purchases returns book and the sales returns book and the general journal book. The ledger book is the main book of accounts. Cashbook This is the book of original entry used to record all cash transactions that is all money that comes into and goes out of the business on a daily basis. A cashbook can be used to determine the amount of money left over at the end of the month. Below is a layout of a cashbook Debit side (Receipts side) Dr Date Details (Receipts) Cash Bank Credit side (Payments side) Cr Date Details (Payments) Cash

Bank

Example 1/02 E Gobvu starts business with capital: Bank 8/02 5/02 15/02 18/02 20/02 22/02 23/02 28/02 Sales (cash) Buys stock with cheque Telephone bill paid by cheque Pay cash into the bank Sales (cheque) Pay wages (cash) Withdraw from the bank to keep in business E Gobvu writes cheque for personal use

Cash

$ 5 000.00 $50 000.00 $15 000.00 $10 000.00 $ 5 000.00 $10 000.00 $20 000.00 $10 000.00 $ 5 000.00 $15 000.00

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E Gobvu cash book for the month of February 2004 Date Receipts Cash Bank Date Payments (Details) (Details) 5 000 1/02 Capital 50 000 5/02 Purchases Sales 15 000 8/02 15/02 Telephone bill 18/02 Deposit 10 000 18/02 Deposit 20/02 Sales 20 000 22/02 Wages 23/02 Withdrawal 5 000 23/02 Withdrawal 28/02 Drawings 25 000_ 80 000 29/02 Balance c/f 1/03 Balance b/f 5 000 45 000

Cash

Bank 10 000 5 000

10 000 10 000 5 000 15 000 5 000 25 000

45 000 80 000

Notes The cash book is divided into two halves that is Debit Side (Dr) or Receipts side and the Credit Side Payment side (Cr). This means that when money comes into the business, it is recorded on the left hand side (Receipts) and on the right hand side (Payment) for money going out of the business. - Capital refers to the money being invested by the entrepreneur into the business. - Purchases refer to goods bought by the business for resale. - Drawings relates to money taken out of business for personal use. - Transfer from Bank to Cash refers to money taken out of bank account to be kept as cash in business. This transaction has to be recorded in the cashbook to show that the money has been moved from one place to the other, otherwise the totals for the money left in the bank and in cash at the end of the month will be incorrect. - When money is withdrawn from the bank account, money has gone out of the bank as such there is need to record it I the Bank column on the Payments side of the Cash Book. This money is added to our supply of cash in the business and a record has to be made on the cash column on the Receipts side of the cashbook. The reverse is true when the business transfers cash from the business into the bank. - Balance carried forward (c/f) is determined at the end of the month by subtracting the total payments (money out) from the total receipts are $25 000 and total cash payments are $20 000, therefore $5 000 is left at the end of the month $25 000 has come in and $20 000 has gone out. $5 000 is the balance carried forward because it is the amount that will be starting the next month and will be recorded as balance b/f (balance brought forward) Purchases journal This is a book of primary entry where goods on credit for re-sale are recorded. The transactions are recorded as follows: Example: Mutsvedu (Pvt) Ltd 10 February bought $5 000 stock on credit from E Gobvu 18 February bought $5 000 stock on credit from T Timothy

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Mutsvedu D Purchases journal for the month of February 2004 Date Details Folio Dr 10/02 E Gobvu 18/02 T Timothy Dr Purchases A/C $15 000.00

Cr $10 000.00 $ 5 000.00

Sales Journal - This is a book of primary entry where goods returned by customers are recorded Example: Mutsvedu (Pvt) Ltd Mutsvedu D Sales Returns Journal for the Feb 2004 20/02 B Sali returned goods $2 000.00 22/02 T Tom returned goods $5 000.00 Date 20/02 22/02 Details B Sali T Tom Dr Sales Returns Folio Dr Cr $2 000.00 $5 000.00

$7 000.00

General Journal This is used to enter all transactions which cannot conveniently be entered into one of the other subsidiary books e.g. fixed assets bought on credit such as furniture. Example; Mutsvedu (Pvt) Ltd 01/02 Received an invoice of $100 000.00 for office furniture bought on credit form M Pienaar 02/02 Bought stationary on credit from M Pienaar $10 000.00

Date 01/02 02/02

Details Office furniture M Pienaar Stationery M Piennar

Folio

Dr 100 000.00 10 000.00

Cr 100 000.00

The Ledger Book This is the main book of account. All other books of account are subsidiary to the ledger and are used to record transactions as they occur, prior to their entry or posting to the ledger. The ledger is ruled as follows: Dr Date Details Folio Amount

Cr Date Details Folio Amount

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Notes: - The ledger is divided into two halves that is the left-hand side called debit side and the right hand side called credit side. The abbreviations Dr and Cr are used respectively at the top of each account as shown above. - The first column is for dates, the second for particulars of the transactions, the third, a folio column (referred to hereafter) and the fourth, or money column for the amount of each transaction. - The two sides of the account (sometimes contained on two pages facing each other) are numbered alike and are together called a folio. - The universal rule in entering or posting transactions to the ledger is that credit the giver and debit the receiver. Example: Mabinge M (Pvt) Ltd Feb 1 Mabinge M starts his business with a capital of 2 Pays cash for shop equipment by cheque Pays cash for goods (purchases) by cheque 3 Sells goods for cash and deposits the money 4 Pays cash for stationery by cheque 5 Pays rent in cash by cheque Bank A/C Dr Date Details Feb 1 Capital 3 Sales _________ 508 000.00 Bal b/d 105 000.00

$500 000.00 $300 000.00 $100 000.00 $ 8 000.00 $ 1 000.00 $ 2 000.00

Cr Folio Amount 500 000.00 8 000.00 Date Feb 2 2 4 5 Details Shop equipment Purchases Stationery Rent Bal c/d Folio Amount 300 000.00 100 000.00 1 000.00 2 000.00 105 000.00 508 000.00

As is seen by the entries in the ledger A/C (Bank A/C), the Bank A/C received $500 000.00 from Mabinge M (the owner) and that transaction has been debited i.e. written on the left hand side of the Bank A/C. Conversely, the capital A/C has given out to the Bank A/C. This ca be shown as follows: Dr Capital A/C Bank Cr 500 000.00

The rest of the transactions in the above to be posted to their respective account to complete the double entry system i.e. credit the giver and debit the receiver. 6.5 Stock Control

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Involves the management of stock levels and ensuring that the best stock level is sustained. Maintenance of the best stock level is important to avoid too much stock which may result in tying up capital. Tying up capital means that money that could be used in other parts of the business is held in unused stock resulting in the business failing to pay its creditors. Another disadvantage of keeping too much stock is that stock may lose its value. Too much stock is associated with high costs of storage and security. Too much stock is also susceptible to deterioration, perishing, theft and damage. Moreover, too little stock may mean turning away customers. Too little stock also means bad reputation and that the entrepreneur may suffer losses resulting in being unable to pay creditors. As such, stock control is essential in ensuring that the correct amount of stock Minimum and maximum stock levels The greatest amount of stock that the entrepreneur must keep to satisfy its customers is known as the maximum stock level and the lowest level that stock can be allowed to fall to while the business is waiting for a new order or delivery is called minimum stock level and the business is not expected to go out of stock completely. The point that the stock is allowed to full to before an order for more stock is placed is re-order level. To determine the re-order level the entrepreneur needs to know the time it takes to receive the stock after the order has been placed. Secondly, there is need to calculate the items that may be sold in that time. Thirdly, the entrepreneur needs to add an allowance in form of the minimum stock level to the amount and that gives the entrepreneur the re-order level. For instance: If the time between order and delivery is 30 days and the quantity to be sold is 30 items, and the minimum stock level is 5 items. The reorder level is 30 + 5 = 35 items.

The Stock book - For effective management of stock, entrepreneurs are encouraged to keep stock books or cards which are used to record the day to day movements of stock that is in and out of the business. Below is the layout of a stock card.

Mutsvedu D Pvt Ltd Stock Card Item Description: Cost Price: Selling Price: Reorder level: Date Details Stock in Stock out Total/Balance________

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Example Prepare a stock card from the following details: Item: Eversharp blue pen; cost price $500, Selling Price $600, re-order level 140 02/02/04 Bought 1 000 pens 03/02/04 Sold 500 pens 04/02/04 Sold 200 pens 05/02/04 Sold 100 pens 06/02/04 Sold 50 pens 07/02/04 Bought 1 000 pens On 8 February 2004, you carry out a stock take and find 850 items (pens). Enter the details on the stock card and determine the re-order date.

Mutsvedu D (Pvt) Ltd Item Description: Eversharp blue pen Cost Price: $500.00 Selling Price: $600.00 Reorder level: 140 Date Details Stock in 02/02 03/02 04/02 05/02 07/02 Purchases Sales Sales Sales Purchases 1 000 500 200 100 1 000 50 100

Stock out

Total/Balance 1 000 500 300 150 1 050

The re-order level is 150 as shown on the stock card Stock Taking - Stocktaking is an essential tool in checking that the stock records are accurate. There are several reasons why the actual amount of items fail to tally or agree with the stock records. - Stock taking is simply defined as the physical counting or checking of the stock items. The physically counted stock items may fail to agree with the stock records because (a) The items were stolen or damaged and a record was not made (b) Goods were bought/sold but a record was to made (c) Sales or purchases have been recorded incorrectly How to carry out a stock take

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STEPS: 1st Set a date for stock take and inform the publics if business hours are interrupted 2nd Organize the stock to facilitate easy counting Develop a stock list 3rd 4th Physically count every item as per stock list and enter the figure in the stock take column 5th Enter the last balance figure from the stock cards in the stock card column for each item 6th Deduct the stock card figure form the stock take figure and enter this amount in the Difference column 7th Find out the reasons if there is a difference i.e. if there is more or less stock than shown on the stock card Below is a specimen of a stocktaking list

Stock taking list Item Eversharp pen Pencil sharpener Ruler Exercise book (A4)

Stock take 1 000 200 300 1 000

Stock card 1 150 200 350 1 000

Difference -150 0 +50 0

As shown on the stock list, during the stock take there were 150 less of ever-sharp pens and 50 more than recorded on the stock cards. The anomalies or differences should be corrected on the stock card. ACTIVITY i) Discuss the importance of stock control in small enterprises. ii) Prepare a stock card from the following details Item Description: Cost Price: Selling Price: Re-order level: 02/02/04 bought 03/02/04 sold 04/02/04 sold 05/02/04 sold 06/02/04 sold 06/02/04 bought iii) T shirt $20 000.00 $30 000.00 1 000 units 10 000 500 2 000 4 000 3 000 10 000

Prepare relevant subsidiary books for Dzomira. S using the following details

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01/02/04 Dzomira S started business with $500 000 Bank 02/02/04 Bought stock with cheque $300 000 03/02/04 Bought stock from Makaye P on credit $200 000 04/02/04 Bought goods on credit from Mapuva J $ 50 000 05/02/04 Sold goods on credit to Maturure H $400 000 06/02/04 Returned goods to Makaye P $ 50 000 07/02/04 Returned goods to Mapuva J $ 5 000 08/02/04 Received $200 000 worth of Sales returns from Maturure H 07/02/04 Sales (cash) $100 000 10/02/04 Telephone bill paid by cheque $ 20 000 11/02/04 Pay cash into the bank $ 10 000 12/02/04 Sold goods cash $200 000 Sold goods (cheque) $100 000 13/02/04 Paid wages cash $ 50 000 13/02/04 Cash deposit $250 000

UNIT 7.0 GENERATE YOUR BUSINESS IDEA 7.1 Objectives By the end of this unit students should be able to: - Define business idea - Carry out needs survey - Explain how to start a business 7.2 Definition of business idea - Every business emerges from an idea - Businesses get started when people (customers) manifest their needs and wants. Entrepreneurs develop business ideas out of the needs and wants of people. Usually entrepreneurs exploit the weaknesses of the existing providers of goods and services to start their own ventures. A business idea is a short and precise description of the basic operations of the business. Thus a business idea must show the following: The product of service to be offered Potential customers/ target market Selling approach Need to be fulfilled for the customers 7.3 Needs survey - This is undertaken to determine the needs of the potential customers. Entrepreneurs need not just produce products and services for unknown customers. There is need to determine the socio-economic needs of customers if the products to be offered are to be accepted. - The needs survey is crucial in ensuring that the business idea has the customer and the customer is needs in mind. - As such it important to find out what customers want and listen to prospective customers in working out a business idea. - A product or service must offer something special for the customers as it is difficult to attract customers to a new business. - Needs survey enable the entrepreneur to decide whether to specialize or offer different products?

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Specialisation is, however, advantageous, as it is easier to be special and attract customers. Entrepreneurs should ensure that there is demand for their product is not or does not guarantee that there is demand for them.

Important Questions to be answered when developing a business idea i) What product or service will your business sell? - That is, the business idea should be based on what one is good at, but should be what customers require. ii) Who will buy your product or service? - This is all about defining the target market iii) How are you going to sell your product/service - That is selling approach should be defined e.g. selling either direct to customers, or non personal selling iv) Which need will your product or service fulfill for customers? - Consider special attributes of product or service. Profitability and Feasibility of the Business Idea - A business idea must be profitable and feasible. - To determine he profitability and feasibility of a business idea one needs to carry out a feasibility study and SWOT analysis. - Feasibility study relates to a detailed investigation of all aspects of a business idea in order to determine if it is likely to be successful. - Before starting a business, it is essential to research that business idea to find if it is feasible. - A business idea should be practical and profitable. - In terms of feasibility the entrepreneur needs to consider availability of market, competition, location, infrastructure and facilities, raw materials, machinery and equipment, labour and other costs such as electricity, insurance, water, security etc. SWOT ANALYSIS - SWOT analysis is very crucial in the formulation of the Business idea - SWOT stands for strengths, weaknesses, opportunities and threats. - In formulating the Business idea one needs to identify his/her strengths, weaknesses, opportunities and threats. - For strengths and weaknesses consider the internal environment of the organisation that can affect your organisation. - Strengths are those things that the business will be good at e.g. location of the business, better product than competitors, skilled workers. - Weaknesses are those things that the business will not be so good at e.g. expensive products, insufficient funds for advertising. - For opportunities and threats, consider the external environment of the organisation. Opportunities are things around the business in the community that will be good for the success of the business e.g. lack of competitors, market niche. - Threats are things around the business in the community that will be good for the success of the business e.g. lack of competitors, market niche. - Threats are things around the business in the community that will be back for the business e.g. sales tax will be going up, new technology

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When one has done a SWOT analysis, the next step is to evaluate the business idea and decide whether to continue with the idea, adjust the business idea or give up the idea completely.

7.4 Starting the Business - The procedures to start a business depend on the form of business that the prospective entrepreneur wants to start. For the procedures refer to Unit 1.0 Activity: Explain the procedures that you would go through to set up a Private Limited Company and partnership.

UNIT 8.0 BUSINESS PLANNING Business Plan is a document that shows the arrangement in advance of business activities the commercial undertaking and how they will be implemented. Importance of Business Plan - Shows strengths, weaknesses and threats of the business(SWOT) - Provides insight into the strategies to be used to outcompete rivals - Acts as the pointer of solutions to business weaknesses - Provides information on the viability and profitability of the business project - Prevents the organization from wasting the resources as it shows the opportunities in advance For major components of the Business Plan see the Model Business Plan below.

Kenshell furnitures

Business plan

2004 Compiled by: Dzomira S.

Executive summary Business name: Kenshell furnitures Kwekwe Poly, Box 399 Kwekwe Business address: Business owners/ directors: NC MARKETING B usiness idea: To provide furniture Business form: PVT LTD Company Manufacturing Business Type: Own contribution: $11500.00

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Loan amount required: Total project cost: Details of own contribution:

$22 500.00 $34 000.00 the owner will contribute

Mission statement:

to provide quality furniture to the community at affordable prices and generate income for the stakeholders through whose efforts profits are gathered. (i) to provide quality furniture to the community (ii) to maximize the owners equity and profit (iii) to be the leading customer driven enterprise

Project aims:

Vision:

To become a high quality, innovative and customer focused furniture enterprise.

Project background Kenshell is a newly established project. The projects core business will be office desk Manufacture. The owner of the business is Masora S. Kenshell Furnitures is based at Stand Number 6 Spathodia Avenue, Msasa Park Kwekwe. What has prompted the Inception of the project is the unexploited opportunities in terms of lack of furniture manufacturers in Kwekwe especially manufacturers of office desks. The mission statement of the project is, To provide quality furniture to the community at affordable prices and generate income for the stakeholders through whose efforts profits are gathered. The vision is, To become a high quality, innovative and customer focused furniture enterprise. The aims of the project are derived from the mission and vision of the enterprise which (aims) are furnished as follows: (i) (ii) (iii) To provide quality furniture to the community To be the leading customer driven enterprise by being responsive to customers needs. To maximize the owners equity and profit

Business location The business will be located in Msasa Park about 3 km outside Kwekwe City along Mvuma road at Number 6 Spathodia Ave. The area is envied by many, owing to its strategic nature in terms of convenience to both customers and suppliers of raw materials. That is raw materials (timber) can easily be ferried from Fair-fields through Mvuma road and customers can easily access the firm through road or rail. Customers can as well use rail to ferry their goods as the project is about a kilometer to the railway station. Benefits of the Project to the owners - The owners will enjoy psycho-socio-economic emancipation. - The owners will enjoy vertical social mobility that is the owners status will rise from lower to middle or upper class.

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The owner and his/ her family members can afford better health and educational services.

Benefits to the economy - Improved standard of living of the community - Creation of employment to the unemployed citizens - Generation of foreign currency for the country - Increased government revenue (payment of tax) - Project acts as source of new technology Project industry The project falls under the furniture manufacturing industry. Although the firm aims to be the leading office desk specialist manufacturer, other furniture pieces will be produced as secondary business. Organisation and Management Owing to the fact that the business will be an infant firm, the owner shall assume the responsibilities of the manager and the supervisor as shown on the following organisation chart:

Owner Director

Manager

Supervisor

Receptionist counter sales person

Carpenters

The organizational chart above shows that the project will not employ many employees at its onset as a way of cutting down cash flow. However, with growth, the project will create employment for many. Accordingly, the project will employ 2 carpenters and a receptionist counter sales person. An outside accountant will be used to prepare books of the project. The project will strive to meet the following objectives: i) To produce quality furniture ii) To extend the product line iii) To maximize the profit and the owners equity

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iv) v)

To have high staff retention To have high customer retention by practicing good customer care.

The following table shows position, responsibilities, qualifications and salaries of organizational members.

Position Owner

Responsibilities Policy formulation Mobilisation of resources New project initiation Human resources planning and recruitment Opportunity identification Policy implementation Allocating resources to business units Marketing Cash flow management Staff motivation and task allocation Resource allocation to workers Solving novel technical problems at operational level Receiving and making calls Advertising & selling products Recording business transactions Making furniture Maintaining tools, equipment and machines Responding to customers needs by producing prescribed products by customers

Qualifications - Entrepreneurial skills, HND or B Tech (Wood)

Salary/month $200 000.00

Manager

Management Certificate Class I (carpentry)

$150 000.00

Supervisor

- Class I (carpentry) & NC Carpentry At least 2 years experience

$100 000.00

Receptionist/ Counter salesperson Carpenter

- Salesmanship Certificate

$80 000.00

Class I (carpentry) At least 2 years experience

$90 000.00

Feasibility Study The owner carried a feasibility study to determine the suppliers, customers, competitors and distributors. The feasibility study was carried out through the use of Internet, personal interviews, telephone interviews and questionnaires. The owners also used the press and electronic media to gather information on competition, supply, customers and distribution channels.

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Marketing Target market The target customers for the project are made up of the upcoming small businesses, medium businesses and large firms. The project also targets schools and households for general furniture. Kwekwe city has a household population of. Whereas the number of schools in Kwekwe is, the number of businesses is. This population related information and statistics show that the target market size is large and that there is likelihood of enjoying high demand for the products.

Products to be offered The project will offer office desks, dining tables, kitchen tables, room dividers, and kitchen units among others. The products will be of different styles, designs and features according to customer specifications. Competition In Kwekwe there are no manufacturers of office desks and other furniture pieces but sales outlets such as Pelhams, Zimbabwe Furnitures, TV sales and other Indian shops. Kenshell Furnitures feels that it will out compete these rivals given that the project is going to be set up in the market. This explains that the project is not going to incur distribution costs as the target market will always conveniently get their furniture at manufacturers price. Pelhams and others do not have competitive advantage in terms of price as they offer their products at retail price. In addition, Kenshell has an added advantage in terms of being able to customize and practise local marketing as well as nichemanship. As such, in terms of quality, the competitors will not match Kenshells given that the latter will be situated in the market making it possible to practise the said strategies (customizing, local marketing and nichemnaship0 Pricing In terms of pricing, Kenshell will charge the manufacturers price whereas the rivals charge retail price. Retail price is more expensive and manufacturers price is cheap. Due to the high inflation and extreme cost of living, individuals and organizations are very price sensitive. Accordingly the customers are likely to buy more from the project at lower prices (manufacturers price). Distribution Kenshell will prefer to sell its furniture direct to the final users that is organizations and individuals or households in need of the latter. Retailers will be considered secondarily. Thus, two distribution channels will be adopted that is:

Kenshell Furnitures (Manufacturer)

Retailers Preferred channel 9 Customers (Kwekwe households, schools, small to large Business)

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Kenshell will prefer selling its products straight to customers for the reason that furniture is part of slow moving goods. Moreover, with regard to physical distribution, Kenshell intends to offer free delivery to customers within Kwekwe city and those within a radius of 40 km. This strategy (after sales service) is designed to out compete rivals or to make it difficult for the new rivals to enter the market. Promotional strategies The project is going to advertise in the local press, that is Observer and the Gweru Times as it will practice local marketing that is considering the needs of the local people. More so, the project will make use of flyers and posters to advertise its furniture as a way of enhancing its advertising coverage through the local press. The local press and flyers as well as posters are less expensive compared to TV and National press. As such, for an infant firm like Kenshell, the Chosen media will be ideal and more suitable. Apart from advertising strategy, the project will also employ personal selling in an attempt to search for the specific needs of customers and also to demonstrate how the furniture should be placed or used in offices, schools and houses. The owner of the business will be involved in personal selling. The owner has undertaken entrepreneurship Studies and doses hold HND in Wood Technology. Moreover, sales promotion is also going to be used in conjunction with advertising and personal selling. In this case, price discounts or reductions will be given to cash purchasers and also bulk-purchasers. Public relations and customer care will also be considered seriously in redressing unexpected customer queries, complaints, suggestions and grievances. Publicity statements are also going to be given in local press to create awareness of the existence of the enterprise and its products on the market. Production procedures The following procedures will be followed in the manufacture of office desks:

Desk designing

1 hr

Timber sliced into desk surfaces, door, legs

11/2 hrs

Frame development

1 hr

Fitting surfaces and pieces

1 hr

Desk

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Varnishing

15mm

Painting

15mm

The above diagram shows that the project will take 5 hrs to make one office desk. Working the normal 8 hrs a day, the project can produce 8 desks per week for 40 hrs. This is a considerable production capacity given that the firm will be an infant. Costing The office desk will be cost as follows: 1st calculate Direct cost a) Direct Material Cost: Timber Hinges Screws Varnish Paint DMC $2 000.00 $1 000.00 $ 500.00 $1 000.00 + $2 000.00 $6 500.00

b)

Calculate Direct Labour Cost:

Formula: No of workers x No of hrs/item x wage/hr/worker DLC = 1 x 5 hrs x $200.00 = $1 000.00 c) Calculate Total Direct Cost

Formula: Direct Cost = Direct Material Cost + Direct Labour Cost + Direct Expenses DC = $6 500.00 + $1 000.00 + $5 000.00 = $12 500 NB: It is assumed that the firm will hire a machine (Direct Expenses = $5000.00) 2nd Calculate Indirect Cost/item a) Indirect cost/yr Rent Electricity Salaries Transport 5 000 10 000 15 000 5 000 35 000

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b) Calculate Indirect Cost/item Formula: Indirect Cost/item = Indirect cost/yr No of items/yr

I/C item

= =

$35 000 400 desks $87.50

NB: It is assumed that the firm will operate for 50 weeks/yr. Therefore, the hours per year are 2 000. See Production Procedures for hours spent to produce each desk. 3rd Calculate Total Cost Formula: TC = = = DC + IC $12 500.00 + $87.50 $12 587.50

In our Project the mark up shall be 35% Therefore the selling price = Cost + mark up = $12 587.50 + (12 587.50 x 35%) = $12 587.50 + 4 405.60 SP/desk = $16 993.13

The profit = =

= SP CP $16 993.13 - $12 587.50 $4 405.60

Project requirements Item Circular saw x 1 Thickresser x 1 Jack plane x 4 Router x 1 Compressor x 1 Rip saw x 4 Cross cut saw x 4 Tenon saw x 4 Try square x 4 Screw drives set x 1 Claw hammer x 4

Cost/Unit $2000 $1500 $ 500 $2000 $4000 $ 500 $ 500 $ 500 $ 500 $1000 $ 500

Total $2000 (own contribution) $1500 $2000 $2000 $4000 $2000 $2000 $2000 $2000 $1000 $2000

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Sash cramps x 10 Smoothing plane x 2 Raw materials & materials Total Project Requirement Less own contribution Loan Amount required

$ 500 $ 750 -

$5000 $1500 $6500 $35500 $11500 $24000

Financial projection Sales & cost plan to show projected profit at the projects selling price Jan $1 409 792.00 $ 208 000.00 $ 32 000.00 $1 169 792.00 $ 2 800.00 $1 166 992.00 Feb $4 000 000.00 $ 300 000.00 $ 200 000.00 $3 500 000.00 $ 500 000.00 $3 000 000.00 Mar $6 000 000.00 $ 600 000.00 $ 200 000.00 $5 200 000.00 $1 000 000.00 $4 200 000.00

Sales Direct Material Cost Direct Labour Cost Gross profit Indirect cost Net Profit

NB: The figures for the month of January have been drawn from pages 12 & 13 Costing. Figures for the months of February to April are based on estimates. The sales and cost plan should be prepared for the whole year (January to December)** Cash flow forecast (To be prepared for 12 months 1 year) Jan Feb Receipts/Cash Inflow: Capital (own contribution) $11 500 Bal b/f $1 376 417 Sales $1 409 792 $4 000 000 Cash from debtors $ 500 000 Other income Bank loan $24 000 TOTAL RECEIPTS (A) 1 443 792 $5 876 417 PAYMENTS/CASH OUTFLOW: Purchases (raw materials) $208 000 $ 300 000 Rent $ 5 000 $ 5 000 Electricity $ 10 000 $ 10 000 Salaries $ 15 000 $ 15 000 Transport $ 5 000 $ 10 000 Equipment & Machines $ 24 000 $ Loan repayment $ 1 875 $ 1 875 TOTAL PAYMENTS B $4268 875 $ 347 875 Bal c/d (Net Income) $1 174 917 $5 534 542 NB: January figures have been drawn from Project Requirements on page 14 and Costing on page 12 & 13. For Feb & March figures are based on estimates

Mar $3 821 542 $6 000 000 $1 000 000 $10 821 542 $ 600 000 $ 50 000 $ 20 000 $ 200 000 $ 100 000 $ 300 000 $ 1 875 $1 271 875 $9 549 667

Apr $9 549 667 -

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PROJECT PROFIT & BALANCE SHEET Projected Manufacturing, Trading, profit and loss A/C January Manufacturing A/C Production Cost: Direct Materials Direct Labour Direct Expenses Product cost of goods finished Sales Less: Production cost on goods sold: Opening stock of finished goods Add: production cost of finished goods February March

$208 000 $ 32 000 240 000 1 409 792

$300 000 $200 00 500 000 4 000 000

$600 000 $200 000 800 000 6 000 000

240 000 500 000 1 169 792 3 500 000 Less closing stock of finished goods 169 792 500 000 1 000 000 3 000 000 Gross Profit Less Indirect cost (Admin/selling/distr.): 1 Rent 5 000 5 000 Electricity 10 000 10 000 Salaries 15 000 15 000 Transport cost 5 000 10 000 NB: Research on SWOT analysis for the above business and include it.

600 000 5 400 000 400 000 5 000 000 5 000 20 000 200 000 100 000

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UNIT 9.0 COMPUTERS IN BUSINESS 9.1 Objectives By the end of this unit you should be able to Define a computer Discuss the use of computers in business areas such as record keeping, stock control, accounts, production control

9.2 Definition of a computer - Is a machine that is used to collect, store, process, retrieve and communicate data in business 9.3 Use of computer in: Record keeping - Computers are used to keep records such as daily sales, employee records, memos and minutes of meetings. Computers can also be used to store customer records in the banking sector and other organizations that deal with customers. Special programs are developed for the purpose of capturing and storing the information into databases that can later be retrieved and used as and when required. Also used in libraries to store book records and facilitating payments for overdue books. - Computers are also used in schools to keep student records such as name, address and age (for those in education business e.g. private colleges) Stock control - Computers are used to monitor the inventory levels i.e. level of stock for each item an organisation has in their warehouse. The computer will be fed with information each time stock is purchased or sold, in return it will give up to date stock levels, items that are at re-order level, most selling stock and items enquiring special attention. - This stock control function can be applied in any kind of business, be it manufacturing, industry, retailers etc

Accounts Computers can also be used to perform the accounting function. This is applied through the development of accounting systems i.e. computer systems that automate accounting activities. The following are some of the accounting systems ii) iii) iv) Accounts receivable systems which monitor the organisations debtors Accounts payable systems that monitor suppliers Pastel accounting an integrated package that provide a variety of accounting functions

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Production control - Computer systems can also be used to monitor production in industry. In such cases, computers are fed with the production output, they compare the actual output with the planned/desired output, if there is a variance, and they thus give suggestions of what can be some to rectify the problem. In some cases computers are used to monitor and control the industrial machinery just as what the human being does. They will be connected to an alarm that rings if unexpected situations arise, which will thus alert the human being in office. Activity Explain the importance of computers in the entrepreneurial world Reference for further reading Kotler Philip & Armstrong G (2001) Principles of Marketing Appleby R (1994) Modern Business Administration Mullins L (1999) Management and Organisational Behaviour 5th edition Justin Smith (2000) Business Management Trainers Guide GYB, SYB and IYB (ILO) Modules Zimmerer T.W, Scarborough M Norman Essentials of Entrepreneurship and Small Business Management End Edition McGuckin Frances (1988) Business for Beginners (A simple step by step Guide to Start Your New Business)

-----------end--------------Dzomira Shelphanos Kwekwe Polytechnic

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