Introduction to

Entrepreneurship,
Innovation & Small Business
Management
By: Handema M.
 Objectives:
 Define Small and Medium – Sized Businesses
 Understand the significance of the Small
Business Sector to national economies
 Appreciate the historical evolution of the
Small Business Sector
 Understand the global trends of the dynamic
and turbulent small business sector
 Understand the development of the Small
Business Sector in Zambia

1-2
 Entrepreneurship
 An Elusive term commonly liked to Small
Business management
 It involves the process of recognizing
opportunities and the development of
new ventures.
 Entrepreneurs operate in a range of
contexts including large corporations and
the public sector not just small
businesses.
 Small Business
 This has a challenging definition especially differentiating
Micro, Small and Medium Enterprises.
 SMEs are run and managed differently from large
organizations because of differences in social structures
and levels of resources.
 Quantitative definition according to the European
Commission:

Category Head Count Turnover

Medium 50 – 249 < € 50m
Small 10 – 49 < € 10m
Micro 0-9 < € 2m
 Small Business
 Advantages of quantitative definition:
◦ More appropriate for policy purposes
◦ Objective and relatively simple to apply
◦ Facilitate the use of statistical analysis
 Limitations quantitative definition:
◦ Different Sectors of business require different
number of people employed.
◦ Issues of full time and part-time employees
◦ The use of turnover is challenged by issues of
exchange rates and inflation.
 Small Business
 Non – Quantitative definition
◦ The committee of inquiry on Small firms set up by the UK
government in the Bolton report proposed that small firms
have the following characteristics:
 Managed by owner in a personalized way
 Relatively small market share in economic terms
 Independent from any larger enterprise.
◦ The report has a quantitative supplement to the qualitative
definition
Small Firm Type Definition Used
Manufacturing ≤ 200 Employees
Construction ≤ 25 Employees
Road Transport ≤ 5 Vehicles
 Small Business
 Wynarczyk et al (1993) identified 3 key
aspects in which small and large firms
differ:
◦ Uncertainty is a persistent feature of small
firms with small customer bases and limited
resources.
◦ Innovation in products and processes is a key
feature of small firms.
◦ Evolution – state of constant structural and
market changes is a feature of small firms as
they struggle to survive and develop.
 MSME Development policy of
2009
 Provides that apart from being registered with the
registrar of companies, MSMEs are defined as follows:
Category Total Investment (K) Sales Turnover (K) No. of
Employees
Micro ≤ 80, 000 ≤ 150, 000 ≤ 10 persons
Small
• Manufacturing 80, 000 – 200, 000 150, 000 – 250, 000 11 - 50
• Trading and 80, 000 – 150, 000
Service

Medium
• Manufacturing 200, 000 – 500, 000 300, 000 – 800, 000 51 - 100
• Trading and 151, 000 – 300, 000
Service
Perceptions in Small Businesses
 Perceptions have shifted from the Shear neglect to
Over – expectation on Small Businesses.
Shear neglect perception
During industrialization in the 19th and 20th Centuries,
Technological and Market changes worked in favor of
larger industrial units due to:
 Benefits of economies of scale in mass production
 High R&D costs for new products.
 Falling of protectionist trade barriers increased
global competition
 Perceptions in Small Businesses
 Shear neglect led to:
◦ Social scientist and policy makers devoted their
attention to large units of production
◦ There were massive mergers and takeovers in 1950s
and 1960s.
◦ Global marketing was the order of the day on
corporations.
◦ Management theory and education focused its
attention on the manager working in a large
company.
◦ All major publications in the areas of marketing,
finance and strategy were written in the context of
large organizations.
 Perceptions in Small Businesses
Over Expectations Perception
 From the 1960s, perception on SMEs changed.
 SMEs were considered to be contributing to
government coffers, providing employment and
alleviating poverty.
 It was emphasized that SMEs fuelled economic growth.
 SMEs are considered to be key to economic growth
because they can be extremely efficient than larger
corporations.
 World over, the development of SMEs is on the
increase,
New businesses registered
Zambia
 Roles of SMEs – Bolton Report (1971)
 Production outlet for enterprising and independent individuals
 Most efficient form of business org in some industries or markets
where the optimum size of production units or sales outlet is
small.
 Specialist suppliers, or subcontractors to large companies.
 Contributors to the variety of products and services made
available to customers in specialized markets, too small for large
companies to consider worthwhile.
 Competition to the monopolistic tendencies of large companies.
 Innovators of new products, services and process
 Breeding ground for new industries
 Seed Bird from which tomorrow’s large companies will grow
 Provide entry points for entrepreneurial talents who will become
the industrial captains of the future.
 Triggers of Small Business
Revival
 Growth of the service and Trading sector
◦ Movement from manufacturing to service sector, i.e
consultancy, advertising and computer services.
 Information Technology
◦ Readily availability of information promotes business
development , i.e internet and the world wide web.
 Flexible Specialization
◦ New patterns of demand require individual preferences
to be met in detail, making mass production less
appropriate. ‘One size fits all approach’ is no longer
effective
◦ New technology allows for specialization in a networked
production process
 Triggers of Small Business
Revival
 Subcontracting and fragmentation
◦ Larger companies have concentrated on what is
more profitable for them and have subcontracted
other activities to SMEs and sold out non productive
units.
 Public Sector Reorganization
◦ Reorganization has provided business opportunities
such as cleaning services
 Enterprise Culture
◦ Unanimous consensus on the benefits of SMEs
 Unemployment
◦ Reluctant entrepreneurs have been pushed into self
employment after unemployment.
 Triggers of Small Business
Revival
 Environmental and alternative movements
◦ A variety of business opportunities have
emerged:
 Recycling material and waste
 Eco - friendly products made from local sustainable
materials
 Alternative medicine products and practices
 Health and organic food producers, wholesalers and
retailers
 Trainers, counsellors, writers, publishers, retailers on
alternative themes
 Producers and retailers of alternative beauty products.
 Entrepreneurship and Business
Development in Zambia
 The Zambian Economy has gone through several
changes from independence to date, reflecting
government of the day economic policies.
 At independence, Zambia was rated among the
richest countries in Africa.
 To fulfil pre-independence promises, the new leaders
decided to use the reserves they inherited for free
education, medical facilities, water and sanitation and
the development of general infrastructure.
 Zambia has been largely a mono culture economy
with heavy dependency on copper production, which
was fetching at high prices on the London Metal
Exchange after independence.
 Entrepreneurship and Business
Development in Zambia
 Before 1991, the Zambian economy had
commandist, socialist policies characterized
by;
◦ Nationalization of industries
◦ State run economy through state controlled
enterprises and conglomerates like;
 The Zambia Industrial and Mining Corporation (ZIMCO)
 Industrial Development Corporation (INDECO)
 The Mining Development Corporation (MINDECO)
 Financial Development Corporation (FINDECO)
 Entrepreneurship and Business
Development in Zambia
◦ State controlled and protected monopolies
 Zambia Airways in the Aviation industry
 United Bus Company of Zambia (UBZ) in the passengers road
services sector.
 Post and Telecommunications Limited (PTC) in the
Telecommunications sector
 Zambia Electricity Supply Corporation (ZESCO) in the Energy
and Power sector.
◦ Trade Restrictions (Import/Export)
◦ Price Controls
◦ Restrictions on Foreign Exchange Transactions
 Entrepreneurship and Business
Development in Zambia
 Results of the Socialist Economic Policies of the 1960s to
1980s:
◦ No competition in the Economy
◦ Curtailed or absence of Creativity, Innovation and
Entrepreneurship
◦ Inefficiency, ineffectiveness and poor performance by the
economy
◦ Poor quality goods and service and severe and constant
shortages of essential commodities
◦ Constant queuing for essential commodities
◦ Continued decline of the economy
◦ Dependency syndrome cultivated in the minds of the citizenry
◦ No initiative
 Entrepreneurship and Business
Development in Zambia
 After 1991, the Zambian economy has had Liberalized, Free
Market Economic policies characterized by:
◦ Transfer of control of the economy from state to private
owned through privatization
◦ Closure/Liquidation of non-profit making organizations,
e.g. Zambia Airways, UBZ an many others.
◦ Retrenchments, liquidations and redundancies
◦ The dwindling and down sizing of the public sector and
the salaried labor market.
◦ Rising need for inculcating and introducing the concepts
of entrepreneurship in the training curricula.
Entrepreneurship and Business
Development in Zambia
◦ The rise in the survival instinct
◦ Rise in self – employment initiatives
◦ Birth of Entrepreneurship and entrepreneurial
tendencies in Zambia
◦ Growth of the informal sector in Zambia
◦ Increase in innovation, creativity and imagination
in a free and liberalized economy leading to
increase competition
◦ Increased need for Entrepreneurial Skills Training
to cope with rising levels of Entrepreneurship.
 Entrepreneurship and Business
Development in Zambia
 Through the Small Industries Development (SID) Act of
1981 the Government attempted to enhance the
effectiveness of the sector by establishing the Small
Industries Development Organisation (SIDO).
 Other institutions established to enhance the sector
include the Village Industry Service (VIS), Small Enterprise
Promotion (SEP), Zambia Development Agency (ZDA),
Citizens Economic Empowerment Commission (CEEC),
etc.
 It is now government policy to have entrepreneurship in
the training curricula.
Thank You…