Entrepreneurship

Contents

Unit 1.0 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 customer’s 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 Maslow’s hierarchy of needs, expectancy model,
Herzberg’s)
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 IDEA5

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:
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, Appleby’s definition of entrepreneurship is
clear about identifying first the needs of customers, unlike Stoner & Freeman’s. Thus, for Appleby,
new goods and services should not just be produced for unknown customers as this is tantamount
to wastage of resources.

Moreover, Appleby’s 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 owner’s 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 one’s 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 self-
confidence 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
company’s 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 entrepreneur’s 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 entrepreneur’s 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 customer’s actions in the society are shaped
by their lifestyles and behaviours which stem from their society’s 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 entrepreneur’s activities. Thus, a
successful entrepreneur must achieve expert communication. This requires a thorough
understanding of the language of the customer’s 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 entrepreneur’s
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
entrepreneur’s 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 entrepreneur’s 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
entrepreneur’s products by customers.

1.5 Entrepreneurship Strategies

GROWTH STRATEGIES

A. Intensive Growth Strategies

According to Ansoff’s 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.
promoting more usage of the product
attracting competitors’ customers
convincing non users to use the existing product

2. Market development strategy

company efforts to find or develop new markets for its current products
This can be done by identifying potential uses in the current sales area where interests
for a product or services can be stimulated.
Selling new products to existing or current markets.
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 product’s 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
Backward integration
Forward integration
Horizontal integration

Ansoff’s Growth Strategies Grid:

Current products. New products.

Market penetration Products development strategy
Strategy
Market development strategy Diversification strategy

Current markets.

New markets.

Ansoff’s Growth strategies

[Link] penetration
market development
 product development

2. Integrative growth
backward integration
forward integration
horizontal integration

3. Diversification growth
Concentric diversification
Horizontal
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 company’s
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.

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

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 one’s 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
• 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 organisation’s 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
people’s 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

- 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
- 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 organization’s
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
- 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 customer’s experience

2. Customer satisfaction is ultimately the result of the sum total of the customer’s 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
- appreciate and understand at there should be some customer’s who visit your business
with hidden agenda and ulterior motives (i.e. competitors of those interested in policing I’ve
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 customer’s 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 don’t 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 there’s a need that you can’t 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 customer’s 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
- Acknowledgement of receipt

4. Delivery deadlines met

Delays explained and apology given

5. Outgoing services
- automatic follow up
- customer feedback
- be sure that your customer’s 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 Maslow’s hierarchy of needs for further details on staff motivation (apply business Admin)
Stoner & Freeman Management).

Entrepreneurship strategies.

Strategy – the broad program for defining and achieving an enterprise’s objectives; the
organisation’s response to its environment over time.

Survival strategies

Star high growth New venture Company markets

Expanding business Speculation
Tomorrow’ star (its hoped)
Cash cow Dog
Low growth mature business No growth
Potential sale
High

Market
Growth

Low

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

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)

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 SBU’S market share

2. Hold – preserve SBU’s market share especially for strong cash low.
3. harvest – the object is to increase the SBU’S 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 company’s 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 company’s 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
- the strategy is appropriate for dogs and question marks that are acting as a drag on
company’s 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
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 decision-making.

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 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 owner’s 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 many people may be
employed by the business.

Capital contribution
Capital may be raised from the owner’s 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.
 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 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 company’s 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 firm’s 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
• 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.

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 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)
• 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 self-sustenance,
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) Analyze the government initiatives to promote entrepreneurship in Zimbabwe since
1980.
ii) Discuss the roles of the following in promoting entrepreneurship in Zimbabwe
a) AAG
b) Development Bank
c) AFC/Land Bank
d) Ministry of Small and Medium Enterprises
e) Zimbabwe Cross Boarders Association

Unit 2.0 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 customer’s 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

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 organisation’s 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
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 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 customer’s 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 customer’s 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

Building Customer Trust

From a customer’s 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 don’t 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 there’s a need that you can’t 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 customer’s 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. Enquiries
- Short turn around time
- Follow up
- Courtesy options offered to caller

3. Correspondence
- Correct
- Shorthorn around time
- Acknowledgement of receipt

4. Delivery deadlines met

- Delays explained and apology given

5. Outgoing services
- Automatic follow up
- Customer feedback
- Be sure that your customer’s 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 people’s 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

• Maslow’s hierarchy of needs model
• Alderfer’s modified need hierarchy model
• Herzberg’s two-factor theory
• McClelland’s achievement motivation theory

Maslow’s hierarchy of needs theory

Maslow’s theory claims that human motives develop in sequence according to five levels of need
arranged in a hierarchy of importance. Maslow’s 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

achievement, self- confidence,

Physiological needs include homeostasis such as satisfaction of hunger, thirst, shelter deficiency,
clothing deficiency and so on. In fact homeostasis relates to the body’s 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 MASLOW’S HIERARCHY OF NEEDS TO THE ENTREPRENEUR

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.

Alderfer’s Modified need hierarchy model

This model condenses Maslow’s 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: Alderfer’s Model has the same implications with Maslow’s hierarchy.

Herzberg’s 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 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 Herzberg’s 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 Maslow’s Hierarchy. The
emphasis in this theory is that entrepreneurs must consider both the hygiene factors and the
growth factors/motivators.

McClelland’s 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 Maslow’s 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

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 room’s expectancy theory

Vroom’s 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.

Student’s 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 Non financial rewards
Salary + bonus/commission Handling grievances/concerns
Salary + profit sharing Personal growth
High salary + benefits Professional growth
Commission Job security
Prizes of employee of the month 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

Three different ethical positions that can provide guidance in evaluating one’s 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 organisation’s 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

• 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 people’s
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

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

OBJECTIVES
By the end of this unit you should be able to:

Define the following costing terms

Costing
Costs
Direct costs
Direct labour
Direct expenses
Indirect costs

Calculate total costs per item

Discuss the importance of costing to the entrepreneur
Define pricing
Calculate prices of products
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 retailer’s or wholesaler’s, 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

- 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

STEP II

STEP III

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. The carpenter is paid $1 000 per hour.
Other costs per month: Rent $ 5 000.00
Electricity $ 500.00
Other wages $10 000.00
Telephone $ 2 000.00
Transport $ 2 000.00

100 items are produced each month

Answer:
Direct Materials: Timber $2 000.00
Nails $1 000.00
Varnish $ 500.00
Glue $ 500.00
$4 000.00 (Direct Material/Cost)

Direct Labour: 1 x 5 hours/item x $1000/hr = $5000.00

Indirect Cost/item: Rent $ 5 000.00

Electricity $ 500.00
Other wages $10 000.00
Telephone $ 2 000.00
Transport t $ 2 000.00
$19 500.00

Indirect Cost/item: $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

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
Transport $20 000.00
Other wages $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 Dress Trousers

Fabric $800.00 $1 000.00
Thread $300.00 $ 400.00
Zip $100.00 $ 100.00
Button $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:

1st calculate direct material cost:

Materials Dress Trousers

Fabric $800.00 $1 000.00

Thread $300.00 $ 400.00
Zip $100.00 $ 100.00
Buttons $100.00__ $ 100.00_
$1 300.00 $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

4th calculate indirect costs: Rent $6 000 000.00

Electricity $ 240 000.00
Transport $ 240 000.00_
$1 080 000/year

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

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 $2 000.00 $3 000.00

Elastic $ 50.00 -
Zip - $ 80.00
Lace $ 90.00 $ 100.00

3 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
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 = Selling Price – Cost
= $250.00 - $200.00
= $50.00

Mark up = 50 (Profit)
200 (Cost)
= ¼ as a fraction or 25% as percentage

Margin = 50 (Profit)______
250 (Selling Price)
= 1/5 as a fraction /25% as percent

Further Questions
a) The entrepreneur makes Dresses and skirts and uses the following:

Material Dress Skirt

Fabric $2 000.00 $3 000.00
Thread $ 200.00 $ 700.00
Buttons $ 30.00 $ 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.
b) The entrepreneur produces two products ‘A’ and ‘B’. The following are incurred by the
business:

Materials Products: A B
Materials $2 000.00 $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 competitor’s 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 product’s 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.

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 buyer’s
perceptions of value rather than on the seller’s 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 product’s 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 it’s price largely on competitors’ prices with less attention paid to it’s
own costs or to demand. The firm might charge the, more, or less than it’s 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 it’s 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

- 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

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
Seller’s name, address, telephone, fax, email (not all of this information may be applicable)
Buyer’s 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)

DEBIT NOTE
~is used to correct an undercharge on a customer’s 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.

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.

STATEMENT FO ACCOUNT
~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
Specimen
Date Details Amount Balance
5/02/04 Invoice No. 011 $1 000.00 $1 000.00
10/02/04 Credit Note 005 $ 300.00 $ 700.00
20/02/04 Invoice No. 13 $ 800.00 $1 500.00
25/02/04 Payment Received $ 600.00 $ 900.00
28/02/04 Invoice No. 16 $1 200.00 $2 100.00

Balance remaining $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.

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.
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.

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.

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 Credit side (Payments side) Cr

Date Details Cash Bank Date Details Cash Bank
(Receipt (Payme
s) nts)

Example
1/02 E Gobvu starts business with capital: Cash $ 5 000.00
Bank $50 000.00
8/02 Sales (cash) $15 000.00
5/02 Buys stock with cheque $10 000.00
15/02 Telephone bill paid by cheque $ 5 000.00
18/02 Pay cash into the bank $10 000.00
20/02 Sales (cheque) $20 000.00
22/02 Pay wages (cash) $10 000.00
23/02 Withdraw from the bank to keep in business $ 5 000.00
28/02 E Gobvu writes cheque for personal use $15 000.00

E Gobvu cash book for the month of February 2004

Date Receipts Cash Bank Date Paymen Cash Bank
(Details) ts
(Details)
1/02 Capital 5 000 50 000 5/02 Purchas 10 000
8/02 Sales 15 000 15/02 es 5 000
18/02 Deposit 10 000 18/02 Telepho 10 000
20/02 Sales 20 000 22/02 ne bill 10 000
23/02 Withdra 5 000 23/02 Deposit 5 000
wal 28/02 Wages 15 000
25 000_ 80 000 29/02 Withdra 5 000 45 000
wal 25 000 80 000
1/03 5 000 45 000 Drawing
Balance s
b/f Balance
c/f
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

Mutsvedu D Purchases journal for the month of February 2004

Date Details Folio Dr Cr
10/02 E Gobvu $10 000.00
18/02 T Timothy $ 5 000.00
Dr Purchases $15 000.00
A/C

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 Details Folio Dr Cr

20/02 B Sali $2 000.00
22/02 T Tom $5 000.00
Dr Sales $7 000.00
Returns

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 Details Folio Dr Cr

01/02 Office furniture 100 000.00
M Pienaar 100 000.00
02/02 Stationery 10 000.00
M Piennar

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 Cr
Date Details Folio Amount Date Details Folio Amount

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 $500 000.00
2 Pays cash for shop equipment by cheque $300 000.00
Pays cash for goods (purchases) by cheque $100 000.00
3 Sells goods for cash and deposits the money $ 8 000.00
4 Pays cash for stationery by cheque $ 1 000.00
5 Pays rent in cash by cheque $ 2 000.00

Bank A/C
Dr Cr
Date Details Folio Amount Date Details Folio Amount
Feb 1 Capital 500 Feb 2 Shop 300
000.00 2 equipme 000.00
3 Sales 8 4 nt 100
000.00 5 Purchas 000.00
es 1
Statione 000.00
_______ ry 2
 Bal b/d __ Rent 000.00
508 Bal c/d 105
000.00 000.00
508
105 000.00
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 Cr
Bank 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

- 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.
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.

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

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
3rd Develop a stock list
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

ACTIVITY
i) Discuss the importance of stock control in small enterprises.
ii) Prepare a stock card from the following details

Item Description: T – shirt

Cost Price: $20 000.00
Selling Price: $30 000.00
Re-order level: 1 000 units

02/02/04 bought 10 000

03/02/04 sold 500
04/02/04 sold 2 000
05/02/04 sold 4 000
06/02/04 sold 3 000
06/02/04 bought 10 000

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

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?
- 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
- 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

Business address: Kwekwe Poly, Box 399 Kwekwe
Business owners/ directors: NC MARKETING
B
usiness idea: To provide furniture
Business form: PVT LTD Company
Business Type: Manufacturing
Own contribution: $11500.00
Loan amount required: $22 500.00
Total project cost: $34 000.00
Details of own contribution: 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.

Project aims: (i) to provide quality furniture to the community

(ii) to maximize the owner’s equity and profit
(iii) to be the leading customer driven enterprise

Vision: To become a high quality, innovative and customer focused

furniture enterprise.

Project background
Kenshell is a newly established project. The project’s 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) To provide quality furniture to the community

(ii) To be the leading customer driven enterprise by being responsive to customer’s
needs.
(iii) To maximize the owner’s 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 owner’s status will rise from lower to
middle or upper class.
- 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 ch

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 owner’s equity
iv) To have high staff retention
v) To have high customer retention by practicing good customer care.

The following table shows position, responsibilities, qualifications and salaries of organizational
members.
Position Responsibilities Qualifications Salary/month

Owner - Policy - Entrepreneurial $200 000.00

formulation skills, HND or B
- Mobilisation of Tech (Wood)
resources
- New project
initiation
- Human
resources
planning and
recruitment
- Opportunity
identification

Manager - Policy - Management $150 000.00

implementation Certificate
- Allocating - Class I
resources to (carpentry)
business units
- Marketing
- Cash flow
management

Supervisor - Staff motivation - Class I $100 000.00

and task (carpentry)
allocation & NC
- Resource Carpentry
allocation to - At least 2 years
workers experience
- Solving novel
technical
problems at
operational
level

Receptionist/ - Receiving and - Salesmanship $80 000.00

Counter salesperson making calls Certificate
- Advertising &
selling products
- Recording
business
transactions

Carpenter - Making furniture - Class I $90 000.00

- Maintaining (carpentry)
tools, - At least 2 years
equipment and experience
machines
- Responding to
customers’
needs by
producing
prescribed
products by
 customers

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.
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 manufacturer’s 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 Kenshell’s
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 manufacturer’s price whereas the rivals charge retail
price. Retail price is more expensive and manufacturer’s 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 (manufacturer’s 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)
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

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 $2 000.00
Hinges $1 000.00
Screws $ 500.00
Varnish $1 000.00
Paint + $2 000.00
DMC $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 5 000
Electricity 10 000
Salaries 15 000
Transport 5 000
35 000

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 Cost/Unit Total
Circular saw x 1 $2000 $2000 (own contribution)
Thickresser x 1 $1500 $1500
Jack plane x 4 $ 500 $2000
Router x 1 $2000 $2000
Compressor x 1 $4000 $4000
Rip saw x 4 $ 500 $2000
Cross cut saw x 4 $ 500 $2000
Tenon saw x 4 $ 500 $2000
Try square x 4 $ 500 $2000
Screw drives set x 1 $1000 $1000
Claw hammer x 4 $ 500 $2000
Sash cramps x 10 $ 500 $5000
Smoothing plane x 2 $ 750 $1500
Raw materials & materials - $6500
Total Project Requirement $35500
Less own contribution $11500
Loan Amount required $24000

Financial projection
Sales & cost plan to show projected profit at the project’s selling price

Jan Feb Mar

Sales $1 409 792.00 $4 000 000.00 $6 000 000.00
Direct Material Cost $ 208 000.00 $ 300 000.00 $ 600 000.00
Direct Labour Cost $ 32 000.00 $ 200 000.00 $ 200 000.00
Gross profit $1 169 792.00 $3 500 000.00 $5 200 000.00
Indirect cost $ 2 800.00 $ 500 000.00 $1 000 000.00
Net Profit $1 166 992.00 $3 000 000.00 $4 200 000.00

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 Mar Apr
Receipts/Cash
Inflow:
Capital (own $11 500 - - -
contribution)
Bal b/f - $1 376 417 $3 821 542 $9 549 667
Sales $1 409 792 $4 000 000 $6 000 000 -
Cash from - $ 500 000 $1 000 000
debtors
Other income
Bank loan $24 000 - -
TOTAL 1 443 792 $5 876 417 $10 821 542
RECEIPTS (A)
PAYMENTS/CA
SH OUTFLOW:
Purchases (raw $208 000 $ 300 000 $ 600 000
materials)
Rent $ 5 000 $ 5 000 $ 50 000
Electricity $ 10 000 $ 10 000 $ 20 000
Salaries $ 15 000 $ 15 000 $ 200 000
Transport $ 5 000 $ 10 000 $ 100 000
Equipment & $ 24 000 $ - $ 300 000
Machines
Loan repayment $ 1 875 $ 1 875 $ 1 875
TOTAL $4268 875 $ 347 875 $1 271 875
PAYMENTS B
Bal c/d (Net $1 174 917 $5 534 542 $9 549 667
Income)
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

PROJECT PROFIT & BALANCE SHEET

Projected Manufacturing, Trading, profit and loss A/C

January February March

Manufacturing A/C
Production Cost:
Direct Materials $208 000 $300 000 $600 000
Direct Labour $ 32 000 $200 00 $200 000
Direct Expenses - - -
Product cost of 240 000 500 000 800 000
goods finished
Sales 1 409 792 4 000 000 6 000 000
Less: Production
cost on goods sold:
Opening stock of -
finished goods 240 000 500 000 600 000
Add: production cost 1 169 792 3 500 000 5 400 000
of finished goods 169 792 500 000 400 000
1 000 000 3 000 000 5 000 000
Less closing stock of
finished goods
Gross Profit
Less Indirect cost 1
(Admin/selling/distr.):
Rent 5 000 5 000 5 000
Electricity 10 000 10 000 20 000
Salaries 15 000 15 000 200 000
Transport cost 5 000 10 000 100 000
NB: Research on SWOT analysis for the above business and include it.

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) Accounts receivable systems – which monitor the organisation’s debtors

iii) Accounts payable systems – that monitor suppliers
iv) Pastel accounting – an integrated package that provide a variety of accounting
functions

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 Trainer’s 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