KWAME NKRUMAH UNIVERSITY OF SCIENCE

AND TECHNOLOGY, KUMASI

Department of Chemical Engineering

Institute of Distance Learning

ChE 458

Entrepreneurship and Business Development

Dr. Moses Mensah

March, 2015

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Table of Contents………………………………………………………………………………....i

CHATER ONE ............................................................................................................................................................5

1.0 ENTREPRENEURSHIP .............................................................................................................................................5

1.1 INTRODUCTION.....................................................................................................................................................5
1.2 Brief History of Entrepreneurship ..................................................................................................................6
1.3 THE THREE DIMENSIONS OF ENTREPRENEURSHIP ................................................................................................7
1.3.1 Entrepreneurship as a process .....................................................................................................................7
1.3.2 Entrepreneurship as Behaviours ..................................................................................................................7
1.3.3 Entrepreneurship as Outcomes ....................................................................................................................7
1.4 NATURE OF ENTREPRENEURSHIP ..........................................................................................................................8
1.5 ENTREPRENEURIAL MOTIVATION.........................................................................................................................9
1.5.1 Opportunity-based Entrepreneurship - Pull influences ...............................................................................9
1.5.2 Necessity-based Entrepreneurship – Push influences ..................................................................................9
1.6 KEY ACTIVITIES OF ENTREPRENEURSHIP .............................................................................................................9
1.7 DEFINITION AND CHARACTERISTICS OF ENTREPRENEUR.................................................................................... 10
1.8 BENEFITS OF ENTREPRENEURSHIP ...................................................................................................................... 11
1.9 POTENTIAL OBSTACLES OF ENTREPRENEURSHIP ................................................................................................ 12
1.10 SUSTAINABLE ENTREPRENEURSHIP .................................................................................................................. 13
1.11 FREE ENTERPRISE ............................................................................................................................................ 14
1.11.1 Major elements of free enterprise ............................................................................................................ 14

CHAPTER TWO ....................................................................................................................................................... 15

2.0 BUSINESS AND TYPES OF BUSINESS ................................................................................................................... 15

2.1 TYPES OF BUSINESS ........................................................................................................................................... 15
2.1.1 Service Business ......................................................................................................................................... 15
2.1.2 Merchandising Business ............................................................................................................................ 15
2.1.3 Manufacturing Business ............................................................................................................................. 15
2.1.4 Hybrid Business ......................................................................................................................................... 16
2.2 FORMS OR STRUCTURES OF BUSINESS ................................................................................................................ 16
2.2.1 Sole Proprietorship .................................................................................................................................... 16
2.2.2 Partnerships: General and Limited ........................................................................................................... 17
2.2.3 Limited Liability Company (LCC) ............................................................................................................. 19
2.2.4 Corporation ............................................................................................................................................... 19
2.2.5 Company Limited by Shares ...................................................................................................................... 19
2.2.6 Company Limited by Guarantee ................................................................................................................ 20
2.2.7 Unlimited Company ................................................................................................................................... 21
2.2.8 Public and Private Companies .................................................................................................................. 21

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 2.2.9 Cooperative ................................................................................................................................................ 21
2.2.10 External Company ................................................................................................................................... 21
2.3 CHARACTERISTICS OR FEATURES OF BUSINESS .................................................................................................. 22
2.3.1. Exchange of goods and services ............................................................................................................... 22
2.3.2 Deals in numerous transactions ................................................................................................................. 22
2.3.3 Profit is the main Objective ....................................................................................................................... 22
2.3.4 Business skills for economic success .......................................................................................................... 22
2.3.5 Risks and Uncertainties ............................................................................................................................. 23
3.3.6 Buyer and Seller ......................................................................................................................................... 23
2.3.7 Connected with production ........................................................................................................................ 23
2.3.8 Marketing and Distribution of goods ......................................................................................................... 23
2.3.9 Deals in goods and services ....................................................................................................................... 23
2.3.10 To Satisfy human wants............................................................................................................................ 23
2.3.11 Social obligations..................................................................................................................................... 23

CHAPTER THREE ................................................................................................................................................... 25

3.0 LAW OF CONTRACT, BUSINESS PLANNING AND REPORTING .............................................................................. 25

3.1 LAW OF CONTRACT ............................................................................................................................................ 25
3.1.1 Nature of right ........................................................................................................................................... 27
3.1.2 Essential Elements of a Valid Contract ..................................................................................................... 27
3.1.3 Classification of Contracts......................................................................................................................... 28
3.1.4 Classification according to validity or enforceability ................................................................................ 28
3.1.5 Classification according to mode of operation .......................................................................................... 28
3.1.6 Classification according to performance ................................................................................................... 28
3.2 BUSINESS PLANNING AND REPORTING ............................................................................................................... 29
3.2.1 Business Plan ............................................................................................................................................. 29
3.2.2 Scope and Value of Business Plan ............................................................................................................. 29
3.2.3 Writing a Business Plan ............................................................................................................................. 30

CHAPTER FOUR ..................................................................................................................................................... 33

4.0 PRODUCTS AND SERVICE CONCEPT OF NEW VENTURES, MARKET AND MARKET DEVELOPMENT.................... 33
4.1 NEW PRODUCTS.................................................................................................................................................. 33
4.1.1 New Service................................................................................................................................................ 33
4.1.2 New means of informing customers about products and services .............................................................. 34
4.1.3 Marketing New Product and Services ........................................................................................................ 34
4.2 MARKET AND MARKET DEVELOPMENT ............................................................................................................. 35
4.2.1 The evolution of Marketing ........................................................................................................................ 36
4.2.2 Traditional Marketing ................................................................................................................................ 37

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 4.2.3 Entrepreneurial Marketing and Traditional Marketing ............................................................................. 38
4.3.4 Market-driven Companies.......................................................................................................................... 38
4.3.5 Strategies for Growth and managing the Implications of Growth ............................................................. 39

CHAPTER FIVE ....................................................................................................................................................... 42

5.0 ORGANIZATION AND FINANCING NEW PROJECTS ............................................................................................... 42

5.1 THE TYPE OF ENTERPRISE ................................................................................................................................... 42
5.2 THE RISK OR REWARD RELATIONSHIP ................................................................................................................. 42
5.3 FINANCIAL ISSUES IN LIFE CYCLE STAGES ......................................................................................................... 43
5.4 STAGES OF BUSINESS DEVELOPMENT FUNDING ................................................................................................. 43
5.4 THE USES AND SOURCES OF FUNDS FOR A SMALL BUSINESS ............................................................................... 44

CHAPTER SIX .......................................................................................................................................................... 45

6.0 CURRENT TRENDS – DIGITAL MARKETING AND E-COMMERCE .......................................................................... 45

6.1 WHAT IS DIGITAL MARKETING? ........................................................................................................................ 46
6.2 INTERNET MARKETING ....................................................................................................................................... 46
6.3 E-COMMERCE, E-BUSINESS AND E-MARKETING .................................................................................................. 46
6.3.1 Electronic Commerce ................................................................................................................................. 46
6.3.2 E-business .................................................................................................................................................. 47
6.3.3 E-marketing ............................................................................................................................................... 48

REFERENCES .......................................................................................................................................................... 55

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 CHATER ONE

1.0 Entrepreneurship

1.1 Introduction

Entrepreneurship is often identified with the creation of new business ventures or with self-
employed individuals. These activities are indeed expressions of entrepreneurial behavior.
Entrepreneurship, however, is a much broader phenomenon. Whether starting a new business,
solving a problem, or deciding what route to take driving home, individuals are always on the
alert to the possibility of changes that may improve their life, even if in very small ways. All
individuals are potential innovators seeking new and better ways to do things. Thus,
entrepreneurship is a characteristic of human behavior consisting in the identification of new
end-means frameworks. It is also a timeless human universal present in all places and cultures.
People are at the core of the entrepreneurial phenomenon, and without a clear understanding of
their behavior our object of inquiry disappears. ‘‘The entrepreneur,’’ William Baumol wrote, ‘‘is
one of the most intriguing and at the same time most elusive characters in the cast that
constitutes the subject of economic analysis. Who are entrepreneurs? What motivates
entrepreneurial behavior? Why are some individuals more entrepreneurial than others?

Entrepreneurship is a complex and multilayered phenomenon. Entrepreneurial actions produce

personal and collective changes which, because of the interdependence among individuals,
ultimately, change the world. Thus, the identification, description, and theoretical explanation of
what entrepreneurs do, and how they do it, can only be rooted in a comprehensive analytical
approach.

Since entrepreneurship is an attribute of human action, all individuals are entrepreneurs. Yet,
some are more entrepreneurial than others, and the entrepreneurial behavior of some groups may
appear to differ systematically from that of others. Why? Human decisions are molded by
cognitive processes and emotional states that influence how individuals learn and what they
attribute importance to. These processes lead to the decisions that determine human actions.
Such decisions are sometimes rational and sometimes biased. In the case of entrepreneurship,
many of them also involve employment choices and risky situations. Moreover, decisions are

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influenced and become meaningful within specific social contexts. Institutions are a particularly
important part of this context since they determine individuals’ incentives and, as a result, what
individuals will do. Explaining these observations helps us know why individuals behave
entrepreneurially albeit not all in the same way or degree

1.2 Brief History of Entrepreneurship

The concept of entrepreneur is borrowed from the French words entreprendre, “one who
undertakes”—that is, a “manager.” In fact, the word entrepreneur was shaped probably from
‘celui qui entreprend,’ which is loosely translated as “those who get things done.” In the early
eighteenth century, a group of thinkers called the Physiocrats surfaced in France around a school
of new economic theory.

They were the first proponents of laissez-faire and opposed all government intervention in
industry, especially taxation. Their doctrine was that the economic affairs of society are best
guided by the decisions of individuals.

One of the most famous among them was Richard Cantillon. In a paper he worked on between
1730 and 1734 and that was later published in 1775 as Essai sur la Nature du Commerce en
General, he introduced the concept of entrepreneur. He developed these early theories of the
entrepreneur after observing the merchants, farmers, and craftsmen of his time.

Jean-Baptiste Say, a French businessman turned economist, followed Cantillon with his Trait
d’economie politique in 1803. His work commented on the theory of markets and how the
entrepreneur is involved in this transaction of goods for money.

Adam smith introduced the concepts of liberal capitalism and entrepreneurial capitalism, Smith
is “known as an architect of our present system of society”. Smith believed that human self-
interest is the basic psychological driver behind economics, and that a natural order in the
universe makes all individual, self-interested endeavors add up to the social good.

Joseph Alois Schumpeter, an Austrian-American economist, was one of the first to study
entrepreneurs and the impact of entrepreneurial capitalism on society. As he wrote in The Theory
of Economic Development, he believed that innovation and creativeness distinguished
entrepreneurs from other businesspeople. He observed that innovation and entrepreneurship are
closely interwoven. He argued that the entrepreneur was at the very center of all business
activity. He observed that entrepreneurs create “clusters of innovations” that are the causes of

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business cycles because their actions create disruptive dislocations and arrive in huge waves. In
fact, Schumpeter believed that entrepreneurs deserve the credit for the industrial revolution.
Schumpeter introduced the phrase “creative destruction,” stating that the entrepreneur does not
just invent things, but also exploits in novel ways what has already been invented.

1.3 The Three Dimensions of Entrepreneurship

1.3.1 Entrepreneurship as a process

➢ Entrepreneurship is the process of creating something new of value by devoting the
necessary time and effort, assuming the accompanying financial, psychic and social risks,
and receiving the resulting reward of monetary and personal satisfaction and
independence
➢ Entrepreneurship is the process by which individuals – either on their own or inside
organisations – pursue opportunities without regard to the resources they currently
control

1.3.2 Entrepreneurship as Behaviours

➢ Entrepreneurship is a way of thinking, reasoning and acting that is opportunity based,
holistic in approach and leadership balanced.

➢ Entrepreneurs are specialists who use judgement to deal with novel and complex
problems

➢ Entrepreneurship is the manifest ability and willingness of individuals, on their own, in

teams, within and outside existing organisations, to perceive and create new economic
opportunities ( new products, new production methods, new organisational schemes, and
new product-market combinations) and to introduce their ideas in the market, in the face
of uncertainty and other obstacles, by making decisions on location, form and the use of
resources and institutions

1.3.3 Entrepreneurship as Outcomes

Outcomes are usually understood in terms of new products and services, innovation, new
ventures, and or the creation of value for society e.g.:

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 ➢ Entrepreneurship is the introduction of new economic activity that leads to change in the
market place

➢ Entrepreneurship is the creation of new organisations Entrepreneurship results in the

creation, enhancement, realization and renewal of value not just for the owner but for all
participants and stakeholders

➢ Shane (2003) defines Entrepreneurship as an activity that involves the discovery,

evaluation and exploitation of opportunities to introduce new goods and services, ways of
organizing markets, processes and raw materials through organizing efforts that
previously had not existed.

➢ Entrepreneurship seeks to understand how opportunities to create something new arise

and are discovered or created by specific persons who then use various means to exploit
or develop them, thus producing a wide range of effects.

1.4 Nature of Entrepreneurship

Entrepreneurship plays an important role in the creation and growth of businesses, as well as in
the growth and prosperity of regions and nations. These outcomes can have quite humble
beginnings; entrepreneurial actions begin at the connection of a lucrative opportunity and an
enterprising individual.

Entrepreneurial opportunities are those situations in which new goods, services, raw materials
and organizing methods can be introduced and sold at greater than their cost of production.

Entrepreneurial action is that action which involves the creation of new products, processes
and/or the entry into new markets which may occur through a newly created organization or
within an established organization.

Entrepreneurial thinking is individual mental processes of overcoming ignorance to decide

whether a signal represents an opportunity for someone is and/or reducing doubt as to whether an

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opportunity for someone is also an opportunity for them specifically and/or processing feedback
from action steps taken.

Therefore, to be an entrepreneur is to act on the possibility that one has identified an opportunity
worth pursuing.

1.5 Entrepreneurial Motivation

Some individuals are attracted towards business ownership by positive motives such as a specific
idea which they are convinced will work whiles others are pushed. This leads to the two types of
entrepreneurships’

1.5.1 Opportunity-based Entrepreneurship - Pull influences

1. Desire for independence, prove that one accomplish a start-up

2. Desire to exploit an opportunity

3. Turning a hobby or previous work experience into a business, adventure of a start-up

4. Financial incentive, supplementary income

1.5.2 Necessity-based Entrepreneurship – Push influences

Many people are pushed into establishing a new enterprise by a variety of factors, including:

1. Redundancy

2. Unemployment or threat thereof

3. Disagreement with previous employer

4. Social, Economic and Technological challenges.

1.6 Key Activities of Entrepreneurship

1. Identifying an opportunity

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 2. Exploiting or developing this opportunity
3. Resource mobilization
4. Launching a new venture
5. Running a new business successfully

1.7 Definition and Characteristics of Entrepreneur

As manager and leader, the entrepreneur is one of the characters which strongly influence
business around the world including in each country. This explains the need to understand the
profile of such a character, characteristics and mode of action in situations they face.

In general, an entrepreneur is a person who creates new business, taking risks in achieving the
objectives which they propose to make profits and growth by identifying some important
opportunities. Entrepreneur manages important resources, which draws from different sources on
a major power to persuade those who hold them.

Many experts have sought to understand and describe the personality of the entrepreneur,
because; although many people have good ideas to start a business, but some turn these ideas
into concrete business, becoming entrepreneurs. Entrepreneur is "a person with leadership, which
take risks to exploit certain opportunities, are based more on their forces, develop its strategy
based almost entirely by personal interests”. Entrepreneurs have the ability to provide
development opportunities, preventing them some changes may occur in the environment, which
seeks to exploit the personal interest. Research has revealed several characteristics of
entrepreneurs, including:

1. Confidence in personal abilities, due to optimism that demonstrate success when

targeting, which many times but can also lead to failure;

2. The desire for immediate results, which causes them to continuously monitor the
results, which will confirm whether they have done right or wrong;

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 3. Preference for a moderate risk, which means they face no risk in any circumstances,
but a calculated risk, but nevertheless in the eyes of others may seem like an impossible
goal;

4. Willingness to assume responsibilities, preferring to control their own resources to

achieve their objectives;

5. High energy, above average, which allows him to make incredible effort needed to start
a business, business creation;

6. Vision to enable the discovery times discovery future opportunities, not to meditate on
the successes or failures that have passed;
7. Organizing skills, which allows entrepreneurs to put together people who carry out
certain tasks, to combined so as to implement the vision;

8. The desire to achieve, above money making entrepreneur motivation is more complex,
expressing the first urge to go further, to do for others is impossible, the money
represents only a confirmation of success ;

9. High level of commitment, which makes them hard to work for a company that creates
success, removing barriers that seem insurmountable to others;
10. Tolerance of ambiguity, as an absolute necessity entrepreneurs, who often must make
decisions based on uncertain information, or even contradictory;
11. Flexibility, which is the ability of entrepreneurs to adapt to changing customer demand,
is an important characteristic of entrepreneurs.

1.8 Benefits of Entrepreneurship

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As shown in the presentation characteristics of entrepreneurs, it cannot be said that they refer to a
specific group of people because they are very different, which leads to the conclusion that
anyone can fall into this category of entrepreneurs, regardless of race, sex, religion nationality,
etc. But to tap into this category is justified by some advantages that can be an entrepreneur.
Of research in entrepreneurship, those owners of small businesses believe that if they work hard
they will earn more money and be happier than if they work in a big company. So, before you
engage in creating a small business, every entrepreneur thinks the potential benefits. In general
an entrepreneur can benefit from the process of creating your own business several advantages,
including:

1. Independence and opportunity to achieve the desired objectives, it offers the

advantage of not depending on others to implement its wishes;
2. Chance to notice a difference in a field they are interested in combining the wishes
their social insurance with a win for a better life;
3. Opportunity to use its full potential for entrepreneurs because there is much difference
between the work of business and recreation, making them find their place of business to
obtain satisfaction, for their use which have better qualities;
4. Opportunities to earn substantial profits, although the reason to start a business, an
entrepreneur may not be primarily profit;
5. Recognition efforts and contribution to the achievement of social objectives,
entrepreneurs become very respected person in the community in which it operates;
6. Opportunity to do what you love, because most entrepreneurs develop business in areas
where they want to work and they get special satisfaction.

1.9 Potential Obstacles of Entrepreneurship

Although, it appears that entrepreneurs are have more numerous advantages, they may have a
number of difficulties, or be deprived of certain opportunities other than the business plans.
Penetration into business not only brings benefits to entrepreneurs, but may face many obstacles,
among which the most important include the following:

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 1. Uncertainty of revenue accruing from starting a business that does not guarantee the
achievement of revenue that would provide the necessary support, entrepreneur
2. Risk of losing the entire investment due to the relatively high percentage
(approximately 35%) of bankruptcies of small businesses, even in the first two years and
in six years the percentage is nearly double;
3. Hard labor without a long period of leave under pressure because if the business
ceases, the income is no longer made and customers are lost;
4. Poor quality of life until the business stabilizes, due to the fact that in a important
period of life (entrepreneurs start their business, usually between 25 and 39 years), their
roles in the family after the two fall in terms of the company that creates;
5. High stress due to large investments that need to be entrepreneurs, in a low certainty of
winning even as they have invested, what it can lead to bankruptcy;
6. Full responsibility for the effects of entrepreneurs to take decisions which, by issues that
often have little knowledge or lack of assistance of a specialist in the field;
7. Discouragement and disillusionment caused by the obstacles they may face, which
sometimes seem insurmountable, making only characterized by optimistic entrepreneurs
to enjoy success.

These were just some of the obstacles they may encounter in developing their own
entrepreneurial business, which if not passed may have adverse effects in some cases
compromise the establishment of business. Evidently for the person who becomes an
entrepreneur a predominant advantage, these obstacles, who realizes that appear in the process of
creating and operating the business, is considered likely to overcome.

1.10 Sustainable Entrepreneurship

Suitable development is perhaps the most important issue of our time and entrepreneurship can
have a positive impact on this issue. That is, entrepreneurial action can help us both sustain and
develop. Specifically, sustainable entrepreneurship is focused on preserving nature, life support
and community (sustainability) in the pursuit of perceived opportunities to bring future products,
processes and services into existence for gain (entrepreneurial action) where gain is broadly

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construed to include economic and noneconomic benefits to individuals, the community and
society (development)

1.11 Free Enterprise

Free enterprise is a business governed by the laws of supply and demand not restrained by
government interference, regulation or subsidy also called free market or private property
system. In this system, governments generally have minimal ownership of enterprises in the
market place. This system aims for limited restrictions on trade and minimal government
intervention.

Free Enterprise is the engine of a free and prosperous society, driven by what Adam Smith calls
an ”invisible hand” which allows individuals choose products, services, and ideas which they
consider most beneficial, and naturally pursue a livelihood generating their own greatest personal
gain. Free Enterprise naturally provides an abundance of goods and services to society at a fair
price. In this enterprise businesses are either sole proprietorship or joint partnership.

1.11.1 Major elements of free enterprise

The major elements of the free enterprise system are competition, profit, private property, and
economic freedom

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 CHAPTER TWO

2.0 Business and Types of Business

Human beings are continuously engaged in some activity or other in order to satisfy their
unlimited wants. Every day we come across the word 'business' or 'businessman' directly or
indirectly. Business has become essential part of our modern world.
A business is an organization that uses economic resources or inputs to provide goods or services
to customers in exchange for money or other goods and services. A business can be a for-profit
entity, such as a publicly-traded corporation, or a non-profit organization engaged in business
activities, such as an agricultural cooperative.

Business organizations come in different types and forms.

2.1 Types of Business

There are three major types of businesses:

2.1.1 Service Business

A service type of business provides intangible products (products with no physical form). Service
type firms offer professional skills, expertise, advice, and other similar products.

Examples of service businesses are: schools, repair shops, hair salons, banks, accounting firms,
and law firms.

2.1.2 Merchandising Business

This type of business buys products at wholesale price and sells the same at retail price. They are
known as "buy and sell" businesses. They make profit by selling the products at prices higher
than their purchase costs.

A merchandising business sells a product without changing its form. Examples are: grocery
stores, convenience stores, and other resellers.

2.1.3 Manufacturing Business

Unlike a merchandising business, a manufacturing business buys products with the intention of
using them as materials in making a new product. Thus there is a transformation of the products
purchased.

Manufacturing businesses combine raw materials, labor, and factory expenses in production.
The manufactured goods will then be sold to customers.

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2.1.4 Hybrid Business

Hybrid businesses are companies that may be classified in more than one type of business. A
restaurant, for example, combines ingredients in making a fine meal, sells a cold bottle of wine,
and fills customer orders.

Nonetheless, these companies may be classified according to their major business interest. In that
case, restaurants are more of the service type.

2.2 Forms or Structures of Business

2.2.1 Sole Proprietorship

This is a business run by an individual for his or her own benefit. It is the simplest form of
business organization. Proprietorships have no existence apart from the owners. The liabilities
associated with the business are the personal liabilities of the owner, and the business terminates
upon the proprietor's death. The proprietor undertakes the risks of the business to the extent of
his/her assets, whether used in the business or personally owned.

Single proprietors include professional people, service providers, and retailers who are "in
business for themselves." Although a sole proprietorship is not a separate legal entity from its
owner, it is a separate entity for accounting purposes. Financial activities of the business (e.g.,
receipt of fees) are maintained separately from the person's personal financial activities (e.g.,
house payment).

2.2.1.1 Advantages

1. Easy and inexpensive to establish a sole proprietorship (you will only need to register
your business name provincially)
2. Relatively low cost to start the business
3. Lowest amount of regulatory burden
4. Direct control of decision making
5. Minimal working capital required to start-up
6. Tax advantages if your business is not doing well, for example, deducting your losses
from your personal income, lower tax bracket when profits are low, and so on
7. All profits will go to you directly

2.2.1.2 Disadvantages

1. Unlimited liability (if you have business debts, personal assets would be used to pay off
the debt)

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 2. Income would be taxable at your personal rate and, if your business is profitable, this
may put you in a higher tax bracket
3. Lack of continuity for your business, if you need to be absent
4. Difficulty raising capital on your own

2.2.2 Partnerships: General and Limited

2.2.2.1 Business partner

A partnership is an arrangement whereby two or more persons combine some or all of their
resources, skills or industry with the objective of making profit which will be shared by the
partners. Limited partnerships limit the personal liability of individual partners for the debts of
the business according to the amount they have invested. Partners must file a certificate of
limited partnership with state authorities.

When establishing a partnership, you should have a partnership agreement drawn up with the
assistance of a lawyer, to ensure that:

1. You are protecting your interests

2. That you have clearly established the terms of the partnership with regards to issues like
profit sharing, dissolving the partnership, and more
3. That you meet the legal requirements for a limited partnership (if applicable)

Forms of Partnership are non-trading partnership, commercial partnership, and limited

partnership.

2.2.2.1.1 Non-Trading Partnership

Firms of Lawyers, Chartered Accountants, Architects and other professional practioners.

2.2.2.1.2 Commercial or General Partnership

All partnerships engaged in trading, manufacturing and other commercial activities.

2.2.2.1.3 Limited Partnership

This is a special type which is very rare. A limited partnership consists of general and limited
partners. A limited partner is liable to the firm or its creditors to the amount of the capital he has
agreed to contribute, but not more. He may share in the profits according to the partnership

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agreement, but must take no part in the management of the business or he becomes a general
partner.

2.2.2.2 Partnership Agreement

It is customary for the partners to execute a signed agreement covering such matters as the
purpose of the business, name of the firm, duration of the agreement, place of business, capital to
be contributed by each partner, division of profits and losses, books of accounts, rights of
management of partners, and procedure for termination or re-organization of the partnership.

2.2.2.2.1 Advantages

1. Easy to start up a partnership because it is a simple, flexible and inexpensive form of

business organization
2. Start-up costs would be shared equally with you and your partner
3. Equal share in the management, profits and assets
4. Tax advantage, if income from the partnership is low or loses money (you and your
partner include your share of the partnership in your individual tax return)
5. It is not subject to corporate taxes and is exempt from most of the statutory returns and
forms which must be filed by limited companies.
6. It is particularly suitable to service type of business that do not require too large
investments and when there is no element in the business which may lead to the risk of
serious personal liability

2.2.2.2.2 Disadvantages

1. Similar to sole proprietorship, as there is no legal difference between you and your
business
2. Unlimited liability (if you have business debts, personal assets would be used to pay off
the debt)
3. Hard to find a suitable partner
4. Possible development of conflict between you and your partner
5. You are held financially responsible for business decisions made by your partner (for
example, contracts that are broken)
6. As the business grows, the partnership organization becomes less suitable, and it is
difficult to obtain investment capital for expansion.
7. If there is partnership act, it limits the number of partners.
8. The duration of a partnership is uncertain as it may be terminated by death, bankruptcy or
withdrawal of partner

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2.2.3 Limited Liability Company (LCC)

A limited liability company is a hybrid between a partnership and a corporation. Members of an

LLC have operational flexibility and income benefits similar to a partnership but also have
limited liability exposure. While this seems very similar to a limited partnership, there are
significant legal and statutory differences. Consultation with an attorney to determine the best
entity is recommended.

2.2.4 Corporation

A corporation is a legal entity, operating under state law, whose scope of activity and name are
restricted by its charter. Articles of incorporation must be filed with the state to establish a
corporation. Stockholders' are protected from liability and those stockholders who are also
employees may be able to take advantage of some tax-free benefits, such as health insurance.
There is double taxation with a C corporation, first through taxes on profits and second on taxes
on stockholder dividends (as capital gains).

2.2.4.1 Advantages

1. Limited liability
2. Ownership is transferable
3. Continuous existence
4. Separate legal entity
5. Easier to raise capital
6. Possible tax advantage as taxes may be lower for an incorporated business

2.2.4.2 Disadvantages

1. A corporation is closely regulated

2. More expensive to incorporate than a partnership or sole proprietorship
3. Extensive corporate records required, including shareholder and director meetings, and
documentation filed annually with the government
4. Possible conflict between shareholders and directors
5. Possible problem with residency of directors

2.2.5 Company Limited by Shares

In a company limited by shares, the shareholder need not pay the whole amount of his shares to
the company at once when acquiring the shares. The usual practice is that shareholders make
payments when the directors make "calls" upon them to pay. The shareholder's liabilities are
therefore limited to any amounts unpaid on the shares, and once a shareholder has fully paid for
his shares, he is not to incur any further liabilities in respect of the company. Thus no
contribution is required from any member, exceeding any amount unpaid on his shares, where
the company is being wound up. However, the company may decide, by special resolution, to

19
reserve any unpaid liability on shares until the company is being wound up. The Regulations of a
company limited by shares must expressly state the fact of the limited liability of members. The
last word of the name of a company limited by shares shall be "limited", or its abbreviation "ltd."

2.2.6 Company Limited by Guarantee

This is a company that has the liability of its members limited to amounts that they respectively
undertake or guarantee to contribute to the assets of the company in case of liquidation. Unlike
companies limited by shares, where the liability of the member may have to be implemented at
any time during the existence of the company, that is, during the active life as well as during
winding up, in the guarantee company, that liability need only be implemented after the
commencement of the winding up of the company. The Companies Code provides for the total
liability of members, and no further contribution shall be required from any member. A
guarantee company is not registered with shares and is not permitted to create any shares. This
type of company is therefore only suitable if no initial funds are required or those funds are
obtained from other sources, e.g. endowments and donations. The company is also not permitted
to engage in trading. The company is not permitted to pay dividends or distribute/return any
assets to members. Whilst other companies may operate on a "one share, one vote" principle, the
operating principle in respect of guarantee companies is "one member, one vote".

The Regulations of a guarantee company must contain the following mandatory

provisions:

1. That the liabilities of the members are limited

2. That the income and property of the company shall be applied solely towards the
promotion of its objects
3. That no portion of the income and property shall be paid or transferred in any manner to
the members, except payments permitted by the Regulations, such as the payment of
reasonable and proper remuneration to officers in return for services actually rendered,
out-of-pocket expenses, interest not exceeding 6% on money lent to the company, and
reasonable and proper rent for premises let to the company. Further, no director is to be
appointed to any salaried office. These may be modified only with the approval of the
Registrar
4. That each member will contribute to the assets of the company in the event of its being
wound up, to cater for the payment of the company's debts and obligations, costs of
liquidation and other amounts required, up to whatever limit is prescribed by the
Regulations. In respect of members, this liability extinguishes only where a person has
ceased to be a member for more than a year. Note that membership of a guarantee
company may end only by death, valid retirement or any other manner prescribed in the
Regulations
5. That upon winding up, the residue of the property shall not be distributed to members,
but shall be either given to some other guarantee company with similar objects or applied
to some charitable purpose. Members before the dissolution of the company shall
determine the beneficiary.

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2.2.7 Unlimited Company

This company is also registered with shares, and, there is no limit on the liability of the members,
e.g. they are liable to contribute whatever sums are required to pay the debts of the company in
case of bankruptcy. There are not too many of such companies in Ghana. The few that exist are
mostly law firms and other professional establishments who may be prevented from operating as
limited liability companies by professional ethics.

2.2.8 Public and Private Companies

Each of the above types of companies may be "private" or "public". A company is a private
company if by its Regulations, it fulfills the following conditions:

1. Where it is a company registered with shares, there is a restriction of the right to transfer
shares
2. The total number of members and debenture holders do not exceed 50
Debentures are similar to bonds except there are no pledges on specific assets. This
number excludes genuine employees and ex-employees of the company who became
members or debenture holders during their employment, and continued to be so after their
employment. The exclusion of employees is designed to enable companies to institute co-
partnerships schemes without forfeiting their private status
3. The company is prohibited from making of any public invitations for the acquisition of its
shares and debentures
4. The company is prohibited from making an invitation to the public to deposit money for
fixed periods or payable at call, whether interest bearing or not.

2.2.9 Cooperative

Membership is unrestricted but is for specific purposes such as joint purchase of raw materials
and group marketing of products.

2.2.10 External Company

Corporate bodies formed outside Ghana that seek to operate in Ghana need not automatically
incorporate subsidiaries in Ghana. Such a corporate body is allowed to establish a place of
business in Ghana after it has registered with the Companies Registry as an "external company".

A company 100% Ghanaian-owned have minimum nominal capital of at least GH¢500. A

foreign investor may team up with a Ghanaian entrepreneur or company for a joint venture,
usually in the form of a partnership or a limited liability company.

21
However, under the Ghana Investment Promotion Centre Act, 1994 (Act 478), a minimum equity
capital of US$10,000 is required from any foreign investor who intends to enter into a joint
venture partnership with a Ghanaian in any area of economic activity, except trading. In trading,
the minimum equity capital requirement is US$300,000

The foreign shareholder is required to satisfy this minimum equity capital either in cash
transferred through Ghana's banking system or its equivalent in the form of goods, plant and
machinery, vehicles or other tangible assets imported specially and exclusively to establish the
enterprise. The imported items must be covered by a Destination Inspection Report issued by an
accredited inspection company, stating the value and condition of the goods. Consideration for
goodwill of a business or services rendered by partners cannot be used to satisfy the minimum
foreign equity capital.

Foreigners are permitted 100-per-cent ownership of an enterprise provided the investor satisfies
section 19 (2b) of the GIPC Act, 1994 (Act 478). Wholly foreign owned enterprises must have a
minimum paid up capital, the equivalent of US$50,000 in all areas of economic activity except
import trading, where the
minimum equity capital requirement is US$300,000. In the cases of export trading and liaison
(external) offices, there is no minimum foreign equity requirement.

2.3 Characteristics or Features of Business

2.3.1. Exchange of goods and services

All business activities are directly or indirectly concerned with the exchange of goods or services
for money or money's worth.

2.3.2 Deals in numerous transactions

In business, the exchange of goods and services is a regular feature. A businessman regularly
deals in a number of transactions and not just one or two transactions.

2.3.3 Profit is the main Objective

The business is carried on with the intention of earning a profit. The profit is a reward for the
services of a businessman.

2.3.4 Business skills for economic success

Anyone cannot run a business. To be a good businessman, one needs to have good business
qualities and skills. A businessman needs experience and skill to run a business.

22
2.3.5 Risks and Uncertainties

Business is subject to risks and uncertainties. Some risks, such as risks of loss due to fire and
theft can be insured. There are also uncertainties, such as loss due to change in demand or fall in
price cannot be insured and must be borne by the businessman.

3.3.6 Buyer and Seller

Every business transaction has minimum two parties that is a buyer and a seller. Business is
nothing but a contract or an agreement between buyer and seller.

2.3.7 Connected with production

Business activity may be connected with production of goods or services. In this case, it is called
as industrial activity. The industry may be primary or secondary.

2.3.8 Marketing and Distribution of goods

Business activity may be concerned with marketing or distribution of goods in which case it is
called as commercial activity.

2.3.9 Deals in goods and services

In business there has to be dealings in goods and service.

Goods may be divided into following two categories:-

1. Consumer goods: Goods which are used by final consumer for consumption are
called consumer goods e.g. T.V., Soaps, etc.
2. Producer goods: Goods used by producer for further production are called
producers goods e.g. Machinery, equipment, etc. Services are intangible but can
be exchanged for value like providing transport, warehousing and insurance
services, etc.

2.3.10 To Satisfy human wants

The businessman also desires to satisfy human wants through conduct of business. By producing
and supplying various commodities, businessmen try to promote consumer's satisfaction.

2.3.11 Social obligations

Modern business is service oriented. Modern businessmen are conscious of their social
responsibility. Today's business is service-oriented rather than profit-oriented

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24
 CHAPTER THREE

3.0 Law of Contract, Business Planning and Reporting

3.1 Law of Contract

We enter into contracts day after day. Taking a seat in a ‘’trotro’’ bus amounts to entering into a
contract. You go to a restaurant and take snacks; you have entered into a contract. In such cases,
we do not even realize that we are making a contract. In the case of people engaged in trade,
commerce and industry, they carry on business by entering into contracts.

The law of contracts differs from other branches of law in a very important respect. It does not
lay down so many precise rights and duties which the law will protect and enforce; it contains
rather a number of limiting principles, subject to which the parties may create rights and duties
for themselves and the law will uphold those rights and duties. Thus, we can say that the parties
to a contract, in a sense make the law for themselves. So long as they do not transgress some
legal prohibition, they can frame any rules they like in regard to the subject matter of their
contract and the law will give effect to their contract.

A contract is defines a contract as an agreement enforceable by law. An agreement is define as

“every promise and every set of promises forming consideration for each other. A promise on the
other hand is defined as “When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.”

From the above definition of promise, it is obvious that an agreement is an accepted proposal.
The two elements of an agreement are:

1. offer or a proposal; and

2. An acceptance of that offer or proposal.

Only those agreements which are enforceable at law are contracts The Contract Act is the law of
those agreements which create obligations, and in case of a breach of a promise by one party to
the agreement, the other has a legal remedy. Thus, a contract consists of two elements:

1. an agreement; and
2. legal obligation, i.e., it should be enforceable at law

However, there are some agreements which are not enforceable in a law court. Such agreements
do not give rise to contractual obligations and are not contracts.

Examples
(1) A invites B for dinner in a restaurant. B accepts the invitation. On the appointed day, B goes
to the restaurant. To his utter surprise A is not there. Or A is there but refuses to entertain B. B

25
has no remedy against A. In case A is present in the restaurant but B fails to turn-up, then A has
no remedy against B.

(2) A father (A) gives a promise to his son (B) to give him a pocket allowance of GH₵ 350.00
every month. In case A fails or refuses to give B the promised amount, B has no remedy against
A.
In the above examples promises are not enforceable at law as there was no intention to create
legal obligations. Such agreements are social agreements which do not give rise to legal
consequences. This shows that an agreement is a broader term than a contract. And, therefore, a
contract is an agreement but an agreement is not necessarily a contract

A legal obligation having its source in an agreement only will give rise to a contract

Example

A agrees to build a stadium for B for GH₵ 51.2 million. The agreement gives rise to a legal
obligation on the part of A to build the facility for B and on the part of B to pay GH₵ 51.2
million to A. The agreement is a contract. If A does not build the stadium, then B can go to a
court of law and file a suit against A for non-performance of the promise on the part of A. On the
other hand, if A has already built the stadium and B refuses to make the payment of amount, A
can go to the court of law and file a suit against B for non-performance of promise

The law of contract deals with those legal relations that arise because of mutual expressions of
assent. The parties have expressed their intentions in words, or in other conduct that can be
translated into words. The notion is not at all uncommon that legal relations called contractual
cannot exist unless the parties intended them to exist, and that the sole function of the courts,
therefore, is one of interpretation: What was the intention of the parties? This notion is far from
correct. In almost all cases of contract, legal relations will exist, from the-very moment of
acceptance that one or both of the parties never consciously expected would exist, and therefore
cannot be said to have intended. Furthermore, the life history of any single contract may cover a
long period of time, and new facts will occur after acceptance of the offer-facts that may gravely
affect the existing legal relations and yet may have been utterly unforeseen by the parties. Many
of these uncontemplated legal relations are invariably described as contractual. Therefore it
appears that a necessary function of the courts is to determine the unintended legal relations as
well as the intended ones

The first step in this judicial process is the merely historical one of determining what the
operative facts were. What did the parties say and do? What words did they use? Did they

26
execute a document? This historical determination is made possible by evidence. The next step is
one of interpretation. In taking this step the court may put to itself two questions: first, what was
the actual state of mind of the contracting parties, their meaning and intention at the time they
said the words or performed the other acts to be interpreted; second, what meaning do the words
and acts of the parties now express to a reasonable and disinterested third party?
It is only in exceptional cases that these questions will be consciously considered by a court;
usually the process of interpretation will involve rapid and unconscious shifts from the one
aspect to the other

3.1.1 Nature of right

One of the chief purposes for which parties make an executor contract is the creation of rights
and duties. A right is the logical correlative of a duty; the one cannot exist without the other, and
neither can exist at all unless there are two individuals living within some organized society. If
for the benefit of A, society commands certain conduct or performance on the part of B and will
take some action detrimental to B in case of disobedience, we say that A has a right and B has a
duty. Right required performance by another; duty requires performance by its possessor

3.1.2 Essential Elements of a Valid Contract

We have seen above that the two elements of a contract are: (1) an agreement; (2) legal
obligation. Section 10 of the Act provides for some more elements which are essential in order to
constitute a valid contract. It reads as follows: “All agreements are contracts if they are made by
free consent of parties, competent to contract, for a lawful consideration and with a lawful object
and are not hereby expressly declared to be void.” Thus, the essential elements of a valid contract
can be summed up as follows;

1. Agreement
2. Intention to create legal relationship.
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreements not declared void or illegal.
8. Certainty of meaning.

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 9. Possibility of performance.
10. Necessary Legal Formalities.

3.1.3 Classification of Contracts

Contracts may be classified in terms of their

1. validity or enforceability,
2. mode of formation,
3. Performance

3.1.4 Classification according to validity or enforceability

Contracts may be classified according to their validity as (i) valid, (ii) voidable, (iii) void
contracts or agreements, (iv) illegal, or (v) unenforceable.

A contract to constitute a valid contract must have all the essential elements discussed earlier. If
one or more of these elements is/are missing, the contract is voidable, void, illegal or
unenforceable.

3.1.5 Classification according to mode of operation

There are different modes of formation of a contract. The terms of a contract may be stated in
words (written or spoken). This is an express contract. Also the terms of a contract may be
inferred from the conduct of the parties or from the circumstances of the case. This is an implied
contract

3.1.6 Classification according to performance

Another method of classifying contracts is in terms of the extent to which they have been
performed. Accordingly, contracts are: (1) executed, and (2) executory or (1) unilateral and (2)
bilateral.
An executed contract is one wholly performed. Nothing remains to be done in terms of
the contract.

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3.2 Business Planning and Reporting

Planning is a process that never ends for a business. It is extremely important in the early stages
and life any new venture when the entrepreneur will need to prepare a preliminary business plan.
The plan will become finalized as the entrepreneur has a better sense of the market, the product
or services to be marketed, the management team and the financial needs of the venture.

As the venture evolves from an early start-up to a mature business, planning and reporting on the
progress will continue as management seeks to meet its short-term or long-term business goals.

For any given organization, it is possible to find financial plans, marketing plans, human
resources plans, production plans, sales plans etc. plans may be short-term or long-term or they
may be strategic or operational.

3.2.1 Business Plan

The business plan is a written document prepared by the entrepreneur that describes all the
relevant external and internal elements involved in starting a new venture. It is often an
integration of functional plans such as marketing, finance, manufacturing and human resources.
If we think of business plan as the a road map for start-up venture, we might better understand its
significant.

It presents objectives and proposes means and the time horizons to achieve those means.

It presents a prediction about the future, given a certain resource investment.

It makes assumptions and forecasts about many aspects of an entrepreneurial venture, including
the size and nature of the market, costs of producing and delivering certain products and services
and the scope and potential responses of competitors and alternatives to the venture

3.2.2 Scope and Value of Business Plan

3.2.2.1 Who Reads The Business Plan?

The business plan may be read by employees, investors, bankers, venture capitalists, suppliers,
customers, advisors and consultants. Who is expected to read business plan can often affect its
actual content and focus. Since each of these groups reads the plan for different purposes. The
entrepreneur must prepare try to satisfy the needs everyone whereas in the actual market place

29
the entrepreneur’s product or service will be trying to meet the needs of selected group of
customers.

The depth and detail in the business plan depends on the size and scope of the proposed new
venture.

3.2.2.2 Benefits of a Business Plan

The business plan is valuable to the entrepreneur, potential investors, or even new personnel,
who are trying to familiarize themselves with the venture, its goals and objectives. The business
plan is important to these people because:

1. It helps determine the viability of the venture in a designated market

2. It provides guidance to the entrepreneur in organizing his or her planning activities
3. It serves as an important tool in helping to obtain financing
4. It helps to obtain financing support
5. It helps to understand competitors and financial position
6. Helps uncover potential weaknesses and overlooked opportunities
7. Tests commitment and that of team members
8. Helps anticipate and adapt to change
9. It provides the entrepreneur with a measure for evaluating results from the business

3.2.3 Writing a Business Plan

The business plan could take hundreds of hours to prepare, depending on the experience and the
knowledge of the entrepreneur as well as the purpose it is intended to serve. It should be
comprehensive enough to give any potential investor a complete picture and understanding of the
new venture and it should help the entrepreneur clarify his or her thinking about the business.

The outline of the business plan is only meant to be a guide. The entrepreneur should be aware
that each business plan may be different depending on the purpose and who will be reading it.
However, most of the items in this outline are critical elements in a general plan and should be
address by the entrepreneur.

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3.2.3.1 Outline of a Business Plan
1. Introductory Page
i. Name and address of the business
ii. Name(s) and address(es) of the principal(s)
iii. Nature of the business
iv. Statement of the financing needed
v. Statement of confidentiality of the repot
2. Executive Summary
i. Two to three pages of summarizing the complete business pan
ii. highlight in a concise and convincing manner the key points in the business
3. Industry Analysis
i. Future outlook and trends
ii. Analysis of competitors
iii. Market segmentation
iv. Industry and market forecasts.
4. Description of Venture
i. Product(s)
ii. Service(s)
iii. Size of business
iv. Office equipment and personnel
v. Background of entrepreneur(s)
5. Production Plan
i. Manufacturing process (amount subcontracted)
ii. Physical plant
iii. Machinery and equipment
iv. Names of suppliers of raw material
6. Operations Plan
i. Description of company’s operation
ii. Flow of orders for goods and/or services
iii. Technology Utilization

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7. Marketing Plan
i. Pricing
ii. Distribution
iii. Promotion
iv. Product forecasts
v. Controls
8. Organizational Plan
i. Form of ownership
ii. Identification of partners or principal shareholders
iii. Authority of principals
iv. Management team background
v. Roles and responsibilities of members of organization
9. Assessment of Risk
i. Evaluate weakness(es) of the business
ii. New technologies
iii. Contingency plans
10. Financial Plan
i. Assumptions
ii. Pro forma income statement
iii. Cash flow balance sheet
iv. Break-even analysis
v. Sources and applications of funds
11. Appendix (contains backup materials)
i. Letters
ii. Market research data
iii. Leases or contracts
iv. Price lists from suppliers

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 CHAPTER FOUR

4.0 Products and Service Concept of New Ventures, Market and Market Development

4.1 New products

One of the most common forms of innovation and entrepreneurship is the creation of a new
product. The new product may exploit an established technology or whole new technology. The
new product may offer a radically new way of doing something it may simply be an existing
theme.

Products are not simply a physical tool for achieving particular ends. They can also have a role
to. play in satisfying emotional needs. Branding is an important aspect of this. A brand name
reassures the consumer, draws ready-made associations for them and provides a means of
making a personal statement. The possibility of innovation being made through branding should
not be overlooked. The English entrepreneur, Richard Branson, for example, has been active in
using the virgin brand name on a wide variety of product areas following its initial success in the
airline business. To date it has been used to create a point of difference on, among other things,
record labels, soft drinks and personal finance products

4.1.1 New Service

A service is an act which is offered to undertake a particular task or solve a particular problem.
Unlike products, Services can’t be stored for later consumption. Services are intangible, they
have no physical form in their own right and as a result services are inseparable from the
provider and staff that deliver them.

Services are open to the possibilities of new ideas and innovation just as physical products. For
example, the American entrepreneur, Frederick Smith, created the multi-million dollar
international business, federal express, by releasing a better way of moving parcel between
people.

Like physical products, services can be supported by the effective use of branding. In fact, it is
beneficial to stop thinking about ‘’products’’ and ‘’services’’ as distinct types of business and
recognize that all offerings have product and service aspects. This is important because it is

33
possible to innovate by adding a ‘customer service’ in component to a physical product to make
it more attractive to the user. Similarly, developments in products technology allow new service
concepts to be innovated.

4.1.2 New means of informing customers about products and services

People will only use a product or service if they know about it. Demand will not exist if the
offering is not proper promoted to them. Promotion consists of two parts: a message, what is
said, and a means, the route by which that message is delivered. Both the message and the means
present latitude for inventiveness in the way they are approached. Communicating with the
customers can be expensive and entrepreneurs especially when their ventures are in an early
stage rarely have the resources to invest campaigns. Therefore, they are encouraged to develop
new means of promoting their products.

A good starting point to mapping a product’s or service’s market category is to review the
markets’ competing, but existing products. Rarely does a new product and service have an entire
market to themselves, regardless of the innovative quality of the product or service. Customer
needs are seldom created by new products or services. Rather, new products or services provide
new ways of meeting existing needs.

For example, Sony’s Walk Man Music Cassette Player, a very innovative consumer product, met
the needs of customers who wished to listen to music while on the move.
This relationship between customer needs and varied product or service solutions is the basis for
the concept of the market category. Market categories are created by needs, buying power, and
products to satisfy needs. If a need is present, the overwhelming odds are that there are already
some products or services around to satisfy that need. Thus, such products or services become a
source of competition. For each customer need, there are typically several products or services
available to satisfy that need. A ‘generic class’ groups all these products into one category, and
each product in the generic class provides an alternative way of satisfying the need.

4.1.3 Marketing New Product and Services

The question “Is there a market for the new technology, product or service?” is a key marketing
question for any new venture or new product development team in an existing business. The
answer and ultimately the decision to launch the new venture and new product or service will

34
depend crucially on the information and evidence gathered and analyzed across the ‘5Cs’
marketing interrogation: namely:

1. Customer needs – what target customer valuable needs do we seek to satisfy or

exceed?
2. Company skills – what special competence do we possess to meet those needs in
a unique, sustaining way?
3. Competition offerings– who competes with us in meeting those needs and where
do we have a sustainable, competitive advantage over their offerings?
4. Collaborators – who should we enlist to help us reach and deliver our offering to
the target customer and how do we involve and motivate them?
5. Context – what is the current industry situation and what political, economic,
social and technological factors limit or enhance what is possible?

A market may be defined as the sum total of all the buyers and sellers in the area or region under
consideration. The area may be the earth, or countries, regions, states, or cities.
The value, cost and price of items traded are as per forces of supply and demand in a market. The
market may be a physical entity, or may be virtual. It may be local or global, perfect and
imperfect

4.2 Market and Market Development

Entrepreneurs interact with the marketplace by finding and developing relationships with them
through marketing, the business function that establishes and maintains the interface with the
marketplace. The UK Chartered Institute of Marketing defines marketing as the management
process responsible for identifying, anticipating and satisfying customer requirements profitably.

Successful companies rely on customers returning to repurchase; the goal of marketing is long-
term satisfaction, not short-term deception. This theme is reinforced by the management
consultant, Peter Drucker, who stated:

“Because the purpose of business is to create and keep customers, it has two central functions –
marketing and innovation. The basic function of marketing is to attract and retain customers at a
profit”. This implies the following:

35
 1.It places marketing in a central role for business success since it is concerned with
the creation and retention of customers.
2. It implies that the purpose of marketing is not to chase any customer at any price.
While profit may be used by many commercial organizations, in the non-profit
sector other criteria might be used such as social deprivation or hunger.
3. It is a reality of commercial life that it is much more expensive to attract new
customers that to retain existing ones. Indeed, the costs of attracting a new
customer have been found to be up to six times higher than the costs of retaining
old ones. Consequently marketing-orientated companies recognize the importance
of building relationships with customers by providing satisfaction and attracting
new customers by creating added value.
4. Finally, since most markets are characterized by strong competition, it is
important to monitor and understand competitors, since it is to rivals that
customers will turn if their needs are not being met.
Marketing exists through exchanges. Exchange is the act or process of receiving
something from someone by giving something in return. This “something” could be a
physical good, service, idea or money. Money facilities exchanges so that people can
concentrate on working at things they are good at, earn money (itself an exchange) and
spend it on products that someone else has supplied. The objective is for all parties in the
exchange to feel satisfied so each party exchanges something of less value to them than
that which is received.

4.2.1 The evolution of Marketing

Marketing probably originated with the beginnings of trade itself, but it was not until
relatively modern times that it developed into the formalized management concept now
known to us. Since the 1950s, the principles of marketing have been gradually adopted
throughout all sectors of the economy. As it has also spread, it has also evolved to suit the
particular contexts in which it has been practiced:

1. Consumer goods were first to be marketed using modern techniques. Unilever,

Proctor and Gamble and Mars were among the earliest companies to see the
benefit of marketing their fast-moving consumer goods such as cereals, soap
powders and confectionery. Consumer durables such as washing machines, record

36
 players, cameras and television sets soon followed, marketed by companies like
Hoover, Electrolux and Philips.
2. Industrial products, particularly in office equipment and supplies, became more
widely marketed in the 1960s as companies such as Xerox and 3M followed the
principles developed by the consumer marketers and offered differentiated,
branded products in business-to-business markets.
3. Consumer services adopted marketing principles as their role in the economy
grew and competition increased. Banks and insurance companies have
fundamentally changed their services to be more in line with consumer demand.
Marketing has adapted to suit the context of intangible products.
4. The not-for-profit and public sectors have also adopted marketing strategies. For
example, charitable organizations have long been recognized as leading exponents
of direct marketing in their appeals for funds. Political parties use market research
such as focus groups to guide their policies and election planning.
5. Small businesses have become an increasingly significant part of developed
economies. Whilst understanding the need for customer focus, many owners of
smaller firms have neither the inclination nor the resources for formalized, mass
campaigns typical of traditional marketing. Instead, they have developed an
entrepreneurial style of marketing in which personal contact and word-of-mouth
recommendations play an important part.
6. The Internet has created new opportunities for marketing in all industries and
market sectors. It has spawned a new sector of companies that trade online. It has
given businesses fresh ways of communicating with customers via websites or
email
In summary, marketing theory and practice has evolved over the past half-century or so
from its roots in large companies selling fast-moving consumer goods to an instrument
that can be used at a very individual level using modern communication technology.
Entrepreneurs have been an instrument of change in the evolution of marketing.

4.2.2 Traditional Marketing

Traditional marketing emphasizes the need for structured market intelligence in order to
understand customer needs including formal research and information-gathering
activities. Entrepreneurs place a low value on formal market research. Entrepreneurs have
a rich network of contacts active in the marketplace that keeps them informed of

37
 developments. The entrepreneurial process of networking modifies the traditional
marketing process of formalized intelligence-gathering. The reasons for this are the
following:
1. Formalized research is seen as slowing down the speed of reaction needed in
order to adapt to changes in the market.
2. Research is regarded as too expensive for the results generated.
3. Research does not come with breakthrough innovations that change the nature of
markets and industries that supply them.

4.2.3 Entrepreneurial Marketing and Traditional Marketing

The number-one source of new customers for new customers for entrepreneurial ventures is
word-of-mouth recommendations from customers, suppliers or other referral groups. The four
areas of entrepreneurial marketing process also known as the four Is are informal information
gathering – networking, intuitive innovation – ideas and adjustments, “bottom-up” identification
of target markets and niches and interactive marketing methods – word-of-mouth.

Entrepreneurial marketing is different from traditional marketing in four areas:

1. Entrepreneurs tend to develop ideas into innovations through intuitive understanding of

what may be needed in the marketplace, and rapidly adapt if they get it wrong or if the
market changes.
2. Entrepreneurs identify target markets (especially niches) through grass-roots, buttom-up
experience in the market, rather than the top-down segmentation, targeting and
positioning approaches of traditional marketing.
3. Entrepreneurs attract and retain customers through interactive methods especially word-
of-mouth recommendations rather than traditional mass marketing and promotions.
4. This process is underpinned, not by the formalized market intelligence of traditional
marketing but by informal information-gathering through networking.

4.3.4 Market-driven Companies

These display customer concern throughout the business. All departments recognize the
importance of the customer to the success of the business. They know how their products and
services are being evaluated against those of the competition. Business that are driven by the
market base their segmentation analyses on customer differences that have implications for

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marketing strategy. They also recognize that marketing research expenditure is an investment
that can yield rich rewards through better customer understanding. Employees who take risks and
are innovative are rewarded. Intensive competition means that companies need to be fast to
succeed. Such companies are fast to respond to latent markets, innovate, manufacture and
distribute their products and services. A key feature of marketing-oriented companies is that they
strive for competitive advantage. They seek to serve customers better than the competition.

There is no guarantee that all companies will adopt a marketing orientation. A competing
philosophy is production orientation. This is represented by an inward-looking stance that can
easily arise given that many employees spend their working day at the point of production.

A comparison of market-driven markets with internally-oriented markets is presented below:

Market-driven business Internally oriented business

Customer concerns throughout business Convenience comes first

Know customer choice criteria and match Assume price and product performance key
with marketing mix to most sales
Segment by customer differences Segment by product
Invest in market research(MR) and track Rely on anecdotes and received wisdom
market changes
Welcome change Cherish status quo
Try to understand competition Ignore competition
Marketing spend regard as an investment Marketing spend regarded as a luxury
Innovation rewarded Innovation punished
Search for latent markets Stick with the same
Being fast Why rush?
Strive for competitive advantage Happy to be me-too
Efficient and effective Efficient

4.3.5 Strategies for Growth and managing the Implications of Growth

The results of the marketing audit and SWOT analysis lead to the definition of marketing
objectives. Two types of objective need to be considered: strategic thrust and strategic
objectives.

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4.3.5.1 Strategic thrust
Objectives should be set in terms of which products to sell in which markets. This describes the
strategic thrust of the business. The strategic thrust defines the future direction of the business.
The alternatives comprise:

4.3.5.2 Market Penetration

This strategy is to take the existing product in the existing market and to attempt increased
penetration. It is a strategy to grow by encouraging existing customers to buy more of the
company’s current products. Marketing can be effective in encouraging more frequent repeat
purchases. For example, a pizza company engages in an extensive marketing campaign to
encourage university students to eat its pizza three nights a week rather than only twice a week.
This growth strategy does not involve anything new for the firm and relies on taking market
share from the competitors and / or expanding the size of the existing market.

4.3.5.3 Market development

Growth can also occur through market development strategies. This involves selling the firm’s
existing products to new groups of customers. New groups of customers can be categorized in
terms of new geographic market (selling the existing product in new locations with the potential
of offering the products to customers who have not previously had the chance to purchase them)
or new demographic market (used to characterize, customers based on their income: where they
live; their education, age sex; and so on. – Growth of the business by offering the same product
to a different demographic group) or new product use (people using the product in a way that
was not intended or expected, thus providing insight into how the product may be valuable to a
new group of buyers). A market development strategy capitalizes on existing knowledge and
expertise in a particular technology and production process.

4.3.5.4 Product development

This strategy involves increasing sales by improving present products or developing new
products for current markets. Experience with a particular customer group is a source of
knowledge on the problems customers have with existing technology and ways in which
customers can be better served. A further advantage of using a product development strategy is
the chance to capitalize on existing distribution systems and on the corporate reputation the firm
has with these customers.

4.3.5.5 Entry into new markets

This strategy occurs when new products are developed for new markets. This is the most risky
strategy but may be necessary when a company’s products and markets offer few prospects for
future growth. When there is synergy between the existing and new products, this strategy is
more likely to work. For example, Apple’s experience and competencies in computer electronics
provided the platform for designing a new product, the iPod, targeting a different market: young
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people who want down-loadable music player. This in turn, has been followed by the launch of
the iPhone which has placed Apple in a strong position in the market for smartphones.

Alongside objectives for product / market direction, strategic objectives for each product need to
be agreed. This begins the process of planning at the product level. There are four alternatives:

1. Build
2. Hold
3. Harvest
4. Divest

For new products, the strategic objective will be to build sales and market share. For existing
products, the appropriate strategic objective will depend on the particular situation associated
with the product. This will be determined in the marketing audit, SWOT analysis and evaluation
of the strategic options.

The important point to remember at this stage is that building sales and market share is not the
only sensible strategic objective for a product. Holding sales and market share may make
commercial sense under certain conditions; harvesting, where sales and market share are allowed
to fall but profit margins are maximized, may also be preferable to building; finally divestment,
where the product is dropped or sold, can be the logical outcome of the situation analysis.

Together, strategic thrust and strategic objectives define where the business and its products
intend to go in the future.

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 CHAPTER FIVE

5.0 Organization and Financing new Projects

The life cycle analysis below illustrates that almost all entrepreneurial ventures need finance at
some time. However, the reason for this funding vary greatly from long-term capital equipment
investments at one end of the spectrum to short-term working capital to pay for the office
supplies until trading begins, at the other end. It is important to match these diverse uses of
finance with appropriate sources as different types of money should be used for different
purposes. However, not all businesses have access to all types of funds so this is a further factor
to consider when matching the sources and use of funds. I summary the matching process of
funding has to take account of:

5.1 The type of enterprise

Some forms of enterprise have limited liability or no ability to raise external equity finance from
shareholders. Sole trade traders and partnerships do not have shareholders and so the equity route
is closed although they can attract loans. Social enterprise is normally funded by grants and
donations rather than shares. Some cooperatives can only raise limited amounts of share capital.

5.2 The risk or reward relationship

The relationship between the risk involved in funding a venture and the likely reward influences
the types of funds available. If the risks are great but the rewards equally large, equity funding
from investors prepared to take the risk is the usual route. If the risks are small and reward less,
debt financing through loans and bank overdrafts are more appropriate. The stage of the
development of the venture is a key factor in this balance: early stage ventures involve more risk
and possibly offer more reward so that share capital is more likely to be involved at this time.
Many mature businesses are less likely to raise money through shares unless they have a major
requirement as they can meet most needs through bank finance.

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5.3 Financial Issues in Life Cycle stages

Life cycle stage of enterprise Financial issues

Concept stage Need for seed investment. Lack of reliable forecasts
Development Under-capitalization – inability to raise enough finance.
Ineffective cost control
Growth Working capital crisis from overloading. Equity gap causes
second phase funding issues

Maturity Return on investment required by investors. Bad debt likely

Decline Exit route for investors and lenders. Tax issues on exit

5.4 Stages of Business Development Funding

Early stage financing

• Seed capital Relatively small amounts to prove concepts
and finance feasibility studies

• Start-up Product development and initial marketing, but

with no commercial sales yet; funding to
actually get company operations started
Expansion or Development Financing
• Second stage Working capital for the initial growth phase,
but no clear profitability or cash flow yet

• Third stage Major expansion for company with rapid sales

growth; company is at breakeven or positive
profit levels but is still private

• Fourth stage Bridge financing to prepare company for

public offering

Acquisition and leveraged Buyout Financing

• Traditional acquisition Assuming ownership and control of another

company

• Leveraged buyout Management of a company acquiring company

control by buying out the present owners

• Going private Some of the owners / managers of a company

buying all the outstanding stock, making the
company privately held again

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5.4 The uses and sources of funds for a small business

Permanent capital needed for: Requirements: Equity capital for which

main sources are:
Start-up Personal investment
Expansion and development Venture capital institutions
Innovation Public sector sources
Refinancing Public equity

Working capital needed for: Requirement: Short-term finance (up to 3

yrs)
Debtor/creditor gap Clearing banks
Seasonal fluctuations Finance houses
Bridging finance Factoring companies
Short-lived assets Leasing companies
Public sector sources

Asset finance Requirement: Medium to long-term finance

Plant and machinery Clearing banks
Equipment and furniture Venture capital institutions
Buildings Pension funds
Vehicles Finance houses
Insurance companies
Leasing companies
Public sector sources

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 CHAPTER SIX

6.0 Current trends – Digital Marketing and E-Commerce

Digital technologies are becoming increasingly important in most sectors of economic activity.
Due to high levels of interconnectivity, the Internet has been likened to the wheel and the
airplane in terms of its ability to affect the future development of business and society.
Consequently, the Internet has provided the impetus for many companies to rethink the role of
technology, and evidence already indicates the extent of its global impact. Research on major
trends in the dispersion of Internet technologies found that approximately 90 % of UK businesses
have access to the Internet and, in companies with over 50 % employees; the percentage is
approaching 100 %. The situation was found to be very similar in Australia, Canada, Germany,
Italy, Japan, Sweden, South Korea and the USA. Interestingly, the report also concluded that the
key measure of information and communication technologies (ICT) adoption is no longer just
about connectivity, but rather the degree to which digital technology is being used to deliver real
value for businesses.

A key benefit of digital technology is that it allows companies to target very specific markets,
even a market of one. This means developing plans to operate as “micronichers”, customizing
products and services to meet the needs of an individual: products delivered to personal
specifications (e.g. computers, books, music CDs). Broadly speaking, at this highly customized
level it is crucial to know which variables are most important for the target customer. A planner
should know the key triggers for individual (targeted) customer decisions (best price, best
quality, best delivery, best service, best image, best environment) as this will help to determine
which aspects of the marketing mix are the most significant.

For consumers, digital technologies have not only provided the means to search for and buy
products while saving time and money, but also to socialize and be entertained. The emergence
of social networking sites such as MySpace, Facebook, WhatsApp and Bebo has enabled
consumers to spend time socializing, and the development of video streaming and music
downloads means that they can be entertained as well.

45
Digital marketing spans the marketing mix as it provides marketing communications channels
and is a means of distribution.

Key elements of the digital age are the Internet, Digitization and connectivity, Convergence,
New distribution channels, interactive television and wireless communications

6.1 What is Digital Marketing?

This may be defined as the application of digital technologies that form channels to market (the
Internet, wireless communications and interactive television) to achieve corporate goals through
meeting and exceeding customer needs better than the competition.

6.2 Internet marketing

Internet marketing is a term that was originally used and is generally considered to mean the
achievement of corporate goals customer needs meeting and exceeding customer needs better
than the competition through the utilization of Internet technologies. More recently the term
digital marketing has become popular due to the inclusion of a wider range of digital and
network communication objectives. The widening application of digital technologies suggests
that marketers should extend their thinking beyond the Internet to encompass all the platforms
that permit a firm to do business electronically.

6.3 E-commerce, e-business and e-marketing

6.3.1 Electronic Commerce

Electronic commerce is often thought to simply refer to buying and selling using the Internet,
and as a result people often think of consumer retail purchases from companies such as Amazon
and Tesco.com. However, e-commerce involves more than electronically mediated financial
transactions between organizations and their customers. It is generally considered to include all
electronically mediated transactions between an organization and any third party it deals with,
including the exchange of information. An organization might become involved with e-
commerce on the buy-side as well as the sell-side, depending on the type of organization and the
market it serves. Buy-side e-commerce refers to transactions to procure resources needed by an

46
organization from its suppliers. Sell-side e-commerce refers to transactions involved with selling
products to customers

The extent of e-commerce is borne out by the fact that all possible combinations of exchange
between consumers and business organizations take place. Digital technologies are breaking
down barriers in the supply chain, enabling new forms of trading to be established. The most
well-established forms of e-commerce are in the business-to-business and business-to-consumer
markets. For example, in business-to-business markets, Cisco has, for many years, bought nearly
all its purchases on the Internet, and in business-to-consumer markets established retailers, such
as Tesco, the UK leading supermarket chain, have set up online shopping facilities and, in doing
so, created an additional channel to market via the Internet. Amazon.com has built a global has
built a global book-selling operation by using Internet technologies, bringing together
consumers, publishers and wholesalers around the globe.

6.3.2 E-business
E-business is a term used to refer to both buy-side and sell-side e-commerce, and the internal
use of Internet technologies throughout an organization. IBM, originally coined the term:

e-business is the transformation of key business processes through the use of Internet
technologies.

An intranet (internal company network of web browsers and e-mail facilitating communications)
is used as part of e-business activities to streamline business processes. A company intranet can
facilitate the sharing of ideas, research on a new product development, business decisions and
applications. E-business is therefore broader than e-commerce, and may involve the automation
of such business processes as the purchase of supplies, production, inventory management,
marketing, invoicing and distribution. Extranets connect a company with its trading partners,
such as suppliers and distributors.

6.3.2.1 Electronic Business models

There are a wide range of electronic commerce business models which are used in many
different industries and markets. Some examples include:

47
 • Online direct marketing. This is where the manufacturer sells online to a customer
without any intermediary. This is particularly suitable for the sale of digitizable products
and services (i.e. those that can be delivered electronically)
• Viral marketing. This is where an organization increases brand awareness or generates
sales by inducing people to send messages to other people or to recruit friends to join
certain programs. In effect, this is web-based word-of-mouth marketing
• Online auctions. eBay.com, the world’s largest online auction site, operates using this
principle of transaction
• Electronic marketplace and exchanges. Although these have existed for some years (e.g.
in stock commodity exchanges) many e-marketplaces have been introduced, bringing
with them increased efficiencies to the trading process.

6.3.3 E-marketing
E-marketing is a term used to refer to the use of technology (telecommunications and Internet
based) to achieve marketing objectives and bring customer and supplier closer together. For
instance, a company might use e-mail to manage customer enquiries and also integrate web-
based technologies with e-mail and other information systems, such as customer databases, in
order to facilitate management of customer and supplier relationships. From a marketing
perspective e-marketing can help identify and anticipate customer needs, and also provide a
means to satisfy customers by providing prompt and informed responses quickly.

6.3.3.1 Stages in digital marketing planning

Deciding how to plan, resource, integrate, implement and monitor digital activities can be guided
by applying established marketing management principles and planning activities. New
technologies can be used to meet a range of different business activities. If a company is mainly
selling via the Internet or other digital platform then it could be classified as engaging in e-
commerce. However, if a company is utilizing digital marketing technology more widely – for
example, to restructure the value chain, engage in procurement, stock management,
administration, supplier relationship management – this will be classified as engaging in e-
business. E-marketing initiatives focus on the development and maintenance of mutually
satisfying long-term relationships with customers using digital technologies. Therefore the type
of activities will determine the significance of the strategic plan and provide an operational
context.

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6.3.3.2 Marketing Objectives
The degree to which digital marketing objectives will be defined can vary tremendously
depending on the extent and time in which digital technologies have been utilized. Digital
marketing objectives fall within some or all of five categories. Marketers must decide whether all
or only some are going to drive their marketing plan.

1. Grow sales: through cheaper prices, wider distribution or greater product range.
2. Add value: through greater convenience (home shopping), improved 24/7 access,
and / or more information (e.g. track orders, receive advice, read customer
reviews, compare product features and benefits)
3. Get closer to customers: inbound by conducting online marketing research,
monitoring chat rooms, blogs and social network sites, and tracking visits to sites,
and outbound by search engine marketing, online public relations and advertising
and e-mail and viral marketing campaigns.
4. Save costs: by replacing sales and telemarketing staff with online sales, order
confirmation by e-mail rather than post, online purchasing, and replacing hard
copy catalogues, manuals and reports with online versions.
5. Extend the brand online: by raising awareness, enhance brand image and extend
the brand experience.

6.3.3.3 Marketing Strategy

A key aspect of strategy development is the creation of a digital marketing competitive

advantage. Marketers have long accepted that success demands identification of some form of
competitive advantage capable of distinguishing from other firms operating in the same market
sector. The unique properties of digital technologies offer opportunities to establish new forms of
competitive advantage. These include highly tailored product assortments and customized
products, instant response, uninterrupted trading hours and more informed customer services.
The secret of the success of most digital operations is that they have exploited digital market
advantages and new technologies, in order to deliver a value proposition superior to that of their
non-digital competitors.
Over and above specific business models applied, there are clear differences emerging between
the so-called digital versus bricks and Mortar Company. Potential sources of competitive
advantage in digital markets include those described below:

49
On the one hand, electronic offers a relatively inexpensive means of advertising and conducting
market and competitor research and on the other hand, the small business rarely has sufficient
financial resources to fully exploit the Web. A transaction website may require relatively high
up-front fixed costs. The music industry, which has been particularly influenced by
digitalization, provides an interesting case study of the influence of the internet.

Lower prices – Digital platforms can make direct links between suppliers and customers without
using an intermediary. The savings generated by the removal of the intermediary from the
transaction can be passed on to the customer in the form of lower prices.

Lower costs – Large manufacturing companies in traditional industries have reportedly been
slow to response to opportunities presented by digital technologies. However a key adoption of
such technologies has been the opportunities for cost reduction, especially within purchasing and
administration. For example, FedEx estimates that it saves between £1 and £3 per customer when
it services them online rather than over the telephone, saving the company millions of pounds
each year. Similarly, Dell claims to save between £3 and £6 per customer when serving them
online.

Improved service quality – In most developed markets it is almost impossible to offer a product
proposition that is very different from that of the competitor. As a result, one of the few ways of
gaining a competitive advantage is through being able to deliver a superior level of customer
service. A key influencer of service quality is the speed of information interchange between the
supplier and customer. The information interchange capability facilitated by digital technologies
has created opportunities to create competitive advantage.

Greater product variety – The average high-street retail shop is physically restricted in terms of
the amount of space available to display goods. As a result, they can use their websites to offer a
much greater variety of goods to potential customers. Catalogue retailers have also benefited
from trading in the digital environment. Empire stores offers extended range of products for sale

50
through its online site – for example, shirts or jerseys from over 80 different national and
international teams.

6.3.3.5 Product customization

Over the past 20 years, many manufacturers have come to realize that adoption of just-in-time
(JIT) production can offer the potential to customize products to meet the needs of individual
customers. For example, computer giant Dell exploited JIT to assist it in building a product to
meet specific needs of each customer. Also, Acumin, for example, is a web-based vitamin
company that blends vitamins, herbs and minerals according to the specific instructions of the
customer.

6.3.3.6 The digital marketing mix

It has been said that utilizing digital technologies to facilitate marketing trading activities affect
the whole of the marketing mix, and brings new and unique properties to each element of it.
However Peppers and Roger went as far as to say that transaction-based marketing and the
traditional mix fail to deliver in the digital age, and they subsequently offered the “5-Is” as a
replacement framework when companies are working digital media to develop customer-centric
strategies. The 5-Is are:
1. Identification – customer specifics
2. Individualization – tailored for lifetime purchases
3. Interaction – dialogue to learn about customers’ needs
4. Integration – of knowledge of customers throughout the company
5. Integrity – develop trust through non-intrusive marketing such as permission
marketing.

Although it is unlikely that such a framework will ever replace the traditional marketing mix as a
strategic planning tool, it however highlights the power of new technologies to engender a shift
in orientation.

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6.3.3.7 Product
There are several ways by which digital technologies create opportunities for product
enhancement. Individual requirements can be met by offering a wide choice. For example Apple
provides a selection of optional accessories for its iPods, allowing consumers to make a highly
individual product selection. NikeID goes even further by providing the opportunity to design a
pair of trainers, by selecting styles, features and colours from a wide range of options. Tesco’s
online shopping website captures details of shoppers’ regular purchase choices and then provides
a customized list of favourites. Amazon also produces a customized selection of recommended
books based on customer’s previous selection. A number of these products can be delivered
directly to the consumer via a digital interface (e.g. music, video, flight bookings and hotel
reservations)

6.3.3.8 Price
Prices are more transparent and new dynamic purchasing practices are emerging. A major impact
of digital technologies from an economic perspective is the potential to reduce search costs when
a buyer is looking for information about new products. The net effect is a reduction in suppliers’
power to control, and therefore pricing strategies become more transparent. Buyers are
increasingly turning to the web for pre-purchase information, which facilitates evaluation of the
best offers in terms of price and quality.

6.3.3.9 Place (distribution)

Trading via digital channels means there are no physical boundaries and an opportunity exists for
companies to utilize new channels to market. The Internet provides a conduit through which
transactions can take place and there is no longer a need for a physical presence. Trading takes
place in a virtual market space, created by computer networks and layers of application software.
Under these circumstances, distance ceases to be a cost influencer from the buyers perspective,
business location becomes irrelevant as buyers and sellers can be based anywhere in the world
and the technology permits continuous real-time trading, 24 hours a day, 365 days a year.

52
6.3.3.10 Ethical Issues in digital marketing
Increased adoption of digital technologies within marketing has had many beneficial effects,
such as increasing customer choice and convenience, and enabling smaller companies to
compete in global markets across a range of digital platforms. However, there are some key
ethical issues emerging as a result of increased usage of digital technologies.

Expansion and changes in the development of the World Wide Web have made Internet
technology more accessible to a greater number of people, but there remains a virtual divide
between the technology’s `haves´ and `have-nots´. Studies have shown that there are significant
differences in usage based on race and educational attainment. Public and private organizations
around the globe need to find creative solutions to improve Internet access for all citizens,
regardless of their demographic background, as they should not be deprived of internet access
due to financial restrictions, a poor education and or a lack of computer skills.

Another ethical consideration is the fear of technological exclusion of the poorest members of
society who cannot afford a computer, broadband connection, interactive television, digital radio
or 3G phones and therefore cannot benefit from the vast array of products and services available
or access to information sources.

6.3.3.11 Limitations of digital technologies to consumers

Delivery times – delivery times are not quite so flexible. To get the physical goods to the
customer’s home, the customer must stay in and wait until the goods arrive.

Information overload – the amount of information that can be accessed via digital platforms by
an end user can be overwhelming.

Access to technology – the greater the capacity to incorporate multimedia content, the higher the
required specification on the equipment that can receive and download such content. However
some consumers do not have access to even the most basic means of access.

Risk – many consumers are concerned about using credit and / or debit cards to purchase goods
online for fear that their details will be captured and misused. Consumers are also concerned
about the risk of not receiving goods that they have paid for.

53
Cost implications – the consumer has to make an initial investment in suitable technology, pay
for like printer ink and fund the cost of downloading company information.

Technological deserts – parts of the world are poorly served by telecommunications and network
access providers; as a result some places do not have access to the Internet, television or radio.

Authenticity – not all Internet users respond to Internet surveys by providing factual data.
Potentially false or deliberately incorrect responses can bias research findings

Intrusion on privacy – some Internet users are wary of online shopping because of the
information provided about them by cookies. Cookies allow customized and personalized
content for online shoppers. Most will object to information about them being held without their
express consent. Another form of invasion of privacy is the sending of unsolicited e-mails
(spam). Recipients find spam intrusive and annoying.

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1. Eugen B., (2010) Fundamentals of Entrepreneurship
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Entrepreneurship: The Engine of Growth
3. The Registrar - General Department, the Registration of Business Names Act,
1962 (No. 151)
4. Stokes D., Wilson N., (2010) Small Business Management and Entrepreneurship,
6th Ed., Cengage Learning EMEA, Hampshire, UK

5. Hisrical R., Peters M., Shepherd D.,(2013) Entrepreneurship 9th Ed., African
Edition. Mc Graw Hill Education.
6. Stokes D.,Wilson N., Mador M., (2010) Entrepreneurship. Cengage Learning
EMEA, Hampshire, UK
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Education UK

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