INTRODUCTION TO ENTREPRENEURSHIP EDUCATION

Meaning of entrepreneurship;

Entrepreneurship is the process through which individuals identify opportunities,

allocates resources and create value.

Or;

Entrepreneurship is a factor of production that is concerned with combining resources

and coming up with new product and services.

An entrepreneur is a person who undertakes risks of a new business.

Or;

An entrepreneur is a person with ability to identify and evaluate business opportunities

from the environment.

Types of entrepreneurs;

a) Innovating entrepreneurs; this category is characterized by innovativeness. They

are quick to identify opportunities to introduce technologies, product, market and
organisations.

b) Imitative entrepreneurs; they are also referred to as adoptive entrepreneurs.

These do not innovate new products and services. They simply imitate existing
entrepreneurs, products and services and start their enterprises exactly in the
same way.

c) Fabian entrepreneurs; these do not adopt to the environment methods of

production and business. They only adopt to new methods if they realise that
their business will fail without adopting new ideas.

d) Drone entrepreneurs; these can also be called conservative entrepreneurs. They

are skeptical of new products and feel comfortable with traditional products and
methods of production. They resist change. They see success of others and start
to question them.

e) Other types of entrepreneurs include;

i) Agricultural entrepreneurs

ii) Accomplished entrepreneurs; already successful and now wish to leave a

legacy.
 iii) Women entrepreneurs

iv) Men entrepreneurs

v) Opportunistic/ visionary entrepreneurs; these go to a venture where they

see profits.

vi) Sola entrepreneurs; these develop their business ideas on their own.

vii) Network entrepreneurs; these get their business ideas from social
networks like friends

viii) Part time entrepreneurs; these operate business on part time basis.

ix) Craftsman entrepreneurs; these begin business on their skills e.g.

footballers, teachers, etc.

x) Business entrepreneurs/trading entrepreneurs.

xi) Industrial entrepreneurs

xii) Service entrepreneurs

xiii) Induced entrepreneurs; these are altered by policies and incentives

provided by government, NGOs and communities.

xiv) Classical entrepreneurs; these are driven by economic gains and profits.

xv) First generation entrepreneurs; these do not inherit business and do not
have any reputable business background. They start business basing on
their skills and resources.

xvi) Professional entrepreneurs; these start business and later sell them off to
start others.

xvii) Copycat entrepreneurs; these copy other entrepreneurs.

Entrepreneurs and intrapreneurs;

Intrapreneurs are persons engaged in innovation but within an existing business

organisation.

These people introduce new ideas, new products and services to keep the business
organisation upto date to meet the customers changing needs.

Differences between entrepreneurs and intrapreneurs;

An entrepreneur is independent whereas an intrapreneur is semi-independent.

An entrepreneur raises his/her funds on his/her own initiative whereas an intrapreneur

depends upon the industry in which he works.

An entrepreneur owns the business whereas an intrapreneur bears few risks.

An entrepreneur takes the profits made by the enterprise whereas an intrapreneur

doesn’t take profits from the industry but may be provided with a variety of benefits.

An entrepreneur operates from outside organisation whereas an intrapreneur operates

from within the organisation.

An entrepreneur converts the ideas of intrapreneur into viable opportunities whereas an

intrapreneur takes the responsibility of innovation within an organisation.

Entrepreneurship culture

This is a culture that encourages the whole population to take advantage of the
opportunities in the environment.

Objectives;

a) To build capacity for living with uncertainty and ambiguity.

b) To familiarize with small business tasks during youth.

c) To be in contact with successful role models

d) To acquire formal/informal managerial knowledge and practice in business.

e) To embrace opportunities and practice entrepreneurial competences.

f) To link with a wide network of independent family/family contacts

ENTREPRENEURSHIP EDUCATION

This is the study that is concerned with providing students with basic knowledge and
skills of creating and operating their own business successfully using the available
resources

COMPONENTS OF ENTREPRENEURSHIP EDUCATION

 Entrepreneurship Education includes;

a) Opportunity recognition; Discovery of business ideas or development of an idea

into a feasible business.

b) Commercial opportunity; Turning an idea into a commercial service or sellable

product.

c) Allocating resources in the face risks to make businesses despite presence of

risks.

d) Identifying an idea or opportunity and committing resources to turn the

opportunity into business despite presence of resources.

e) Giving instructions/skills to learners to manage their own businesses to a proper

way.

f) Marketing information systems and finance. Providing information on marketing

and finance.

REASONS FOR STUDYING ENTEPRENEURSHIP EDUCATION

a) To equip students with knowledge and skills / To put more emphasis on

imagination and risk taking in business

b) To work towards job creation and not job seeking.

c) To improve entrepreneurial skills of existing businesses.

d) To be able to identify opportunities from the environment.

e) To encourage creativity and self-sustenance with students.

f) To enable the youths develop positive attitude towards work.

g) To equip students with financial management skills.

h) To enable students address some of the contemporary needs in business

education

i) To introduce learners to marketing skills for earning profits.

j) To help learners discover a clear business idea and turn it into feasible project.

k) To provide students with the motivation for learning . Students enjoy studying
it.

Role of entrepreneurship in economic development;

 a) Promotion of small enterprises in society through creativity and innovation.

b) Source of business information on market, market standards, partners, etc.

c) Introduction of new techniques through entrepreneurial activities.

d) Encouraging use of the locally available resources in communities.

e) Generation of employment opportunities in the country.

f) Promotion of even development in all parts of the country.

g) Provision of goods and services to society members.

h) Provision of taxes to the government.

i) Promotion of balance of payment (BOP) through increased exports.

j) Promoting creativity and innovation within small business.

k) Improvement in quality of products produced because of competition.

l) Utilisation of locally available resources.

Barriers to entrepreneurship

These are factors that hinder the development of Entrepreneurship . They include;

Individual barriers

- Poor entrepreneurial skills

- Lack of business and technical skills.
- Low mobility and exposure.
- Lack of role models
- Lack of business ethics

Political barriers

- Political instability
- Corruption and favouritism.

Economic environment

- Lack of access to finance

- Low purchasing power
- Poor infrastructure
- Economic instability
Social barriers

- Discouraging society
- Traditional rigidity which leads to denial of acceptance to businesses
Measures to promote Entrepreneurship in Uganda
- Improving infrastructure
- Maintaining political instability.
- Improving technology
- Reducing interest rates on loans
- Encouraging savings through SACCOS
- Improving entrepreneurial skills through workshops like PAKASA FORUMS
- Expanding the size of the market by joining the regional integrations.
- Increasing the exploitation of the available resources.
- Providing information about investment to both local and foreign investors by
UIA.
- Further privatization of public enterprises to encourage private investment.
- Providing credit facilities to low income groups.
- Encouraging capital inflow by attracting foreign investors.
- Reducing taxes so as to reduce the cost of production.
- Controlling the population growth so as to reduce dependency burden

CAREER OPTIONS/OPPORTUNITIES IN UGANDA

A career refers to the occupation/activity or work that one does over a period of time
for survival.

Examples of career options in Uganda include;

a) Accountant b) Database administrator

c) Computer hardware engineer d) Computer software engineer

e)Judge f) Lawyer

g) Teacher h) Librarian

i)Civil engineer j) Chemist

k) Politician l) Psychologist

m)Secretary n) News reporter

 o) Webmaster p) Veterinarian

q)Soldier/police officer r) Electrical engineer

s) Doctor t) Nurse

u)Carpenter v) Actuary

w) Assessor x) Farmer

y)Zoo keeper z) Musician

aa)Loan officer bb) Pilot

cc)Pharmacist dd) Surveyor

ee)Urban planner ff) Photographer

gg)Book keeper/clerk hh) Etc.

Factors to consider when selecting a career;

a) Job security; people mostly select careers that guarantee high level of job
security.

b) Personal interest; people select careers they like and lead to their satisfaction
and can make them better.

c) Demand for the career in the job market; jobs that have high demand are
usually preferred to those whose demand in the labour market is low.

d) Job satisfaction; jobs that are satisfying in terms of good and regular pay are
preferred to those where there is absence of job satisfaction.

e) Talent and abilities of a person; individuals usually select careers where they are
talented for instance, footballers, comedians, musicians, etc. and abandon those
where they possess no talent.

f) Family preference or bias; sometimes, individuals take up careers favoured by

family members for example some families don’t want their children to become
teachers while others like it.

g) Government policy on employment; certain careers are promoted by the

government for example scientists in different fields.

h) Natural resources in the locality; availability of natural resources like minerals

may influence people to take up the mining career.
 i) Income level of the family; certain careers are very expensive in terms of tuition
fees for example doctor, engineer, etc. A person from a low income family can’t
afford them.

j) Training period; most individuals select careers that take a short training period.

k) Peer influence/pressure; people select careers depending on the interest of their

peers.

l) Teacher influence/career guidance by teachers. Teachers offer advice to students

about career selection and influence them to take on particular careers.

ENTREPRENEURSHIP AS A CAREER OPTION

Entrepreneurship is a career in one’s own business rather than wage/paid employment.

The entrepreneurial process;

There are mainly three steps involved in the entrepreneurial process;

a) Income generation; one tries to generate surplus or profit or capital for example
through putting the money on an account in the bank.

b) Self-employment; this is an individual’s fulltime involvement in his/her business.

c) Entrepreneurship; this is the last stage where after setting up a venture, one
looks for diversification and growth. An entrepreneur always search for new
challenges and converts them into opportunities.

Differences between entrepreneurship and wage employment career options;

Entrepreneurship (self-employment) Wage employment (paid employment)

a) One is a boss of his own a) One works for others
b) There is making of own decisions b) There is following of instructions
c) Income earned is not fixed c) Income/salary is fixed
d) There is creativity and innovation d) There is low or no creativity and
innovation
e) Creates wealth and contributes to e) Doesn’t create wealth
GDP
f) It may not be a routine job. f) It is a routine job

THE CONCEPT OF SELF EMPLOYMENT;

Self-employment is where an individual starts his own business using his resources and
gets employed.

Advantages of self-employment;

1) Income earned is unlimited i.e. there are no fixed earnings.

2) There is creation of wealth and profits or oneself and employment of others.

3) It promotes ones social recognition.

4) There is high level of creativity and innovation.

5) There is high degree of job security.

6) It encourages hard work and commitment.

7) It leads to provision of goods and services to the community.

8) There is independent and quick decision making.

9) It encourages development of self-confidence and self-esteem.

10)It brings about job satisfaction through creating own employment.

11)It leads to creation of employment to people.

12)It increases the volume of assets eg land, houses,machinery etc.

13)Enables one to work for own hours. Not forced to work at any time.

14)It increases ones self confidence.

15)One has control over the work environment.

Disadvantages/challenges of self employment;

1) It leads to fatigue and exhaustion due to long hours of working.

2) The owners income isn’t certain or fixed.

3) It leads to a low life style on the side of the owner due to too much work.

4) The owner suffers from all risks alone for example losses.

5) There is no fringe benefits like transport, medical and housing allowances.

6) It is hard for one to delegate work since there is no one to refer to.

7) It leads to payment of hih taxes to the government.

 8) It is hard to delegate since there is no one to refer to.

9) The business creates both real and imaginary enemies which endanger ones life.
E.g envy

10)A person does much work alone . (broad responsibility)

Measures for promoting self employment in Uganda

- Encouraging practical and vocational education

- Improving infrastructure.
- Providing soft loans at low interest.
- Giving tax holidays to beginner entrepreneurs.
- Encouraging talent development.
- Encouraging intrapreneurship in organizations.
- Promotion of political stability
- Reducing taxes on young entrepreneurs.
- Using role models and mentors to encourage others.
- Recognising and rewarding successful entrepreneurs.
- Ensuring economic stability / controlling inflation
- Further liberalization of the economy
- Creation of local markets
- Sensitizing masses about the benefits of self employment.

Merits of paid employment;

1) Specific responsibilities are given to someone.

2) Steady income

3) Regular payments are assured

4) A worker may enjoy fringe benefits

5) There is minimal risks on side of the worker

6) Reduces fatigue of the employee due to fixed hours of work

7) There are chances of further training in some businesses

8) It is easy for the government to collect taxes

 9) Specialisation is possible

Demerits of paid employment;

1) There is a tendency of following strict orders

2) There is a set of span of control

3) There are limited and fixed responsibilities

4) There is limited room for initiating ones ideas

5) Workers may be dismissed due to poor performance

6) There is hierarchy one has to consult before doing anything.

7) Absence of some workers makes work come to a standstill

8) It promotes corruption and embezzlement as people struggle to be given jobs

Rewards/benefits of being an entrepreneur.

1) It leads to increased income and this improves one’s standard of living.

2) It brings about freedom and independence for example in decision making.

3) It encourages development of self-confidence due to high levels of

independence. The owner is a leader himself.

4) It allows one to become creative and innovative as he/she comes up with new
ideas and implements them.

5) It leads to respect and recognition by the society.

6) It ensures maximum job security.

7) It allows a person to use his/her skills and resources fully and productivity. This
leads to self-employment.

8) It increases one’s status in the society.

9) It provides jobs and benefits to others for example suppliers, bankers,

customers, etc.

Challenges/disadvantages of being an entrepreneur.

1) The entrepreneur works for long and regular hours with a lot of hard work to
succeed.

2) There is uncertainty of income.

 3) It is associated with low life style as a result of working for long hours.

4) An entrepreneur bears all risks in the business for example losses.

5) There is personal responsibility for the business failure i.e. the blame for
business failure is put on the entrepreneur.

6) An entrepreneur sacrifices other aspects of life like leisure for the development of
the business.

7) A lot of financial investment is required to make the business stand.

8) An entrepreneur needs a lot of energy to make the business move on well.

DIFFERENCES BETWEEN AN ENTREPRENEUR, INTRAPRENEUR AND

ENTERPRISING PERSONS;

The entrepreneur;

Entrepreneurs are the ones that conceptualise, implement, maintain and expand
business in the face of risk and uncertainty.

They achieve profits and growth by identifying opportunities and mobilising resources to
capitalize on those opportunities.

An entrepreneur can therefore be described as someone who;

a) Identifies new products/services or opportunities.

b) Is creative and innovative.

c) Organizes and controls resources to ensure profits for the business.

d) Has the ability and insight to market, produce and finance a service or a product.

e) Has financial means or can obtain financing to support the business.

f) Is willing to take calculated risks.

The intrapreneur;

This is a person who focuses on innovation and creativity to transform an idea or a

dream into a profitable venture within an organisation.

An intrapreneur can therefore be described as someone who;

a) Works in an existing business.

 b) Is hired to manage the business.

c) Identifies new product/services or opportunities for an existing business.

d) Is creative and uses ability/insights to market/produce/finance a product or

service.

e) Organizes and controls resources to ensure a profit for an existing business.

f) Gets benefits from an existing business such as a salary.

An enterprising person;

This is a person who takes on imaginative and risky projects. He is a person who is
ambitious and energetic.

To be an enterprising person is to keep your eyes open and your mind active. It is to be
skilled enough, confident enough, creative enough and disciplined enough to get
opportunities from the environment.

Characteristics of enterprising people;

a) They are strong enough and not lazy.

b) They always see the future in the present.

c) They always find a way to take advantage of a situation. They are not burdened
by it.

d) They don’t wait for opportunities to come to them. They go after the
opportunities.

e) They are hard working

f) They feel good about themselves.

Meaning of enterprise;

Enterprise means always finding a way to keep yourself actively working towards your
ambition. Enterprise means two things; creativity and courage to be creative.

Creativity; this is the ability to generate new and unique ideas. Creativity is needed to;

a) See what is on there and shape it to your advantage.

b) Look at the world a little different.

c) Take a different approach to the different.

Courage to be creative; this is needed to;

a) See things differently.

b) Go against the crowd.

c) Take a different approach.

d) Stand-alone if you have to.

e) Choose an activity over inactivity.

Functions of an entrepreneur;

1) Scans opportunities from the environment.

2) Net working with other entrepreneurs.

3) Determining the quality and quantity of a product to be produced.

4) Plans for the business

5) Distributing rewards to other factors of production.

6) Responsible for business success.

7) Promote creativity and innovation in the business.

8) Markets the products of the business.

9) Finances the business.

10)Takes calculated risks.

ENTREPRENEURIAL CHARACTERISTICS

Successful entrepreneurs possess the following characteristics;

1) Hard working; running a business involves or requires a lot of energy and drive.
The ability to work for long hours when necessary.

2) Goal oriented; this involves the ability to set goals/targets and to work to achieve
them.

3) Self-confidence; an entrepreneur to succeed he/she has to believe in him/herself

and in their ability to achieve the set goals.
4) Creativity and innovation; entrepreneurs are usually creative people who come
up with new and original ideas. This helps them to tackle the unknown and the
abstract ones.

5) Risk taking; entrepreneurs have the ability to take measured or calculated risks
for example losses.

6) Persistent; this involves being persistent in solving business’ problems and

disappointments.

7) Builds for the future; the goal for most entrepreneurs is to build a secure job and
income for themselves, improved livelihood and wealth for their families.

8) Profit oriented; this implies that entrepreneurs aim at generating profit/interest

from the money invested in the business.

9) Demonstrates initiative; successful entrepreneurs take the initiative and put

themselves in positions where they are personally responsible for success or
failure.

10)Responds feedback; entrepreneurs are concerned to know how well they are
doing and keep track of their performance. They always obtain feedback and
advice from others.

11)Copes with uncertainty; they aren’t much stressed with uncertainties about sales,
prices, etc.

12)Willing to listen; entrepreneurs are people who are willing to listen to advices of
others. They always ask for assistance from accountants, bank officials, URA,
NEMA, etc.

13)Set own standards; they set standards of performance and work to achieve
them.

14)Commitment; starting and running an enterprise requires total commitment from

an entrepreneur in terms of money, time and life style.

15)Builds on strengths; successful entrepreneurs base their work upon the strengths
they have such as manual skills, interpersonal skills, selling skills, organizational
skills, writing skills, knowledge of a particular product, etc.

16)Reliability and integrity; this involves honesty, fair dealing and reliability in terms
of doing what one has promised to do.
 17)Copes with failures; success isn’t guarantee. When there is failure, one learns
from it.

Major competences required for successful entrepreneurship;

Competency is the ability to do something successfully or efficiently.

Types of business competences;

a) Distinctive competences; these are competences that enable innovation,

efficiency, quality and customer responsiveness.e.g distinctive brands, access to
high quality raw materials, highly trained staff etc
b) Core competences; this is an activity a company does especially well in
comparison to other internal activities. Examples of core competences
i)Production based competences e.g product quality, cost effectiveness, technology

ii)Marketing based competences e.g experienced marketing personnel, superior

marketing (branding), best distribution channels

iii)Financial management competences e.g personalized relationship with bankers,

excellent cash flow management

There are three major competences for successful entrepreneurship and they
include;

a) A body of knowledge

b) A set of skills

c) A cluster of traits

They are illustrated in the diagram below;

 Knowledge

Traits
Enterprise

Skills

Explanation;

Knowledge; this is a set or a body of information stored which may be recalled on

appropriate time. In business, knowledge may be shown or exhibited on the following
aspects;

- A business opportunity
- Customers
- The market
- Production process
- Business management
- Source of assistance
- Competitors
- Technical matters
Skills; this is the ability to apply knowledge and can be acquired or developed through
practice e.g. driving, flying, etc.

In business context, skills are both technical and managerial.

Examples of technical skills include;

 - Engineering
- Computing
- Sewing
- Carpentry
- Mechanics
- Catering
Examples of managerial skills include;

- Marketing and selling

- Time management
- Financial management
- Organisation
- Planning
- Leadership
- Controlling
- Strategy skills
- Decision making skills
- Motivation skills
- Delegation skills
- Negotiation skills
- Communication skills
Traits; these are aggregate of peculiar characteristics that constitute personal
individuality.

Traits may be unique characteristic or qualities possessed by entrepreneurs.

They take time to develop and are not easily changed or acquired.

NB; an entrepreneur who doesn’t have all the three competences in his/her business
will encounter difficulties in operating the venture successfully.
THE CONCEPT OF ENTREPRENEURIAL MOTIVATION

Entrepreneurial motivation is the strong desire, impulses, dedication and drive of

individuals to accomplish a specific business goal.

Motivation is an inner state that activates/stimulates the internal and psychological

process which are not directly observed and in turn account for the behavior of
individuals.

Or, it is a process of stimulating or energizing the feelings of individuals towards

achieving the business goals.

The motivation process

1

FELT NEED

2
3
GOAL ORIENTED
NEED SATISFACTION
BEHAVIOUR

From the above illustration;

Human behavior is designed to achieve certain goals and objectives.

1st step; FELT NEED, this involves determining what you want to be motivated or to
accomplish.

2nd step; GOAL ORIENTED BEHAVIOR, these are little things. This is a part that breaks
the task up into manageable and convenient sized pieces.

3rd step; NEED SATISFACTION, this involves satisfying the need by removing
distractions. Remove all the things that ruin your ability to stay focused and stay
motivated.

Classical concepts of entrepreneurial motivation;

1) Unconscious motive; according to this concept, people are not normally aware of
everything that they want. They will often have tastes, biases or attitudes which
strongly influence their behavior for which they can’t really account.
 2) Power motive; this is the ability to require others behave in ways that suite ones
purpose for example an infant has a great deal (influence) of power over others.
3) Affiliation motive; this is the desire to be with other people. People seek the
company of others to gain some rewards like money, favours or protection or for
socializing just.
4) Competence/achievement motive; this involves interest in getting to know what
the world is like, to be able to make things happen, to create events rather than
merely waiting for them passively.
In adults, competence motive is a desire for job mastery and professional
advancement.

Achievements of motivation;

This is the intense urge to excel and do something unique. People with high need to
achievement have an intense desire for success.

Behavioral characteristics associated with strong need for achievement.

People with a strong need for achievement are associated with the following behavioral
characteristics;

1) They work for long hours

2) They like specific and prompt feedback on how they are doing.
3) They do not worry about possible failure.
4) Have an intense desire for success
5) They set moderately difficult but not impossible goals.
6) They experiment with novel activities to reach set goals.
7) Take realistic risks and prefer to assume personal responsibility to get the job
done.
8) They look for help/assistance from experts rather than from friends to overcome
both external and internal blocks.
9) They anticipate possibilities of success and failure and do something about the
obstacles which can cause failure.
10)They look for more opportunities from the environment rather than passively
waiting for them to come their way.
 11)Experience positive feelings of joy and satisfaction in achieving moderately
challenging goals and disappointment but not self-condemnation in failure.
12)They derive maximum satisfaction from achievement itself and less from other
factors like recognition and money.
13)They learn a lot from the feedback. Whether right methods were used or
changes should be carried out.
Advantages of achievement motivation;

1) It increases the self-confidence of an entrepreneur.

2) Creates enjoyment in taking carefully calculated risks
3) It enables an entrepreneur to scan his environment.
4) It leads to high performance, energy, determination and enthusiasm in
overcoming problems.
5) It makes an entrepreneur flexible i.e. can easily change to other methods of
production.
6) It creates much interest in concrete measures of how the entrepreneur is
performing.
Disadvantages/challenges of achievement motivation;

1) It leads to setting goals that are too high which might fail.
2) Fear of failure, leads to setting of goals which are too low to ensure success.
3) It encourages thinking of weaknesses and problems in the environment rather
than ones strength and opportunities available.
Factors which hinder entrepreneurial motivation;

1) Societal business; a society which doesn’t encourage or facilitate entrepreneurial

spirit and urge to excel.
2) Inadequate provision of physical economic infrastructures like roads, water,
electricity and machinery.
3) Some social-cultural benefits for example the belief that high profits are
unethical, certain roles are for a particular tribe or sex, etc.
4) Inadequate educational orientation, limited entrepreneurial experience and
market opportunities.
 5) Political instability which discourage industrial freedom, free market economy
and private enterprise.
6) Unfriendly economic environment in terms of high interest rates on loans, non-
existence of lending and funding organisations, etc.
7) Psychological factors like high need for affiliation, conformity and compliance to
rules and regulations. All these kill the drive and urge to excel.
8) Non-availability of labour and skills. Though there is a high supply of labour,
there is generally scarcity of skills at all levels.
Ways of fostering entrepreneurial motivation / Factors that help to develop
a positive mental attitude.

The following factors can help potential entrepreneurs to develop a positive mental
attitude;

1) Involving in positive activities.

2) Net working with successful entrepreneurs to acquire their thinking and
characteristics.
3) Having work objectives that are achievable and have an impact.
4) Taking each experience as an opportunity to learn.
5) Being result oriented. Focus on specific problems and solve them.
6) Avoiding negative thoughts and ideas.
7) Identifying successful entrepreneurs to be your role models and mentors.
8) Having faith in oneself. Success comes to those who use their talent and abilities
to the fullest extent.
Developing entrepreneurial habits;

1) Starting work earlier than usual might be one way of becoming motivated. If an
entrepreneur starts work earlier than before for around two months, this practice
becomes a habit.
2) Planning the next day’s important activities before going to sleep each night. An
entrepreneur practices this for a month, kit becomes a good habit which
motivates him/her.
3) Another good habit is having a positive mental attitude. Viewing all experiences
in a healthy manner, having a positive outlook on life. This makes entrepreneurs
find satisfaction and pride in work thus success.
 4) Set aside a certain time each day for reflective thinking. Do not limit your
thoughts to just day-to-day problems and activities. Be motivated to expand your
thought and think “big”.
5) Mentally, be highly organized and able to focus on a variety of problems. Shift
your attention from one problem to another with minimum effort.
Entrepreneurial motivation and positive mental attitude turn jobs of
entrepreneurs exciting, interesting and rewarding.
THE CONCEPT OF RISK TAKING;

A risk is the possibility of suffering harm or loss or danger.

Business risks are factors that may have a negative impact on the profitability or
success of a company.

A risk may also be defined as a situation where one is required to make a choice
between two different alternatives which may result into differing rewards for success
or penalties for failure.

Types of risks;

There are mainly three;

a) Low risks/minimal risks; these are risks that yield low profits to the business e.g.
putting little capital in the business, investing in similar businesses, etc.
b) Moderate risks; these are risks that can be forecast, calculated and managed by
the entrepreneur. An entrepreneur can easily avoid/stop the occurrence of these
risks for example fire, accidents, burglary, machine damages, etc.
c) High risks; these are risks whose chances of happening are very high and yet the
entrepreneur has little control over them. If they happen, the business would fail
and chances of recovering resources invested are very low. However, businesses
with high risks fetch higher profits in case they succeed.
Examples of risks;

The following below are examples of risks an entrepreneur encounters in business;

1) Dealing in perishable commodities (high)

2) Dealing in smuggled commodities (high)
3) Dealing in illegal commodities (high)
4) Changes in customers demand
 5) Risk of being out competed
6) Shortage of raw materials, power, fuel, etc.
7) Deterioration in industrial relations leading to strikes.
8) Faulty in managerial decisions
9) Changes in technology
10)Fire, theft and other natural calamities.
Origin of uncertainty and risks in business;

1) The uncertain behavior of the market forces i.e. demand and supply.
2) The changing business environment e.g. cost of capital, inflation.
3) Changing government policy.
4) External influence on domestic market e.g. increasing ………….
5) Political changes in the country.
6) Natural calamities.
7) Social changes e.g. tastes.
Factors that enhance risk taking ability of entrepreneurs;

1) Capacity to assess the risk situation realistically.

2) Ability to alter the odds.
3) Comprehensive planning.
4) Looking at the risk in terms of established goods.
5) Proper implementation.
6) Willingness to use abilities to the fullest.
Risk situation;

A risk situation occurs when a choice is required between two or more alternatives
whose potential outcomes aren’t known and must be subjectively evaluated.

Risk takers have to balance the potential success against the potential loss. Choosing a
risky alternative depends on;

a) How attractive alternative is.

 b) The extent to which the risk taker is prepared to accept the potential loss.
c) The relative probabilities of success and failure.
d) The degree to which one efforts increase the likelihood of success and decrease
the likelihood of failure.
Assessing the risk situation;

This activity involves the systematic and thorough assessment of the likelihood of the
firm’s success and the extent to which the entrepreneurs’ efforts could influence this
livelihood.

Or, it involves determining the potential success (risk not happening) or potential loss
(arising from a risk happening).

Procedure for analyzing/assessing a risk situation;

1) Analyzing the risk; it involves determining whether there is a potential loss

involved in choosing one particular alternative.
2) Determining goals and objectives; a company’s objective might be to achieve
slow growth, or steady growth or no growth, or growth in other product areas.
The risk involved must be consistent with the objectives.
3) Clarifying the alternatives. This involves surveying various alternatives. Costs for
each alternative should be well specified, financial, social and physical costs.
4) Gathering information and weighing alternatives; this helps to make a realistic
assessment for each alternative. Market estimates should be made, competitive
reaction and effect calculated.
5) Minimizing risks; this involves a realistic assessment of the extent to which the
entrepreneur can affect the odds. It involves;
a) Clear awareness of entrepreneurs’ abilities and company capabilities.

b) Some creativity in determining how the odds may be changed.

c) The ability to come up with strategies and tactics to effect the change.

d) The drive, energy and enthusiasm to implement the strategy.

6) Planning and implementing the best alternative.

Factors considered when assessing risks;
 1) Availability of the idea; is the chosen business idea profitable given the available
resources, staff, etc.
2) Experience and abilities; whether person involved in managing the business
possesses the required knowledge, experience and technical abilities.
3) Availability of market; whether people in the area are willing to buy the business
product/service.
4) Pricing policies and strategies; whether the price set for the product is
competitive.
5) Cash flow; whether the business will generate enough money to finance the
planned business expenditure.
6) Flexibility of the business; whether the business choice made can easily be
changed without much destructions or effect.
7) Honesty and reliability; whether the people the business deals with are honest
and reliable e.g. workers, suppliers and customers.
Types of risk takers;

a) Low risk takers; these are needed at the worker level (low level) so that they can
do the routine things and bring organizational stability.
b) Moderate risk takers; these are managers at the middle management level. They
are considered risk takers because they need some freedom to be innovative and
make minor modifications in procedures and functions.
c) High risk takers; these are the creative and innovative entrepreneurs. They
develop innovations for products and services in business.
Managing risks;

Risks can be managed using the following methods;

1. Minimizing the risk; risks can be minimised using the following ways;
a) Employing experienced personal to reduce on the problem of family managerial
decisions.
b) Delegating authority and responsibility to the workers in the business.
c) Maintaining and upgrading production technology.
d) Extensive training of an entrepreneur and staff on equipments/procedures.t
e) Maintaining adequate security in the business.
 2. Shifting the risk (taking insurance); the burden of shouldering risks can be
shifted say to insurance companies.
3. Acquiring emergency equipments/sources.
THE CONCEPT OF CREATIVITY

Creativity is the ability to come up with innovative solutions to needs/problems and to

market them. It is ability to produce work that is both novel/unique and appropriate.In
business, an entrepreneur’s creativity is often the difference between success and
failure.Therefore creativity is allowing yourself to make mistakes.

The creative process;

Creative process involves the following steps;

a) Preparation/immersion (knowledge accumulation); this involves gathering data,

options and speculations to obtain the details of the problem at hand. It is a
brainstorming exercise.
b) Incubation/gestation; this involves letting the mind work over the information
obtained in step 1.
c) Illumination/insight; this involves coming up with a solution. The solution may
come abruptly by revelation illumination. Illumination means seeing the light and
the creative juice is flowing. Someone picks a pen and writes it down in order to
remember it.
d) Verification and application; this involves evaluating, modifying, reworking and
retesting of the ideas generated.
Characteristics of creative people (creative thinkers);

Creative people usually possess the following characteristics;

1) Originality; they do things that no one else has done. They think of an idea,
redesign it and make something new out of it.
2) Independent thinking; they think for themselves. They are observers and
analysts.
3) Growth and change; they search for change constantly. They change for the
better in order to grow and prosper.
4) Flexibility; they are flexible and always learn from current inventions.
 5) Sensitivity; they are sensitive to the world and their environment so as to raise
their creativity.
6) Innovation; they have the courage to try new things and build something out of
the ordinary.
7) Ask questions; they always ask questions and ask people to explain what they
mean and the things they don’t understand. They don’t accept things as they
are.
8) Search for better ways to do tasks; they focus on what they do and find new
possibilities and new ways of doing things
9) Bright.
10)Good at generating many ideas quickly
11)Motivated by challenges
12)Positive self-image
13)Concerned with meanings and implications of a problem.
Characteristics of non-creative people;

1) Not able to think positively

2) Too busy or stressed to think objectively
3) Prone to apply logic as first and last resort
4) Very self-critical
5) Timid in putting forward a new idea
6) Uninspired
Obstacles to creativity in business;

The main obstacles to creativity are;

1) Negativity; the tendency to focus on negative aspects of problems and spend

much energy on worry.
2) Thinking that you aren’t creative; this result from lack of self-confidence.
3) Fear of failure; fear of looking foolish or being laughed at.
4) Not having time to think creatively; the over-stressed person finds it difficult to
think objectively.
 5) Over conformances with rules and regulations; a tendency to conform to
accepted patterns of belief or thought i.e. the rules and regulations of the state.
6) Selfishness/self-centeredness; refusing to share your ideas with others.
7) Making assumptions; assumptions restrict creative thinking.
8) Dehumanizing mass media; spending a lot of time watching TVs or listening to
radios which are taken to be popular.
9) Beliefs; having a strong belief in something for example religious and traditional
beliefs.
10)Becoming over specialised
11)Feeling secure with the present
12)Avoiding ambiguity
13)Applying too much logic
14)Demand for quick production; this does not give an entrepreneur enough time to
think creatively.
Techniques for developing creative ability;

Below is a list of things that one has to do in order to be creative;

1) Thinking beyond the invisible framework that surround problems.

2) Recognizing when assumptions are being made and challenge them.
3) Transferring technology from one field to another.
4) Being open and prepared to use the source.
5) Getting ideas from more than one source.
6) Drawing on the experience of other individuals.
7) Noting down thoughts/ideas that apparently drop into the mind.
8) Trying to make the strange familiar.
9) Making connections outside your sphere of expertise.
10)Stimulating own curiosity in everything, observation, listening, reading and
recording.
11)Suspending judgments to encourage creative process.
12)Avoiding stressful situations.
 13)Tolerating ambiguity and occasionally live with doubt and uncertainty.
14)Finding valuable and agreeable things when not seeing them.
Techniques/strategies/ways/methods/tools (through/by);

1) Adopting ideas from more than one source.

2) Making connections with points that are apparently irrelevant.
Importance of creativity;

Creativity is useful in the following ways;

1) It increases awareness by paying attention to insights and sounds we ordinarily

ignore.
2) It leads to development of new and original ideas by using the existing ideas as
starting point.
3) It is used to update product and service.
4) It is used to solve everyday problems in business.
5) It is used to promote product and services of a business.
6) It enables an entrepreneur to make proper use of limited resources.
THE CONCEPT OF INNOVATION;

Innovation is the act of introducing something new. It is the way of transforming the
resources of an enterprise through creativity of people into new resources and wealth.

Or, is the ability to apply creative solutions to those problems and opportunities to
enhance people’s lives.

Types of innovation;

a) Marketing innovation; this is the development of new marketing methods with

improvement in product design or packaging, product promotion or pricing.
b) Business model innovation; this involves changing the way business is being
done in terms of capturing value e.g. Nile breweries Vs Uganda brewaries.
c) Organizational innovation; this involves creation of new business structure,
practices and models.
d) Process innovation; this involves the implementation of a new or significantly
improved product and delivery method.
 e) Product innovation; thisinvolves the introduction of a new good or service that is
substantially improved e.g. in terms of ease of use.
f) Financial innovation; this involves the development of new financial products and
services, combining basic financial attributes i.e. risk-sharing, liquidity and credit
in innovative ways.
g) Supply chain innovation; this is where innovations occur in the sourcing of inputs
from suppliers and delivery of output products to customers.
Sources of innovation;

There are seven sources of innovation;

Internal source (source within an industry);

a) Unexpected occurrences; unexpected success and failure. It is often through

such unexpected occurrences that need ideas are born and developed.
b) Process needs; when there are some parts of raw materials/machinery missing in
the production process, innovations are inspired by such needs.
c) Industry and market changes; the opportunity of an innovative product/service
or business approach occurs when the foundation of the industry or market
shifts.
d) Incongruities; a discrepancy or a difference between the reality and what the
company assumes it to be can create an innovative opportunity.
External source;

e) Demographic changes; changes in population size, age structure, sex

composition, employment, level of education and income can generate
innovative opportunities e.g. increase in the level of education in Uganda has
resulted into qualified workers going for some low paying jobs.
f) Changes in perception, mood and meaning; innovative opportunities can develop
when a society’s general assumption, attitudes and beliefs change.
g) New knowledge; advances in scientific and non-scientific knowledge can create
new products and new markets.
Characteristics of innovation/innovators;

1) A compelling vision; innovative people believe that they are part something
better to come. They have the ability to formulate and articulate a compelling
vision for their goals.
 2) Self-disciplined; they priotise their time, they do important work first. They have
the ability to do the hard work to make it happen.
3) Inner-directed; they are inner directed and goal oriented and don’t need anyone
else to innovate them. Nobody tells them what to do.
4) Extra-ordinary persistent; an innovator is committed to achieving his goals. He
keeps going and doesn’t let obstacles get in the way.
5) Passionate about belief; they are truly passionate about what they believe. They
go for what they want with all their hearts and souls.
6) Trend spotter; he/she is able to identify something new and its social
responsibility.
7) Associates with positive people; they usually surround people with positive
attitudes towards creating something new.
Principles of innovation;

Below are principles of innovation that can help you take advantage of a new
innovation that you may have discovered;

a) Begin with an analysis of the opportunity.

b) Analyse the opportunity to see if people will be interested in using the
innovation.
c) To be effective, the innovation must be simple and clearly focused on a specific
need.
d) Effective innovators start small. Starting a business requires little money, very
few people.
e) Aim at market leadership; dominating the market.
Ways to foster innovation in small business;

1) Being a learner always; this involves the ability to learn faster and better than
competitors.
2) Being fast during implementation of strategies; it is better to be 80% right and
quicker than 100%.
3) Avoiding barriers; this involves dissolving internal barriers that separate people
and departments.
4) Developing innovative strategies; involves developing conscious strategies and
mechanism to promote consistent innovation.
 5) Thinking global; the fastest growing markets may be at the international level
e.g. e-commerce. Therefore entrepreneurs need to think global to be innovative.
6) Measuring performance indicators; involves concentrating on key strategic and
profitability drivers that reveal the underlying dynamics of your business. Focus
your energy on what really drives the future success of your business.
7) Thinking like an entrepreneur; by making things happen and accepting failure
and improve because of it.
8) Doing well for instance through improved service delivery. By doing well for
others, success is easier to attain.
9) Expecting change; there is increase in velocity, complexity and unpredictability of
change. This creates hyper-competitive international environment.
10)Implementing new rules; competitive advantages/profits belong to innovators
who go beyond existing parameters of competition.
Advantages/merits of innovation;

1) It leads to improved product design and quality. This increases the number of
customers.
2) It assists a company in packaging and repositioning its products for global
distribution.
3) It streamlines relationship with suppliers and customers.
4) It reduces waste levels and downtime.
5) There is greater potential for a wider product range.
6) It supplements the company’s research and development.
7) Helps a country to produce goods/services which are in line with customers
needs.
8) It helps in developing new distribution channels which helps the products to
stand out with less competition.
9) Helps in creating alliances with other partners in business.
Why small businesses more successfully use innovation than large
businesses;

Small businesses possess the following qualities that make them use innovation more
than large ones;
 1) Personally invested and passionate; most small business owners are willing to try
new approaches to make their businesses more successful.
2) Personal connection with customers; small businesses understand customer
needs, identify new opportunities and fix problems quickly and efficiently.
3) Alertness and adaption; small businesses can easily adapt to changing market
conditions and implement new business practices.
4) Experimentation/ improvisation; many small business entrepreneurs experiment
and improvise. They accept failure as part of the path to success.
5) Resource limitations; small businesses are used at doing more with less.
6) Information sharing and collaborations. Small businesses traditionally rely on
strong local social networks to share information needed for innovative thinking.
COPYING WITH CHANGE

Change means to give an object a completely different form or appearance. Change is

inevitable in a business.

Types of change;

There are mainly three types and these are;

a) Developmental change; this occurs when a company makes an improvement to

their current business. For example if a business decides to improve their
processes, methods or performance standards. A business carries out a
development change to stay competitive.
b) Transitional change; this type of change involves replacing existing processes or
procedures with something that is completely new to the company. It involves
dismantling of the old processes and implementing of new ones.
Transitional period is the period when the old process is being dismantled and
the new process is being implemented.

c) Transformational change; this type of change occurs after the transitional period.
It involves making drastic transformations in the business rather than
methodologically implementing new process. This type of change may involve
both developmental and transitional change.
Factors that bring about change in business;

1) Efficiency; successful management normally develop business methods that are

not only effective in achieving the set goals, but also efficient in utilizing the
 resources. The methods keep on changing time to time to bring about more
efficiency.
2) Change of desire; usually, entrepreneurs use their attitude to control conditions.
If the entrepreneurs desire change, then change in the business becomes
inevitable.
3) Environmental change; the tremendous and fast changes in all places have made
ecologist foresee the possible destruction of irreplacement resources. This has
made managers and other stakeholders to look for other means of carrying out
their activities without causing environmental destruction.
4) Change of technology; technology is constantly changing the demands of
consumers. Businesses therefore need to embrace new technological
developments to meet their customers’ needs.
5) Social changes; community changes can be brought about by growth of the
population. Entrepreneurs change in order to satisfy the growing needs of the
society.
6) Competition; businesses that sell similar products and give similar services
compete for the same customers. Competition makes an entrepreneur change or
improve his/her products/service.
7) Change in management as different managers come with different styles.
8) Change in employee attitude like dissatisfaction.
9) Change in government laws and regulations e.g. change in quality.
10)Change in company strategy like merger.
11)Need to reduce inertia or inflexibility among employees.
Critical factors to be considered in planning for change in small business;

Below is an outline of what the future may hold for change in small business
operations;

1) Capital; this will become more difficult and expensive to obtain and may become
unavailable to many small businesses.
2) Raw materials; raw materials will be increasingly expensive/costly and difficult to
obtain. This means small firms will heavily rely on inventions or switch toother
substitutes.
3) Labour; abundant labour will be substituted for scarce capital.
 4) Government regulation; regulation will increase as elected officials struggle to
keep the country prosperous.
5) Market; market based on product which consume large amounts of increasingly
costly resources will tend to decline, while those that make smaller demands or
irreplaceable resources will tend to flourish. Consumers faced with inflation and
growing economic uncertainty will put more emphasis on price and durability.
Repair, re-use or recycling of products plus use of handcraft materials will be
encouraged.
6) Technology; technology will become more important to small businesses. Small
businesses will continue to profit from technological advances.
7) Management; entrepreneurs will exhibit greater professionalism which will guide
small businesses through the period of economic scarcity e.g. raw materials.
Importance of change;

The following below are benefits of change to business;

1) It leads to adoption of new technology which increases productivity and service

delivery.
2) It determines the direction of the economy. A strong economy and increasing
demand for products and services means that companies consider expansion or
change in staff and facilities.
3) It leads to acquisition of new ideas and innovations. Organisations benefit from
change that results into new ways of looking at customers’ needs, strengthening
customer interactions, new workers joining an organisation, etc.
4) It leads to growth of opportunities; change allows employees to learn new skills,
explore new opportunities and exercise their creativity.
5) It responds to customer needs. Customer needs change and grow. For
companies to meet their needs, they have also to change.
NB; without change, businesses lose their competitive advantage.

Effects/shortcomings of change;

Change has led to radical consequences in all parts of commerce, industry and the
public service. These shortcomings include;

1) It leads to increased complexity of methods of production.

 2) It leads to intensive reliance on computers, information technology and decision
support systems. This reduces the number of jobs available for labour.
3) It forces employees to acquire new skills or modify existing competences.
4) It results into job changes and redundancy of many workers especially those
who cannot cope with the new changes.
5) It results into geographical relocation of industries and workers.
Reasons why people resist change;

1) Change usually benefits some while it hurts others. This is true when change is
seen as damaging in some way.
2) Inability to cope with change. Some people resist change because they feel they
are not capable of handling it.
3) For security purposes; if change brings a threat to security, people go ahead to
resist it.
4) It is time consuming; adopting to a new change in the business takes some good
time and this makes some people resist it.
5) It is costly; many changes in businesses involve very many financial attachments
and other costs like loss of jobs.
6) Different personal ambitions among stakeholders.
7) Stubbornness of some people. The pride and independence of some members
many make them not to embrace any change in the business.
8) Pessimism; lack of hope for things to get better.
9) Lack of interest among stakeholders.
10)Irritation; some workers feel tired of changes.
Steps involved in the change process;

Below is the basic decision making technique that can be applied tocope with change;

1) Understanding the situation; this involves understanding why there is a need for
a change and how it is going to affect the business in the short and long term.
2) Defining the problem; this involves identifying the need to take some king of
action for example taking an advantage of a new market area by relocating or
expanding the business.
 3) Finding alternatives; this involves doing research to come up with realistic
alternatives and explore their potential, advantages and disadvantages.
4) Selecting a course of action; this involves selecting the best alternative that suits
the goals and objectives of the business.
Indicators of resistance to change in an organisation;

a) Grievances about pay

b) Aggression against management
c) Restriction of output
d) Increased absentism
e) Feelings of failure
f) Low level of aspiration
g) Feelings of frustration
Techniques/ways to foster change in business;

Below are some of the tips for managing the complex and difficult change processes in
business;

1) Rewarding success; simple acknowledgement or thanks for what someone has

done well can make a lot of difference in the attitude of employees regarding
change.
2) Giving explanation; formal or informal meetings in which leaders can explain why
change is taking place. Such explanations make all members of the group
embrace change in a good spirit.
3) Encouraging feedback on progress; people accept change easily if their leaders
accept their thoughts and concerns. Feedback gives administrators a chance to
monitor progress.
4) Managing resistance; this involves preparing yourself for anything anyone might
do in order to stop the change.
5) Assessing readiness; this measures how prepared employees and administrators
are to handle modifications. These assessments include; evaluation of inventory
or other resources, interviews with employees and administrators.
Ways of overcoming resistance to change;

1) Involving all stakeholders

 2) Building support networks
3) Having early communications and discussions.
4) Using managerial authority and status
5) Offering assistance to those involved
6) Encouraging and supporting those involved
Common mistakes when dealing with change in organisations;

1) Having no winning strategy

2) Making it a fanfare
3) Starting too late
4) Employees hearing it from the media first
5) Not enough leadership
6) Lack of communication
7) Not involving employees
8) Using wrong indicators to measure progress
9) Lack of skills and resources
10)Focusing only on the long term
11)Over reliance on structure and systems to change behavior
COMMUNICATION SKILLS

Communication refers to the process of exchanging information between the sender

and the receiver. It involves transfer of thoughts, ideas, instructions, feelings and
knowledge from one person to another.

Effective communications;

Communication is said to be effective if the message sent by the sender is understood

by the receiver in the same sense

Or, it is a process of transferring information from the sender to the receiver with
information being understood by the receiver in the sense as communicated by the
sender.

Essentials/principles of effective communication;

These are aspects which must be taken into account by all media house or sender of
information. They may be summarized as 7Cs;

1) Complete; the message should include all the facts the receiver needs to know
about the subject matter. The receiver should be made not to doubt the
message being communicated.
2) Concise; the sender should give the message in the fewest words possible. It
should not be wordy so as not to confuse the receiver.
3) Courteous; the sender should be sincere when giving the message and should
avoid hurting the receiver. However, he/she should not shy away from
addressing the issue under concern.
4) Correctness; the message given should be as correct as possible in order to
avoid misconceptions.
5) Considerate; the sender should have receiver in mind when sending the
message. It is very important that the sender uses possible words other than
negative sentences.
6) Concrete; the message should be precise to the point or it should be specific to
the point. It should not be vague or too general.
7) Clear; the message should be as clear as possible. The sender must be clear
about the objective of the communication.
8) Timing; the message should be conveyed at a time when the receiver is able to
receive or listen to it.
9) Environment; the environment within which the communication is being made
should be good to make the receiver get the message.
10)Media; the sender must use a medium that the target recipient uses. E.g. using
newspapers to the receivers who know how to read.
The communication process;

This is the systematic way/steps followed to convey a message between different

parties. Communication process involves the sender, the encoding process, the
message, the media and the receiver. These are elements in the communication
process;

An illustration of the communication process

Sender Message Encoding Media Receiver

 Feedback Decoding

Explanation;

a) Sender; this is the source of message. He/she organizes idea or thought and
initiates the communication.
b) Message; message is the form in which the sender encodes the information he
wants to send. A message may be oral, written, felt by touch, seen or tasted.
c) Encoding; this is when the sender translates the idea or thought into some
symbols. The message may be put in words or gestures to appear meaningful to
the receiver.
d) Medium/channel; this is a method of transmission of the message from the
sender to the receiver. Medium includes paper, phone, camera, video
equipments, etc.
e) Receiver; this is a person who receives the message from the sender. Is the
person to whom the message is intended.
f) Decoding; this is the process by which the receiver interprets the message and
translates it into meaningful information.
g) Feedback; this is the reaction or response to the senders’ message. It is a
reversal of the communication process. It goes through the same steps as
original communication. It can be in form of nod of a head, acknowledgement,
letters, actions like increased output, etc.
Types/methods of effective communication;

a) Verbal/oral communication; this is the communication by word of mouth. It

involves face to face meetings and telephones conversations.
b) Non-verbal/body language; this is the communication by body
movements/gestures/signs, facial expressions, eye movements, nodding and
pointing. It is also known as sign language which is useful to communicate to
people with hearing problems.
c) Written communication; this involves writing and reading messages; it takes
forms of letters, memos, circulars, magazines, journals, reports, manuals, etc.
 d) Visual communication; this is the sending of information through the use of films,
diagrams, pictures, etc. without necessarily using words.
e) Audio-visual communication; this is communication by means of recorded sound
or pictures e.g. radio, television, videos, films, media player, use of computers
i.e. internet through websites and e-mails.
Channels/media of communication;

The commonly used media of communication include the following;

1) The press; this communication media includes newspapers, magazines, journals,

printed catalogues, etc.
2) Radio and televisions; traders communicate to the public through televisions and
radios. These are persuasive or informative advertisements that are made to the
public.
3) Telephone; this is a method of oral communication where people speak to one
another through telephone receivers or mobile phones.
4) Internet; this is the world wide area network of computers communicating across
the continent. It is a world wide website for communicating.
5) Letters; this is a method of written communication which involves writing and
sending letters.
Organizational communications;

This is the communication structure or channel in the organisation through which

information is reflected from one person to another.

Types of communication structures/channels;

Down ward communication;

Down ward communication structures are channels of communication in the

organisation where information flows from top management to lower levels of
management. It takes information in form of instructions, policies, reports, etc.

Types of down ward communication channels;

a) Meetings; these transmit information from one level to another. They may be
face to face.
b) Letters; manager uses letters to present something special to the staff and each
employee receives his/hers.
 c) Company periodicals; these are at times called newsletters. They disseminate
information about the company, its products and policies.
d) Annual reports; these give summaries of information of the stakeholders who are
not directly in management.
e) Employee hand books and pamphlets; these provide information to the outsiders
or those in the organisation. These are common in schools and universities.
f) Posters and notice boards; this is an important medium for short messages that
are clear. It is common when addressing a large number of people.
Upward communication;

Upward communication structures are channels of communication that facilitate the

flow of information from lower levels of management to the top levels of management
in the hierarchy. Information flows from subordinates to supervisors.

Types of upward communication channels;

a) Meetings; these allow employees express their issues to the supervisors.

b) Suggestion boxes; this is an avenue for getting ideas, suggestions and
complaints from the subordinate staff. Subordinates send their views without
fearing anybody.
c) An open-door policy; the manager welcomes subordinates to discuss problems
with him freely anytime.
d) The grievance procedure; many organisations have procedures through which
aggrieved subordinates initiate action to address misunderstandings. In some
organisations, it may be through a trade union, a manager or established
channels.
e) Counseling; in organisations where boss syndrome exists, subordinates fear to
express their views direct a part from channeling them through counsellors who
can talk to the management.
f) The complaint system; in addition to grievance procedure, some organisations
encourage all types of upward communication e.g. staff committees.
g) Labour union; these are used to convey message to management feelings and
demands of the employees.
h) Grapevine; this is an informal underground network that channels
communication both within and outside an organisation. The grapevine should
 be fed, watered and cultured to combat rumors and also collect information. It
conveys rumors both correct and false thus it has to be dealt with.
Illustration of downward and upward communication;

Managing director

General Manager Upward

Downward
communication
communication

Production’s manager

Workers

Horizontal communication;

This is the communication between and among individuals at the same level. It talks
about performance, facilities and staff. All people aim at achieving organizational goals.

Electronic organizational channel (internet);

This is a series of networks among different people in the organisation enabled by

internet technology. It is the network of communication among different individuals in
the organisation powered by electronically

Types of electronic organizational communication channels;

The electronically mode of communication enables the following communication

channels;

a) Notice boards; circulars and notices can be posted to the electronic notice board
where people can read them.
b) Discussion boards; these enable different members of management to discuss an
issue by posting options.
c) Electronic mail (internet); here letters or mails are posted on internet.
Factors considered when choosing a channel of communication;
 1) They urgency of the message; telephone and telex or internet are the best
channels for urgent messages to be delivered.
2) Reference; for messages where a record is required for future use, telex, letters
and magazines are the best.
3) Confidentiality; messages that need to be delivered in a confidential manner,
letters are the best.
4) Impression to customers/public; the channel chosen should put the message in a
much more appealing form. Television is the best.
5) Cost of the channel; an entrepreneur should choose the cheapest channel of
communication so as to maximise profits.
6) Coverage of the media; message to be conveyed to a wide geographical area
newspapers, radio and television are more appropriate.
7) Social and education status of people; for poor people, radios or posters are the
most appropriate and internet, newspapers and television for the rich.
8) Age group of the recipient; teenagers and youth use internet, magazines and
televisions.
9) Personality of the recipient; dump use gestures or sign language.
10)Availability of the medium; communicators should use media which are in their
reach.
11)Language to be used in the message; it should be in the receivers’ language.
12)Detailed messages; letters are the best.
Internal objectives of communication in business;

1) To search for, establish and disseminate organizational goals. The departmental

goals which are set lead to achievement of organizational goals.
2) To facilitate development of plans and strategies to achieve goals. Once goals
are formulated, are discussed and communicated.
3) To facilitate allocation of organizational resources in the most effective way.
Communication facilitates development of resources and this is done through
meetings or memos.
4) To enable managers to influence, direct, motivate and create a condusive
working condition for organizational members.
 5) To facilitate identification, selection development and appraisal of organizational
members. This is done through advertising posts, conducting interviews, filling
appraisal forms and so many others.
6) To facilitate the making of feedback about performance. This is done through
report writing.
External objectives;

1) To link the entrepreneur to the suppliers; communication enables a business

identify suppliers who are competent.
2) To link an entrepreneur to important services like banking, insurance, transport,
etc.
3) To keep an entrepreneur in touch with his or her customers. Communication
helps an entrepreneur to know the customer’s needs.
4) To inform shareholders about organizational performance. This is because they
are not involved in day to day running of the business.
5) To relate and establish the needs of society. Through communication, an
organisation addresses social problems like AIDS and global warming.
6) To get information about macro policy intentions of government, tax policies,
regulations and other information.
Importance of communication in business;

1) Communication helps in keeping good relationship with customers.

2) It enables a business to get competent suppliers of goods.
3) It improves the organization’s relationship with the society through mobilizing
masses against social problems like AIDS.
4) Helps an entrepreneur to pass on relevant information to his staff,customers,
government and public.
5) Helps in selecting and recruiting workers for the business.
6) Helps an entrepreneur to make decisions basing on informed basis.
7) It facilitates proper coordination of business activities in different departments.
8) Helps an entrepreneur to pass on policies and instructions to his workers.
9) It is a measure of managing credit sales and credit purchases in business.
10)It helps the government to monitor and regulate the business activities.
 11)It facilitates registration of newly formed companies or businesses.
12)It enables customers to pass on their complaints to the entrepreneurs.
13)It enables an entrepreneur to forge good relationship with his workers.
14)It helps an entrepreneur to carryout market research. This is through
interviewing, questionnaires and others.
Techniques of communicating with customers and suppliers;

a) How to present a product to a customer;

When presenting a product to a customer, an entrepreneur should consider;

1) The target customer needs

2) Customers privacy, convenience, ability to use the product, etc.
3) Giving samples, guarantee, etc. to back up the product.
4) Presentation aids like photographs, catalogues and chart to back up the product.
b) How to give personal attention with customers;
The entrepreneur should;

1) Understand customers’ wants and needs.

2) Sell products at the right prices, in the right quantity and quality.
3) Use the right promotion, place and right time.
c) How to collect overdue accounts;
An entrepreneur should;

1) Send polite reminders to customers with overdue accounts.

2) If no response is received within specified time, a more strongly worded
reminder should be sent.
3) If recovery is not achieved, employ courts of law for stubborn debtors.
d) How to follow up orders from suppliers;
The entrepreneur should;

1) Make sure that he/she has their physical and postal addresses, telephone
numbers as a means of contacting them.
 2) Make physical check or use other methods of contact as he/she follows up
his/her order. E.g. a letter of reminder, making a telephone call, sending an
email.
e) How to bargain with customers;
The entrepreneur should;

1) Be a good communicator.
2) Avoid dominating the customer
3) Try to convince the customer to buy the product at the price.
4) Give counter offers like reduction in price.
5) Offer in delivery services.
f) How to handle difficult customers;
1) Acknowledge and evaluate customer objections.
2) Listen carefully to words being used and feelings being expressed.
3) Get the customers open up so that you can understand the basis for his being
difficult.
In the process, the customer may raise some important points. In this case an
entrepreneur should;

1) Buy time suggesting that you will look at the issue later.
2) Hold your arguments until the customer is ready for them.
3) Compensate customers by price reductions or refund or replacement of goods in
case the previous purchases had a problem.
Writing business letters, memos, circulars, notices and reports;

a) Business letters/correspondence;
Component/content of a business letter;

1) Letter head
2) Reference (our reference); identification purpose e.g. GEL/L2/MM/29/01/2012
GEL means General Enterprise Limited.

L2 means Letter Two

 MM means Mbogo Mixed

29/01/2012 means Date

3) Date
4) Inside address
5) Salutation
6) Subject heading
7) Body of the letter
8) Complementary close, yours faithfully, etc.
9) Signatory
10)Name of the sender and title (designation)
11)Enclosures (Enc)
12)Carbon copy (CC)
Ways of presenting a business letter;

1) Blocked format; all parts of the letter begin from the left margin. Paragraphs are
indicated by skipping lines.
2) Semi-blocked; a letter is put on a letter head or headed paper. All other parts
begin from the left margin a part from the complementary close which is part in
the middle.
3) Indented format/style; this is the traditional method; this is the traditional
method. Date and our ref appear on the same line but different sides. Paragraph
are indented.
Example;

b) Office memos (memorandum)

This is an official note from one person to another in the same organisation.

Components/contents of a memo;

1) Heading
2) Document title
 3) From
4) To
5) Date
6) Reference (identification number)
7) Subject heading
8) Body of the memo/content
9) Enclosures
10)Carbon copy (CC)
NB; A memo has no salutation and complementary close.

Example;

c) Circular
This is a printed letter sent to a large number of people.

Example;

MBOGO MIXED S.S

P.O BOX 28989

KAMPALA-UGANDA

CIRCULAR

Circular number 010

Date; 11th December 2012

From; Director of studies

To; All teaching staff

RE; MINUTES OF THE LAST MEETING

Following the staff meeting that was held on 5th December 2012, it was resolved
that;

 All teachers prepare schemes of work

  All teachers should be in class by 8:00am
 Teachers on duty should supervise morning and evening preps.
We look forward to your maximum cooperation.

Yours faithfully

……………………………….

Bakka Juma

(DOS)

CC. H/m

CC. D.H/m

CC. Staffroom notice board

d) Notice
This is a piece of paper giving information, a warning, etc.

Example;

MBOGO MIXED S.S

P.O BOX 28989

KAMPALA-UGANDA

TEL. NO. 0424-567045

NOTICE

11th December 2012

To; all teachers

SUBJECT; LATE COMING;

It has been noticed with great concern that so many staff members report for work
late. This notice serves to remind all of you that the reporting time for work is
7:00am.

Looking forward to your positive response.

 Yours faithfully

………………………………………………

NANDAULA AMINA

(DEPUTY DOS)

CC. H/m

CC. D.H/m

CC. DOS

CC. Staffroom notice board

e) Business report; this is a communication tool used to explain complex situations

that cannot be ordinarily explained in a simple letter or meeting.
Qualities of a good report;

1) It must be on a clearly defined subject.

2) It omits irrelevant information.
3) It must be clearly presented.
4) It must be accurate and up to date.
5) It should not contain too much technical details (jargons).
6) It must be written in a concise and simple format.
7) It includes everything the reader needs to know.
Contents of a business report;

1) Heading/letterhead.
2) Date
3) From
4) Subject heading/title
5) Body of the report/content
6) Summary
7) Conclusions
8) Recommendations/suggestions
9) Carbon copy.
Example;

MBOGO MIXED S.S

P.O BOX 28989

KAMPALA-UGANDA

TE. NO. 0414-567045

HEALTH CARE SERVICES

December 30th 2012

TO; HEADMASTER

MBOGO MIXED S.S

FROM; THE SCHOOL NURSE

MBOGO MIXED S.S

SUBJECT; REPORT ON THE OPERATIONS OF THE SCHOOL HEALTH SERVICES

This is the report on the operations of the school health services as required by the
board.

STAFFING

Designation number of staff

Doctors 2

Nurses 3

Clerk 1

NUMBER OF CASES PER DAY

The number of patients seen on average is between 15 – 20 per day and 300 – 500
per month.

SERVICES OFFERED
 1) Dispensing of drugs
2) Health talks to students and staff
3) Pregnancy test
4) Voluntary counselling and testing
5) Health inspection of school premises
6) Minor surgical procedures
7) Laboratory services
CHALLENGES

1) Irregular drug supplies

2) Low doctor patient ratio
3) Limited quick transport for emergency cases
4) Uncooperative patients
5) Increased dental cases
SUGGESTIONS

1) Recruit more doctors

2) Provision of an ambulance
3) Offer dental services
4) Decentralize purchases
From;

……………………….

NAKABI CISSY

(SCHOOOL NURSE)

CC. H/m

CC. D.H/m

CC. DOS

BARRIERS TO EFFECTIVE COMMUNICATION

A barrier to communication is any hindrance that stops the receiver from getting the
intended message the way the sender sent it.

Some of the barriers include;

1) Language differences; a sender uses a language which isn’t familiar to the

receiver. For example a trader uses Luganda to communicate to an Arab
customer.
2) Using improper channels of communication. For example communicating to the
blind using a television, using newspapers when the target group cannot read.
3) Incompleteness of the message; the message sent by the sender doesn’t include
all the facts that the receiver needs.
4) Distractions; these may be in form of noise or thought or anything that prevents
one from concentrating on what the sender is conveying.
5) Differing perceptions; people have different backgrounds, knowledge and
experience. This makes people perceive things differently.
6) Emotional blocks; this normally happens when the sender is worried, afraid,
excited or nervous such that he is not able to organize his message properly.
7) Poor personality of the sender; the sender sends the message while hurting the
receiver.
8) Boring message; this is due to lack of interest by the receiver in the message
being conveyed. This may be caused by poor delivery of the message.
9) Poor listening skills; lack of good listening culture especially among the youths
tends to make communication ineffective.
10)Long distance between the sender and the receiver; most people communicate
through telephone and telex facilities yet such facilities are not available
everywhere.
11)Non-verbal communication; body movements, clothing, gestures and facial
expressions may distort meaning of the message.
12)Distrust; the lack of trust in the sender makes the receiver not to take his/her
message seriously.
13)Poor planning; this makes the sender not to think and respond effectively to the
receiver thus ineffective communication.
14)Inadequate preparation of the subject matter by the sender.
Ways of overcoming barriers to effective communication;

1) By using simple, direct and national language while communicating.

2) By understanding or being aware of the meaning of different gestures, body
movements.
3) By eliminating physical noise.
4) By planning well before any form of communication
5) By explaining to the receiver the meaning of the message
6) By training the receiver to develop a good attitude towards becoming a good
listeners.
7) By communicating a reasonable amount of information that can easily be
perceived by the sender.
How an entrepreneur can attend to the message effectively;

1) Maintaining an eye contact; this increases chances of getting the message.

2) When on phone, avoid looking at things which distract listening and attending to
the speaker.
3) Using an appropriate body gesture which helps him to stay turned and pay
attention.
4) Verbal or no verbal acknowledgement of the speaker.
5) Using non-verbal attending behaviors like nodding the head to show approval.
Common ethical/legal issues that affect communication;

1) Privacy and respect for others.

2) Truth telling
3) Bribery and extortion
4) Defamation
5) Copy right/plagiarism/legality
6) Misrepresentation
Relevance/importance of ethical issues in communication;

1) Promote responsibility and accountability for individual actions.

 2) Promote fairness in competition
3) Enforce corporate social responsibility
4) Prevent conflict in society
5) Promote corporate image of the organisation.
6) Promote innovation and creativity e.g. copy right.
7) Promote good business and economic environment
NEGOTIATIONS

Negotiation refers to the process of bargaining that precedes an agreement. It is a

meeting between two or more parties with an intention of reaching an agreement.
Successful negotiations result into contracts/agreements between parties.

Principles of negotiations;

No matter what you are negotiating, there are certain rules or principles that will help
settle your disputes. They include;

1) You don’t have to be right to settle; feeling that you are right can be emotional,
but it has no place in the negotiations.
2) Look at the future; don’t focus on the past. Figure out the past to get the
present and deal with current issues of the case.
3) Focus on the goal; don’t be distracted by your emotions. Emotions like anger can
make one lose control. Focus on what you like to accomplish and tell yourself
that nothing is going to stand in the way of that goal.
4) Set the tone and look the part; you are the one to set the tone of the
negotiations. Put on decently (professional clothes), get a note book and a brief
case and start right away.
5) Be prepared and do your research. List your arguments on a sheet of paper. If
you are not prepared consider delaying the start of the negotiations.
6) Know what you want and what the other side wants; you should have a detailed
plan of what you want. You also need to know what you are willing to give up in
getting what you want.
7) Always have a plan B; you should not put all your eggs in the basket. You should
have a backup plan (plan B). It helps to react to what the other wants and think
fast.
Personal attributes of good negotiations/negotiators;

A negotiation needs to show the following personal attributes;

a) Integrity; a negotiator must be honest as honesty builds mutual trust and

cooperation among the parties.
b) Empathy; this is the ability to understand the other party’s point of view. This
can be used and manipulated to ones advantage in the negotiation.
c) Patience; this makes each party accommodate another’s views in the
negotiations.
d) Tenacity/persistence; negotiations are persistent. They have the determination
to continue with something.
e) Self-assurance; this is the freedom from doubt or belief in oneself and abilities.
f) Self-confidence; good negotiators have confidence in themselves, their own
abilities and judgments.
g) Stamina; this is the physical or moral strength to resist or with stand hardship in
business. A negotiator must endure.
h) Ingenuity; negotiators normally possess inventive skills, imagination and
cleverness.
The negotiation process;

Negotiation is a process that involves steps and these are;

1) Determining the subject and objectives of the negotiation. Both sides show what
they want and this sets the scope of the negotiation.
2) Preparation/planning for negotiations. This involves thinking about the subject
matter of negotiations i.e. goals, objectives and interests, who will negotiate,
venue, etc.
3) Evolving negotiation strategies; this involves considering different options/ways
of handling the negotiations to achieve the desired goals and objectives.
4) Actual negotiations; this is the final preparation for the actual negotiations. It
involves getting the necessary documents and going through them, organising a
final meeting before negotiations start. If everything is set and ready, then
negotiations may be started.
Steps involved in preparing for negotiation
 - Making research to understand the other sides motives.
- Assessing own needs to establish the objectives of the negotiation.
- Deciding who to use in the negotiation. (people/ representatives)
- Choosing a chief negotiator who is experienced, trained in negotiation and has a
good background about the problem to discuss.Deciding on the negotiation
venue.
Guidelines for effective actual negotiations;

1) Determining your negotiation tactics.

2) Creating the right climate.
3) Starting the subject matter and objectives of the meeting.
4) Depending on the strategy you have selected either state your position or let the
other party respond to the opening statements.
5) Stating your interests but put emphasis on commonalities.
6) Seeking agreement.
7) Ending negotiations.
Negotiation skills/tactics with different stakeholders;

The following are the negotiation skills;

- Clear communication
- Sticking to objectives
- Avoiding personalizing situations.
- Controlling emotions.
- Occasionally showing anger but never losing temper
Negotiation tactics with customers;

Successful businesses don’t just communicate with customers for sales. The following
tactics below are employed;

1) Communicating frequently; this involves communicating regularly with customers

through letter, phone contacts or face to face communication.
2) Offering customer rewards; such rewards include price reductions, prizes/gifts
like T-shirts, umbrellas, pens, etc.
3) Holding special events; holding special events or parties which bring customers
and workers together.
 4) Enhancing customer service; this involves serving customers quickly and
effectively.
5) Launching multi-cultural programs; this involves putting advert messages in
different languages in order to communicate to very many people.
6) Visiting the customers; this involves getting out to customers’ locations to
understand better their needs.
7) Ensuring that negotiations promote two way communication; this involves
getting immediate feedback from customers.
Salary negotiation tactics with employees;

An entrepreneur can have smooth negotiations on salary with his/her workers using the
following tactics;

1) Setting a ceiling; this involves establishing how much you can spend on salaries.
This helps not to spend much time on workers who are too expensive (above
your ceiling).
2) Setting a floor; this involves establishing the last amount you will pay out. It also
saves time during negotiations.
3) Deciding how to make payments; the entrepreneur decides on how to make
payments to workers, fixed monthly, hourly or weekly.
4) Making the salary attractive; the entrepreneur should ensure that his offer to
workers is attractive. Bonuses and allowances are part of the package.
5) Avoiding legal tussles; before deciding on salaries, the entrepreneur should first
familiarize himself with the labour laws to avoid legal tussles with workers.
6) Being sensitive; this involves keeping workers’ personal needs in mind before
offering a compensation package.
Basic rules for negotiating with employees;

a) Balance both strengths and weaknesses; know what you want to get from
workers.
b) Listen actively to what your workers say.
c) When it comes to salary increases, have a fallback position. They may want more
than you can offer.
d) Make concessions together; don’t feel you have to win or they have to lose.
Challenges in negotiations;
A number of things can occur in negotiations that can be challenging. They include;

1) Delay tactics; some negotiations tend to delay the negotiation in order to make
you become more nervous. This tactic is used by senior people to the junior
ones.
2) Time pressure; at times, there is unexpected time pressure and attempts to push
you straight to your fallback position. E.g. let’s skip the haggling, just give me
your best price.
3) Influence of another decision maker; in course of negotiations you may realise
that you are not talking to the decision maker. There is another person “boss”
he/she first consults.
4) Last minute-wavering; you may think that negotiations are over and you have
agreed, and another party begins wavering (moving away) from the agreed
position on the last minute.
5) An early concession; some negotiations begin with an early concession and wait
for you to reciprocate in the spirit of relationship building.
6) Aggressive behaviors; bad comment, bullying, attempts to make you feel guilty,
inferior, etc. They are designed to help the other person at your expense.
7) Price-only negotiation; less experienced negotiators focus on important non-price
factors such as relationships and interests which has resulted into wastage of
time in some negotiations.
8) Letting positions override interests; some negotiations have a bias towards
focusing on their own positions instead of their interests.
9) Neglecting the other side’s problem; at times, there is a failure to understand
and address the other party’s problem as a means of solving your own. You
cannot negotiate effectively unless you understand your own interests and the
other side’s interests.
10)Linking logic; this is based on an assumption that if a person is correct in one
thing, he/she must be correct in another.
Ways of overcoming negotiation challenges;

Below are some of the strategies for handling negotiation challenges;

1) If the work load is increasing,

 Look for tasks to eliminate
 Review work you could handle yourself
  Combine similar jobs
 Consider use of temporary or part time workers
2) If there are problems of turnover;
 Help new workers identify with their groups
 Try to develop stable work groups which members can identify.
 Review status implications in jobs
3) If the work load is declining;
 Work on improving efficiency
 Do house-keeping that has been postponed
 Start projects that could generate new work
4) If there is a group of employees who are controlling production;
 Remove misunderstanding if there are any.
 Find out if it is to the group’s advantage to slow down
 Find out and deal with the real problem
5) If employees are dissatisfied with their pay;
 Review benchmark job i.e. compare with similar jobs on other enterprise
 Adjust assignments
 Communicate on the broad pay issue
 Compare with other jobs in the area
6) If workers are spending too much time on any job;
 Review managements’ objectives and shareholders for their job.
 Clarify the degree of perfection needed and why
 Set specific targets and follow up on them
 Reassure the group members on the quality of their work
7) If you go over budget;
 Identify the resources of increased cost/expense
 Ask for suggestions on cost reduction and waste control
  Get explanations of increased cost
 Curtail or freeze some activities
 Review the results expected from this activity.
Strategies/keys to successful negotiations;

1) Use the negotiation style of other party to achieve positive outcomes.

2) Be flexible in your minds
3) Focus on solving problems
4) Ask good questions and be a good listener
5) Both parties should feel satisfied with the results
6) Negotiating outcomes should be a win-win for both parties.
7) Don’t become emotional
8) Compromise; don’t expect all your demands to be met.
BUSINESS ETHICS

Ethics are a set of moral principles which are recognized in respect to a particular class
of human actions or a particular group for example medical ethics, teaching ethics, legal
ethics and bring people of the same profession together.

Business ethics are the acceptable behaviors/ways in which business should conduct
themselves towards their customers, workers, society, government and fellow
businesses.

Principles of good business ethics;

Ethical principles are the values that set the ground rules for all that we do;

1) Honesty; an entrepreneur must be open and freely share information. He/she

should not tell lies …………
2) Promise keeping; entrepreneurs should keep their promises/commitment.
Nobody else should promise on behalf of the company unless given authority.
3) Fairness; entrepreneurs should remain or act justly to all parties.
4) Compassion; entrepreneurs should meet the needs of the customers and those
of the society as a whole (social responsibility).
 5) Integrity; entrepreneurs should set ethical principles to guide them even during
time of pressure and social risks.
6) Respect for others; entrepreneurs should value and honour the abilities and
contributions of others.
Parties to business ethics;

 Customers
 Workers
 Government
 Competitors
 Society
 Suppliers
 Shareholders
Business ethics towards customers;

The business ethics to be observed by a business when dealing with customers include;

1) Honesty; the entrepreneurs should be honest to his customers in terms of price,

quality and quantity of goods.
2) Courtesy; an entrepreneur should be polite, patient and sincere when dealing
with customers. An entrepreneur should provide good services and not only
minding about money.
3) Geniality; the entrepreneur should be kind, cheerful and try to balance his
temper when dealing with customers. He/she should not shout or abuse
customers.
4) Responsibility; an entrepreneur should meet his obligations as agreed with the
customers.
5) Fair pricing of products.
Business ethics to employees;

An entrepreneur should treat his employees in an ethical manner. He/she can do the
following;

1) Giving them a fair pay; the business should pay workers in relation to their work
load, seniority, responsibility, etc.
 2) Provision of clear and fair terms of employment; the appointment letter should
be given clearly specifying the salary, duties and responsibilities.
3) Provision of good working conditions; the business should provide all the
necessary tools to workers for example working clothes, gloves, tables, chairs
and allowances like lunch, transport, medical and others.
4) Ensuring job security; the business should renew contracts of workers or not in
order to make them know their future.
5) Politeness; entrepreneurs should treat workers politely in all situations. A wrong
done by a worker should not over shadow the so many good things he/she has
done for the organisations.
6) Respect for workers; the entrepreneur should not publicly abuse or shout at
workers. They should be given their due respect.
7) Guaranteeing a safe work place.
Business ethics towards society/environment;

1) Conserving the environment; the business should not release gases or wastes
that pollute the society’s natural environment like air, water, swamps, etc.
2) Not endangering the people’s health and lives through its operations e.g.
poisonous gases, loud noises, etc.
3) The business should respect norms of the society. For example an entrepreneur
should not sell pork and alcoholic drinks in a Muslim community.
4) The business should contribute to the society’s needs like construction of roads,
bridges, sensitizing masses about AIDS, etc.
5) The business should also provide employment opportunities to the members of
the community.
6) The business should come to the society’s help in case of emergency situations.
Business ethics towards suppliers;

a) Paying them promptly

b) Offering them a fair price
c) Attending to their complaints
d) Respecting terms and conditions of the transactions
Business ethics towards competitors;
 a) Ensuring fair trading
b) Merging where possible
c) Giving referrals in favour of competitors.
Business ethics towards government;

a) Complying with the business laws for example registration, licensing, labour,
occupational hygiene, etc.
b) Observing and setting the tax obligations as required by law.
c) The entrepreneur should also meet the production standards in terms of quality
and weight.
d) The business should also comply with the environmental and occupational
regulations.
Importance of business ethics to business;

1) Good business ethics are so useful in decision making process of any business.
2) Business ethics maintain old and attract new customers to the business.
3) It enables business people to meet the obligations of their customers and
business partners.
4) Honest businesses attract government support and sympathy in times of need.
5) The business gets workers easily for its being ethical in its activities.
6) The business easily gets raw materials from the society. So many suppliers fight
to deal with it.
7) The entrepreneur’s reputation and recognition increases in the society.
8) It increases the business’ sales which increases profits.
9) Loans from banks
10)Good relationship
11)Out compete others
PERSONAL BRANDING

A brand is a name/ a sign/a symbol of a product, a service, business entity or individual

which has become attacked in the consumers’ mind.
Personal branding in the process by which individuals and entrepreneurs differentiate
themselves and stand out from the crowd by articulating their unique value.

Or, it is the process of creating a mark around one’s personal name or career.

Procedures/steps followed in setting a personal brand;

Below are the guidelines in setting a personal brand;

1) Determining who you are; one needs to first look at his personal strengths and
talents. This eases identification in case the name/mark is given to the product.
2) Determining what you do; this involves writing down one’s greatest area of
professional interest or passion. It reflects what one wants to do in life. It shows
people’s values and makes them relevant to other people.
3) Positioning yourself; by identifying the qualities or characteristics that make a
person distinctive from his competitors or colleagues. The aim of every personal
brand is to be clear, distinctive and easily be understood and make people
believe in it.
4) Managing your brand; the key to any personal branding campaign is “word of
mouth marketing”. The network of friends, colleagues and customers is the most
important marketing vehicle for personal brand.
NB; personal branding will develop as people feel the need to be heard and to be able
to position themselves in a world of rising competition.

Principles of effective personal branding;

Regardless of your age, position, sex, etc. today you have to be your own brand. Here
is a list of eight laws that should help you create an effective and lucrative personal
brand.

1) Specialisation; a great personal brand must be precise and concentrated on a

single core strength, talent or achievements.
2) Leadership; endowing a personal brand with authority and credibility demands
that the source should be perceived as a leader by people in his/her domain of
influence.
3) Distinctiveness; an effective personal brand needs to be expressed in a way that
is different from competitors.
 4) Visibility; to be successful, a personal brand must be seen over and over again
until it imprints itself on mind of the people in the region. Must be visible from a
distant place.
5) Personality; a great personal brand must be built on a foundation of the sources’
true personality.
6) Good will; a personal brand produces better results and endures longer if the
person behind it is perceived in a positive way.
7) Unity; the private person behind a person brand must adhere to the moral and
behavioral code set down by that brand. The private conduct must minor the
public brand.
8) Persistence; any personal brand takes time to grow and you can accelerate the
process, you cannot replace it with advertising or public relations.
Importance of developing a personal brand;

1) It creates a clear focus for the entrepreneurs business or career.

2) A strong brand creates a sense of individuality and uniqueness in the minds of
the market.
3) It helps an entrepreneur to compete with already established brands in the
market as he builds his own brand loyalty with consumers.
4) It increases sales of an entrepreneur. A magnetic brand attracts new customers.
5) A clear brand increases the entrepreneurs’ confidence by understanding himself
better.
6) It saves the entrepreneur’s time and energy by selecting goals aligned with his
unique value and reaches them faster.
7) It provides a road map to success. The personal brand you put in place serve as
a reference for your long journey.
8) It helps an entrepreneur to raise his brand visibility and presence on and offline
as his audience is willing to pay a premium after becoming acquainted with his
brand.
9) An appropriate and effective branding strategy voices the promises of the
entrepreneur for example quality products.
10)It helps an entrepreneur to mind about his target customers all the time.
BUSINESS IDEAS
A business idea is the response of a person or an organisation to solving an identified
problem or to meeting perceived needs in the environment.

Importance/reasons for generating business ideas;

Entrepreneurs need to generate business ideas due to the following reasons;

1) Need for an idea; a good idea is essential for a successful business venture, both
when starting and stay competitive afterwards.
2) To respond to market needs; a business can become successful if it provides
new products/services or managers to reach new clients.
3) To respond to natural threats and scarcities; for example inadequate water, fuel,
wood, pests, drought, etc. innovative business ideas like water harvesting,
irrigation, weather forecast, insurance, etc. help a business adopt to changes in
the environment.
4) To change fashions and requirements; entrepreneurs respond to the demand of
people with new ideas, product and services.
5) To respond to the product life style cycle; all products have a finite life. Even
new products become obsolete. Therefore there is a need to plan for new
products and their growth.
6) To give help to specific groups of people like the elderly, disadvantaged, disabled
ones. For example helping such categories of people to reach the tourist sites,
shops upstairs, etc.
7) To spread the risks and allow for failures; 80% of new products fail. It is
therefore necessary for firms to spread their risks and allow for failures that may
occur from time to time by constantly generating new ideas
8) To exploit technology to do things better; technology has become a major
competitive tool in today’s market. Many firms come up with new ideas which
lead to new products and services.
9) To stay ahead of competition; an entrepreneur needs to come up with ideas,
product and services so as to outcompete his rivals.
Sources of business ideas;

The common sources of business ideas include the following;

1) Mass media; this includes newspapers, magazines, television and internet.

Theseform a great source of information, ideas and business opportunities.
 2) Hobbies/interests; for example if you enjoy photography, you may be able to
expand your hobby into a profitable, full time enterprise.
3) Vocational training/personal skills and experiences; a business idea can be
developed from one area of training. For example a teacher start a private
school, a mechanic a motor garage, etc.
4) Trade shows and exhibitions; attending to trade shows and exhibitions organised
by manufacturers and traders can also generate some business ideas.
5) Surveys; new business ideas can be identified by finding out what consumers
need and want.
6) Customer complaints; complaints and frustrations on the part of customers have
led to many new products/services. A person puts up arrival firm offering better
products/services.
7) Franchise; this is where a manufacturer gives exclusive rights to an independent
distributor to use his name. This can also generate business ideas.
8) Brainstorming; this is a technique for problem solving as well as generating
business ideas. For example you may ask what are the products/services needed
in the home today? Each idea will lead to another.
Rules followed when using a brainstorming method;

a) Don’t criticize another person’s ideas.

b) Encourage free-wheeling. The wider the range of ideas the better.
c) Try for quantity. The larger number of ideas, the better the chances of getting
good ones.
d) Combine and improve. Group members should state their own ideas.
Ways of generating business ideas;

1) By reading newspapers
2) By reading magazine articles
3) Through exploiting hobbies
4) Attending trade shows
5) By surveying
6) Asking for customers options
7) Through brain storming
Identifying/formulating business ideas from the environment;

Everybody has ideas, but how do you come up with those valuable ideas that translate
into a big business. The following are some of the ways of generating such ideas;

First, developing an idea where you have interest; take a good look at yourself, what
you do best. If your interest for example is dogs, then start a business that has to do
with dogs. To spark more creativity, put yourself in unusual situations, avoiding the
routine of everyday life. Meet different people and read so many books.

Secondly, putting yourself in unusual situations; take note of the obvious problems you
encounter in everyday life. Allow ideas filter through your mind. Get a pen and a paper
and put down all your ideas.

Listening to and observing what is going on around you; every edition of your
newspaper contains atleast five valuable ideas if you know what you are to look for.
Objects the surround you for example a lamp, T.V, radio, paint, and dream up ways to
improve/rework those same products to create another big idea.

Listen to and observe what is going on around you; after getting an idea, tell it to
others and accept criticism. Talk to potential customers and ask them what they think.

Modifying your idea; if you had set a certain business plan, don’t be afraid to change
course. Avoid dismissal of the idea quickly and easily.

Modifying your business idea;

Even if you have already made a business plan, don’t be afraid to change especially if
you have an idea which continues to percolate in your mind. You need to be
courageous and quick enough to shift your gears. Don’t fear change.

Enthusiasm is vital in determining whether your idea will succeed or fail. You need to
measure your genuine interest in the idea.

People often assume that if no one has jumped on a concept, then it must be no good.
Don’t dismiss your idea so easily. Take the time to check it out and prove that theory
wrong.

Action plan/materializing business ideas;

Follow the steps below to materialize your business ideas;

a) Look long term; do some long range planning for your business to get a better
idea of whether the concept will flop or fly.
 b) Jump in; if you still think that you have got a great idea, then go for it. Do a test
run, Customers and people to help will come.
c) Be patient; standing a business from a scratch always takes longer and is more
complicated than you think. Don’t be afraid of failure just keep on moving.
Classification of business ideas;

Business ideas are classified into two;

a) Food and recreation; this includes;

 Horti-culture
 Dairy farming
 Construction
 Quarrying
 Apiculture
 Floriculture
 Aquaculture
 Poultry
 Etc.
b) Manufacturing; this includes;
 Flour milling
 Tailoring
 Repair and maintenance
 Auto garages
 Metal workshops/metal fabricating
 Plastics manufacturing
 Chemical manufacturing
 Textile manufacturing
 Agro manufacturing
How to research a business idea;
Somewhere between writing and idea in a book and actually starting a business, there
is a process you need to carry out that essentially determines your success or failure in
business.

The process involves the following steps;

1) The idea stage; this involves getting the idea and imagining the possibilities.
Market research is vital here in determining idea’s potential. You can use
internet, magazine, libraries, etc.
2) Idea analysis; this involves evaluating the idea that has been generated. The
best way/approach to make this analysis is by looking at idea from four
perspectives;
 Company; think an idea in terms of products/services
 Customers; these are purchasers who will influence your idea
 Competitors; these are people or organisations providing
products/services that serve the same purpose.
 Collaborators; think of organisations/people who may have interest in
your idea and they are ready to offer some help.
Another approach to research is SWOT analysis.

3) Checking out the competition; talk to your competitors’ customers, ask them
what they like and what they don’t like about your competitors product. Your aim
is to know what your competitors are doing so that you can do it better.
4) Turning the idea to make it work in case it flops; when your idea looks like a
flop. After the above steps, you may find that your idea is the one with holes.
Does that mean you drop it? The answer is no, you just need to rework it out.
5) When the idea is ready to go; the key factor to consider here is pricing. Set
prices for your products/services in respect to those of competitors. Prepare a
marketing plan and a budget showing the distribution strategy in case the idea is
ready to go.
Evaluation of different business ideas;

Each business idea should be evaluated in terms of;

a) Present market; the size of the presently available market must provide
prospects of immediate sales volume to support operations.
 b) Market growth; there should be prospects for rapid growth and high return on
invested capital. Such prospects include; increase in customer acceptance,
increase in need, competitive advantage, etc.
c) Costs; these are costs of production such as startup cost, cost of raw materials,
labour, patent and licenses, etc. businesses with low costs of production are
selected.
d) Business risks; in assessing business risk, consider the following factors;
 Market stability
 Technology risks
 Import competition
 Size and power of competitors
 Quality and reliability risks
 Seasonal demand
 Inventory requirement
 Time required in generating profits
 Initial investment cost
 Legislation and controls
Businesses with moderate risks are selected.

e) Personal considerations; under personal considerations you need to consider.

One selects a business in his line of skills;
 Your skills
 Your interests
 Your commitment
f) Business considerations; business considerations include;
 Market consideration. Is there market for goods/services
 Amount of personal capital you can raise for example in house valve,
savings accounts, material possession, bonds, shares, etc. one looks at
the market of the business.
Turning a business idea into a business opportunity;
The following steps below are considered/followed when turning a business idea into a
business opportunity;

1) Documenting the invention; this involves writing everything you think of that
relates to your invention. This is the first step to patenting your idea and keeping
it from being stolen. Write your idea down in an inventor’s journal and have it
signed by a witness. This journal will become your bible throughout the patent
process.
2) Researching about the idea; this involves researching your idea from a legal and
business stand point. Before you file a patent, you should;
 Complete an initial patent search to make sure that no one else has patented
your idea
 Research your market before you invest too much time and money into
patenting your invention.
3) Making a prototype; this is a model of your invention you have written in the
inventor’s journal. It demonstrates the design of your invention.
4) Filing a patent; after working out all the above, you can finally file a patent using
a patent attorney or agent. This stops other people from copying your idea.
5) Marketing your invention; it involves deciding whether you will manufacture and
sell the product yourself, or license it for sale through another company.
Ways of protecting business idea;

1) Patents; grant from government to the inventor of the product, giving exclusive
rights to make, use or sell the invention for a number of years.
2) Trademarks; distinctive word, phrase, symbol, name, logo, slogan.
3) Copyrights; exclusive right that protects creators of original works of authorship
e.g. literacy, dramatic, musical and artistic works.
4) Trade secrets; consists of knowledge that is kept secret in order to gain an
advantage of business e.g. source of supplies
Factors that lead to failure of business innovation;

a) Poor operational management

b) Lack of objective setting
c) General failure to communicate
Factors that determine or affect sales in business;
 a) Market size
b) Product’s relation to customers’ needs
c) Level of competition
d) Sales effort required
e) Service/repair requirements
f) Distribution system
g) Export possibilities
h) Price changed
i) Population size
j) Level of consumers’ income
BUSINESS OPPORTUNTIES

A business opportunity is an attractive idea or proposition that provides the possibility

of a monetary return for the person taking the risk.

Or, a business opportunity is an identified situation that can be changed into a real and
profitable business.

Feasible and viable business

Before putting money in any business venture, one needs to first find out whether such
a business opportunity is feasible and viable.

A feasible business is a business that can possibly be done or implemented using the
available resources.

Or, a feasible business is the one that can last for a long period of time.

While;

A viable business is the one that is profitable.

Feasibility of the business idea is the degree or extent to which the business idea can
be implemented using the available resources. While viability of a business idea is the
degree to which a given business idea is profitable.

Characteristics/indicators of good business opportunities;

Some of the indicators of a viable/feasible business include the following;

 1) Availability of market/real demand; these are people or institutions willing and
able to buy goods and services of a business.
2) Availability of required resources; these are means required for production of
goods and services e.g. capital, raw materials, labour, land, etc.
3) Return on investment; the rewards/profits realised from the business should be
acceptable/reasonable depending on the level of investment.
4) Availability of required technical skills. These are machines and man power
needed for production of goods/services. Should be available and affordable.
5) Acceptability in community; the business should confirm to the social norms and
get liked by the people in the society e.g. a pork joint isn’t a viable business in a
Muslim community.
6) Favourable government policy on investment; these should be a conducive
government policy for example low taxes, tax holidays, etc. for a business to be
viable.
7) Availability of good infrastructure (support services); this takes the form of good
transport, communication, power, insurance, ware houses, etc.
Qualities of good business opportunities;

Attractive or good business opportunities have the following qualities;

1) Good market scope; this is the gap between current supply and present or likely
demand. The gap must be sizeable.
2) Good income potential; a good business opportunity gives sufficient income to
support oneself in a reasonable life style.
3) Low or moderate startup capital; a good business opportunity requires low
capital investment.
4) Good growth potential; an attractive business opportunity has a chance to
survive for a long time while generating sufficient income to the owner.
5) Reasonable ease of entry into the market; one should enter into a business in
which he/she has general background knowledge. The experience/reputation
one already has can help the business become successful.
6) Properly timed; a good business opportunity is timely and responds to the
unsatisfied needs of customers.
7) Related to one’s skills and experience; an attractive business opportunity should
be related to one’s skills and experience for it to attain success easily.
 8) Ability to use available resources
9) Should be acceptable by the community
10)Should attract government support
Criteria of a good business opportunity;

 Real demand; it responds to unsatisfied needs or requirements of customers who

have the ability and willingness to purchase.
 Return on investment; provides acceptable rewards for the risk and effort
required.
 Be competitive; be equal or better than available products or services.
 Meet objectives; meet the goals and aspirations of those taking the risk.
Types of business opportunities;

There are many opportunities out there for anyone who wants to start a business. They
include the following;

1) Retail or whole sale type of business; retail businesses sell goods directly to
consumers in small quantities. Whole sellers buy in large quantities from
manufacturers or importers and sell to retailers.
2) Franchise or independent type of business; these are companies given
permission by parent companies to sell or produce goods in their names.
3) Product or service type business; trained professionals provide services around
their professions e.g. dentists, accountants, teachers, etc. photographers may
sell cameras, photo frames and photo papers. Teachers can decide to sell text
books.
4) Industry type of business; this is a collection of firms producing related
goods/services. Entrepreneurs should choose industries in which they have some
knowledge and experience.
5) Store front type of business; store front are business websites. This is the
offering of goods/services using interest.
Identification process for a good business opportunity/feasibility study;

If an entrepreneur identifies a business opportunity, it is ideal to carryout a pre-

feasibility study in order to ascertain whether the opportunity is viable. Feasibility study
is an analysis of the viability of an idea.
The feasibility study is divided into three categories;

a) Market feasibility study; a study that shows the market available for the product.
Under this;
 Consider market demand
 Product description
 Location of the market
 Expected market growth
 Competing firms
 Competitors’ strength
 How to differentiate products
 Projected market share
b) Technical feasibility; under this look at the manufacturing process, plant and
machinery to be used, raw materials and time to spend. Gives details on how
one will deliver a product or service e.g. materials, transport, labour, etc.
c) Financial feasibility study; this reveals how attractive or hopeless the business
idea is for the financial point of view. This is divided into the following;
 Project cost
 Means of finance
 Capacity utilisation and income estimation
 Expenditure estimate
 Profitability estimates
 Risk analysis
d) Organizational / management feasibility study. This give information about the
founders of the business and their skills.
e) Political feasibility study. This analyses how the key stakeholders view the system
which can affect distribution of information , thus power
f) Operational feasibility. Analyses the likelihood of the project attaining desired
objectives.
g) Schedule feasibility (time frames). This studies the likelihood that the time
frames can be met using the available resources to meet organisation’s needs.
 h) Legal feasibility study (laws); This analyses the copyrights , ant trust laws,
contractual obligations etc.
i) Environmental feasibility study; This is concerned with the impact of environment
on the project. The factors include, air, land, sound, location etc.
Components of technical feasibility study;

 Possible location of the capacity

 The size of facility needed
 The costs of the building
 Infrastructures and services like highways, railways, etc.
 Transportation of goods between facility and the market
 Raw materials
 Labour requirements
 Technology needed
 Potential suppliers
 Quality specifications
Purpose of carrying out financial feasibility study;

 Establishing means of finance

 Projecting costs
 Establishing capacity utilizations
 Carrying out income establishments
 Estimating expenditures
 Profitability estimations
 To carryout risk analysis
 Identifying other business needs
 Determining how attractive the idea is.
Evaluating business opportunities;
It is necessary to thoroughly investigate a market opportunity before going into
business. There are five steps that you should use to determine the profitability of a
potential business. They include;

1) Deciding on the type of business; you can choose from;

 Merchandising/trading business
 Service business
 Manufacturing business
 Farming
The three important questions you need to think about when deciding on the type of
business;

 Is there a need for this type of business, does it have market?

 Do I have the skills to run this type of business?
 Do I have or can I obtain enough money to run this business?
2) Choosing a location; when selecting the site for your business, you need to
consider the following aspects;
 Personal factors; do you like the place, town or rural?
 Economic factors; do customers have regular income, poor or rich?
 Competition; other businesses in the area selling same products
 Security
3) Forecasting your sales; estimate the size of the market and estimate how much
can be sold. Follow the following steps when forecasting sales;
 Gather information about the market. Make research.
 Estimate the total sales of the market in a year using a selected number of
families.
 Estimate your share of the sales, you expect to capture.
4) Estimating your costs; look at the cost of goods, wages, advertising, taxes,
power, rent, etc.
5) Estimating your profits; once you have estimated sales and costs, you will have
to calculate your estimated profits.
 Estimated profits = estimated sales – estimated costs.

Organizations that provide business opportunity guidance and counselling;

These include KACITA, UCDA, UNFA, CMA, UMA,UFA, UIA, NAADS, UNCCI,
URA,CMA,NEMA,

 Private sector foundation

 Uganda industrial research institute
 Non-government organisations
 Government organisations like NAADS, UIA
Importance of a feasibility study;

 Lists all things you need to make business work

 Identifies logistical and other business related problems and solutions
 Develops marketing strategies
 Serves a solid foundation for developing a business plan
 Finds a cost effective way to market and sell the products
 Narrows business alternatives
 Surfaces new opportunities
 Provides quality information for decision making
 Provides documentation that is thoroughly investigated.
Steps involved in determining the profitability of a potential business

- Deciding on the type of the business i.e merchandise or service or manufacturing

business.
- Choosing a site for the business i.e either rural or urban location
- Forecasting the sales i.e estimating the size of the market
- Estimating the costs . i.e cost of goods, wages, advertising etc
- Estimating the profits .
Factors that affect the level of profits for a business

1. Price levels / rate of inflation. High prices lead to higher profits than lower
prices.
2. Cost of production. High cost of production lead to less profits.
 3. Goals / objectives of the entrepreneur. Profit maximization leads to higher profits
than sales maximization objective.
4. Entrepreneurial skills / organization ability. Good organization leads to more
profits than poor organization.
5. Degree of risks. Higher risks lead to higher profits.
6. Level of out put / size of business. Large output leads to higher profits.
7. Market demand / size ; large market leads to more sales hence more profits.
8. Number of firms or level of competition. Large number of competitors reduce
sales hence low profits
Measures or ways of maximizing or increasing profits

- Buying raw materials from cheaper sources in bulky

- Charging high price
- Using cheaper advertising media.
- Using cheaper packaging materials
- Motivating sales personnel to increase sales.
- Being creative and innovative
- Employing cheaper skilled labour
- Producing quality products
- Making use of the available facilities eg buildings.
Factors that influence or affect the location of the business

Personal factors. An entrepreneur locates a business where he has friends or relatives.

Economic factors; An entrepreneur locates a business in an area where customers have

regular incomes.

Market size. Entrepreneurs locate their businesses in areas with large markets.

Government policy on location. Government gazetted areas for businesses attract many
entrepreneurs to locate their businesses there.

Political climate. Entrepreneurs locate their businesses in areas that are politically
stable.

Level of competition. An entrepreneur locates a business in an area where there are

few competitors / low competition.

Availability of raw materials. Easy access to raw materials attracts location of the
business than limited access to raw materials.
Availability of utilities like water, power etc. Most businesses are located in urban areas
where there is easy access to utilities.

Availability of auxiliary services like banks, insurance companies etc. Entrepreneurs

locate their businesses in areas where such services are available.

Level of infrastructural development. Well developed roads in an area attract business

location.

Availability of land for expansion. Places with more land attract business location than
places wher land is limited.

Steps involved in commencing business operations

 Identifying potential business opportunities from the environment.

 Selecting a business opportunity that is feasible and viable in the area.
 Conducting a market survey for the selected business opportunity .
 Preparing a business plan that will act as a guide in business operation.
 Mobilising the required resources to start a business eg capital, land , labour and
others.
 Completing all the legal formalities necessary for the selected business. E.g a
trading license.
 Acquiring land, buildings, equipments, raw materials, and labourers
 Preparing a marketing plan on how the products will be marketed.
 Launching the business
 Managing the business operations successfully
Sample of a launching programme

Name and address of the business

Programme for the official launch on 24th April 2020 at business premises

Time ACTIVITY. PERSON IN REMARKS (don’t

CHARGE( fill in fill in, leave it
names of people) blank)
7:00am Preparation of the venue Magezi Mike
10:00am Arrival and registration of Magezi Mike
invited guests
10:30am Arrival of the chief guest General manager
11:00am Touring the business Mwebe Emma
premises
11:30am Prayer and national Fr. Augustino
anthem Kamya
 12:00pm Opening remarks Magezi Mike
12:10pm Speeches Magezi Mike
12:30pm Official launch of the Chief guest
business/ product
1:00pm Entertainment Community
members
1:00pm Refreshment / lunch Kimere Justine
2:00pm Closure and departure Magezi Mike

Prepared by Approved by

Ssemugaya ……………………

SSEMUGAYA FREDRICK SEMANDA FRED

PRODUCTION MANAGER GENERAL MANAGER

SMALL AND MEDIUM ENTERPRISES

Meaning micro, small and medium enterprises;

Micro-enterprises;

These are very small businesses with very little capital for example peddlers, roadside
sellers, borrow boys, etc.

Characteristics of micro enterprises;

 They are sole trade businesses

 They require very little money to be started
 Their sales are usually low
 They may not need fixed premises
 They use locally available resources
 They don’t have to be registered before they commence
 They require very simple technology to operate
 They employ a maximum of four people
Small businesses;

These are businesses which operate on a small scale and employ a maximum of 50
people e.g. shops, bakeries, millers, etc.

Characteristics of small businesses;

 They require little capital to start (50 million)

 They use simple technology in production
 Usually operate from fixed premises e.g. shops, small factories
 May not require formal documents to start like a registration certificate
 Their periodical sales are relatively higher than those of micro-businesses
Medium enterprises;

These are enterprises employing more than 50 people and operate from well-
established premises.

Characteristics of medium enterprises;

 They operate from well-established premises

 They use advanced technology
 They require a lot of capital (500 million)
 They produce for both local and international market.
 They use a lot of energy/electricity
 They employ a large number of people
These businesses include; large bakeries, coffee nulling factories, mattress
manufacturing factories, etc.

FORMAL AND INFORMAL BUSINESSES;

FORMAL BUSINESSES

These are businesses which are registered with the registrar of companies. A person to
start this kind of business must first get a license.

Characteristics of formal businesses

- They are registered

 - Provide salaried employment.
- Proper record keeping
- Produce good quality goods
- Mostly urban / semi urban based.
- Mostly use skilled labour
- Production is for commercial purposes.
- Have a separate legal entity.
- Governed by Company Act or Parliamentary Act .
Advantages of formal businesses;

 They are legally recognized

 They are properly organised
 It is easy for them to get loans from banks
 It is easy for them to get skilled labour
 They have a sound base for further growth and development
 Enables a business to be reliable and permanent.
 Comply with social security regulations . eg NSSF payment.
 Provide a separate legal entity.
 It is easy to get tenders for the supply of materials to the government.
Disadvantages;

 They are not flexible i.e. difficult to change

 They require so many legal procedures to start
 They are governed by laws and rigid regulations
INFORMAL BUSINESSES

These are businesses that are generally not registered though they may have licenses.
People with such businesses dodge payment of taxes and try not to adhere to the
government regulations.

Characteristics of informal businesses

 Mostly small scale businesses.

 Mainly produce for local market
 Mostly use simple production techniques
  Mostly produce consumer goods
 There is limited record keeping
 Mostly rural based
 They are not registered
 Dominated by sole proprietors
 Most of them produce low quality goods
 They have low productivity
 Mostly use unskilled and semi skilled labour
Advantages of informal businesses;

 They are adaptable to change

 They are easy to start
 They lead to fast employment generation
 They help in initiating new industries
 They earn higher profits as most of them dodge payment of taxes.
 They do not have a separate legal entity from their founders.
Disadvantages;

 They are not properly organised

 They are not legally recognized
 They are not always reliable as profit making enterprises
 They don’t have clear access to loans
 They don’t comply with social security regulations
 They dodge payment of taxes to the government
Role of small and medium enterprises in development;

 Providing government revenue through payment of taxes

 Development of infrastructure for example transport net work
 Provision of social services for example health, education, etc.
 Provision of goods and services to meet society needs
 Provision of market for the society’s products.
 Utilizing the idle resources such as land, labour, etc.
  Sponsoring of community activities like football, health campaigns, etc.
 Providing information for research and study purposes
 Improvement of food security through farming
 Provision/creation of employment opportunities to society
 Provision of economic growth through raising the GDP as a result of increased
output
 Recycling wastes that would have caused harmful effect thereby cleaning
environment
 Reduction of income inequality
 Providing a Centre for training and developing of skills of the local man power.
Advantages of small and medium enterprises;

 Decision making is easier compared to large enterprises

 They require relatively less capital to start.
 They have low operational costs due to fewer workers
 They are flexible in that they can even be located in rural areas
 They use local resources
 They are a source of employment to families
 They sell goods in affordable quantities to customer
 They are charged with low taxes
 They can be transferred from one area to another
 There is personal contact with customers.
 Help in bringing goods nearer to customers.
 Require a small market size.
 Simplifies management. They are simple to manage.
 They lead to regional balance.
Reasons for the popularity of Small and Medium enterprises

 They are flexible. i.e can even be located in rural area.

 The increased need to provide employment to family members.
  The increased awareness about the importance / role of entrepreneurship.
 Use idle local resources. E.g land, labour etc
 They have low operational costs due to fewer workers
 Decision making is easy in SMEs.
 They require less requirements like documents to start.
 The relaxed lending terms and conditions by financial institutions.
 Improved infrastructure e.g feeder roads.
 Favourable government policy as regards SMES
 Require simple technology which is readily available.
 Ready market for the products in the surroundings.

Disadvantages of small and medium enterprises;

 They don’t enjoy economies of scale like large enterprises

 It is not easy for them to get loans from banks
 They easily collapse as soon as the owner dies
 They produce low quantity products
 They may not compete favourably with large enterprises
 They frequently suffer from customers changing tastes and preferences
 They lack skilled man power to manage the business
 They have limited storage facilities for perishable goods
 Their existence depends on the owners.
 They don’t have access to enough raw materials.
Challenges faced by small and medium enterprises (reasons for high rate of
failure of SMEs in Uganda)

It is common that the majority of businesses that are started in a given period of time
fail and disappear from the scene. The failure is due to the following factors;

1) Poor location; even if a business is properly managed, a bad location leads to its
failure. For example locating a business far away from the market, raw materials.
2) Poor management of the business; businesses which are poorly managed for
example no book keeping, wrong costing and pricing methods, ineffective use of
resources, etc. cannot succeed. They only fail and disappear.
3) Limited market for goods; this normally results from competition, changing
customers’ tastes, decrease in the number of people in an area.
4) Poor handling of customers; being rude to customers and shouting at them leads
to the downfall of the business.
5) Limited market research; starting a business without first knowing the customers’
needs and their buying habits contributes to its failure.
6) Over-expansion or rapid expansion; this often happens when business owners
confuse success with how fast they can expand their businesses. It is better to
focus on slow and steady growth of the business.
7) Choosing a business that is not profitable. A business having no profits cannot be
sustained.
8) Low quality products for sale; selling low quality products to customers makes
the business lose its competitive advantage thus failure.
9) Inadequate credit facilities; small and medium enterprises hardly obtain loans
from financial institutions which crumbles their growth.
10)Inadequate support services; some areas have no enough roads, water,
electricity which makes it difficult and expensive to operate these businesses.
11)Inadequate skilled man power; SMEs use unskilled man power due to shortages
of the skilled ones which contributes to their failure.
12)Over-dependence on a single customer; some SMEs are reluctant to look for a
big number of customers and rely on only one. If the customer gets a problem,
the business almost closes down.
13)Believing you can do everything yourself; some owners of SMEs want to do each
and everything themselves, they don’t allow others to help which leads to
business failure.
14)Unconducive government policies; for example high taxes make businesses
produce less and earn less.
15)Improper product pricing; over pricing of products eventually makes businesses
fail.
16)Inappropriate technology; using poor methods in producing goods contributes to
business failure.
17)Shortage of storage facilities; lack of enough stores for goods like perishable lead
to losses thus business failure.
 18)Founders’ inability; starting a business in which a person has no interest, skills or
experience also leads to its failure.
19)Industrial unrest; strikes of workers lead to losses hence business failure
20)Insecurity/hostility; this makes business operations difficult in a given area
leading to its closure.
Ways of overcoming the challenges faced by SMEs in Uganda;

1) By locating businesses in areas where they can easily access support services,
markets, raw materials, etc.
2) Undertaking research and development to come up with products that meet
customers’ needs.
3) Ensuring good business management for example creating a good working
environment to encourage productivity.
4) By establishing good relationship with customers.
5) Avoiding over expansion of the business.
6) By saving and re-investing profits back to the business to adequate working
capital.
7) By advertising and promoting business products so as to attract new customers.
8) Training of workers to ensure that they are skilled to manage business
operations.
9) Involving your business in the activities of business associations.
10)Starting a business for good reasons.
11)Maintaining political stability by the government
12)Delegating some activities in the business to other people to reduce on the
mistakes made.
13)Motivating workers to avoid industrial unrest.
14)Improving on the quality of goods sold to customers.
INSURANCE FOR SMALL AND MEDIUM ENTERPRISES

Insurance is the paying of small amount of money (premiums) to the insurance

companies by individuals/businesses that are bound to suffer losses from risks in order
to be compensated.
Or, insurance is a financial intermediary providing compensation for the effect of risks
or misfortunes from accumulated contribution (premiums) made by individuals or
businesses.

Common terms used in insurance;

1) Insured; this is the person/company taking out insurance and promised

compensation by the insurance company.
2) Insurer; this is the insurance company giving protection to the insured’s
property.
3) Premium; this is the annual contribution made by the insured to the insurer.
4) Sum insured; this is the total value of the property which the insured stands to
lose in case of risk happening. It is the value the insurer would compensate the
insured.
5) Risk; this is something that causes a financial loss once it happens.
Risks are of two types;

 Insurable risks; these are risks on which insurance is taken.

Or, risks whose losses can be calculated and forecast e.g. thefty, fir, burglary, etc.

 Non-insurable risks; these are risks whose losses cannot be calculated.

Or, risks on which insurance cannot be taken e.g. drought, lightening, floods, etc.

6) Loss; this is the happening of the events against which insurance is taken.
Loss is of two types;

 Total loss; this is when the whole property is completely destroyed.

 Partial loss; this is when part of the property is destroyed.
7) Co-insurance; this is where a property is insured against similar risk with more
than one insurance company.
8) Re-insurance; this is when an insurance company which has undertaken to
compensate another big firm or person against a big loss also insures itself with
another insurance firm so that it can ask for contribution when compensation is
made.
9) Over insurance; this is when the insured overstates the value of the property
when applying for insurance.
 10)Under insurance; this is when the insured under declares the value of the
property and he is charged less premium.
11)Surrender value; this is the money given back to the insured when he decides to
cancel the insurance contract before the period ends.
12)Actuary; this is the professional person employed by the insurance company who
has skills in assessing and calculating premium.
13)Assessor; this is an expert or professional person who calculates and determines
how much to be compensated in case of a risk happening.
14)Pooling of risks; this is where everybody exposed to a risk contributes some
money to a common insurance pool from which the few who actually suffer
losses will be compensated.
Principles/doctrines of insurance;

These are regulations governing the insurance business and they include;

1) Utmost good faith (uberimma fides); here the insured is required to state all the
material facts concerning the item to be insured.
2) Indemnity; this states that insurance does not benefit a person. Insurance only
restores the insured to his/her original position, but doesn’t put him/her in a
better position.
3) Proximate cause; this states that before any compensation is made, the cause of
the loss must be close to the actual risk insured. For example a car insured
against an accident and gets destroyed by fire, compensation isn’t carried out
because there is no connection between fire and accident.
4) Subrogation; this principle states that an event of total loss, after the insurer has
compensated, the insurer takes ownership of the wreckage/scrap of the
destroyed property.
5) Insurable interest; this states that, one must insure something/property in which
he/she has interest such that when a risk happens, he/she suffers.
6) Contribution; this states that if a person insures his property with more than one
insurance company, in case of a loss each company pays a certain stated
amount of money towards the loss. The total payment should not be more than
the value of the property destroyed.
7) Insurable risks; this states that one should take up a policy against risks whose
losses can be calculated.
Insurance and gambling;

Gambling is a risky matter where people work on probability/chance/luck.

Or, gambling is any activity where there is no formula in order to win e.g. betting
football matches.

Similarities between insurance and gambling;

 In both many people contribute towards a common pool.

 At least two or more members are involved.
 In both cases, either chance or misfortune determines who takes the money
from the pool.
 Many people contribute but one or few take the money.
 In both there is element of gaining, if the risk does not happen, the insurer
takes the money and in gambling, the winner benefits.
Differences between insurance and gambling;

 Insurance is a legal business whereas gambling is illegal.

 In gambling events must occur (there must be a winner or loser) whereas in
insurance events may or may not occur.
 Insurance is of a great importance to the society whereas gambling is a curse to
the society.
 Insurance helps the unlucky ones (unfortunate) whereas gambling helps the
lucky ones.
 In gambling the winner doesn’t suffer any loss while in insurance the loss
sufferer is compensated.
 In insurance, money paid (premium) can be in installments while in gambling it
is paid once.
 There is utmost good faith in insurance while in gambling people use a lot of
tricks to win.
 In insurance, there are many documents used while in gambling, documents
may not be used.
 In insurance, one must have interest in the property insured while in gambling
such doesn’t exist.
Insurance policy/contract;

This is a document that states the relationship between the insurer and the insured. It
states terms and conditions.

Procedures/steps in taking out an insurance policy;

1) Inquiring; this involves finding out the best insurance company.

2) Filling a proposal form; this is the application for insurance which is filled by one
wishing to be insured. Material facts must be stated about the property.
Contents of a proposal form

- The applicant’s name and address

- The occupation and location of the applicant
- The age of the applicant.
- Name of the insurer
- The risks to be insured
- First insurance or last insurance
- Any precautions taken against the risk
- The signature of the applicant
- The declaration of the applicant
3) Calculating of premiums; after the company accepting the proposal form, the
entrepreneur is advised to begin paying the premium calculated either in lump
sum or in instalments.
4) Issuing a cover note/binder; this document is a proof that premium has been
paid and accepted by the insurer who now undertakes to indemnify the insured
in case of a loss.
5) Issuing of an insurance policy; this is a document that presents a
contract/agreement between the insurer and the insured. The document
confirms that the insured has cleared everything and the insurer has also agreed
to compensate him in case of a loss.
Contents of an insurance policy

- Name and address of the insurer

- Name and address of the insured
- The property insured
- Period for which the policy is valid
- Amount of premium paid
- The value of the property insured
 - Terms and conditions for compensation
- The type of insurance policy undertaken
Importance of an insurance policy.

- It holds the two parties to be responsible

- It serves as an evidence of contract between insurer and insured.
- Enables the insured to be compensated in case of loss.
- It act as a collateral security for the insured to acquire a loan
- It guarantees continuity of the business .
- It spells out the terms and conditions of the contract
6) Filling a claim form; the document is filled by the insured claiming for
compensation from insurer in case a loss occurred.
7) Surveying the damaged property; assessors are sent by the insurer to survey the
damaged property and make a report before compensation is effected.
8) Compensation; on receipt of the survey report, the insurer pays due to
compensation.
9) Terminating of the policy; the payment of compensation implies the end or
termination of the policy (insurance contract). A fresh contract has to be entered
into by both parties if there is still a need.
Circumstances under which an insurance policy may be terminated

- In case of destruction of the subject matter

- When the insured under or over declares property.
- In case of failure to pay premium.
- If the insured insures a property in which he / she has no insurable
interest.
- If the insured has been compensated
- If the contract has expired.
Types of insurance policies in business;

1) Personal insurance; this covers insurance of human life. It is also known as life
assurance.
Forms of life insurance include;

 Whole life policy; this assists the family of the insured when he/she dies.
Premium is paid throughout one’s life.
 Endowment policy; this benefits the insured after he/she has retired from job or
during old age. Premium is pad every year.
  Group life insurance; families or business partners take insurance to provide
pension during old age.
 Sickness policy; this covers against a specified disease. The insurer pays medical
bills and other expenses involved.
2) Property/general insurance; this gives protection to all property belonging to a
person or organisation.
Forms include;

 Fire insurance policy; this protects business property against loss resulting from
fire.
 Theft and burglary; this protect property against loss resulting from theft and
burglary.
3) Loss of profit; this protect entrepreneurs against losses in the business caused
by bad debtors, high operation cost, etc.
4) Motor insurance policy; this protects the business against loss of vehicles.
Forms include;

 Third party insurance; this covers losses inflicted upon a third person e.g.
passengers, pedestrians, property, etc.
 Comprehensive motor insurance; this covers all possible type of risks, property
as well as persons.
5) Money in transit; money being moved from one place to another may insured
against loss while in transit.
6) Fidelity guarantee; this protects against the dishonesty of workers e.g.
embezzlement of business funds.
7) Employer’s liability/workmen’s compensation; this protects the employer against
damage caused by his negligence or mistakes to his workers e.g. injuries
sustained by workers while performing their duties.
8) Machinery break down and consequential loss; this covers against loss resulting
from machinery break down.
9) Marine insurance; this is the insurance of ships and good on them.
Forms include;

 Marine hull; safeguards the vessel against damage due to storms/collision of

ships.
  Marine cargo/floating policy; this covers goods on the vessels.
10)Aviation policy; this is the insurance of air crafts.
Importance of insurance to businesses;

1) It allows individuals and business people to save money that can be used to
cover unexpected emergencies.
2) It gives an entrepreneur confidence because he/she is assured of compensation
after the loss has occurred.
3) The insurance policy is used by entrepreneurs to get loans from banks.
4) Insurance companies also give loans to businessmen.
5) It promotes international trade because entrepreneurs are able to import and
export goods.
6) Insurance companies provide employment opportunities to people who work with
them.
7) Reduce costs of production through workman’s compensation.
Responsibilities of insurance companies to the business community

- Educating the business community like campaigns on safety and health care
- Encouraging investment confidence in the business community.
- Reduction of costs like workman’s compensation or public liability policy.
- Promoting trade by issuing policy covering goods in transit.
- Ensuring continuity of business by giving compensation.
- Safeguarding property of businessmen against all risks.
- Acting as trustees for the businessmen by looking after the property of the
deceased.
- Enabling businessmen to save money that can be used to cover emergencies.
- Compensation in case of losses
- Providing insurance policies which are used as collateral security
Challenges facing insurance industry in Uganda;

1) Many people in Uganda are poor. They don’t have property worth insurable.
2) Very many Ugandans are ignorant about the insurance services. They think
insurance it is a wastage of money.
3) Loss of trust among people in insurance business. Some take long to settle
insured claim.
 4) Many businesses operate on a small scale hence no need for insurance services.
5) Insurance companies are charged with high taxes.
6) Political instability affects the insurance industry.
7) Insurance are not widely stressed in all parts of the country.
8) Inflation affects the insurance business because of increasing prices of goods
and services. This increases the operational costs.
9) There is also excessive competition among the insurance companies which
makes them to earn losses.
FAMILY AND BUSINESS

Factors that necessitate good relationship between family and business;

Several factors necessitate close ties between the family and business. These include;

1) Joint family funding; some members of the family tend to pool their resources
together to start anew enterprise. All those members have a say on business
operations.
2) Inheritance; some businesses are inherited and passed from one generation to
another.
3) Fear of hired management; workers from outside the family are seen as thieves
therefore family management is seen as a way to reduce and protect the family
property.
4) Source of employment to family labour; family business is seen as the main
employer of the family labour.
5) Managerial decision making; all managerial tasks of planning, organising,
supervision and control which are performed consistently in big organisations
need also to be performed in family business.
6) Trained family management.
7) Business being a source of employment to family members.
8) Collective family participation in decision making.
9) Transparency among family business managers.
10)Controlled spending of business funds on non business activities.
11)Timely mentoring of junior family members.
Challenges associated with family businesses;

1) Emotions; family problems like divorce, separations, health and financial

problems create difficulties for family members.
2) Informality; this takes the form of absence of clear policies and business norms
for family members.
3) Tunnel vision; this is the challenge of limited outside opinions and diversity on
how to operate the business.
4) Challenge of compensating family members; dividends, salaries, benefits and
compensation for non-participating family members aren’t clearly defined and
justified.
5) Role confusion; the roles and responsibilities of each member aren’t clearly
defined. This results into overlapping of functions.
6) Poor managerial skills; family members lack skills and abilities for organisation
and there is inability to fire them.
7) High turnover of non-family members; this happens when employees feel that
the family “mafia” will always advance over outsiders and when the employees
realise that management is incompetent.
8) Inadequate succession planning; most family organisations don’t have a plan for
handling the power to the next generation, leading to great political conflict and
divisions.
9) Absence of retirement and estate planning; older members aren’t ready to leave
the company.
10)Limited training; there are no specific training programs for family members.
11)Centralized control system; control is centralized and influenced by tradition
instead of good management practices.
12)Conservativeness of members; older family members try to preserve the status
quo and resist change.
13)Communication challenge; this results from role confusion, emotions, fear, envy,
anger, etc.
14)Difficulties in decision making; decisions are made day-to-day in response to
problems. No long term planning.
15)Limited business valuation; this is no knowledge of the worth of the business.
16)Variation in vision; each family member has a different vision for the business.
 17)Laziness among family members.
Solutions to challenges above;

1) Persuading members of the family to allow hiring of professional workers.

2) Spelling out clearly the roles and functions of each family member.
3) Advising and convincing the family members to register the enterprise.
4) Ensuring informal counselling and guidance services to the members of the
family.
5) Inviting experts in the field of management.
6) Ensuring that remunerative packages are tied to the types of work individuals do.
7) Exchanging information with other firms on various issues like marketing, source
of raw materials, expansion plans, etc.
Importance of family savings in establishing SMEs;

Family savings help a lot in starting business. The money is used in the following ways;

 Paying for business license

 Renting for the building
 Buying tools, machinery, equipments and furniture
 Buying raw materials
Helps the family to be in full control of the business. Make own decisions.

Ways through which the family can support Entrepreneurs business

 Giving moral support to the entrepreneur.

 Giving financial support in terms of capital.
 Assisting in the management of the business.
 Allowing the entrepreneur to use the assets of the family.

HUMAN RESOURCE MANAGEMENT

Human resource management is the part of management which deals with effective
control and use of workers to do all activities involved in an enterprise
Or, it is the process of planning, monitoring, controlling and administering personnel
including recruitment, motivation and retention in business.

Elements of human resource management;

- Man power planning; this concerns assessment of the man power of an

enterprise in terms of both quality and quantity.
- Recruitment; this refers to the process of attracting and identifying a suitable
worker for a given job.
- Selection; this is a process an entrepreneur or enterprise follows so as to pick
out the most suitable candidate for a particular job.
- Placement; this involves assigning workers tasks to be done in an enterprise.
- Induction training/orientation; this involves introducing a new worker to the
enterprise so as to build confidence and sense of cooperation, etc.
- Human resource development; this concerns with improving the skills of workers
like through further training, study tours, etc.
- Determination of employee remuneration, terms of employment and working
conditions; this involves assessment of monetary and non-monetary rewards
payable to workers.
- Motivation; this involves encouraging or stimulating workers to work hard in
order to achieve desired goals of an enterprise.
- Communication; this involves putting in place formal and informal
communication requirements and procedures for the enterprise. It involves
making consultations between employers and employees.
- Termination; this concerns laying off a worker due to some reasons such as
inefficiency, indiscipline, etc.
Importance of human resource management to an enterprise;

- It enables careful recruitment, selection and placement of the right workers with
the required skills and training to the right departments which increase
productivity.
- It helps in staff training and development; this is done through organising
workshops and seminar which improves skills of workers.
- It improves working conditions and provides a good working environment for
workers. Motivate them to concentrate and improve out put.
 - It eliminates wastage of resources since workers will put their efforts together to
use the available resources effectively to achieve objectives of the business.
- It promotes good staff relations through development of cooperation between
the employer and the staff.
- It eliminates labour strikes in business through installing commitment in workers.
- It helps an enterprise to minimise damage to machines and equipment through
use of technologically competent people. This minimises the risks and cost of
production.
- It promotes a good image of the business to the public through the good skills
exhibited by the personnel manager.
- It helps in evaluation of the performance appraisal.
Objectives of man power planning;

- To ensure that the right workers are available at the right time to perform the
different tasks efficiently.
- To forecast or predict the type of skills required by the business in future.
- To promote the development and training of the existing personnel.
- To ensure optimum use of the present man power through assigning them
duties.
- To ensure proper control measures in an enterprise so that man power is
available when needed.
- To identify man power gaps in the organization. i.e which area or department is
lacking workers
- To enhance quick achievement of organizational aims and objectives.
- To formulate policies regarding employee promotion, retention, retirement and
benefits after retirement.
NB; man power planning (human resource planning) is the strategy for acquisition,
utilisation, improvement and preservation of enterprise human resources.

Benefits of man power planning;

1. It enables the management/entrepreneur to reduce labour costs since workers

with required skills are recruited.
2. It helps in formulation of management succession plans. It provides enough time
for an employer to identify and develop managers to be promoted.
3. Helps in identifying gaps that need to be filled in the existing man power so that
suitable training programs can be designed so as to build particular skills
required in future.
4. It provides a sound basis for the development of workers so as to ensure
optimum use of available talent.
5. At national level, it guides the government in employment creation, educational
reforms and transfers of workers in the country.
6. It helps in diversification of business to undertake new projects and expansion
programs aimed at increasing earnings.
7. It promotes good working environment in the organization since workers are
planned for in form of remuneration, good hygiene.
8. It helps in mobility both occupational and geographical since workers will gain
skills and abilities.
9. It enables promotion of workers in future
ORGANISATIONAL CHART

This is a diagram / illustration that shows the position , department and

functions of the personnel in an organization and how they are related.

Objectives of preparing an organizational chart

- To facilitate smooth flow of information in an organization.

- To motivate employees to work hard.
- To specify clear reporting relations.
- To have clear management guide
- To fairly determine remuneration packages.
- To give clear hieranchy of command.
- To easily identify vacant posts in the enterprise.
- To avoid duplication of work.
- To make supervision easy as duties as spelt out.
- To create or encourage team work.
- To enable the entrepreneur coordinate with the different departments in
the organization.
- To provide a platform for delegation of work.
- To identify training gaps.
Importance of an Organisational chart in an enterprise;

- It acts as a visual aid for staff training during induction sessions.

- It shows the hierarchy of authority within the organisation.
- It specifies the duties and responsibilities of different personnel in an
organisation.
- It shows the flow of communication in an enterprise.
- It instills discipline among employees and managers as it specifies the level of
administration and subordination.
- It creates a platform for delegation of authority between superiors and
subordinates.
- It is used as a reference point whenever transfers and promotions are to done in
organisation.
- It helps in coordination of different departments. i.e departments can work
together.
- It serves as a starting point for discussing the possible effects of the
organisational structure to the performance of an enterprise.
Sample of an organizational chart

SHARE HOLDERS

BOARD OF DIRECTORS

GENERAL MANAGER

DEPARTMENTAL MANAGERS

ASSISTANT MANAGERS

CASUAL WORKERS

HUMAN RESOURCE / PERSONNEL REQUIREMENTS OF A BUSINESS;

1) Job description; this is a written summary of what a worker is supposed to do on

a specific job. It summarises the different tasks, duties and responsibilities of a
job holder in a particular enterprise.
Components of a job description;
 - Job summary; this gives the brief details of the business including the nature of
the business.
- Job duties and responsibilities; this shows the conditions under which the
workers are to operate.
- Equipments to be used; it shows the nature of the equipments to be used by the
worker.
- Relationship with other jobs; it shows how the job given is related with others in
the organisation.
2) Job specification; this is a detailed statement of minimum acceptable qualities
required for successful performance of a job. It specifies the knowledge, skills,
experience and aptitude an individual should have to perform the job effectively.
Components of a job specification;

- Specification of the physical requirements

- Experience level
- Qualifications possessed by the workers
- Remuneration to be given to the worker
3) Job grading/job evaluation; this refers to the process of determining the relative
value of every job in the organisation in order to price the jobs in terms of wages
and salons.
4) Job performance standards; these are acceptable competence aspects required
for a given job. It is the minimum expected output for the job.
5) Recruitment; this means getting applicants for the present or future jobs in an
enterprise.
6) Job induction; this is the process by which a newly recruited employee is
introduced to a job and the various aspects of the enterprise given to him.
7) Job analysis; refers to the systematic collection and recording of information
concerning the job to be performed in an organisation.
8) Job security; systematic collection of all facts about the job.
Procedure for conducting job analysis;

- Collecting the data; this involves getting back ground information about what the
job is made of, its relation to other jobs and its requirements for satisfactory
performance.
 - Selecting representative positions; this involves selection of sample
representative positions for the analysis process.
- Collecting job analysis data; this information is then developed into a job
description.
- Developing a job specification; finally the job description statement is modified a
job description.
ASAMPLE OF A JOB ADVERT

Name and address of the business

Job advert for the post of purchasing manager

Location of the business and what it deals in.

Job title: Purchasing manager

Reporting line: Reports to the general manager.

Equipment/ tools required: Vehicle, computer, pens and books

Duty station: Kawanda

Type of employment: permanent basis

Duties and Responsibilities:

- Writing weekly reports on purchases.

- Ensuring purchases at the right time.
- Supervising workers in the purchases department.
- Preaparing a budget for the purchases department.
Other requirements:

Education qualification: degree in business administration.

Age: Between 25 – 65 years.

Experience: 3 years working experience.

Marital status: married

Health status: HIV negative

Nationality: Ugandan
Gender: Preferably male

Salary/ Remuneration: shs 2000,000 monthly.

Deadline: Not later than 30th December 2020.

Frame.

NB: A job advert is made up a job description and a job specification.

Methods of recruitment of workers;

Internal sources of recruitment of workers

- Transfers; this involves shifting a worker from one job to another within the
same business.
- Promotion; this is the appointing of an employee to a position of greater
responsibility. It creates change in duties and authority of a worker.
- Present employees; this is where an entrepreneur asks employees to recommend
their friends and relatives to fill vacant posts in an organisation.
External sources of recruitment of workers;

1) Advertisement; this involves making the vacancy known to the public by use of
media like newspapers, television, radio stations, etc.
2) Head hunting/talent spotting; this involves looking around for the type of person
that would suit the specifications of the job.
3) Visiting institutions of higher learning and technical institutions. The most
suitable candidates for the available vacancies in the business can be obtained
from institutions.
4) Private employment agencies/ labour agencies; these are organisation which
specialise in recruitment workers for different employers.
5) Employee referrals; references by current employees may provide excellent
prospects for the business.
6) Specialty media publications; such as trade associations, magazines and
newsletters. These can also produce quality job applicants.
7) Field trips; this is where an entrepreneur goes out to different places spotting the
right type of personnel needed for existing job.
8) Walk ins
 9) Labour / trade unions
10)Fellow entrepreneurs / Net working
11)Internet
12)Competing organisations
Reasons for recruiting workers:

- To get the required people with the required skills

- To minimize damage on the machines by using competent people.
- To increase productivity.
- To replace the dead, inefficient and retired employees.
- To manage business operations.
- To motivate workers through promotion.
- To promote good public image.
Factors considered when recruiting employees in an enterprise;

1) The level of education/training; the level of education a worker has attained will
determine his recruitment or not. Workers with desired qualifications are
preferred.
2) The age level; the age of a worker is also considered during recruitment.
Workers shouldn’t be too young and not too old.
3) The level of experience of a worker; workers with higher levels of experience are
preferred to those with no experience.
4) The personal appearance of a worker; when recruiting a receptionist, a person
who is having a natural smile can serve better in this position.
5) Communication and interpersonal skills of a worker.
6) Marital status; workers who are married are preferred to those who are not
married in some organisations like schools. Single are preferred since they can
work for long hours.
7) Sex of an employee; this depends on the type of work to be done e.g. for the
profit of senior woman a female employee has to be employed/recruited.
8) Distance from the business; the distance should be shorter from the residence of
an employee and the work place.
9) Health status; an employee should be free from chronicle diseases which may
interfere with the working rate.
 10)Attitude to work; workers to be recruited should be with the zeal to work so as
to meet the desired goals and objectives of the business.
The procedure followed when recruiting workers;

- Identifying vacant posts

- Determining the number of employees required.
- Advertising the posts
- Receiving applications
- Cross checking the applications against the job specifications
- Short listing the applicants
- Contacting the successful and selected candidates
- Conducting interviews.
- Issuing appointment letters to the successful candidates.
- Giving induction training to the appointed employees
- Placing / placement of new employee
SAMPLE OF A RECRUITMENT PROGRAMME
Name and address of the business
RECRUITMENT PROGRAMME

DATE (begin with ACTIVITY.( fill in PERSON IN REMARKS (don’t

the date on which procedures for CHARGE( fill in fill in, leave it
the paper is being recruiting names of people) blank)
done workers )

Prepared by Approved by
Ssemugaya ……………………
SSEMUGAYA FREDRICK SEMANDA FRED
HUMAN RESOURCE MANAGER GENERAL MANAGER

Competences expected of an applicant during an interview

  Confidence
 Consistence
 Courtesy
 Academic qualification.
 Time management.
 Decency / smartness
 Intelligence
 Respect
 Experience
 Team work
 Controlling emotions
 Good communication
 Concentration
 Self motivation
 Knowledge
 Flexibility
 Attentiveness / listening
 Relaxed / never in a hurry
 Creativity and innnovation

Methods used in paying workers in Uganda;

1) Piece rate method; this is a method of payment where a worker is paid according
to the amount or size of work done.
Merits of piece rate;

- More output is produced since every worker involved works had to produce more
output as he/she earns income.
- It encourages innovation and creativity since it encourages workers to come up
with better methods of increasing output.
- It doesn’t require close supervision thus reduces cost of supervision.
- It enables the employer to easily determine labour costs per unit of output.
- It provides an incentive to fast and more efficient workers since they can earn
more.
 - The method promotes team spirit where output must be produced by workers
operating is small groups.
- It reduces the possibility of exploiting workers since each worker is paid the
extra reward for work produced.
- Work is completed faster since workers try to out compete each other with the
aim of earning more.
Demerits of piece rate;

- It encourages laziness, abseentism and laxity because workers with the same
qualification are paid the same amount.
- It is difficult to estimate the output per individual under the time rate method.
- It requires close supervision of employees and this increases administrative costs
to the entrepreneur.
- It discourages fast and efficient workers because they receive the same pay as
the one received by inefficient and lazy workers
- The workers can produce poor quality products so as to produce more output in
short time.
- Working at a very high speed so as to produce more results into increase in
accidents and over straining of workers.
- It cannot be used for service occupations such as teaching since output cannot
easily be measured.
- This method doesn’t ensure a stable monthly income of workers.
2) Time rate method; this is a method of payment where a worker is paid according
to the amount of time spent at work like per hour, per week, per month and per
year.
Merits of time rate;

- It minimises accidents and damages at work since workers take their time while
performing that tasks assigned.
- Better quality work is produced especially when proper supervision of workers is
done.
- Workers can plan how to spend their incomes and they are assured of regular
and standard payments.
- Workers are not over strained since the employer sets a standard time for work.
 - It is convenient and the employer can easily calculate the wage for each worker.
- It gives time to the employer to organise workers’ payment.
- It eliminates the need to measure the performance of each worker. Therefore
less efficient workers can benefit especially where supervision is limited.
- It is more suitable to service occupations where work cannot be divided into
smaller limits e.g. work of a doctor.
Demerits of time rate;

- It encourages laziness, absentism and laxity because workers with the same
qualification are paid the same amount.
- It is difficult to estimate the output per individual under the time rate method.
- It requires close supervision of employees and this increases administrative costs
to the entrepreneur.
- It discourages fast and efficient workers because they receive the same pay as
the one received by inefficient and lazy workers.
3) Over time pay; this is a method of payment where a worker is paid an extra
amount of money when he/she works for long period of time beyond the normal
working time.
4) Contract based payment; this is a method of payment where a worker is paid on
agreed amount of money after taking on and completing an agreed amount of
work within a standard time.
5) Payment in kind; This is where workers are given a certain amount of the goods
they have produced rather than being paid cash/money.
6) Shift pay; this is paid to workers who change work hours in order to compensate
them for the inconvenience and hardships borne. It is an addition to the normal
pay.
7) Cost of living allowance; this is given as a response to the rise on the general
price level to employee who work in high cost areas.
8) Salary; this is a fixed periodical payment normally to skilled workers. It is
confidential and progressive.
9) Wage; this is payment to normally non-permanent, unskilled/manual workers in
a firm.
 10)Commission payment; this is a method of payment where the amount paid to a
worker of an organisation depends on the level of his/her performance. The
higher the output sold/purchased, the higher the commission.
11)Flat rate payment; this is a method of payment where the workers are paid a
fixed amount regardless of the amount of output produced and time spent at
work.
12)Profit share rate; this refers to the fixed percentage of specific amount of profits
paid by the employer to each employee to motivate them.
13)Special wage additions; this is paid to workers during abnormal working
conditions.
Causes of differences on wages for workers in an enterprise;

1) Differences in the nature of job performed; more difficult or demanding jobs

earn high wages and salaries compared to simple jobs.
2) Differences in the level of education and training; women with high level of
education and skills would normally be paid higher wages and salaries compared
to those with low level of education.
3) Differences in cost of living; some entrepreneurs fix wage rates depending on
cost of living. Workers in places with high cost of living earn higher wages than
those working in places with low cost of living.
4) Differences in productivity of labour; more productive employees in terms of
output should be paid higher wages than those whose productivity is low.
5) Differences in entrepreneurs’ capacity to pay; entrepreneurs enjoying higher
profits are can afford to pay higher wages than those firms earning low profits or
operating in losses.
6) Demand and supply of labour; if the demand for labour in relation to supply is
higher than their demand, the wage rate tends to be low.
7) Differences in profits made by the employer
8) Differences in working conditions; jobs with poor working conditions such as high
level of risks should be paid highly compared to less risky jobs.
9) Differences in trade unions’ bargaining power; a stronger and more powerful
trade union will secure higher wages for their members and weak unions may
only afford to negotiate a bare minimum wage for their members.
10)Differences in the level of experience/expertise; highly experienced workers tend
to be paid higher wages than the less experienced ones.
 11)The availability of people with the required skills; the level of competition on the
labour market also determines income level in both private and public sectors.
12)Government policy on wages; the government may set up a minimum wage. If
the minimum wage rate is high, wages and salaries will also be high.
13)Differences in the nature of employment; workers on contract receive high
payments compared to those on temporary or permanent basis.
14)Difference in workers bargaining power
15)Differences in efficiency of the workers
16)Differences in social factors like gender, religion, race and discrimination in
labour market.
MOTIVATION

1) This is the process of encouraging/stimulating a person to work hard in order to

achieve desired goals of an organisation.
2) Motivation is the process of stimulating someone to adapt a desired course of
action.
3) Robert Dubin defines motivation as something that moves a person to action and
continues in the course of action when already initiated.
4) Gupta says, motivation is an internal psychological feeling that produces goal
directed behavior.
5) Motivation is a motive or a driving force or a need within people that compels
them to act or behave in a particular manner.
According to Abraham Maslow’s theory of motivation, an individual tries first of all to
satisfy his/her lower needs, once these needs are satisfied then he/she tries to satisfy
the higher needs.

The hierarchy of human needs consists of;

1) Physiological needs (basic needs)

2) Psychological/social/love needs
3) Safety/security needs
4) Ego/esteem needs (reputation/respect)
5) Self-actualization needs (domination)
Reasons why it is necessary to motivate employees;
 - To stimulate workers to perform their duties positively so as to contribute
towards the achievement of objectives and goals of an organisation.
- To promote good human relations through job satisfaction.
- To improve the productivity of workers through inducing them to work hard
which increase output.
- To create a better image of the firm/business since employees will be given
monetary and non-monetary rewards.
- To create improve the skills of workers through provision of training programs
like on job training.
- To minimise labour strikes and other forms of labour unrests through regular and
appropriate communication with workers and involving them in decision making.
- To improve the quality of products
- To prevent workers from seeking alternative jobs (retain them).
- To encourage the spirit of team work
- To encourage employees to be open
- To reduce supervision costs
- To improve self-esteem of employees
Ways of motivating employees in an enterprise;

1) Ensuring job security; this is the assurance that an employee is employed

permanently. He/she will not be dismissed without any serious reason. This is
done through issuing employees with appointment letters.
2) Through participation in decision making; allowing the workers to participate in
decision making for an enterprise encourages them to have interest in the
performance of the business.
3) Assuring promotion prospects; objectively assuming workers of available
opportunities for promotion basing on their performance in the organisation
motivates them to work harder and better.
4) By giving workers rewards for the specific good work done.
5) Ensuring favourable working conditions; for example providing protective
gadgets like gloves, gum boots, etc.
 6) Through timely and adequate remuneration; paying workers adequate salaries
and wages in time. This stimulates workers to work hard towards achievement of
goals of an organisation.
7) Using open/proper communication; this involves conveying information from one
level to another at the right time. This can provide remedy to the problems of a
firm.
8) Appraising and recognizing the contribution of the workers; this can be done by
giving them prize, financial incentives, certificate of merit to encourage them
work hard.
9) Providing of further training to workers; for example on job training and may be
further studies to some workers.
10)Provision of transparency in business operations. For example being open to
employees on issues concerning fund management.
11)Attending to workers’ problems; sharing and showing concern to workers’
problems e.g. by providing them with emergency financial assistance, visiting
workers in time of sickness, etc. this makes them feel liked and they will work for
business loyalty.
12)Through management of discipline; encouraging workers to cooperate, work in
orderly way and maintain respect for one another. This creates peace in the
work place.
13)By involving employees in profit sharing schemes.
14)By organising staff get together parties
15)By respecting gender balance and religious affiliations.
PERFORMANCE APPRAISAL/MERIT RATING

This is the judgment of an employee’s performance in his/her job based on productivity

and other considerations

Or, performance appraisal is the continuous process of evaluating or assessing the

performance of subordinates and providing information/feedback about how well or
poorly they are performing.

Types of appraisal;

a) Informal appraisal; this is conducted on day to basis. The managers

spontaneously mention that a particular piece of work was performed well or
poorly.
 b) Formal/systematic appraisal; this occurs semi-annually or annually on a formal
basis. It may involve a group of superiors rating the subordinates.
Reasons why it is necessary to appraise workers’ performance;

- To decide whether there is need to increase a worker’s pay.

- To determine the future use of an employee i.e. whether he/she should remain
in present job or be transferred, promoted, demoted or dismissed.
- To identify the training needs of employees.
- To motivate employees to do better in present job by allowing them to appraise
their own performance.
- To judge whether the employee has performed according to the expected
standards of performance or not.
- To provide performance records needed by financiers/donors/creditors so as to
evaluate the performance of the enterprise.
- To enable employees set realistic job targets.
- To re-enforce desired competences/behaviors among workers.
- To obtain feedback on performance.
- To monitor and ensure efficiency and effectiveness of workers.
Methods used by organisations to appraise performance of their workers;

1) Ranking method; this is where the manager rates his/her subordinates in the
merit and total ability on job. This can be based on agreed standards like quality,
output and others.
2) Grading; this groups employees into a pre-determined series of merit, categories
based on performance.
3) Rating scale; this is where a list of personal characteristics is drawn and against
which a scale of up to five points is attached for the manager to base his/her
assessment of the subordinates.
4) Open ended method; this is the method where the manager writes few
sentences about each subordinates performance in different aspects of the job.
5) Behavior expectation scale; this requires the assessor to select some aspects of
subordinates’ behavior considered in performance of certain aspects of so as to
base on the assessment.
 6) 360 degree appraisal; this involves self, superiors, subordinates and peer
appraisal.
Elements of an effective performance appraisal system;

- Reflection of objectives of the appraisal system in a clear way/clarity of

objectives.
- Training of employees and evaluators.
- Standards of performance/quality/quantity/output/behavior.
- Face to face interaction
- Rewarding employees/incentives
- Seniority in the provision of appraiser
- Communication and giving feedback
- Objectivity of the appraiser/fairness, should avoid person friendliness to
subordinates.
- Maintenance of performance records of all appraisal events.
- Involvement of all relevant stakeholders
- Cordial relationship between the employer and employee or appraiser and
appraise
- Monitoring of the appraisal system
- Facilitating of employees to work to their best (motivation)
Demerits of performance appraisal in an organisation;

- All the qualities reflecting the performance and potential of an employee are not
qualified accurately.
- There is a bias/hallo effect
- Most managers and supervisors are not trained enough
- Discrepancies between theory and application
- It is time consuming/wasting
- It’s expensive/costly
- It involves use of negative rewards
- It demonstrates/demoralises and it is bitter
 - It is a bitter process and it creates emotional pressure and stress.
- Performance appraisal increases the dependency of employees on their
supervisors
- Superiors/supervisors end up exploiting their juniors through bribery and
corruption.
- Organisational conflict/misunderstandings/conflicts and bad relationships may
rise.
Measures that can be undertaken to promote good working relationship
between the employer and the employee;

- Proper communication; an employer should communicate with employees the

functional objectives of the business, management steps prior to major changes
and workers should be given achieve to be hard.
- Ensuring empathy; the entrepreneur must put him/herself in the position of the
workers order to understand their problems.
- Ensuring proper motivation of workers by giving them prize.
- Treating workers with dignity and respect. An entrepreneur should take workers
as human beings like himself/herself.
- Putting in place proper way of handling grievances.
- Providing good leadership by setting examples through actions rather than
shouting at workers to force them to work
- Knowing workers well and by names. This provides for proper discussions
whether the entrepreneur can freely talk about the personal strengths and
weaknesses of each worker.
- Promoting economic satisfaction of workers; the employer should satisfy the
need of the workers especially the basic needs like food, clothing, shelter, etc.
Indicators of effective discipline in an enterprise;

- Cooperation and team work among workers.

- Timely and effective communication of necessary information on rules and
regulations to workers.
- Fairness i.e. treating workers equally without favoritism.
- Giving employees opportunity to present their complaints to higher authorities.
 - Absence of work strikes in the enterprise
- High level of productivity of workers
- Authority; it should be clear as to who is responsible in improving discipline.
- Well laid rules and regulations to govern employees
Causes of indiscipline among employees;

- Indiscipline among supervisors or managers

- Defective work by workers
- Bad habits like absentism, rudeness, late coming, etc.
- Inadequate work rules or failure to put in place public work rules.
- Inconsistency in enforcing discipline. Indecisive management.
- Favoritism where some employees are treated fairly compared to others.
- Excessive dictatorship on the side of management.
- Delays in paying workers’ salaries and wages.
Procedures for disciplining workers;

- Documentation,
- Disciplinary Committee,
- Verbal warning
- Written warning
- Dismissal
- Legal action
Reasons why entrepreneurs terminate workers services;

- To reduce expenditure on employees

- To attain a competitive advantage over other enterprises.
- To encourage innovation and creativity among workers
- To motivate employees using such negative rewards
- To get rid of the indiscipline employees
- To attract employees with better skills
 - To improve on the work of other employees
Reasons for the poor performance of employees;

- Limited ability
- Limited knowledge about the job
- Stress about work
- Emotional problems
- Limited motivation
- Negative group influence
- Poor working conditions
- Medical disorders
- Poor education
- Poor selection
- Inadequate training

TRAINING WORKERS

Training is the process of identifying and developing the necessary knowledge for
doing a job administratively and meeting compliant conditions.

Methods of training workers;

1) On the job training; this is delivered to employees while they perform their
regular jobs. This enables workers not lose time while learning. A time table is
established to monitor progress. It includes orientations, instruction training,
apprenticeship, internships and coaching.
2) Off the job training; this includes lectures, special duty, films, television
conferences, discussions, case studies, role playing, simulation, programmed
institution and laboratory training.
3) Induction training; this is given to new employees in the organisation where all
the necessary information about the organisation is passed on these employees.
It involves introducing new employees to the rest of employees, giving an overall
view of the entire operation and showing their jobs fit in the total operation of
the business.
 4) Management training; this is designed to enable managers acquire a final polish
on their work.
The procedure of training workers;

1) Setting organisational objectives; the organisation reviews its objectives so that

the training offered is geared towards attaining the set objectives.
2) Assessing the needs to determine whether there is a gap that requires training
3) Setting training objectives; the training objectives are set to guide the training
process for example developing a well-trained person, assisting employees
towards achieving their high potential, motivating and stimulating employee
participation.
4) Selecting the trainees; this involves deciding on what to be trained.
5) Setting training goals; these relate directly to the needs determined. Goals
transform the employee from one level of performance to another.
6) Selecting the training methods; these methods may be on the job or off the job
training.
7) Selecting competent trainers; on the job training is mostly conducted by
supervisors and off the job by outside instructors.
8) Administering the training; the training is then administered for the selected
employees. While training considerations are made on time, location, facilities,
accessibility, comfort and equipment to use.
9) Evaluating the training; this involves assessing the extent to which the desired
changes are accomplished. The newly acquired skills are compared with the skills
defined by goals of the training program.
Advantages of training workers;

1) It increases workers’ productivity; adequate training increases skill which

improves the quality and quantity of output due to increased performance.
2) Improves employee morale; training improves needed skills which build up
confidence and satisfaction of the employees.
3) It reduces the need for supervision of workers; a trained employee supervises
him/herself since he/she accepts responsibility.
4) It creates a pool of readily available and adequate replacements for personnel
who may leave or get promoted in the organisation.
 5) Enhances company’s ability to adopt and use advances in technology because of
a sufficiently knowledgeable staff.
6) It builds a more efficient, effective and highly motivated team which enhances
the company’s competitive position.
7) It ensures adequate human resources for expansion into new programs
8) It reduces employees’ turn over since workers will have the necessary skills
needed for the better performance of the job
9) It enables old/current employees to adjust rapidly to the changing job
requirements.
10)It enables the business to make long term profits since there will be a good
policy of investing in the development of their skills so as to increase their
productivity.
11)It gives employees a sense of satisfaction through achievement of personal and
company goals.
12)It reduces accidents since workers are trained to handle the work smoothly.
13)Training facilitates delegation and decentralization of authority since the workers
at different levels will be informed of what to do at the different position of work.
14)It improves employee-employer relations in an organisation which provides a plat
form for promotion of junior workers.
15)It improves the corporate image of the enterprise through possession of highly
motivated employees and production of high quality products.
16)It optimizes the utilisation of the available human resources due to a high level
of commitment built in the employees.
Purpose / Reasons for training employees

- To meet expansion needs.

- To improve employee morale
- In order to meet a pool for replacement of workers
- To increase productivity / encourage hard work.
- For increasing the ability to adopt a new technology or change.
- Need to reduce labour turn over
- To increase employee efficiency.
- To develop competence of employees
- To help employees grow within the organization e.g after training
- To make workers provide better services to customers
 - To maximize the utilization of the available human resource.
- To increase the commitment of employees
- To improve on employee – employer relationship.
- To build a positive employee perception of feeling about the organization.
- To improve on the quality of the product produced.
Factors that determine employee training and professional development.

- Future expectation. Employees who expect promotions go for further studies

compared to those who do not.
- Level of competition. Firms facing stiff competition encourage employee training
compared to those with low competition.
- Employee work schedule. Fixed work schedule limits the employee’s further
training while free time table favours employee training.
- Expertise management. Knowledgeable and highly skilled managers do not
support employees for further studies than those with less management skills.
- Financial capacity of the organization. Organizations with strong financial base
support their workers for training compared to those which are financially weak.
- Company objectives. Companies which aim at maximizing productivity
encourage employee training unlike those without specific objectives.
- Company human resource policy. A positive human resource aimed at developing
human resource encourage employee training compared to those policies
opposed to human resource development.
- Cost of training. High cost of training discourages employee training as compared
to those with low cost training.
Factors that limit employee training / challenges of training employees

- Limited time . Training needs time which most enterprises do not have.
- Limited trust of employees
- Broad expertise of managers.
- Limited trust of openness to employees.
- Unpredictable future business needs.
- Desire for high profits by business owners.
- Limited commitment on the side of trainees.
- Doubt about the value of training.
- Fear of losing workers.
- Difficulty in identifying training needs
- Limited skilled personnel.
Induction of new employees / orientation of new workers
This is the process of introducing the job and organization to the newly recruited
workers in the organization.

Objectives of employee induction.

- To enable new employees learn about company policies.e.g regarding quality.

- To reduce employee turn over .
- To enable new employees understand the organizational culture.
- To avoid confusion in the organization.
- To promote team work.
- To motivate new employees as they feel welcomed.
- To increase employee productivity through training.
- To enable new employees develop a sense of belonging to the organization.
The factors considered when preparing induction of new employees;

- Knowledge and the job. One should have the necessary knowledge about the
job which the new employees are to be inducted .
- Have the current employee serve as a mentor. There is need to give a new
employee a mentor to guide him / her on the job.
- Prepare a simple job break down. This spells out the contents of the job to be
done.
- Set a training timetable. This shows the activity and time when it is to be done.
- Arrange the work area. This involve arranging the venue for induction by
providing facilities required.
- Evaluate new employees work on a daily basis. This helps to know their
performance to guide them well where they are to work.
- Treat employees with a disability as other employees but provide specific
equipment to enable them perform the job effectively.
Steps followed in the induction process;

- Receiving and welcoming the new employees and obtaining personal data.
- Making employee tour around the business. This enables them find out where
different facilities are located.
- Introducing the new employee to the rest of the employees
- Giving employees an overall view of the business, including training and
performance appraisal programs and capacity development opportunities.
 - Giving the workers the dos and don’ts of the organization. Or reading rules and
regulations governing the business.
- Issuing an organisational chart to stress the hierarchical order and issuing job
descriptions to show the duties of the job as well as minimum work standards.
SAMPLE OF AN INDUCTION PROGRAMME

Name and address of the business

INDUCTION / ORIENTATION PROGRAMME

DATE (begin with ACTIVITY.( fill in PERSON IN REMARKS (don’t

the date on which Steps for inducting CHARGE( fill in fill in, leave it
the paper is being workers ) names of people) blank)
done

Prepared by Approved by

Ssemugaya ……………………

SSEMUGAYA FREDRICK SEMANDA FRED

HUMAN RESOURCE MANAGER GENERAL MANAGER

Basic rule for orientation of workers;

- Preparing the employees

- Present the work to the new employees
- Try the employee out under supervision
- Make a follow up on the work done
Advantages of inducting employees;

- It leads to improved productivity; it improves the quality and quantity of the

products produced which increases the workers level of performance.
 - It improves employee morale; training improves needed skills which build up
confidence and satisfaction of the employee
- It reduces employee supervision; it enables the employee to accept responsibility
and this require less supervision
- It enables the new employee to get used to the new work place building
confidence.
LABOUR TURN OVER

Labour turn over refers to the movement of employees in and out of business

Or, is the ratio of the number of employees that leave a company through dismissal or
resignation during a period to the number of employees on pay roll during the same
period.

Labour turn-over is measured in the following ways;

1) Crude wastage rate/separation rate. According to this method;

NUMBER OF LEAVERS
Labour turn over ¿ x 100
AVERAGE NUMBER EMPLOYED

2) Stability index. According to this method labour turnover is given by;

Stability index
NUMBER OF EMPLOYEE WITH ONE∨MORE YEA R' S SERVICE NOW
¿ x 100
NUMBER OF EMPLOYED ONE YEAR AGO

Causes of labour turnover;

- In adequate wage levels leading to employees moving to competitors.

- Low levels of motivation of workers/poor morale
- Recruiting and selecting wrong employees who later leave to look for more
suitable employment.
- A buoyant local market offering more opportunities to employees
- Promotion prospects in other businesses
- Ineffective communication in the organisation
- Delayed payment of workers’ salaries
- Disrespect of employees by bosses
 - Excessive work load to workers
- Excessive authoritarianism/unfriendly supervision of workers by bosses
- Sexual harassment to workers by bosses
- Lack of appointment letters/job security
- Lack of appreciation for workers’ efforts/contributions towards organisation
development
- Discrimination/segregation of workers in the organisation
Solutions to the high labour turnover;

- Engaging employees to make them committed; employees should be fully

engaged and given well designed jobs to bring about committed.
- Enabling employee to access knowledge; knowledge and ideas should be made
widely available to employees to make them stay in the organisation.
- Sharing information with employees; this makes employees feel appreciated for
their effort and thus chances of leaving are minimised.
- Optimizing workers’ performance by providing good working conditions.
- Internalizing the value of the job to create job involvement. This encourages
employees not to quit jobs.
- Respecting employee to make them achieve their self-esteem.
- Giving adequate and timely remuneration to employees.
- Recruiting employees who are qualified for that particular job.
- Practicing equal/fair treatment of all workers
- Empowering employee to enhance their continuity in enterprises i.e. delegation
of more tasks to subordinates.
Benefits of labour turnover;

- It brings new ideas, skills and enthusiasm to the labour force.

- It enables an enterprise to get rid of undisciplined workers/less productive
workers.
- It enables an enterprise to reduce its workforce rather than having too many
who are redundant.
- An enterprise can get new employees who are resistant to change.
 - It gives management the opportunity to restructure departments and functions.
- It allows flexibility in the way the organisation is run.
- New employees become excited about their new jobs and thus work harder to
please the management and client.
- New employees are willing to accept even lower pay rates.
The costs of labour turnover;

- Additional recruitment costs

- Low productivity
- Loss of know-how and customer good will.
- Potential loss of sales due to morale and productivity of those who remain in the
enterprise.
- Hiring costs
- Higher accident rates
- Under utilisation of production facilities
- Higher rate of scrap and waste
- Over-time pay is increased
- It lowers the reputation of the enterprise
Ways through which proper human resource management promotes quality
of the products;

- Ensuring workers job security through appointment letters.

- Giving workers timely and fair payment
- Training employees to equip them with required skills
- Ensuring proper organisational structure
- Motivating of employees
- Providing favourable working environment/conditions
- Carrying out objectives performance appraisal
- Promotion of good discipline among workers
PRODUCTION MANAGEMENT
Production refers to an activity that results into creation of goods and services
for the satisfaction of human wants.

OR

Production is an activity aimed at bringing a physical change in a good or

service to make it useful.

Production management is the process of planning for production and ensuring

that production plans are put into efficient operation.

A product refers to a good or service that a business produces or offers for

sale.

The product concept

To clearly understand a product, one needs to view the product from three
different levels:
 Actual product. This is a physical product defined by its design,
packaging, quality and brand name.
 Core product. This refers to the benefits of the product that actually
satisfies the consumers’ needs.
 Augmented product. This refers to the additional consumer service and
benefit built around the actual and core product.

Types of products

1. Intangible products (non-material goods). These are services that satisfy

human wants e.g. teaching, banking etc.
2. Tangible products. These are goods which are physical and can be seen.

Tangible goods are divided into:

 Non-durable goods. These are products designed to last for relatively

short period of time e.g. milk, bread etc.
 Durable goods. These are products designed to last for a relatively long
period of time.

Durable goods are further divided into:

a) Consumer goods. These are goods that are used by consumers as final
users.
Or
Consumer goods are gods meant for immediate consumption e.g. salt, sugar,
bread, clothing etc.
 b) Producer/ industrial/ capital goods. These are goods that are used as
inputs for further production e.g, industrial machinery and Equipments,
vehicle for business use etc.
c) Convenient products. These are products for which consumers have
knowledge of use.

Elements of a product
Elements of a product refers to the attributes/ features which make a product
different from others i.e. they are techniques entrepreneurs use to make their
products unique.

1. Branding. This the giving of a name or trade mark to a product to make

it different from other similar products e.g. tooth paste such as close up,
fresh up, delident, etc.
2. Product design/ Shape/ model. Entrepreneurs always strive to design
their products in order to have a difference from those of competitors e.g.
cameras, cars, computers etc.
3. Packaging. The design of a product should conform to the planned
packaging material. Packaging helps to promote or protect a product.
4. Labeling. Usually products are labeled with a view of identifying a
particular brand. This is done through symbols, coding, logos.
5. Product distribution. This involves making the product conveniently
more available by a firm to consumers than its competitors.
6. Method of sales promotion. Entrepreneurs use unique techniques to
promote their products e.g. unique pricing of products.
7. Technology used in production. Entrepreneurs normally use unique
methods of production that come up with a quality output than their
competitors.
8. Blending. This is the grading of different products or ingredients to come
up with a more quality good e.g. blended tea leaves, royco, etc.

Designing and developing the right product.

The image and profitability of a business largely depend on its product design.
While designing a product, an entrepreneur should keep in mind a number of
factors viz ;

1. Product attributes. The entrepreneur should ensure that he/ she

considers product attribute like shape, colour, brand name, durability,
quality, etc that are appealing to his customers.
2. Needs/ wants of the market. The entrepreneur should develop a product
in response to what customers want.
3. Availability of raw materials. The entrepreneur should consider the
availability and cost of raw materials so as to make profits.
 4. Feasibility and viability of the product. It is important for an
entrepreneur to analyse the extent to which a product can be produced
using the available resources (feasibility) and its profitability.
5. Availability of labour. An entrepreneur should consider the availability of
labour with the required skills to perform the production of the intended
product.
6. Competition. An entrepreneur should compare his products with those of
competitors. He/she should decide whether to produce exactly the same
or different products from those of competitors.
7. The nature of the potential market. An entrepreneur should consider the
customers to whom he expects to sell the products like their age, gender,
income bracket, interests, etc.
8. Nature of packaging materials to be used. An entrepreneur should
consider the nature of packaging material which makes the product
attractive.
9. Technology. The entrepreneur should consider the current status of
technology and scientific development in the field so as to produce a high
quality product.
10. Government policy on product design. The design should meet the
standard of regulatory bodies like UNBS, NEMA etc.

Importance of designing a product.

Designing a product is advantageous in the following ways:

 It increases the profit level of an entrepreneur since product creates good

product image of the business.
 Protection and preservation. Well-designed products are carefully packed
thus no contamination.
 Easy handling. Well packaged goods are easy to handle by entrepreneurs
and customers.
 Helps customers/ consumers to easily identify and differentiate the right
product from other similar products.
 It creates brand loyalty which increases and or retains customers since
they repeatedly buy the same product.
 It enables the entrepreneur to standardize the price of the products
which can help him/ her use the system of resale price Maintainance.
 Well-designed goods/ products reduce the costs of production through
economizing materials used to design them.
 It enables an enterprise to meet the required standards and
specifications provided by Uganda National Bureau of Standards (UNBS).
 Well-designed products are easier to promote through advertising and
other methods of sales promotion.

Activities involved in the production process.

  Carrying out market research. This involves finding out the potential
customer’s opinions about the product.
 Developing the product idea. This involves planning the shape, size
colour etc. of a product to be produced.
 Translating a product idea into product design.
 Sourcing raw materials. This involves obtaining the raw materials
necessary for production of a particular product.
 Carrying out actual production while observing the quality standards.
This involves transforming raw materials into finished products.
 Packaging the products. This involves wrapping the product to protect it
against contamination or pouring.
 Branding the product. This involves labeling the product as well as
including other distinguishing features from the similar products of other
manufacturers.
 Storing the product. This involves putting/ keeping the product in a good
place with good storage conditions that do not tamper with the product
quality.
 Distributing the product. This involves offering the product for sale to
customers. It includes all activities that enable the product reach final
consumers.
 Making a follow up with customers to find out how the product is
performing in the market.
 Making any improvement desired. After obtaining feedback on quality
from customers, an entrepreneur makes improvement on the product.

Important aspects in production of goods/ services.

For an entrepreneur to be in position to retain the market of his/ her product
and out compete others, these must be considered.

1. Quality of the product. He should produce a product of right quality.

2. Technology, its source and technical skills for the production process.
3. Raw materials and its acquisition.
4. Production support services like financial services, advisory and
technical services.
5. Production process, this is how the business intends to produce the
desired good/ service. It involves carrying out;
i. Market research
ii. Sourcing for raw materials
iii. Carrying out actual production
iv. Packaging of the product
v. Branding
vi. Distributing the product
vii. Making a follow up with customers
viii. Making improvements desired by customers.
Factors affecting production decisions.
 Facilities and organization. This focuses on all what the entrepreneur
requires to produce or sell a product.
 Sales potential. This shows how much, why and when the customers will
buy the product.
 Costs. This involves setting a reasonable price for the product basing the
costs.
 Sales promotions and growth. This involves the type of promotion an
entrepreneur is to use and analyse whether the sales will be increased.
 Money requirements. This shows the initial investment required,
operating capital required and the revenue required generating money for
expansion.
 Labour requirements. This focuses on the number of employees required,
their wages and salaries, training programmes required and where they
are sourced.
 Supply sources. This shows the raw materials needed, quality and
quantity needed and the prices for the raw materials.
 Transportation. This focuses on how the entrepreneur is to handle
transportation of materials and finished goods.
 Acceptance by community. This analyses the general feeling the
community has on the product and hot the community helps or hinders
the business operations.
 Legal requirements. This show the licenses required, processes that are
potential, local business requirements. Etc.

Purchasing skills.
Purchasing refers to the process of procuring materials and components
needed for production and Maintainance of the business.

Or
Purchasing means keeping production supplied with the required goods and
services at the right time and right place.

Principles of purchasing
The main principles of effective procurement/ sourcing of materials in the
business include:

1. Right quality. This is the quality that is most appropriate for a given
purpose i.e. shape, colour, etc.
2. Right quantity. The amount of goods supplied should be what was
actually agreed upon to create satisfaction of the buyer.
3. Right price. The items supplied should not be inflated (increased) but
should be what is currently prevailing in the market.
4. Right time. Proper timing is important to avoid excessive stock and stock
 out problems. The entrepreneur should consider the lead time of the
supplier.
5. Right delivery place. The product should be delivered to the right place in
order to minimize on the costs and time for the production process.

Objectives of purchasing
 To ensure that the organization has a sufficient stock of raw materials,
goods in the process of production and also finished goods.
 To develop and maintain adequate standards and quality of purchased
raw materials.
 To avoid duplication and wastage of raw materials
 To study, anticipate demand levels and match them with the company’s
purchases.
 To maintain the organization’s competitive edge in the market by
practicing a cost effective purchasing process
 To develop long term relationships with external suppliers to ensure that
the interests of the business are assumed at all times e.g. obtaining
right quality goods at a right price.

Procedures for purchasing goods, raw materials and requirements from

suppliers.
1. Determining the business needs. This is done through conducting
market survey in order to know who the consumers are as well as
establishing their wants.
2. Identifying potential suppliers. This involves finding out the different
suppliers who have the materials need by the business say through
contacting/ asking friends, contacting media or business support
organizations.
3. Contacting the suppliers. This involves the entrepreneur contacting
different suppliers directly or by visiting their offices to obtain
information regarding goods each supplier can provide.
4. Selecting the best suppliers. This involves comparing quotation received
from various suppliers to determine what each of them can offer and
then select the best supplier basing on prices and other factors.
5. Ordering for goods. This involves the entrepreneur placing an order
requesting for the supply a particular item.
6. Checking the goods as soon as they are received. This involves checking
the delivery note to ensure that is corresponds with the order, damages
may be isolated or excluded.
7. Checking the invoice for accuracy. This involves checking whether the
invoice is correct by comparing with the delivery note.
8. Making payments. This involves the entrepreneur paying the supplier for
the goods ordered and received by cash or cheque. A receipt is used as a
proof of payment.
Factors considered when selecting raw materials for a manufacturing firm.

N.B: Raw materials are the basic materials from which products are made.

When selecting raw materials and suppliers, the following factors are
considered.

1. Source/ location of raw materials. Nearby raw materials sources are

preferred or selected compared to far sources of raw materials.
2. Cost of raw materials. Entrepreneurs select cheaper but quality raw
materials.
3. Quality of raw materials. Entrepreneurs usually select good quality raw
materials in order to produce high quality products.
4. Terms and conditions for payment of raw materials. An entrepreneur
selects raw materials from suppliers that offer favourable terms of
purchase e.g. discount, credit facilities, etc.
5. The lead time of the supplier. One selects a supplier/ raw materials from
supplier with short lead time so as to avoid stock out and loss of
customers to other competitors.
6. Quality of raw materials. An entrepreneur selects a supplier with enough
raw materials so as to maintain production of the business.
7. Amount of waste from the production process. Businesses prefer
materials that produce less waste to those that produce much.
8. Amount of units of raw materials used per production cycle. The amount
of raw materials selected corresponds with goods to be produced per
production cycle so as to yield more output than inputs used.
9. Amount of raw materials to be maintained in inventory. One selects
materials which are easily stored. This depends on the business policy
and the rate at which goods are produced and bought.
10. Availability and reliability of the raw materials. An entrepreneur
selects raw materials that are available and reliable whenever needed.
11. Risk of damage. An entrepreneur selects materials whose risk of
damage is low.
12. Amount of waste from the production process. Businesses prefer to
use raw materials that produce less waste to those that produce much.

Factors considered when selecting suppliers

 Distance between the entrepreneur and he supplier.
 Past performance. Suppliers with good past performance are selected.
 Reputation of the supplier. One selects a supplier with good reputation.
 Lead time. One selects suppliers with short lead time.
 Price consideration. Suppliers with lower prices are considered.
 Ease of communication with the supplier. Convenient suppliers are
selected.
  Quantities available for supply. One selects suppliers with enough and
readily available supplies.
 Transport mode and availability.

Steps that can be taken to ensure purchase of quality materials.

 Identifying the materials to be purchased.
 Identifying the specifications of the materials
 Comparing materials with standard materials on the market
 Generating attractive sources of suppliers
 Assessing the credibility of the suppliers
 Making economic orders considering lead time
 Checking and testing the quantity of the materials before accepting tem.

Steps considered when making purchasing plans

 Determining the proper quality of everything needed.
 Establishing and following quality standards.
 Ensuring on time delivery of items needed.
 Purchasing at the right value of the quality and quantity of items
brought.

Elements of a work place that increase productivity of the business.

A work place if a place where actual production of goods and services is carried
out e.g. kitchen, office, store, class rooms, factories, etc.

Elements
 Material handling and storage. This requires proper handling of all
materials that are used in the production process.
 Work station. This is a place where production work of goods and
services takes place for example factory, school, etc. it should be
designed such that it promotes efficiency and quality.
 Production machine handling and safety. This requires different methods
of making the machines safe so that they are so much productive and
faster.
 Control of hazardous substances. Hazardous substances are dangerous
materials that cause harmful effects to workers e.g. broken glasses,
chemicals, contaminated food, etc. They should be controlled to avoid
losses ad promote quality.
 Lighting. Good quality lighting in the work environment increase
productivity.
 Welfare facilities. These should be in place to enhance workers’ health,
morale and productivity.
 Premises/ work layout. The management can improve work place layout
and working conditions in the work place for better efficiency.
  Work organization. Proper work organization optimizes production and
job satisfaction.

Objectives of work place management

 To properly handle and store materials as some need careful handling
and storage
 To facilitate easy movement of workers at the workplace.
 To avoid accidents and dangers that are caused by workers and
machines
 To control hazardous substances involved in the production process of
chemicals from affecting others.
 To suit the conditions of production
 To create conditions favourable for workers so as to increase
productivity.

Material handling and storage

 This involves proper handling and storage of materials in right places.

Reasons for proper handling and storage

 To reduce material damages and losses due to theft
 To reduce time wastage during production
 To reduce accidents that would be caused to workers
 To gain space for further production and easy
 To reduce costs related to over/ under stocking

Ways of ensuring proper material handling and storage

 By keeping items that are frequently used away from the work place
 Through providing convenient storage tracks for tools and materials to
ensure that materials and requirements are stored and managed
frequently.
 By providing specifically designing equipments in workplace for moving
inventory
 Through using caterpillars, cranes, pulleys when moving heavy loads
 By providing stores and cup boards for easy handling of machines/
materials.

Work station
This refers to the actual place where production of goods and services is done.

Ways of ensuring proper workstation management

 Putting machine switches and other tools within easy reach of workers
 Using lifts and other mechanical measures to reduce the effort required
by the workers
 Providing a stable work surface at each work station
  Using cramps for holding things tightly and vices with two saws for
hodlig things firmly
 Adjusting the height of equipment to avoid bending postures or high
hand positions which strain workers
 Provision of enough space within workstation which enables smooth
production process to take place.

Machine handling and safety

Ways of ensuring proper machine handling and safety
 Attaching proper guards to dangerous moving parts of machines and
power transmission equipment.
 Using safety devices which prevent running of machines while the
workers’ lives are in danger
 Redesigning situations which interfere visibility, production and
maintenance like aeration
 Making sure that the machines are well maintained by regularly
servicing them.
 Reading and following instructions about the use of machines before
using them
 Putting precautions for use of machines.
 Painting machines to avoid rusting which affects their use
 Covering machines when not in use like computers to avoid dust effects
 Employing skilled employees to avoid accidents caused by machines
 Through close monitoring and supervision of employees
 Switching off machines in case of any break down and reporting it
immediately to competent personnel
 Checking machines to find out whether they are in good order before
they are switched on for use
 Avoiding use of the machines for something they are not designed for.
Respecting machine capacity.
 Ensuring proper connection of machines to avoid short power circuits
and damaging machines.

Factors considered when selecting machines

 Cost of the machine. An entrepreneur selects machines whose cost is fair
in terms of purchase and installation.
 Life span of the machine. Entrepreneurs prefer durable machines nu
 Efficiency of the machine. More efficient machines are preferred
 Capacity of the machine. One prefers machines that have large
production capacity
 Skills required to operate the machine. Machines that require less skills
are preferred.
 Terms and conditions of payment offered by a seller. Entrepreneurs
prefer machines from suppliers that allow credit.
  Guarantee and warranty given by the manufacturer. Machines with a
warranty are preferred.
 Power consumption of the machine. Machines that consume less power
are preferred.
 Availability of other equipments that are required to operate the
machines. One prefers a machine with available cooper ant factors
 Flexibility of the machines. Machines that are flexible are preferred.
 origin of the machines. Machines from reputable producers are preferred.
 Availability of labour. One prefers machines that can easily be used by
the available labour force.
 Taxes on the machines. One prefers machines with less taxes.

Control of hazardous substances

Hazardous substances refer to dangerous materials to workers e.g. brokers,
glasses, chemicals, contaminated food.

Reasons for controlling hazardous substances

 To minimize losses in business
 To improve or enhance quality
 To minimize health complaints among workers
 Need to promote efficiency/ productivity of workers
 To minimize or control pollution
 To avoid accidents
 To maintain good relationship within the society

Ways of controlling or handling hazardous substances in an enterprise

 Substituting hazardous substances or chemicals with less hazardous
ones
 Keeping hazardous substance covered in containers
 Providing adequate and appropriate types of protective equipment
 By ensuring proper disposal of hazardous substances
 By training workers on proper use and Maintainance of protective
substances
 by providing adequate emergency, health and safety facilities
 through reading and understanding instructions on the hazardous
substances before using them
 ensuring proper lighting facilities or ventilation
 providing warning labels on hazardous substances or areas to minimize
accidents
 developing general rules on safe working habits and publicizing them e.g.
washing hands with soap, changing clothes and cleaning the
environment
 through maintenance of health and safety records or statistics
 through proper supervision and monitoring
Lighting facilities
Ways of ensuring proper lighting
 adding skylights and keep skylights and windows clean to let in natural
light in the work place
 painting the ceiling white and in white colours to help reflect light
 providing artificial lighting systems e.g. installing reflectors or
prepositioning existing lights to improve on light
 reducing obstruction and eye strain by positioning workers so that they
don’t face bright light from windows or other sources
 providing local lighting or adjustable lights
 cleaning and maintaining light fixtures and replacing bulbs lights
regularly to provide enough light
 switching off in case there is no need of light

Welfare facilities. This helps to enhance health, morale and productivity

through work related welfare facilities

Ways of ensuring/ improving welfare facilities

 Providing adequate supply of cool safe drinking water in all workplaces to
the workers.
 Providing regularly cleaned sanitary facilities, close to the work place
including soap for washing hands and separate toilets for both sexes
 Providing a separate comfortable hygienic place for meals of the workers
while at work
 Availing storage space for person clothing, bicycles or private changing
rooms to workers as they report for work
 Providing resting time (breaks) and resting place to help workers get
refreshment at work
 Providing recreational facilities to the workers within the workplace to
help workers spend their leisure time
 Providing first aid equipments
 Providing special clothing e.g. company uniform
 Providing working incentives which keep mind awake like music during
production

Work premises (work place layout)

Ways of improving work premises
 Providing sign posts for the business to direct visitors and other people
involved in the workplace
 Providing clean environment for the business to ensure cleanliness
 Improving ventilation and heat protection of the building by covering
metal walls and roofs with insulting materials
  Increasing natural ventilation by having more roof and opening, windows
or open doors
 Moving source of heat, noise, fumes, welding out of the workplace to
provide good conditions for production
 Providing enough fire extinguishers within easy reach and ensuring that
workers know how to use them
 Providing walk ways and freeways at the work place
 Clearing passage and providing marking of barriers to keep them clear
and allow free movement of workers
 Eliminating irregular wiring connections to reduce risks
 Ensuring that the layout and the working conditions are in good order to
suite the nature of the product and productivity of the business
 Ensuring safety and security of assets of the business
 Providing good storage facilities for raw materials, work in progress and
finished goods during production
 Ensuring enough work space for workers during the production process
 Ensuring stability of the work surface for quality products to be
produced
 Providing proper furniture to the employees to use during production
with stable back rest
 Allowing for further development plans where expansion can take place

Work organization
This helps to optimize production and job satisfaction through better work
organization.

Ways of ensuring proper work organization

 Eliminating some tasks by using machines
 Keeping workers alert and reducing fatigue through frequent changes in
tasks, opportunities to change posture, short breaks, music etc.
 Using quality circles or group work to improve productivity and quality of
the workers
 Through re-arranging layout and order of operations to improve
production flow, efficiency and productivity
 Dividing labour and separating tasks so that each worker knows what is
supposed to do and when
 Avoiding monopoly by using shifts for workers during production process
 Keeping records for worker’s performance and those who are better being
rewarded e.g. by promotion.

THE CONCEPT OF INVENTORY
Inventory refers to the stock of goods held in the business at a given period of
time.
Types of inventory
 Stock of raw materials
 Stock of finished goods
 Work in progress/ semi-finished goods
 Goods under repair
 Office supplies
 Consumables. These are used during the process of production

Inventory management
Inventory management refers to the activities aimed at ensuring that the right
quality and quantity of stock required is at the required time.

OR
It refers to various ways or rules of controlling inventory.

Tools of inventory management

1. Re-order level. This refers to the minimum level below which stock
should not fall before fresh or new orders are made.
2. Lead time. This refers to the time lag (period between placing an order
and receiving the goods.)
3. Working capital. This is the amount of money used in the daily running
of the business.
4. Asset register. This is a document used to record and establish the
number of assets at the end of the year.

Measures/ ways for proper management of inventory

 Periodic/ regular stock taking
 Determining/ fixing/ setting lead time
 Monitoring the flow of stock
 Keeping proper business records
 Determining the re-order level
 Ensuring tight security
 Proper storage and getting out of available stock
 Ensuring or maintaining sufficient working capital
 Carrying out stock reconciliation
 Physical stock counting
 Ensuring continuous supply of raw materials to avoid production
interruption
 By keeping optimum investment in inventory.

Dangers of over investment in stock

 Unnecessary tie up of the firms funds and loss of profits
 Opportunity cost of tied up funds
 Excessive carrying cost incurred in storing the items.
Dangers of under investment
 Production stoppage
 Failure to meet the delivery commitment
 Loss of customers and customer good will
 Production of substandard items or goods
 Ordering costs. These are costs incurred by a firm when placing orders.
They include;
o Requisitioning costs
o Purchase ordering costs
o Transportation costs
o Receiving costs
o Inspection costs
o Cost of movement to stores

 Storage costs
 Insurance costs
 Obsolescence and deterioration costs
 Lighting costs
 Heating and cooling costs
 Lighting costs
 Heating and cooling costs
 Costs on security
 Opportunity cost on funds tied up
 Rests resulting into losses

Objectives of inventory management or control

 To ensure constant availability of goods when required.
 To account for the goods which have been produced.
 To avoid tying up a lot of working capital in inventories.
 To ensure timely replacement of raw materials for production or goods
for sale.
 To minimize over stocking and under stocking
 To meet demand fluctuations and avoid embarrassing and expensive
stock outs.
 To reduce stock losses while in store and to buy materials which may not
expire quickly or deteriorate due to change in fashion.
 To maintain timely records of all items and to maintain the stock
within the desired limits.
 To allow flexibility in production scheduling as well as marketing.
 To have an update of records or information
 To ensure sufficient use of materials
 To acquire and maintain adequate storage technology
  To ensure proper lead time management or in the procurement
inventory.
 To relieve management of excessive supervision of inventory.

STORES MANAGEMENT
A store is a place where stock of raw materials or goods is kept before it is sold
A store helps to protect goods from getting spoilt, damaged or stolen.
Stores management refers to the process of keeping inventories/ stock before
they are consumed or sold off.

Stock levels. This is the amount of stock that should be maintained by

the business.

Types of stock levels

 Maximum stock level. This refers to the level beyond which stock should
not be allowed to rise.
 Minimum stock level. This refers to the level below which stock should
not be allowed to fall.
 Re-order level. This refers to the point at which stock should not fall
before fresh/ new orders are made.
 Average stock level. This refers to the average of maximum and minimum
stock level.

Factors that affect stock levels.

 Availability of raw materials. Easy access of raw materials leads to low
stock level compared to limited access.
 Lead time. A long lead time leads to a high stock level compared to a
short holding costs. High cost leads to low stock level and low cost lead
to high stock level.
 Consumption. Higher consumption level leads to high stock level than
low level of consumption.
 Trade discount allowed. More trade discount lead to high stock level than
low/ no discount.
 Durability of stock. Durable items are stocked in large quantities than
perishable items.
 Availability of space. Large business space calls for large stock than
small business space.
 Level of demand. High demand leads to large stock than low demand.

Tools of stores management.

1. Stock card.These are cards used for recording stock received and issued
in the store.
 Example

KAMU SPORTS CENTRE

P. O BOX 10
JINJA
TEL: 0414 507077

STOCK CARD

Name of the item........................................... Item No...........

Card No..........

Date Particula Quantit Date Quantit Balanc Issue Authorize

receive rs y of y e d to d by
d receive issu issued
d e

b) Stock requisition form. This is a document that shows the details of

what is being requested for and the corresponding record of issue.

Illustration.

KAMU SPORTS CENTRE

P. O BOX 10
JINJA
TEL: 0414 507077

STOCK REQUISITION FORM

Date...........
 Request from..............................................................................

Department..................................................................................

Date Particula Quantit Date Quantit Balanc Issue Authorize

receive rs y of y e d to d by
d receive issu issued
d e

c) Physical stock counting. This refers to the counting of stock physically

to

find out what is available in store to crosscheck with what is expected to

be there as per stock cards.

This helps an entrepreneur to know how much is available so that more

can be ordered.

d) Stock reconciliation. This refers to the process of updating and

balancing all records regarding what is in the store so as to give a true of
what is updated and balanced.
e) Stock taking. This refers to the actual counting of the stock available
in the store i.e. the entrepreneur counts his/ her stock one by one.
f) Stock ledger. This is a document that shows the quantities and
monetary values of the stock items.

LABOUR REQUIREMENTS
Labour refers to my human effort, physical or mental directed towards
production of goods or service in return for payment.
An employee is a person who works for the business in return for a wage or
salary.

Types of labour.
a) Skilled labour. This is where a worker possesses special skills,
knowledge or ability in work.
b) Semi-skilled. This is where a worker possesses certain skills in his
area of work but he/ she has limited training hence needs close
supervision.
c) Un skilled labour. This is where a worker possesses no skills and he/ she
performs simple duties which require exercise of tittle or no independent
judgement.
Need for labour in an enterprise.
 To increase production of goods and services
 To combine with other factors of production to aid production.
 To manage business operations
 To facilitate the exploitation of the would be idle resources
 To promote good public image of the business
 To replace the dead, inefficient employees
 To increase government revenue through planning.

LABOUR PLANNING
This refers to determining the number of workers, skills, wages or salary of the
labour force.

Factors that determine the number and types of employees to work in the
business.

1. Type of skills. Work that requires special skills takes less workers than
one this open.
2. Number of jobs available. More jobs available calls for more labour/
workers than less jobs available.
3. Family members supporting the business. Businesses with many family
members supporting the business requires less external labour than that
with less or no family members supporting it.
4. Cost of hiring labour in relation to business output and profit. Higher
costs reduce labour required since it reduces business profits than low
costs.
5. The level of demand for the product. High demand for the products
increases labour required than low demand for products.
6. The level of technology needed in the business. Advanced technology
calls for less labour than traditional technology.
7. Size of the business. Large businesses use more labour than small
businesses.
8. Source of employees. Local labour is used more than international labour
(expatriates)
9. Working experience of the employee. Experienced labour is needed more
than in experienced labour.

Factors considered when recruiting workers in an organization.

 Cost of the employee. An entrepreneur recruits workers who are
relatively cheaper in order to earn profits.
 Gender/ sex of the employee. Most enterprises employ more men than
women maintaining that women have a lot of marital responsibilities.
 Language spoken by the employee. Some businesses require people who
speak a variety of languages e.g. radio and TV presenters.
  Age of the employee. Entrepreneurs always employ people who are
above 18 years.
 Number of workers needed. For a bigger organization, the number
should be relatively big compared to a small business.
 Working experience. Entrepreneurs want to employ workers who
have experience to perform the job compared to those with no work
experience.
 Type of skills required. Workers who have the required skills are
recruited more than semi-skilled and unskilled.
 Health conditions of the employee. Employees with good health status
are most employed than those with poor health who may be associated
with high level of absenteeism.
 Marital status. Most employees prefer people who are single because they
are committed to work and are flexible but this depends from
organization to organization.

TECHNOLOGY FOR SMALL BUSINESS

Technology refers to the know-how, design and intellectual input of doing
things.

Types of technology
1. Indigenous technology. This is the art developed with in the country and
passed over the years from generation to generation often with no
development or improvement.
2. Advanced/ modern technology. This is the technology that has been
developed from modern scientific principles e.g. use of projectors.
3. Adapted technology. This is technology developed by one country or
society and copied by another.
4. Transferred technology. This is technology developed by one country and
transported to another country.
5. Intermediate technology. This is technology that strikes a balance
between labour and capital intensive technology.
6. Capital intensive technology. This is technology that uses more of capital
than labour.
7. Labour intensive technology. This is technology that uses more labour
than capital.
8. Appropriate technology. This is technology that suits the level of
development of a country or firm.

Features/ x-tics of appropriate technology

a) Simplicity i.e. it should be simple to use/ operate.
b) Effectiveness. It does right work in the shortest time required.
c) Availability. It should be easy to access.
d) Flexibility. It should allow changes with time.
e) Durability. It should last/ stay for a long period of time
f) Efficient i.e. faster
 g) Cost effective. It Minimises costs or cheap.

Factors that influence the choice of technology

 Technological requirements. Firms use technology with less requirements
than one with many requirements.
 In put constraints. The more the inputs the lower the demand for such
technology than less input requirements for the fact that developing
countries have constraints in getting them e.g. raw materials.
 Investment costs/ outlay/initial cost of technology. Entrepreneurs
choose cheaper technology to minimize costs than expensive technology.
 Production costs/ overhead costs. Costly production requires more
efficient technology than slow technology.
 Ability to use other inputs/ co-operant factors. Entrepreneurs prefer
technology that is adaptive with other inputs than one which is difficult.
 Production and efficiency of technology. Efficient technology is preferred
to inefficient technology.
 Market conditions/ market trends/ size of market/ demand. Technology
of a high capacity is preferred for a product with a stronger market and a
small capacity is used where the market is uncertain.
 Government policy on technology. Entrepreneurs choose technology that
is in line with government policy than technology which is destructive.
 Ease of Maintenance and repair. Technology that is easy to maintain is
preferred to technology which is not easy to maintain.
 Impact that the technology has on the environment. One prefers
environmentally friendly technology to one that is not environmentally
friendly.
 Availability of skilled man power. Technology to be used depends on the
availability of skilled man power to operate it.
 Resources of the business. Businesses with more resources go for
advanced technology than those with limited resources.
 Availability of spare parts/ complimentary components. One chooses
technology with readily available spare parts than those with scarce
spare parts.
 Adaptability/ flexibility of technology. Flexible technology is preferred to
one that is not flexible.
 Durability/ life span/ useful life of technology. Durable technology is
preferred.
 Power consumption. Technology that consumes less power is preferred.
 Guarantee/ warranty given by the manufacturer. One prefers technology
with a guarantee.
 Terms and conditions of payment. One prefers technology
 Source/ origin of technology/ nature of suppliers. Technology from
reputable sources is preferred.
 Nature of technology used by competitor. Level of competition. One
prefers technology which is better than one used by competitors
  Availability or accessibility of technology. One prefers technology that is
locally available.
 Plant capacity. Large plant capacity requires advanced technology as
compared to small/ low plant capacity.

TYPES OF PLANT CAPACITY

Feasible normal plant capacity. This refers to capacity attainable under normal
working conditions established on the basis of installed capacity technical
conditions of the plant. OR
It refers to the volume or number of units that can be manufactured during a
given period of time.

Normal maximum capacity. This is the capacity which is technically

available and often corresponds to the installed capacity guaranteed by the
supplier of the product.

PRODUCTION MACHINERY

EQUIPMENT

TOOLS AND FACILITIES

To attain and maintain quality of products and control capacity of production,

there is need for an entrepreneur to select machines, tools and Equipments
which can operate efficiently and effectively.

Machinery refers to a group of machines in general that gets work done e.g. a
sewing machine, recording machines, etc.

A machine refers to a device which performs certain functions e.g. sewing

machine, vending machines, washing machines etc.

Equipments. These are things needed to do some work.

Some machines which are specific for particular function are also referred to
ad equipments e.g. office computers, calculators, type writers, weighing scales
etc.

Tools. A tool is any instrument or apparatus which held in the hand to do some
work e.g. an axe, hammer, spade and knife.

Factors that affect the choice of machinery, tools and equipments.

1. Initial cost of machinery and equipments. An entrepreneur selects
machinery which is cheaper to buy than one which is expensive.
2. Capacity of the machine. A machine with large capacity is selected than
one with low production capacity.
3. Ease of Maintenance and repair. Machinery that has spare parts and
repair services available is more desirable than that whose spare parts
and maintenance services are scarce and expensive.
 4. Flexibility for adjustment in relation to customers changing tastes and
preferences. An entrepreneur selects machinery that can easily adjust to
customers’ tastes and preferences.
5. Source of machinery and equipments. Entrepreneurs usually buy
machinery from reliable suppliers e.g. Germany or Japan to those from
England and or China.
6. Availability of other equipment (co-operant equipments) required to
operate machinery or equipment. Machinery with available co-operant/
complimentary equipment is selected.
7. Productivity and efficiency of machinery. An entrepreneur chooses
machinery that us efficient than one that is not.
8. Complexity of work or task to be done. More complex machinery is
required for complex work than simple machinery.
9. Guarantee/ warranty given by the manufacturer in terms of efficiency,
durability, maintenance, quality and safety.
10. Life span or durability of the machine or equipment.
11. Power consumption of the machine.
12. Terms and conditions of payment offered by the seller.
13. Availability of labour to operate the machine.
14. Skills required to operate the machine.

Contributions of technological advancement in business.

 Improving productivity i.e. advanced technology increases the level of
output since production per unit time increases.
 Enhancing labour knowledge and skill development, which help workers
to complete a given task in the shortest time possible.
 Enhancing customer satisfaction. This is because it creates efficiency in
service delivery hence leading to satisfaction.
 Increasing the level of profits in the business as sales increases due to
improved technology guaranteeing increased profit margin.
 Increasing resource utilization i.e. resource that would remain idle are to
be exploited.
 Minimizing resource wastage since advanced technology provides a
means of accountability.
 Reducing operational costs through automatic ways of production which
Minimises labour costs.
 Enhancing competition i.e. technological advancement enables the
enterprise to stay ahead of competition due to production of quality
products and better production strategies.

PRODUCTION EQUIPMENTS AND FACILITIES

Common facilities and equipments required to produce a product include;
 Plant lay out
 Choice of technology and machines
 Plant capacity
PLANT LAYOUT
This refers to the arrangement of machines and other production facilities
according to the production flow.
OR

Plant layout refers to the physical arrangement of physical facilities like

machinery, equipments and furniture within a factory building in such a way
so as to have the quickest flow of work at a lowest cost.

Components of a plant layout.

 Storage facilities for materials, suppliers, work in progress, and finished
goods.
 Space required for movement and provision or emergency outlet.
 Room for future expansion
 Process flow and flow of materials
 Means of interdepartmental communication e.g. notice board.
 Disposal of industrial waste
 Security room.
 Machinery/ process section/ work station.
 Employee facilities (toilets, bathrooms etc)
 Parking yard
 Inspection room/ section
 Maintenance section
 Power/ generator room
 Entrance/ exit etc.

SAMPLE OF A PLANT LAYOUT

SECURITY ENTRANCE ADMINISTRATION OFFICES

PARKING YARD WARE HOUSE WATER SOURCE

MACHINERY SECTION INSPECTION ROOM

Jl

MAINTENANCE SECTION DISPATCH ROOM WEIGHING

SECTION

EMPLOYEE FACILITIES DISPORSAL SECTION PACKING/

GRADING SECTION
N.B: Toilets facilities, disposal sites and power rooms should be located far
away from the production section.

Factors considered when designing a plant payout.

1. Nature and size of the factory/ plant building. The nature and size of the
building determines the floor area/ space available for layout.
2. Nature of the products to be produced. For uniform products, product
layout is suitable while for customer made product, process layout is
more appropriate.
3. The production process for the product. In manufacturing firm, process
layout is economical and efficient and in assembling industries, procut
payout is preferable.
4. Type of machinery to be used in production. General purpose machines
are arranged as per the process layout while special purpose machines
are arranged according to product layout.
5. Plant environment. Noise, heat, pollution, ventilation, light and other
aspects should be considered. For example, welding section and other
sections should be located in separate rooms so that firms can be
removed through proper ventilation.
6. Human needs. Adequate arrangement should be made for employee
facilities like toilets, changing/ dressing rooms, resting rooms, repair and
maintenance, adequate space should be put between facilities to allow
for movement of equipment and people required for repairing machines.

TYPES OF PLANT LAYOUT

There are three types of plant layout namely;
1. For manufacturing business.
2. For service business
3. For trading business.

1. Manufacturing business.

Here the plant layout of may be divided into:

a) Product line layout. Under this layout, machines and equipment are
arranged in one line depending on the sequence of operation required for
the product e.g. in a beverage processing factory.
b) Process layout. This is where machines of a similar type are arranged
together at one place e.g. for a maize milling factory.
c) Location layout/ fixed position layout. This is where the product being
produced is fixed at one location. All facilities are arranged at one centre.
d) Combined layout. This involves the combination of all other layouts
above. Most manufacturing units have this layout.

TRADING UNITS.

Here there are three kinds of layout.

i) Self-service layout. This involves positioning of goods in such a ay
that customers can lead themselves thorough the store e.g. in
supermarkets, departmental stores, some groceries, etc.

ii) Full service layout. This is used by enterprises which sell to fewer
number of customers or sell high priced products like furniture, office
machines, etc. They provide all necessary equipments in one area for
example Hwansung furniture.

iii) Special service layout. These are used in store that require special
design e.g. retail layout.

SERVICE UNITS

Service businesses such as entertainment centers, hotels, restaurants, etc. give

attention to client convenience, quality of service and efficiency in delivery
services.

Importance of a good plant layout.

 It increases production as work is done easily and faster.
 It leads to maximum exposure to natural light and ventilation thus
improving work station.
 It leads to labour efficiency, proper supervision and control.
 It increases safety because workers have more room hence less
accidents.
 Improves on the way materials are handled because raw materials are
located in the right place.
 Proper plant layout allows flexibility in operation.
 Proper plant layout encourages economic use of the plant building.
 Promotes effective utilization of man power.
 It reduces wasted space since each part of the floor space will be used in
the best way.

PRODUCTION PLANNING AND CONTROL

Components of production plan.

 Raw materials. These are materials needed to make a product.

 Labour planning. This involves determination of the number of workers,
skills, wages and salaries of labour force.
 Costing. This involves the determination of the total cost of producing
one product including the cost of materials, labour and over heads.
 Plan location. The site of the plant chosen should be viewed in relation to
other equipments or facilities in the environment.
 Office space. This is the space required for key personnel to operate.
 Capital equipments. This involves the number of equipments whether
rented, built or purchased.
  Work schedule. This shows the work distribution for workers and the
time allocated to do work to avoid idle time.
 Waste disposal. This is the placement of waste into the land. It involves
designing of special facilities for permanent usage and other ways of
managing waste.
 Packaging. This involves planning for the type of packaging to be used.

PACKAGING

This is the wrapping, sealing, filling or compressing of the goods to protect

them or handle, transport and preserve them easily.

Packaging refers to the enclosing of products in containers and wrappers to

protect them from atmospheric conditions.

Types of packaging

1. Bottling and canning or putting in bottles

2. Bagging or putting in bags
3. Putting in plastic containers/ jerycans
4. Tinning or putting in tins
5. Putting in boxes

Types of materials used in packaging.

 Plastics i.e. polythene papers, jerycans and bottles.
 Glass bottles
 Paper bags
 Wood
 Laminates (Aluminium foils and plastic films)

Factors to consider when choosing the types of packaging to be used for a

product.
 Cost of production in relation to the value of goods being packaged i.e.
entrepreneurs should always go in for low costs of production materials
so as to maximize profits.
 Availability of packaging materials in the required amount. The
entrepreneur should ensure that their packaging materials whenever
required so as to maintain production schedules.
 Nature of product to be packed e.g. liquid products are packaged in
bottles or sealed containers, solid products into bundles or boxes.
 Quality of packaging materials. Packaging materials usually have an
impact on the product, therefore, an entrepreneur should use good
quality packaging materials.
 Source of packaging materials. The entrepreneur should ensure that he/
she buys the packaging materials from reliable sources so as to minimize
un necessary losses.
  Purpose of packaging. If the purpose is to attract customers, then an
entrepreneur should use attractive packaging materials.
 Means of transport to be used. If goods are to be transported by road,
hard durable materials should be used.
 Environmental impact. An entrepreneur should consider packaging
materials which doesn’t negatively affect the components of the
environment like paper bags compared to polythene papers.
 Weight of the packaging materials. Entrepreneurs should select light
packaging materials than heavy ones.

Importances of packaging.
 It gives physical protection to the goods. Good packaging protects goods
from rough handling, atmospheric conditions etc.
 Well packed goods are easy to handle and transport.
 Packaging protects goods against contamination and keeps the contents
clean, fresh and safe.
 Packaged goods are easy to advertise.
 Packaged goods are easily delivered to customers e.g. by mail order
service.
 Helps in information transmission i.e packages communicate how to use,
transport, recycle or dispose off the package.
 Self-service is possible with packed goods.
 Packaging adds value to goods. Packaging design and structure add
value to the product and make it more attractive.
 Packaging helps in product differentiation. Packaging helps to make
goods different from similar goods of other firms.

Demerits of packaging.
 Packaging increases the cost of production
 Low quality goods are picked and sold to customers.
 Some packaging materials like polythene bags are dangerous to the
environment.
 Packed goods appear to be bigger than their actual size.
 Packaging increases transport costs.

The techniques used by entrepreneurs to make their products unique in

the market.
 By branding
 By blending i.e. adding flavors in the product so as to improve on their
quality.
 Using unique packaging
 By pricing the product differently
 Using unique distributing strategy
  Giving guarantee and warranty while selling
 By suing different technology.

How human resource management promotes quality of a product.

 Training employees to equip workers with the required skills hence god
quality output.
 Monitoring employees to encourage them work hard hence maintaining
standard of quality.
 Ensuring proper organizational structure. This enables flow of
communication to be faster and feedback urgently communicated.
 Employing skilled and qualified man power to produce quality products.
 Giving workers detailed instructions. This makes them understand
whatever is necessary to produce quality goods.
 Providing a favourable working environment and working conditions.
 Carrying out performance appraisal in order to meet the set quality
standards.
 Giving timely and adequate remuneration.
 Ensuring discipline among workers which promotes unity and peace at
work.
 Giving workers appointment letters and involving them in decision
making.

Ways in which proper financial control promote quality of products.

 Giving employees adequate remuneration
 Purchasing quality packaging materials
 Financing research about quality management
 Managing of inventory properly to avoid expiry of materials.
 Financing the servicing of machines
 Employing skilled man power
 Buying all the requirements needed in the production process
 Paying for utilities in time
 Paying workers’ wages and salaries in time to encourage them work
harder to attain the set quality standards.
 Constructing the work place in a systematic way to promote quality of
products.
 Motivating workers using monetary and non-monetary rewards to make
them (workers) perform better hence quality of products is improved.

QUALITY MANAGEMENT
Quality refers to ability of a product to meet customer’s needs and
requirements.
Or
Quality is the fitness of the product for the intended purpose or use.
Quality management/ control refers to the process which attempts to minimize
or eliminate differences in product quality.

Or

Quality management refers to the organizational techniques and activities that

are used to fulfill the requirements for quality.

Attributes that define quality of a product.

 Performance. This is the basic or primary characteristics of a product
e.g. in case of TV performance may mean picture, sound and clarity.
 Features. These are the secondary operating characteristics of a
product. They supplement the basic functions e.g. DVD player on a
computer.
 Durability. This is the product life i.e. the longer the use full life of the
product means its quality.
 Reliability/ guarantee of the product. This is the probability of a
product failing to perform with in a given period and it breaks down after
3 months then it’s not a reliable product.
 Conformance. This is the degree to which a product design and
operating characteristics meet the set standards like weight e.g. if a
bread of 400gms is being sold as 500gms bread, it doesn’t conform to the
set standards and therefore is of poor quality.
 Serviceability. Consumers understand or perceive quality of a product
differently. This refers to the period a service spends after repair when it
breaks down.
 Suitability of the product from the consumer’s point of view. This
measures the extent to which a product satisfies particular customer’s
needs.
 Protection of customer interest. The product should avoid dangerous
substances which cause health hazards on the customers.

MISCONCEPTION ABOUT QUALITY

Due to differences in tastes and preferences, consumers usually understand
quality differently.
- Misconception about price. Keeping other factors constant, it is assumed
that the higher the price, the higher the quality of product and this is un
realistic.
- Origin. Customers think that product from outside countries are of
better quality than those locally produced.
- Brand name. Attractive brand names are taken to represent good quality
which is un realistic.
- Packaging. Buyers take well packaged products to be a better quality
than those lacking attractive packaging.
 - Place of sale. Consumers take products sold from urban areas to be of
better quality than those sold elsewhere e.g. Kampala road vs down
town.
- Size of the product. Large sized products are considered to be of a better
quality than small sized products.
- Consumer’s point of view. Due to difference in tastes and preferences,
consumers perceive quality of a product differently e.g. a person who
prefers coca cola soda praises its quality more than other types.
- Quality improvement requires new and large investment in use of new
machines.
- The staff (workers) is over blamed for the poor quality in the business.

COMMON TERMS USED IN QUALITY MANAGEMENT

- Quality policy. This refers to overall intention and direction of an
organization with regard to quality as formally expressed by top
management.
- Quality planning. This refers to measures of establishing what an
enterprise is going to do in order to achieve quality.
- Quality assurance. This refers to the already planned and systematic
activities implemented with quality system and demonstrated as needed
to provide adequate confidence that an entity will fulfill the requirements
of quality.
- Quality system. This refers to the organizational structure, procedures,
processes and resources needed to implement quality management.
- Quality control. These are operational techniques and activities that are
used to fulfill the requirements of quality.
- Total quality management. This refers to a business management
strategy aimed at increasing awareness of quality in all organizational
processes.

Factors that influence quality standards of an enterprise.

- Cleanliness and hygiene of the work place. A clean environment under
which goods are produced leads to production of high quality products
than a dirty environment.
- Nature of packaging materials used. use of attractive packaging
materials improve the quality of products since it reduces contamination
compared to poor quality packaging materials.
- Technical specifications regarding quality, quantity, expiry dates etc.
Alteration in the mixing of chemicals or inputs reduces the quality than
when specifications are followed.
- Quality of raw materials. Use of good quality raw materials lead to
production of good quality products than use of poor quality raw
materials.
- Storage facilities. Clean and organized storage facilities provide good
quality products than dirty and disorganized storage facilities.
 - Financial management. Strict and proper financial management leads
to saving which may be used for other activities aimed at improving
quality than weak financial management.
- Marketing and market research. Conducting market research identifies
customer needs and requirements hence production of good quality
products as compared to lack of market research.
- Nature of monitoring and supervision. A well monitored production
process leads to quality output as workers follow instructions as
compared to limited monitoring.
- Nature of the production process. A well designed production process
helps workers to produce high quality products than a complicated
technology.
- Technical assessment and servicing. Good technical assessment and
servicing of machines leads to production of good quality products
compared to poor or no assessment and servicing of machines.
- Instructions given to workers. Correct and followed instructions leads
to better quality than absence of instructions.
- Quality standards set by regulatory authorities. If the set quality
standards are high, entrepreneurs will try to ensure that they meet the
high standards than when the standards are low.
- Objectives set by an entrepreneur. An entrepreneur whose objective is
to produce high quality products and has the necessary resources can
provide high quality products compared to one who has not set high
quality standards.

Objectives of observing quality in the production process.

- To improve on the brand image of the enterprise.
- To facilitate standardization of the product
- To reduce the costs of production by reducing wastage
- To determine product costs and prices at competitive levels in advance of
production.
- To comply with standards set by responsible authorities like Uganda
national bureau of standards.
- To increase the market share or demand of the product.
- To improve entrepreneurs image and reputation.
- To compete favourably with other competitors or (to have a competitive
advantage over other)
- To ensure customer satisfaction hence retain the customers.

Benefits of quality control in the production process.

- It improves on the brand image of the enterprise through production of
high production of high quality products which appeals to customers.
- It enables an entrepreneur to produce standardized goods which
eliminate cheating of customers.
- It reduces production costs by ensuring the right amount and type of raw
materials are used in production process.
 - Helps an enterprise to determine its production costs and prices at
competitive level in advance before production starts.
- Enables an enterprise to comply with standards set by supervisory
authorities like UNBS.
- It helps an entrepreneur to maintain the image and reputation of the
enterprise since it will be known and linked for its high quality products.
- Helps an enterprise to achieve its set goals and objectives concerning
quality specifications i.e. if it wants to be a market leader with the best
quality.
- It increases sales since the quality of the product will attract customers.

Ways of ensuring production of goods quality products.

- Ensuring proper distribution channels of the product.
- Setting up quality standards to be achieved.
- Using quality raw materials
- Giving clear instructions to all workers
- Motivating workers to keep their morale high.
- Sensitizing and training workers
- Ensuring cleanliness of business premises
- Employing skilled man power
- Undertaking market research
- Using good storage facilities
- Monitoring and supervision of the production process.
- Provision of detailed description of the steps involved in production
- Encouraging specialization and division of labour.
- Using appropriate technology or methods of production
- Using quality machines

PRODUCT LIFE CYCLE

This refers to the period of time over which an item is developed, brought to the
market and eventually removed from the market.

Major events during product life cycle (stages of the product life cycle)
1. Introduction/ development stage. This is the first stage where a product
is put on market for sale, sales grow on slowly as advertising is done to
inform people, profits may be there or not.

Characteristics/ features
- Sales are generally low
- Production costs are high on a per unit basis because the firm has not
yet experienced economies of scale.
- Competitors tend to be very low
- Marketing costs like advertising are high
- Profits tend to be very low due to low sales and high unit costs.
 2. Growth stage. This is a stage that involves rapid growth in sales and
profits.

Characteristics / features
- Consumers rapidly spread positive word of mouth about a product.
- An increasing number of competitors enter the market with their own
versions of products.
- Increased promotion through advertising and other forms to create
market awareness.
- Declining costs of production on a per unit basis.
- Customers are mainly early adaptors and early majority.
- Profits rise due to increase in sales and decline in unit costs.
- Competition continues to grow hence strategies change to differentiate
the brand from others.

3. Maturity stage. This is a stage where competition is most intense as

companies fight to maintain their market share.

Characteristics / features
- Sales continue to grow during the early part of maturity.
- Sales reach the peak and may last for extended period of time.
- Costs continue to grow/ rise because of market circulation
- The only remaining customers to enter the market are the late majority
and laggards.
- Competition is most intense during this stage hence changes in costs
and profitability.

4. Decline stage. At this stage, the market is reducing the overall profits
hence great care has to be taken to manage the product carefully.
At this stage, the company may decide to end the product.

Characteristics / features
- Sales continue to reduce or deteriorate
- Profits continue eroding with little hope of recovery
- Customers gains are primarily laggards
- There are generally many competitors still in the industry at the
beginning of the declining stage.

5. Withdrawal stage. At this stage, many more products are withdrawn

from the market.

Characteristics / features
- More innovative products are introduced
- There is intense price cutting
- Consumers tastes change
- Many more products are withdrawn from the market.
ILLUSTRATION OF THE PRODUCT LIFE CYCLE

Benefits of the product life cycle management

- It helps an entrepreneur in decision making
- It enables product designers and service providers.
- It leads to improved product quality
- It Minimises production costs through re-use of the original data.
- It reduces wastage of products and raw materials
- It enhances the entrepreneur’s ability to quickly identify potential sales
opportunities and revenue contributions.

Problems/ criticisms of the product life cycle.

- It doesn’t in any way predict the length of each stage/ phase and cannot
be used to forecast sales accurately.
- Few products follow such a prescriptive cycle i.e. some go from
introduction to decline
- The decision of marketers can change the stage e.g. from maturity and
decline by price cutting.
- It is not easy to tell a stage the product is in.

TOTAL QUALITY MANAGEMENT

This is the method designed to prevent errors such as poor quality products
from happening. It is a way of managing an organization such that every job
and every process is carried out in a right way.

Features/ elements of total quality management.

1. Company policy and accountability. There will be improvement in quality
of products if there is a wide company policy, commitment of employees
from top to bottom.
 2. Quality chain. This emphasizes linkage between suppliers and
customers. It is aimed at satisfying the customers so as to make the
chain intact.
3. Control. Customers’ needs will only be satisfied if the business has
control over factors that affect the quality of products.
4. Monitoring process. Monitoring the business process enables possible
improvements to be made leading to quality.
5. Team work. Successful team work is the most effective way of solving
problems. This increases worker’s morale across departments and
workers get skills from each other.
6. Consumer’s view. firms using total quality management must be
committed to their customer’s opinions about the products.
7. Zero defect policy. This is aimed at ensuring that every product
manufactured is free from defects. Companies use zero defect policy to
ensure quality.

Benefits of total quality management

- It helps an entrepreneur to achieve quality in all aspects of business.
- It focuses clearly on the needs of customers and relationships between
suppliers and customers.
- It enable an entrepreneur to critically analyse all processes to remove
waste and inefficiencies.
- It enables an entrepreneur to utilize human resources better
- Leads to development of effective procedures for communication and
acknowledgement of work approach to problem solving.
- Enables an entrepreneur to continually review the processes to develop a
strategy of constant improvement.
- In increases flexibility in meeting market demands.
- It reduces product development time
- Enable an entrepreneur to find improvement and develop measures of
performance.

Problems of total quality management (TQM)

- There is too much stress exerted on the process rather than the product.
- Training and development costs of the new system are high
- Total quality management over works if there is no commitment from the
entire business/ organization.
- There is excessive bureaucracy and documentation since regular audits
are needed which is too complex for small firms.
- It delegates the determination of quality to quality experts since total
quality management is a complicated entity beyond comprehension of
the average employee.
- Some workers and unions regard total quality management as
management by stress.

Quality management tasks.

Management is a science of getting things done through people and proper
utilization of resources like capital, raw materials etc.

Basic functions of management include;

1. Planning. This is management task which involves establishing goals
and objectives of the business and determining how they will be
achieved.
Steps involved in planning process.
- Setting goals and objectives of the business
- Determining alternative course of action to achieve the set goals and
objectives
- Selecting the best alternative
- Formulating strategies to translate the chosen alternative into action.
2. Organizing. This involves identification of what activities are to be done,
grouping then into sections and delegating activities to particular
individuals.
3. Staffing. This is the process of recruiting. Training, developing,
evaluating and compensating employees who do the identified tasks.
4. Leading. This involves motivating and guiding employees about the
procedures about the procedures and method of work in the
organization. It requires leading by example and ensuring open
communication.
5. Controlling. This deals with monitoring the goods purchased and sold,
money received and paid out, stock and other property of the businesses
in order to attain the set goal.
6. Communication. This is the process of passing information from one
person to another. This enables sharing of ideas, opinions and facts with
suppliers, workers and customers for successful performance.
7. Motivation. This involves encouraging people to give their best services
towards achievement and making employees to work willingly to attain
business objectives.
8. Budgeting. This involves preparing budgets covering incomes and
expenditure of the enterprise in financial terms in a given period of time.
This is used as a guide in monitoring and controlling the implementation
of the planned activities.

Benefits of budgeting
- It provides specific goals and objectives that serve as a yard stick for
evaluating performance.
- It provides managers with a way to cot their products and see their
financial implications.
- It reveals potential problems before they occur.
- It coordinates the activities of the entrepreneur’s business by integrating
the plans and objectives of various departments.
- It attracts other people to invest in the business
- It helps an entrepreneur in making decision.
 - It reminds entrepreneurs to pay business debts and collecting them.
- Helps in supervising daily cash receipts and expenditures.
- It helps the government in assessment of tax,
- It motivates employees by making them part of the team that sets
objectives in the budget.
- Helps the business to get the necessary man power.

COSTS OF PRODUCTION.

Costs of production are expenses incurred when producing goods and services.

Types of costs
- Prime costs. These are expenses which are directly chargeable to a
particular job e.g. cost of raw materials , cost of labour, selling charges
i.e. they are costs that depend on the level of output e.g. direct labour,
direct materials, direct charges etc.
- Work costs. These include all expenses necessary to produce the
various product e.g. work management expenses, technical expenses,
supervisory and clerical staff, depreciation allowance, labour expenses
etc.
- Total manufacturing costs. This includes all costs incurred in the
production of goods an industrial organs. It is the sum of the prime costs
and work costs.
- Administration, selling and distribution costs. These include all office
expenses incurred in selling and distributing goods e.g. sales man’s
salaries/ allowance. Driver’s wages etc.
- Fixed costs. These are costs which do not depend on the level of output.
They are also called supplementary costs or over load costs e.g. rent,
wages of top management etc.
- Variable costs. These are costs which depend on the level of output e.g.
cost of raw materials, cost of utilities like water etc.
- Implicit costs. These are costs which are not planned for and not
included in the calculation of profits e.g. own labour etc.
- Explicit costs. These are costs which are planned and are included in
the calculation of profits.

Elements of costing
- Direct labour
- Indirect labour
- Materials used directly for the job
- Other direct expenses
- Management expenses
- Administration including general office expenses
- Distribution costs
- Selling charges
- Profits.
Methods of costing
1. Job costing. This is concerned with finding out the cost of each job or
work order. A job cost sheet is prepared to find out the profit loss of each
job.
2. Contract costing. This is used for contract work where contract or job is
treated as a separate cost for control e.g. dam construction.
3. Batch costing. This is where a batch of products is treated as a separate
unit for purpose of ascertaining costs e.g. a bucket of powder soap.
N.B A batch is a group of identical products.
4. Process costing. This is where costs are determined at different stages of
producing a product before becoming a finished product before becoming
a finished product e.g. in textile industries etc.
5. Service costing. This is a method used in industries which render
services. Costs are determined by providing a service e.g. water supply,
electricity, entertainment etc.
6. Operational costing. This is used where production is continuous and
units are exactly identical to each other.
A cost sheet is prepared to find out the cost per unit and profit or loss of
production e.g. in mines, drilling cement work etc.
7. Multiple costing/ composite costing. This is a combination of two or more
methods of costing where a product comprises many assembled parts or
components e.g. a car, a radio, TV set etc.

Ways of minimizing/ reducing costs of production in the business.

- Studying the production methods employed to ensure that they are very
efficient and effective.
- Providing support facilities like tools to ease the process of handling work
(using appropriate technology which make work easier and less labour
force so as to minimize costs.
- Employing skilled and experienced labour force to minimize costs arising
from damage as a result of using inexperienced and un skilled labour.
- Training and developing of workers to equip them with necessary skills to
enable them do their work efficiently.
- Fixing time standards for all operations clearly specifying the minimum
and maximum time taken.
- Using cheap and quality raw materials to reduce costs on raw materials.
- Introducing strict monitoring and supervision of workers to ensure that
work is done as planned.
- Lobbying the government for low tax rates through business associations
like UMA, KACITA etc.
- Laying off redundant workers or employing part time workers.
- Spelling out duties and responsibilities to employees to minimize
conflicts, duplication and wastage of time and other resources.
- Studying the lead time i.e. time lag between placing of orders and
receiving of materials. It should be short to avoid un necessary delays in
the process.
 - Proper handling and storage of raw materials, finished and semi-finished
products to minimize damage, wastage and loss.
- Recycling products and raw materials that have been damaged due to
production errors so as to avoid wastage and losses.
- Using alternative sources of energy like solar, biogas, so as to minimize
power costs.
- Encouraging specialization and division of labour to promote efficiency
which leads to increased output hence reducing costs of production.
- Awarding tenders for suppliers and raw materials to competent, reliable
and affordable suppliers so as to avoid disruptions and un necessary
delays.
- Combining operations to reduce on the number of workers so as to
reduce labour costs.
- Buying raw materials in bulk to acquire discounts due to large purchase.
- Ensuring proper storage of tools, equipments, raw materials to avoid
rusting, theft by workers and people.

TIME MANAGEMENT

This refers to a technique of allocating the manager’s time through setting

goals, assigning priorities, identifying, eliminating time wasters and use of
managerial techniques to reach goals efficiently.

Efficient time management involves organising and planning which can result
into accomplishing a great deal.

Time management is a full planning technique because;

- It deals with the manager’s time

- It is a technique by which each manager is challenged to use his/ her
time efficiently and avoid setting standards to themselves before setting
for others.
- It is general purpose technique of systematizing one’s efficiency without
un due sophisticated.

Ways of structuring time for increased production

- Making use of the hidden time i.e. time that was previously mismanaged,
consumed with destructions or used for other tasks.
- Using your energy highs and lows. This involves improving the schedule
of work depending on the time where performance is high.
- Ensuring that work is started faster by accomplishing the first tasks
earlier to avoid interfering with actual work time.

Techniques for time management.

- Identifying goals. This involves understanding what is required to be
accomplished each month, week or day.
 - Ensuring self-motivation. Entrepreneurs should motivate themselves to
produce high output in work which themselves to do in a specified time
frame.
- Establishing deadlines. More work can be done if specific deadlines for
achieving certain tasks are set.
- Taking notes. This involves recording through and ideas to be done.
- Being goal oriented. Concentrating on activities which lead to
significant results.
- Working in blocks of time i.e. do major tasks in blocks of time during the
period of the day you feel more effective.
- Asking question before working e.g. what, where, who, how and why?
- Being action oriented i.e. outline your specific course of action and do it.
- Being reflective i.e. reflective thinking is the act of learning from one’s
past, present and potential future activities.
- Planning the next day’s activities at the end of each day.
- Questioning yourself on time usage.

Activities involved in better time management

- Having alternative plans
- Choosing the quickest, safest and most convenient time and mode of
travel
- Making decisions quickly
- Keeping diaries
- Selecting priorities
- Delegating duties
- Avoiding un necessary interruption
- Conducting meetings properly
- Reducing paper work
- Choosing useful reading materials
- Avoiding long queues i.e. long lines

Controls of effective time management

(How an entrepreneur effectively manage time in the production process)
- Spending time planning and organising i.e. using time to think so that
time is well spent.
- Setting goals i.e. goals should be specific, measurable, realistic,
achievable and time bound to give a sense of direction.
- Using a to-do list. This may start with the last thing of the previous day
or first thing in the month.
- Being flexible. Allowing time for interrupt destructions and un planned
emergencies.
- Considering biological prime time. Prime time is the time of the day
where high performance is expected of an individual.
- Doing the right thing right i.e. doing the right thing is effectiveness and
doing things right efficiency focus on effectiveness and concentrate on
efficiency.
 - Eliminating the urgent. This involves doing the urgent things first by
highlighting them on the to do list.
- Practicing the art of intelligent neglect i.e. eliminating in your life those
tasks which do not have long term consequences for you.
- Avoiding being a perfectionist i.e. believe that errors and mistakes are to
human.
- Conquering procrastination i.e. breaking something you want to avoid
into smaller tasks and doing just one of the smaller tasks.
- Learning to say no. this helps one to focus on his/ her goals.
- Rewarding oneself i.e. celebrating the achievement of goals even for small
successes.

Tips on time management

- Making a list of things to be accomplished each day.
- Following a schedule to help in controlling the time needed to complete
tasks.
- Classifying activities into those that must be done and the least
important activities last.
- Setting priorities for each day there by organising or planning what to do.

ways through which entrepreneurs waste time

- Talking with people about personal matters unconnected with work.
- Having unnecessary or extra-long group meeting
- Allowing too many interruptions
- Being disorganized or no specific targets
- Engaging in little or no delegation
- Being indecisive i.e. failure to make decisions
- Being late or absent
- Role conflicts

Disadvantages/ costs of wasting time

- It leads to the delays in production
- It lowers sales volume hence reducing revenue
- It leads to poor or late service delivery
- Puts the business at a competitive disadvantage i.e. firms can easily be
out competed.
- It leads to consumer dissatisfaction
- Makes strategic planning difficult
- Worsens employee-employer relationships
- Destroys team work spirit
- Lowers the productivity of the firm
- Delays or prolongs decision making process.

SPECIFIC BUSINESS CONTROL SYSTEMS

This involves various ways of controlling business assets and internal

organization of the business to achieve the set goals.
It includes control of business assets and internal control systems.

Mechanisms for controlling business assets.

N.B: Business assets include;

- cash
- accounts receivable
- inventory of merchandise for sale
- physical assets
- customer merchandise

i) Cash. This refers to the money that is receivable and spent in the daily
running of the business.

Ways of ensuring proper cash management

- Recording all cash on sequentially numbered sales slips
- Utilizing a daily cash reconciliation work sheet to record all cash receipts
and the cash register or sale slips total
- Avoiding accumulation of cash at the work place
- Documenting and authorizing all cash by concerned officers.
- Giving proper accountability whenever expenditure is made
- Jealously guarding, locking the cash which is kept in the business
premises.
- Using external certified auditors to audit business books to detect any
cash theft.
- Safely guarding cash being taken to and from the bank.
- Properly storing all cash receipts and other documents related to
accountability
- Using cash for only the intended purpose.
- Reducing the amount of petty cash in the business

Importances of cash management

- Cash management ensures that the firm has sufficient cash during peak
times for purchase and for other purpose.
- Cash management helps to meet obligatory cash outflows when the flow
is due.
- It assists in planning capital/ expenditure projects
- Helps to arrange for outside financing at favourable terms and conditions
if necessary.
- Cash management helps to allow the firm to take advantage of discounts,
special purchase and business opportunities.

Accounts receivable. This includes all monies expected to be received by the

businesses.
Justification for investment in debtors (receivable) (importance of trade
credit)

Trade credit is important to the firm because;

- It helps the firm to protect its sales f from being eroded by competitors.
- It is used as a marketing tool i.e. when a company has launched its
products, credit can be used to expand sales
- It builds customer good will. Credit is extended so as to build long term
relationship with the buyer or as a reward for their loyalty.
- Helps in enhancing a company’s bargaining power. A company with a
high bargaining power will grant less credit but if a company’s
bargaining power is low, it grants more credit so as to build and enhance
its bargaining power.
- Trade credit is useful in maintaining the market share in a declining
market and on the other hand it keeps increasing the market share in
growing market.
- It acts as a bridge for movement of goods through production and
distribution stages to customers. It therefore creates receivables which
the firm is expected to collect in the near future.
- In competition, firms give trade credit to counter the effects of
competition and recessional situations.

Costs of extending credit (account receivable)

- Increases collection costs. These are incurred at the time of collection of
receivables e.g. sending reminders through letters, telephone calls,
through the press.
- Bad debts loss. These are irrecoverable debts arising due to failure of the
client to honour credit obligations
- Opportunity costs i.e. some business opportunities such as expansion
are foregone in favour of investing in receivables which ties up capital in
debts.
- Administration costs. These are normally incurred in supervising and
investigating the accounts receivable e.g. processing costs, costs of
application analysis.
- Production and selling costs. These increase with increase/ expansion in
sales which arise from investment in receivables.

Physical assets. These are valuable items that are owned by the business.

Ways/ measures of controlling or managing physical assets.

- Maintaining a file of information on all assets that are to last for more
than one year e.g. building, vehicle, and furniture.
- Maintaining a depreciation schedule listing all depreciation equipments.
- Ensuring timely service of all assets that require service.
- Properly storing the assets that are movable.
Customer merchandise. This refers to the goods or services that are meant for
the customer at a fee.

Measures for controlling customer merchandise

- Keeping a file by date on which completed work was promised.
- Calling or sending a letter to remind the customer if the items are not
picked up.
- Releasing goods only after getting cash, cheque or a signed promise to
pay.
- Separating different customer’s goods
- Ensuring first in, first out or first come, first serve techniques for serving
customers.

INTERNAL CONTROL OF A BUSINESS

This involves the control over business operations in various areas to achieve
the set goals.

Areas under which business control may be exercised.

- Purchasing
- Quality control
- Employee morale
- Financial analysis
- Cast controls
- Sales controls
- Pricing

a) Purchasing

This can be controlled by;

- Buying from at least two suppliers to check on prices

- Talking to sales people, reading trade magazines and visiting trade shows
to determine new products and marketing trends
- Purchasing in bulk to enjoy discounts and improve relationship with the
suppliers.

b) Quality control. This can be controlled by;

- Checking the goods to ensure that they meet quality standards
depending on their prices
- Spotting slow moving items and reducing price to get rid of them
- Surveying customers to find out whether they are satisfied with the
product/service.
- Discussing feedback from customers to obtain area of discontent and
with drawing the goods not liked.
 c) Employee morale. This control include; improving employee morale
through ensuring open communication to be aware of their problems
before they sabotage business progress.
d) Financial analysis. This involves analyzing the costs and sales to ensure
that business costs are lower than revenue hence operating at a profit
e.g.
- Ensuring proper record keeping
- Comparing operating costs and profits with other similar businesses to
find areas of improvement.
e) Cost controls. This involves reducing the costs of production in order to
operate at a profit.
Controls include;
- Analyzing labour efficiency to establish whether workers are performing
to other abilities
- Reducing expensive ingredients as well as not lowering customer
satisfaction.
- Scrutinizing expenses to reduce costs through more efficient tools or
materials.
f) Sales control. This involves establishing the total collections (revenues)
from the selling of the products produced.

Ways of controlling sales

- Setting sales quotes and keeping track of sales
- Checking the effects of seasonal variations on the sales
- Advertising the business correctly and efficiently
- Motivating the sales force

g) Pricing controls. This involves establishing the exact price to be charged

on customers.
This can be through
- Setting prices high enough to provide enough gross margin that allows
for a reasonable profit.
- Ensuring that the processes are in line with competition so that one does
not lose sales.
- Making end of season merchandise to get rid of it.

NB: Other ways, consider measures of reducing costs of production