-CHAPTER TWO

SMALL BUSINESS MANAGEMENT

Introduction
Specifying size and standard to define small business is necessarily arbitrary, because people adopt
different standards for different purposes. Based on socio- economic conditions, countries define small
business differently. But all may use size and economic criteria as a base to define small business. Size
criteria include number of employees and the startup capital. Size does not always reflect the true
nature of an enterprise; in addition, qualitative characteristics are used to differentiate small business
from other business. The economiccontrol definition covers market share, independence and
personalized management.
Small and medium enterprises !S"#s$ cover a wider spectrum of industries and play an important role
in both developed and developing economies. #thiopia is no e%ception and S"#s occupy a prominent
position in the development of the #thiopian economy. &hile the small entrepreneurs can set up a
unit even with less capital, en'oy quic( returns and have the fle%ibility to handle the vagaries!change$
of the mar(et, they have to face many problems li(e lac( of finance, poor operations management,
lac( of e%perience, poor financial management, etc,. The process of setting up a venture begins with
searching for an opportunity. )dentifying a good opportunity is a difficult tas( and involves scanning
the environment and the use of creativity and innovation.
2.1. Concet! "nd de#inition o# S$"%% Bu!ine!!
Specifying size and standard to define small business is necessary because people adopt different
standards for different purposes. *or e%ample, legislators may e%clude small firms from certain
regulations and specify ten employees as the cut-off point. "oreover, a business may be described as
+small, when compared to larger firms, but +large, when compared to smaller ones. *or e%ample,
most people would classify independently owned gasoline stations, neighborhood restaurants, and
locally owned retail stores as small business.
Similarly, most would agree that the ma'or automobile manufacturers are big businesses. -nd firms of
in-between sizes would be classified as medium on the basis of individual viewpoints. There are two
approaches to define small business. They are.
/. Size criteria
/
0. #conomiccontrol criteria.
1. Si&e Criteri"
#ven the criteria used to measure the size of businesses vary. Size refers to the scale of operation.
Some criteria are applicable to all industrial areas, while others are relevant only to certain types of
business. #%amples of criteria used to measure size are. number of employees; volume, and value of
sales turnover, asset size, and volume of deposits, total capital investment, volumevalue of
production, and a combination of the stated factors.
#ven though number of employees-is the most widely used yardstic(, the best criterion in any given
case depends upon the user1s purpose. To provide a clearer image of the small firms, the following
general criteria for defining a small business are suggested by Small b
Business -dministration !SB-$
*inancing of the business is supplied by one individual or a small group. 2nly in a rare case would
the business have more than /3 or 04 owners.
#%cept for its mar(eting function, the firm1s operations are geographically localized.
5ompared to the biggest firms in the industry, the business is small.
The number of employees in the business is usually fewer than /44.
0
-ustralia "anufacturing
s services
6/44 employees
604 employees
7ermany S"# 6344 employees
*rance S"# /4 -899 employees
5hina S"# :epends on product group.
;sually /44 employees. investment ceiling ;S <= million.
)ndonesia S"# 6/44 employees
"alaysia S"# 6/>3 full time wor(ers investment ;S </ million
This size criteria based definition of S"#s varies from country to country. -ll over the world, number
of employees or capital investment or both has been used as the basis for defining S"#s
The following are size criteria definitions of S"#s in some of the developing and developed
countries.
;sing c"it"% as size criteria, "inistry of Trade and )ndustry of #thiopia adopted official definition of
"icro and Small enterprises as follows.
Microenterri!e! are business enterprises found in all sectors of the #thiopian economy with a paid-
up capital !fi%ed assets$ of not more than Birr 04,444, but e%cluding high-tech consultancy firms and
other high-tech establishments.
S$"%% Enterri!e! are business enterprises with a paid-up capital of not less than Birr 04,444 but not
more than Birr 344,444, but e%cluding high-tech consultancy firms and other high-tech establishments.
2. Econo$ic'Contro% Criteri"
Size does not always reflect the true nature of an enterprise. )n addition, qualitative characteristics may
be used to differentiate small business from other business. The economiccontrol definition covers.
"ar(et share
)ndependence
?ersonalized management
-ll three of these characteristics must be satisfied if the business is to ran( as a small business.
M"r(et !)"re. The characteristic of a small firm1s share of the mar(et is that it is not large enough
to enable it to influence the prices of national quantities of goods sold to any significant e%tent.
Indeendence. )ndependence means that the owner has control of the business himself. )t, therefore,
rules out those small subsidiaries which though in many ways fairly autonomous, nevertheless have to
refer to ma'or decisions !e.g., on capital investment$ to a higher level of authority,
Per!on"%i&ed M"n"*e$ent. )t is the most characteristics factor of all. )t implies that the owner
actively participates in all aspects of the management of the business, and in all ma'or decision-
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ma(ing process. There is little delegation of authority. 2ne person is involved when anything material
is involved.
Tec)no%o*+. Small business is generally labor intensive. 2nly few are technology intensive.
Geo*r")ic"% "re" o# oer"tion. The area of operation of a small firm is often local.
7enerally, small ,u!ine!! is a business that is privately owned and operated, with a small number of
employees and relatively low volume of sales. Small businesses are normally privately owned
companies, partnerships, sole proprietorships, or cooperatives.
2.2. Econo$ic- !oci"% . o%itic"% contri,ution! o# !$"%% ,u!ine!! enterri!e
Small and medium enterprises !S"#s$ cover a wider spectrum of industries and play an important role
in both developed and developing economies. #thiopia is no e%ception and S"#s occupy a prominent
position in the development of the #thiopian economy. 2ver the years, the number of S"#s is
growing from time to time. They need a strong support on Scio- economic and political ground. Some
of the contributions are hereunder.
E/uit",%e di!tri,ution o# 0e"%t) "nd decentr"%i&"tion o# econo$ic o0er
;nregulated growth of large-scale industries results in concentration of economicA power in the hands
of a few and consequently gross inequalities in the distribution of income and wealth will occur. 2n
the other hand, income generated in a large number of small enterprises is dispersed more widely and
its benefit is derived by the large segments of the society. This is due to wide spread ownership and
decentralized location of small scale enterprises. )n this way small scale enterprises bring about greater
equality of income distribution. )t is also argued that most of the small scale units are either
proprietary or partnership concerns. -s a result, relations between wor(ers and employers are more
harmonious in small enterprises than in large enterprises. Small enterprises also encourage
competitive spirit and generate the impetus to self development.
More E$%o+$ent cre"tion c""cit+
#conomic planners have realized the necessity of encouraging small enterprises because they require
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less capital but generate more employment. The small-scale sector has the capacity to generate a much
higher degree of employment than the large-scale sector. This is because small scale enterprises are
labor intensive and thus create more employment with a given level of capital. "ore production
needs more capital in such a situation. The small firms will stand in good position because they are
less capital intensive and more labor intensive.
Re$o1in* Re*ion"% I$,"%"nce
-nother problem is the continuous shifting of people from rural to urban areas which causes over-
crowding in cities with slum conditions due to lac( of social and medical amenities which require
heavy investments. This problem can be solved by inducing people to set up small firms in rural areas.
Barge scale industries have the tendency to concentrate in big cities. -s a result semi urban and rural
areas remain deprived of the benefits of industrialization. "oreover, undue concentration of large
industries in urban areas creates several problems, e.g., pollution, shortage of civic facilities, etc. :ue
to lac( of employment opportunities in the country side, people migrate in large numbers to big cities.
Small scale units can be located in rural and semi urban areas to reduce regional disparities.
Anci%%"r+ 2unction
"any small-scale enterprises supply parts and accessories to bigger enterprises. This ancillary function
involves specialization in specific areas and results in greater profitability.
E3ort Pro$otion
Small-scale enterprises are opening up fresh avenues in the e%port mar(et in our world. Cealizing the
importance of the small-scale sector in the economy the #thiopian government has adopted several
measures to speed up the growth of small enterprises.
2.2.1. Ad1"nt"*e! o# *oin* into S$"%% Bu!ine!!
The desire for individuals to own and operate their own small business is growing. -s stated earlier,
this continual creation of new business is at the heart of free enterprise system. *or individuals
pursuing a career in business ownership, numerous benefits can be attained personally as well as
professionally. The ne%t section e%plains the following common advantages of owning a small
business.
Indeendence
3
"ost small business owners en'oy being their own boss; they li(e the freedom to do things their own
way. -lthough a great deal of responsibility is associated with this independence, they are also willing
to assume it.
2in"nci"% Oortunitie!
-nother ma'or reason for going into business for oneself is financial opportunity. "any small business
owners ma(e more money running their own company than they would be wor(ing for someone else.
Co$$unit+ Ser1ice
Sometimes an individual will realize that a particular good or service is not available. )f the person has
reason to believe the public will pay for such output, he or she will start a small company to provide it.
4o, Securit+5 &hen one owns a business, 'ob security is ensured. The individual can wor( as long
as he or she wants; no mandatory retirement e%ists.
2"$i%+ E$%o+$ent
-nother advantage is the opportunity to provide family members with employment. This has several
benefits. *irst, owner-managers want to perpetuate their business and how better to do it, then to get
children or relatives to ta(e it over. Second, higher moral and trust usually occur more in family-run
businesses than others. Third, in times of severe economic downturn, small business owners can
provide employment for family members.
Le"rnin* #ro$ C)"%%en*e
"any small business owners are attracted by the challenge that accompanies going in to business for
oneself. Cesearch reveals that most successful small business owners li(e to feel they have a chance to
succeed !they want to (now success is possible$ and the chance to fail. They learn from the past failure
or success.
Introducin* Inno1"tion5
Dew products that originate in the research laboratories of big business ma(e a valuable contribution
to our standard of living. There is question, however, as to the relative importance of big business in
achieving the truly significant innovations. The record shows that many scientific brea(throughs
originated with independent inventors and small organizations.
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C"terin* #or !$"%% or nic)e $"r(et!5 Barge firms with high overheads must produce high levels
of output to spread costs. By contrast, small firms are able to ma(e a profit on much lower sales
figures. They can therefore sell into much smaller mar(ets that are ignored by larger organization. e.g.
a local window cleaner serving a few hundred houses, a specialist 'eweler with personal clients.
2.6 S$"%% Bu!ine!! 2"i%ure #"ctor!
The following are some of the ma'or factors, which cause most small business failures.
Poor oer"tion! $"n"*e$ent F The manager lac(s the ability to operate a small business.
L"c( o# e3erience F "any owners start businesses in industries in which they have no e%perience
Poor #in"nci"% $"n"*e$ent F "any owners start with too little money and with little or no
understanding of financial spreadsheet applications.
GO1er-in1e!tin* in #i3ed "!!et! F 2wners who over-invest in fi%ed assets may find themselves with
no access to funds for wor(ing capital.
Poor credit r"ctice! F 2wners often sell on credit to meet !or beat$ the competition and find that
they lac( the additional wor(ing capital required or the ability to collect receivables.
G2"i%ure to %"n 7 The lac( of a strategic plan to guide the business in the long run
Un%"nned "nd uncontro%%ed *ro0t) F 7rowth is natural and healthy, but unplanned growth can
be fatal to a business.
In"rori"te %oc"tion F 2wners who choose a business location without proper analysis,
investigation, and planning often fail. Too often, owners see( +cheap, sites and locate themselves
straight into failure.
2ther common causes of business failure include neglect, fraud, and disaster.
Neglect occurs whenever an owner does not pay sufficient attention to the enterprise. The owner
who has someone else manage the business while he or she goes fishing often finds the business
failing because of neglect.
Fraud involves intentional misrepresentation or deception. )f one of the people responsible for
(eeping the business1s boo(s begins purchasing materials or goods for himself or herself with the
companyHs money, the business might find itself ban(rupt before too long.
>
Disaster refers to some unforeseen happening. )f a hurricane hits the area and destroys property in
the companyHs yard, the loss may require the firm to declare ban(ruptcy. The same is true for fires,
burglaries, robberies, or e%tended stri(es.
2.6.1. Pro,%e$! in t)e Et)ioi"n S$"%% Bu!ine!!
Small-scale businesses have not been able to contribute substantially to the economic development,
particularly because of financial, production, and mar(eting problems. These problems are still ma'or
handicaps to their development. Bac( of adequate finance and credit has always been a ma'or problem
of the #thiopian small business.
Small-scale units do not have easy access to the capital because they mostly organized on proprietary
and partnership basis and are of very small size. They do not have easy access to industrial sources of
finance partly because of their size and partly because of the fact that their surpluses which can be
utilized to repay loans are relatively small. Because of their size and partly because of the limited
profit, they search for funds for investment purposes. 5onsequently, they approach traditional money
lenders who charge e%tra high rate of interest hence small enterprise continue to be financially wea(.
Small scale enterprises find it difficult to get raw materials of good quality at reasonable prices in the
field of production. *urthermore, the techniques of production, which the enterprises have adopted, are
usually outdated. Because of their poor financial position they are not able to buy new equipment,
consequently their productivity suffers.
Small business owner can avoid some of the common pitfalls that lead to business failure by.
Inowing the business in depth
:eveloping a solid business plan
"anaging financial resources
;nderstanding financial statements
Bearning to manage people effectivelyJ
2.8. Entrereneur!)i "nd Bu!ine!! Enterri!e Cre"tion

=
2nce an individual decides to ta(e up entrepreneurship as a career path, to be a 'ob provider instead of
a 'ob see(er, heshe has to establish an enterprise. Kowever, setting up of a small new enterprise is a
very challenging as well as a rewarding tas(. Several problems are involved in this tas(. )t is e%tremely
important to ta(e utmost care in identifying the product or service to be launched by the entrepreneur;
otherwise it might prove to be a costly mista(e. Ke she must develop sensitivity to changes around
himher, which can provide business opportunities and then carefully scan hisher environment to
generate ideas. -fter tentatively identifying four to five ideas, he she should go in for detailed
assessment and feasibility study. This will help the entrepreneur to crystallize one idea in an ob'ective
and systematic manner, which will greatly enhance his her chances of success.
*igure 0 shows the entrepreneurial process to set up a business. -nd then the detail of each process is
herewith.
2.8.1. Oortunit+ !coutin*' !en!in*
The entrepreneurial process begins with identifying an opportunity and evaluating it through an initial
screening process. )f it appears reasonable, a detailed business plan can be made. )f not it can be
discarded.
5learly, e%cept in rare cases, opportunities 'ust do not Loccur1 to the individual. These have to be
actively searched scouted for. Kence, the startup process for a new venture creation begins with
scouting for opportunities.
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. Figure 2 - Opportunity dea - !nalysis
The process may start from an arm1s length, that is, one may 'ust loo( around one1s immediate
conte%t- family, community, and 'ob and build up a case for business from the bottom-up. #lse, one
may ta(e a top-down approach, starting from the scanning of the international and macroeconomic
environment and conductingusing industrialconsumer surveys and identifying appropriate business
ideas. -n entrepreneur can sense and intelligently seize opportunities, which e%ist in the environment.
2ften it is said that necessity is the mother of all inventions. Kowever, in the conte%t of
entrepreneurship, opportunities besides e%isting in the environment in the form of needs and problems
of people around might have to be Lcreated.1 Thus, the entrepreneurs meet not only the e%isting needs;
but they also create the new needs as well.
2.8.2. Oortunit+ !c"nnin*
2nce the entrepreneur perceives opportunities, it becomes important for him her to scan the
environment. )t is quite possible that many of the promising opportunities might not ma(e commercial
sense. Scanning involves close e%amination of the environmental conditions and their impact upon the
business idea. )t is not a superficial e%ercise but rather an attempt to loo( beyond the immediate
opportunities to the emerging trends. -n attempt can be made to modify, adapt, rearrange, substitute,
combine, reverse etc. &hat to be scanned by an entrepreneur are shown as follows.
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). #nvironmental analysis
#ntrepreneurship does not e%ist in a vacuum. )t is affected by and affects the environment.
Celationship between entrepreneurship and environment is shown in the figure below.
Figure " #ntrepreneurship $s #nvironment
-s the economies are getting internationally integrated, for an analysis of the environment of
entrepreneurship you would be required to develop an understanding of macroeconomic, and
industrysector specific factors.
". M"cro en1iron$ent
The macro environment of an entrepreneur consists of the political, technological, social, legal and
economic environments. -ll of these are not immediate part of the entrepreneur1s venture yet they
have an impact on his enterprise. Bet us now e%amine the elements of the macro environment of the
entrepreneur one by one.
?olitical #nvironment
#ntrepreneurship can flourish under a stable and conducive political climate. 7overnment policies
which give priority to growth of trade and industry, infrastructural facilities, and
institutional support gives a stimulus to entrepreneurship. 5onsidering the employment and e%port
potential, the short gestation period and the fact that small industries act as a seedbed for nurturing and
developing entrepreneurship, the government is supportive of the small-scale sector. )t has created an
e%tensive institutional framewor( for provision of finance, technology as well as help in mar(eting is
made available by government institutions.
Technological #nvironment
//
The level of technology, the trends and the rate of change in technology all have a direct impact on
enterprise creation. 5hanges in technology, both innovation and invention change industry structures
by altering costs, quality requirements and volume capabilities. )n the advanced countries of the &est
more pure inventions have been ta(ing place which created new industries for e%ample -utomobile,
-eronautical, 5omputer Kardware, Telecommunications, ?harmaceuticals etc. )n developing
economies there is usually an imitation of the above through greater process innovation.
)t has been observed that many small units use obsolete technologies and do not invest in research and
development !CM:$. -s a result their goods are of poor quality and lac( standardization. - direct
consequence of this is their inability to face competition. )n many industries the technological
threshold is low and as a result the success of an entrepreneur promotes many others to start similar
businesses and he loses the initial competitive advantage. 2n the other hand if heshe uses certain
costly technology chances of others to quic(ly becoming his competitors are less.
Socio-5ultural #nvironment
The customs, norms and traditions of the society also play an important role in either hindering or
promoting enterprise. *or e%ample, we sometimes say that the 7urage people are very enterprising. )n
many traditional communities of our country wor(ing of females out of the home environment is
frowning upon. "any times the choice of occupation is also dictated by the family traditions.
Socio-cultural factors are also crucial for the operations of multinational companies. )t is very
important for a multi-national company to understand the socio-cultural bac(ground of its customers
in the host country. Socio-cultural environment is also concerned with attitudes about wor( or quality
concerns, ethics, values, etc.
Begal #nvironment
The laws of the country can ma(e the process of setting up business very lengthy and difficult or vice-
versa. The labor laws and legal redressing system also have a bearing on business operations. ?atents,
agreements on trade and tariffs and environmental laws also need to be studied. 5opyright, trademar(
infringement, dumping and unfair competition can create legal problems in the shape of long drawn
out court battles. Simpler legal procedures can facilitate the process of new venture creation and its
smooth functioning including setting up of ancillaries, foreign tie-ups and 'oint ventures.

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#conomic #nvironment
Biberalization, globalization and opening of the economy of #thiopia, has increased the space for
business operations. )t has also opened channels for foreign investors to start operations. The resultant
competition, rapid and comple% changes have generated uncertainties, which have to be handled by
the entrepreneurs.
b. Sectoral -nalysis
-fter having understood the general environment in which the business has to ta(e birth, it is
important to study the sector or industry conditions in which the entrepreneur proposes to launch a
venture. This will help to put the proposed venture in the proper conte%t. The purpose of industry
analysis is to determine what ma(es an industry attractive- this is usually indicated either by above
normal profits or high growth rates. *or such analysis one should study the history of the industry, the
future trends, new products developed in the industry, forecasts made by the government or the
industry. )t is also advisable to study the e%isting or potential competition, threat of substitutes and
entry barriers. Sometimes there might be bilateral agreements between countries regarding some
sectors or government policy that is sector specific or some event that throw up challenges.
.
There might be certain constraints regarding availability of technology, manpower or raw materials,
which are industry specific. Similarly there might be certain strengths of a particular sector, which
might outweigh some negative general trends. 5urrently the cement and steel sector are on an upward
swing with a favorable climate in the housing sector as well as government1s thrust on the construction
sector.
)). S&2T analysis
-t this stage, conducting a S&2T analysis will help the entrepreneur to clearly identify hisher own
strengths and wea(nesses as well as the opportunities and threats in the environment. Threats in the
environment can arise from competition, technological brea(throughs, change in government policies
etc. Ke she might posses certain unique s(ills or abilities, which along with his her (nowledge and
e%perience can provide him her cutting edge.
/@
Strengths are positive internal factors that contribute to an individual1s ability to accomplish hisher
mission, goals and ob'ectives. &ea(nesses are negative internal factors that inhibit an individual1s
ability to accomplish hisher mission, goals and ob'ectives. -n entrepreneur should try to magnify his
strengths and overcome or compensate for hisher wea(nesses.
2pportunities are positive e%ternal options that an individual could e%ploit to accomplish hisher
mission, goals and ob'ectives. Threats are negative e%ternal forces that hinder an individual from
accomplishing hisher mission, goals and ob'ectives. These could arise due to competition, change in
government policy, economic recession, technological advances etc. -n analysis of the above can give
the entrepreneur a more realistic perspective of the business, pointing out foundations on which he can
build future strengths and remove obstacles. The hierarchical approach to the development of business
idea is given below.


Figure % &ierarchical environmental analysis
The entrepreneur has to use the opportunities provided by the environment, combine these with hisher
unique strengths in terms of (nowledge, s(ills, e%perience etc. and then ta(e a decision to launch a
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particular product or service. The proposed product service should be compatible with the capability
of the entrepreneur, resources available in the environment and the need of the society.
II.8.2.1. Oortunitie! In Conte$or"r+ Bu!ine!! En1iron$ent
&e have observed above that the business environment is constantly evolving as a result of
demographic, technological, legal and other changes. These constantly throw up new challenges for
entrepreneurs. Some opportunities, which can be e%plored by the potential entrepreneur, are given
below.
Diche "ar(eting
Diche mar(eting is a mar(eting strategy, which can be intelligently used by a small entrepreneur. The
entrepreneur can try and identify a very specific mar(et segment called a niche. By providing personal
service, convenience and value to the customers the small entrepreneur can successfully compete with
the bigger mar(et players. The standardized goods produced on large scale cannot cater to the special
requirements of a small segment of the mar(et. *or e%ample there is an emerging niche in the world
food mar(et for health conscious people who want to consume only organically grown foods.
Service Sector
;nli(e products, services are not tangible, they cannot be stoc(ed, and they cannot be mar(eted
through wholesalers and retailers - if you want a haircut you will have to go the barber or a beauty
saloon. ?roduction and consumption are simultaneous. -nother advantage of setting up a service
enterprise is that they require lower investments compared to the manufacturing sector.
*ranchising
*ranchising ta(es a proven formula for success and e%pands it. Business franchising is a name given to
relationship in which the owner of a product, process or service allows a local operator to set up a
business under that name, for a specified period. *ranchising is an arrangement between the buyer
who is called a franchiser and the seller who is called the franchisee. The buyer gets the right to sell
the trademar( product or service to the franchisee. Ke is relieved of most of the functions involved in
setting up of an enterprise and gets the benefit of visibility and recognition. ;sually the franchiser
loo(s after the training, design and layout, etc. for the franchisee. The franchisee is able to e%pand his
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mar(et geographically without having to worry about day-to-day operations. The licensing system
gives the franchisee barriers to entry, standardization and incentives for growth. Kowever the
franchisee is obliged by the franchising agreement to be careful that the standards of quality are
adhered to.
Tourism
Tourism is amongst the fastest growing industries the world over; it is the highest foreign e%change
earning sector for many countries and offers tremendous opportunity for entrepreneurship and
employment. )t includes any business connected with the activities of tourists. -
Travel arrangement !rail, road, air or sea$
-ccommodation !hotels, motels, guest houses$
*ood
#ntertainment
-part from the potential in providing these direct services, tourists use many indirect services. *or
e%ample, they hire ta%is for local site visit, they need guides and interpreters. There is a shortage of
service providers in all these areas. The gap between the demand and supply is li(ely to increase in the
foreseeable future opportunity. The growing segments of tourism include 5ultural Tourism, Keritage
Tourism, -dventure Tourism, #co-Tourism, Cural-Tourism, and Celigious Tourism. Some people
have even capitalized on the high cost of "edical Services abroad and have promoted "edical
Tourism. )t is clear from the above that this sector has untapped potential which can be e%ploited by
potential entrepreneurs.
#ntertainment
The entertainment industry is another sector, which boasts of very high rates of growth. There are
innumerable entertainments ranging from news, sports, cartoons, family dramas, music, religious etc.
"usic industry is also flooded with music videos, remi%es, music and film nights, preparation and
launch of 5:s and :N:s.
#nterprises can be set up to provide services for pre and post production including script writing,
music, dubbing, animation, editing to name a few. Bi(e the tourism sector the entertainment sector too
has a host of feeder activities attached to it - supply of 'ewelry, food, banners, posters which provide
endless entrepreneurial opportunities.
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7reen #ntrepreneurship
5onservation and #nvironment protection are presently getting a lot of attraction. 7reen
#ntrepreneurship signifies concern for the environment. Such business activity should be chosen
which has the least adverse impact on the environment. This concept also stresses upon the prevention
of waste at the source rather than at the end of the process. )t concentrates on new and creative ways to
recycle usable materials, use of substitutes or processes that are less polluting as well as adoption of
waste minimization strategies.
II.8.6. Ide" Gener"tion
The starting point for any successful new venture is the basic product service to be offered. This idea
can be either generated internally or e%ternally .*or a new entrepreneur it becomes very difficult to
filter information from the business environment, identify opportunities, evaluate them and then
crystallize one specific idea. :eveloping a hobby, difficulty in obtaining a satisfactory product or
service, evaluating new products being offered in the mar(et and active engagement in Cesearch and
:evelopment can help in generating a number of ideas.
- reading of the #conomic Times, business magazines, watching special business programs on the
television, discussions with professionals, friends, even teachers, surfing the internet all help to
provide valuable inputs .- study of government policies for e%ample ta% incentives and holidays for
setting up pro'ects in bac(ward area can help an entrepreneur to arrive at some decision . -ttending an
#ntrepreneurial :evelopment ?rograms can provide himher with a sound understanding of all the
steps one has to ta(e to initiate and run a venture. The sources of idea generation are listed in the
figure below.
/>
2nce the idea or group of ideas is generated it has to screened or evaluated to determine its
appropriateness for further development. )deas showing the most potential are sub'ected to a feasibility
analysis and a ?ro'ect -ppraisal is then made. Oou will learn about these stages of a venture starter in
the ne%t chapter
II.8.6.1. Ro%e o# Cre"ti1it+ "nd Inno1"tion in Ide" Gener"tion
)t is frequently commented that the only constant thing in business is change. )t is a true statement as
the business environment is constantly changing for any number of reasons. There can be
technological brea( thorough li(e the )T revolution, demographic changes li(e nuclear families,
wor(ing parents, which have fueled a demand for day care centers, old people1s homes, fast food etc.
5hanges in tastes and preferences have resulted in mushrooming of restaurants and designer clothes. -
natural disaster can create a demand for tents, blan(ets, medicines, torches, food etc. -n entrepreneur
with hisher vision, creativity and innovation can capitalize on these changes and create customers.
5reativity is the ability to bring something new into e%istence. )nnovation is the translation of an idea
into application, which has a commercial value. 5reativity is a prerequisite for innovation. )t can be
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developed by any individual who has a concern for e%cellence and is willing to wor( hard. - creative
person develops new alternatives and offers innovative solutions.
)t is through their creative thin(ing that entrepreneurs find solutions to problems, handle adversity and
e%ercise control over business. 5reativity helps not only in doing different things but also in doing the
things differently. )dea generation, as part of creativity process, a number of ideas and solutions are
generated depending upon the personal (nowledge, e%perience, insight etc. of the potential
entrepreneur.
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