KEY POINTS WITH SUMMARY
INTRODUCTION TO ENTREPRENEURSHIP SKILLS (THEORY)
GRADUATE SELF EMPLOYMENT
PART A : KEY POINTS WITH SUMMARY
NATURE PURPOSE AND SCOPE OF BUSINESS
* Business refers to an occupation in which goods and services are produced and sold in return for
* The prime objective of business is proﬁt making
* Business organization is an entity that is both commercial and social, which provides the necessary
structure to achieve the central objective of trade in goods or services
* Business enterprises are institutions whose primary objective is Proﬁt—making
* Forms of business org. includes:
> Sole Proprietorship: this is the simplest form of business under which an individual can operate a
business. Feature of SP. Includes:
- Simplistic in nature
- Easy and simple to set—up
- It does not require legal recognition and attendant formalities.
- There is no distinction between the business and the owner.
- Management rest with the owner/proprietor him/herself
- Owner has unlimited liability
- Owner bears all the proﬁts earned and bears all losses incurred by the business.
Advantages of SP
- It is easy to form, formal registration is not necessarily needed
- There is independence and freedom in decision making.
- There is high secrecy in the business
- Presence of tax advantage
- Dissolution of business is very easy.
Demerits of SP
- A sole proprietor has unlimited resource at his/her disposal.
- There is limitation to the ability of the proprietor
- He is fazed with unlimited liability
- Life span of the business is usually limited.
> PATNERSHIP: This is an arrangement where parties, known as partners, agree to cooperate to advance
their mutual interests. A partnership agreement may be either written or not.
Features of partnership include:
- Proﬁt of the business are shared according to partners’ contribution to the business.
Partnership is not separated from the partners
It is easy to form, as initial starting cost is low
Death of a partner can lead to the dissolution of the partnership.
Partners risk their personal assets.
Beneﬁts of Partnership
- It is easy to form
- Shared ﬁnancial commitment
- Complementary skills
- It provides employment opportunities
Demerits of Partnership
- Joint and individual liability
- Possibility of disagreement among partners
- Discord among partners on shared proﬁt.
> LIMITED LIABILITY COMPANY: this is an artiﬁcial creature, invisible, intangible, and existing in only one
contemplation of law.
* A company is legally formed by meeting the condition stipulated in the Companies and Allied Matter
Act (Decree), 1990.
*Promoters must apply for registration at the Corporate Affairs Commission together with both a
Memorandum and Articles of Association.
*The Registrar—Genera|, issues a Certiﬁcate of Incorporation ifthe Memorandum and the Articles of
association are in order.
* The business environment includes Customers, competitors, government regulatory agencies, legal
and political framework and institutions, technological development and social cultural factors that
inﬂuence business behavior
* The objectives of business are:
— Proﬁt objective — Growth objective — Market Share objective
— Survival — Employee Satisfaction — Image and Reputation
— Social Objective — National Objectives — Shareholder Satisfaction
* The purpose of business activity is to identify and satisfy the needs and wants of the people, with the
overall aim of earning proﬁt.
* Functions of a business are:
> Production Function: The transformation of inputs into speciﬁed outputs as demanded by the market
> Marketing Function: The distribution of goods and services produced by the business’ production
> Finance Function: The arrangement of sufﬁcient capital for the smooth running of the business.
> Personnel Function: Finding suitable employees, training them, as well as motivating them.
*The theories on the purpose of business are:
> shareholder’s theory: Shareholder theory encompasses the idea that the main purpose of business
lies in generating proﬁts and increasing shareholder wealth.
> Stakeholder Theory: states that ﬁrms can best generate competitive advantage and wealth by taking
more than just their shareholders into account
* The characteristics/features of business are:
Exchange of goods and services
Proﬁt: the reward of business is proﬁt.
Involvement in numerous transactions
Marketing and distribution of goods
Risk taking and Uncertainties
Availability of buyer and seller
Production of goods and services
Development of skills for economics
Meeting human needs and wants
*The scope of business may be looked into from two perspectives; Industry and Commerce
> Industry: This activity of extraction, production, conversion, processing or fabrication of products.
The products of an industry may be a:
- Consumers goods: goods used by ﬁnal consumers
- Capital goods: goods used in the production of other goods
- Intermediate goods: these are materials that were once the ﬁnished products of one industry
but are now intermediate product of other industries.
*The types of industry are:
— Primary Industries: which can be;
- Extractive industry: one which draws it products from natural sources
- Genetic Industries: one involved in the breeding of plants and animals for use in further
— Secondary Industries: which can be;
- Manufacturing Industries: one engaged in producing goods through the creation of ”form
utility”. The products of extractive industry eventually become the raw—materials of manufacturing
industry. M.| may take the form of Analytical, Synthetic, Processing and Assembly line.
>Commerce: This is an interchange of goods or commodities between different entities, either
domestically or foreign/internationally. The main function of commerce is to remove the hindrance of
persons through trade, place through transportation, insurance and packaging, time through
warehousing and storage, and knowledge through salesmanship.
The concept of commerce usually covers two important areas; Trades and Service business or Aids or
* Trade can be classiﬁed into
(i) Domestic Trade: this is an internal trade. Payment is made in national or local currency and it can be
further subdivided into retail and wholesale trade.
(ii) Foreign Trade: this is an international trade. It involves the use of foreign currency.
* Service Business: There are referred to as Aids to Trade and they include:
* Further research led to the discovery of the following important scope of business
- Demand Analysis and Forecasting: This assist business owners in maintaining and strengthening
market position and reduce wastage.
- Cost and Production Analysis: It helps in yielding signiﬁcant cost estimates which are useful for
- Price Decisions, Policies and Practices: It help in proﬁt planning exercises.
- Proﬁt Maximization: It refers to sales level where proﬁts are the highest
- Capital Management: It ensures a business has sufﬁcient cash ﬂow in order to meet its short—term
debt obligations and operating expenses.
- E—commerce (Electronic Commerce): This is the buying and selling of goods and services or
transmitting of funds or data, over an electronic network.
NOTE: (B2C) = business—to—consumer
(B2B) = business—to—business
(CZB) = consumer—to—business
(CZC) = consumer—to—consumer.
*Beneﬁciaries of Business
- Business owners
* The stakeholders of business are: Communities, Competitors, Customers and consumers, employees
and agents, families, government, Media and advocacy groups, Owners/shareholders, Society, Suppliers.
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