Learning unit one lectures


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Learning unit one lectures

  1. 1. Jill MitchellBUPE- 2012
  2. 2. JILL MITCHELL WHO AM I? Jill Mitchell BSc(Hons) Chemical Engineering MBA Currently studying for a PhD in Entrepreneurship at Pretoria University Chartered (Professional) Engineer www.jillmitchell.net 2
  3. 3. ASSESSMENTAssessment Weighting Due DateAssignmentICE 3 TasksExamination 3
  4. 4. NATIONAL SMALL BUSINESS ACT Definition of a Small Business “A separate and distinct business entity, including co-operative enterprises and non-government organisations, managed by one owner or more, including its branches and subsidiaries, if any, is predominantly carried on in any sector or sub-sector ofthe economy mentioned in column 1 of the Schedule and whichcan be classified as a micro-, a very small, a small or a medium enterprise by satisfying the criteria in columns 3,4 and 5 of the Schedule opposite the smallest relevant size or class as mentioned in column 2 of the Schedule” 4
  5. 5. NATIONAL SMALL BUSINESS ACTDEFINITION – SMALL BUSINESS Qualitative Criteria Relate to ownership structure  Be a separate and distinct business entity  Cannot be part of a group of companies  If it does have subsidiaries and branches, they must be included when measuring size  Should be managed by its owners  It can be a natural person, sole proprietorship, partnership, or a legal person such as a close corporation or company 5
  6. 6. NATIONAL SMALL BUSINESS ACTDEFINITION – SMALL BUSINESS Quantitative Criteria Classifies into micro, very small, small and medium, using the following criteria for different sectors in economy  Total full-time paid employees  Total annual turnover; and  Total gross asset value (excluding fixed property) 6
  7. 7. NATIONAL SMALL BUSINESS AMENDMENT ACT 2003 Act 26 of 2003 : GG No 25763, 26 Nov. 2003) Advisory Board to replace NSBC Public Finance Management Act 1999 applies to Agency Schedle revised (definition) to reflect current rand value “other non-financial services” deleted in order to give more focus Added: “expand, co-ordinate and monitor the provision of training, advice and counselling to small business Added: “to facilitate and co-ordinate research relating to support programmes by the agency 7
  8. 8. DEFINITION FOR EXAM/TEST PURPOSES SMALL BUSINESS – A small business is one that is independently owned, managed and controlled; is not dominant in its field of operation; and employs fewer than 50 people; with a turnover not exceeding R5million per year. 8
  9. 9. EXAMPLES OF SMALL BUSINESSES Spaza shops Vendors Franchises Brokerages Cleaning Services Underwriting Agents Photography business 9
  10. 10. ENTREPRENEURSHIP Entrepreneurship is the process of conceptualising, organising, launching and, through innovation, nurturing a business opportunity into a potentially high growth venture in a complex, unstable environment 10
  11. 11. ENTREPRENEUR A catalyst for economic change who uses purposeful searching, careful planning and sound judgement when carrying out the entrepreneurial process by working creatively to establish new resources or endow old ones with a new capacity, all for the purpose of creating wealth 11
  12. 12. INTRAPRENEURSHIP Intrapreneurship is the form of entrepreneurship which takes place in existing businesses around new products, services or markets 12
  13. 13. ENTREPRENEURSHIP VS INTRAPRENEURSHIP See Table 1.1 page 14 module manual 13
  14. 14. SCHEDULE (SEE DEFINITION OF “SMALL BUSINESS”)Sector or sub-sectors in Size or Total full-time Total annual Total grossaccordance with the standard class equivalent of turnover asset valueindustrial classification paid employees (fixed property excl) Less than Less than Less thanAgriculture Medium 100 R 4.00m R 4.00m Small 50 R 2.00m R 2.00m Very small 10 R 0.40m R 0.40m Micro 5 R 0.15m R 0.10mMining & quarrying Medium 200 R30.00m R18.00m Small 50 R7.50m R4.50m Very small 20 R3.00m R1.80m Micro 5 R0.15m R0.10mManufacturing Medium 200 R40.00m R15.00m Small 50 R10.00m R 3.75m Very small 20 R 4.00m R 1.50m 14 Micro 5 R 0.15m R 0.10m
  15. 15. SCHEDULE (SEE DEFINITION OF “SMALL BUSINESS”)Sector or sub-sectors in Size or Total full-time Total annual Total grossaccordance with the standard class equivalent of turnover asset valueindustrial classification paid employees (fixed property excl) Less than Less than Less thanElectricity, gas & water Medium 200 R40.00m R15.00m Small 50 R10.00m R 3.75m Very small 20 R 4.00m R 1.50m Micro 5 R 0.15m R 0.10mConstruction Medium 200 R20.00m R 4.00m Small 50 R 5.00m R 1.00m Very small 20 R 2.00m R 0.40m Micro 5 R 0.15m R 0.10mRetail and motor trade and repair Medium 100 R30.00m R 5.00mservices Small 50 R15.00m R 2.50m Very small 10 R 3.00m R 0.50m 15 Micro 5 R 0.15m R 0.10m
  16. 16. SCHEDULE (SEE DEFINITION OF “SMALL BUSINESS”)Sector or sub-sectors in Size or Total full-time Total annual Total grossaccordance with the standard class equivalent of turnover asset valueindustrial classification paid employees (fixed property excl) Less than Less than Less thanWholesale trade, commercial agents & Medium 100 R50.00m R 8.00mallied services Small 50 R25.00m R 4.00m Very small 10 R 5.00m R 0.50m Micro 5 R 0.15m R 0.10mCatering, accommodation & other trade Medium 100 R10.00m R 2.00m Small 50 R 5.00m R 1.00m Very small 10 R 1.00m R 0.20m Micro 5 R 0.15m R 0.10mTransport, storage & communications Medium 100 R20.00m R 5.00m Small 50 R10.00m R 2.50m Very small 10 R 2.00m R 0.50m 16 Micro 5 R 0.15m R 0.10m
  17. 17. SCHEDULE (SEE DEFINITION OF “SMALL BUSINESS”)Sector or sub-sectors in Size or Total full-time Total annual Total grossaccordance with the standard class equivalent of turnover asset valueindustrial classification paid employees (fixed property excl) Less than Less than Less thanFinance & business services Medium 100 R20.00m R 4.00m Small 50 R10.00m R 2.00m Very small 10 R 2.00m R 0.40m Micro 5 R 0.15m R 0.10mCommunity, social & personal services Medium 100 R10.00m R 5.00m Small 50 R 5.00m R 2.50m Very small 10 R 1.00m R 0.50m Micro 5 R 0.15m R 0.10m 17
  18. 18. SMALL BUSINESS:DEFINITIONS OF OTHER COUNTRIES Country No. of Annual Other Employees TurnoverAustralia Less than 20 None but $ limits for taxes & employees financial reportingUK Less than 50 Less than £5.6 employees millionCanada Less than 50 employeesFrance Less than 50 Less than Є10 employees millionUSA 500 Manufacturing $ 6million retail & 100 wholesale trade service $ 0,75 for 18 agriculture
  19. 19. SME POLICY To strengthen the existing base of small enterprises by ensuring they can compete in the marketplace and that they are not prejudiced because of their size , relative to large firms. (Lundström & Stevenson, 2001:37) 19
  20. 20. ENTREPRENEURSHIP POLICY Measures to stimulate entrepreneurship Aimed at pre-start, the start-up and post start-up phases Designed and delivered to address areas of motivation, opportunity and skills Primary objective of encouraging more people to consider entrepreneurship as an option To encourage and develop entrepreneurial and growth ventures 20
  21. 21. SMALL BUSINESS VS ENTREPRENEURS Not all small businesses are entrepreneurial Example: lifestyle firm, elderly couple purchase a coffee shop Entrepreneurs usually aim for high potential return ventures Three factors distinguish entrepreneurial ventures:- Innovation Growth potential Broad vision 21
  22. 22. SMALL BUSINESS VS ENTREPRENEURIAL VENTURE SMALL BUSINESS ENTREPRENEURIAL VENTUREPreferred funding source Owners own capital investment Other people’s capital investmentsWhen the business is in trouble Cut costs Sell moreWhat’s more important Sales MarketingPersonal control preference Retain autonomy Involve other key personnelFocus Efficiency EfffectivenessMeta-strategy Imitation NoveltyExternal control preference Control business Control marketGrow When necessary When possibleHuman resources Personalise ProfessionaliseWhat limits growth Fear of loss of control Market responseDelegation orientation Delegation is difficult Delegation is essential 22
  23. 23. SMME VERSUS ENTREPRENEURSHIP POLICYFeature Small business policy Entrepreneurship policyObjective Protection against big business Motivate more new entrepreneursTarget Existing firms, Business(entities) Nascent entrepreneurs / new business starters Individuals (people), growth orientationTargeting “Pick winners” (i.e., General population/subsets growth sectors, firms) (i.e., women, youth)Client group Easy to identify “existing” Difficult to identify “nascent”Levers Direct financial incentives (tax- Non-financial, business support credits, loans, guarantees) (networks, education, counseling)Focus Favourable business environment Entrepreneurial culture/climate (i.e., tax regime, reduce red-tape) (i.e., promote entrepreneurship)Delivery system Well-established Lots of new players (need orientation)Approach Generally passive Pro-active outreachResults orientation More immediate (Results More long-term 23 in less than 4 yrs) (Results can take longer)
  24. 24. PARAMETERS OF ENTREPRENEURSHIP POLICYFavourable business climate e.g., tax regime, competitive environment, savings, flexible labour market, competitivebanking system, low inflation, low interest rates, etc. Make it easier to go through the Make it easier to survive and steps Reduce entry/exit barriers. grow Improve access to resources Improve access to advice, – financing, networks, expertise. information, networks mentoring, Improve access to markets, incubators. Provide access to employees, technology. Reduce micro-loans and seed capital Opportunity regulatory and labour market obstaclesMake it easier to gain know-how Make it easier to gainPut entrepreneurship education in management know-how Accessschools. Tailor entrepreneurship to counselling, technical assistance,training programs. Support student management skills, peer networks,venture programs. Establish peer Skills “best-practice” management tools,learning performance benchmarksIncrease awareness and Influence “will to grow”legitimacy of entrepreneurship Motivation motivation Promote newProvide information about its role in business possibilities.society. Profile role-models. Promote growth possibilities.Promote entrepreneurial role asfeasible option Promote role-models For start-up Create entrepreneurial climate For growthGeneral population “A want-to-be” Nascent Start-Up Survival Growth tn t T-42 months 24
  25. 25. A MODEL FOR ENTREPRENEURSHIP Entrepreneurial orientation Supportive Environment Co-operative EnvironmentCulture Role models Infrastructure Finance Institutions which are activelyEducation Work experience Laws Training involved and assist with newPersonal orientation Development services firms Entry of entrepreneurs Acquired abilities + Inherent abilities Products / Services Results of entrepreneurship Economic growth occurs Tax base is enlarged by a greater number of new firms Incomes increase Technological development occurs Living standards improve Job opportunities arise Investment opportunities arise 25
  26. 26. BUSINESS MANAGEMENT PROCESS AND ACHIEVINGGOALS Management made up of 4 basic functions:- Planning Organising Leading (activating) Controlling 26
  27. 27. BUSINESS MANAGEMENT PROCESS AND ACHIEVINGGOALS Six additional management functions can be added to form the management process:- Decision making Communicating Motivating Co-ordinating Delegating Discipline 27
  28. 28. SEDASmall Enterprise Development AgencyNever under estimate the challenges ofrunning a small business: - “ it requires youto be disciplined, organised and wellinformed……to learn as much and asquickly as you can – and then practice thecraft of managing yourself and others” 28
  29. 29. EXPERIENCE Asa minimum small business owners require expertise in marketing and management if they are going to be successful 29
  30. 30. PERSONAL ORIENTATION  Creativity and innovation (experimentation  Autonomy (independence)  Risk taking  Pro-activeness (taking initiative, Pursuing opportunities)  Competitive aggressiveness (achievement oriented) 30
  31. 31. WORK EXPERIENCE Contributes to individuals entrepreneurial orientation Research required on youth entrepreneurship vs work experience before start-up 31
  32. 32. FAMILY & ROLE MODELS Exposure to entrepreneurial activities increases propensity towards entrepreneurship Entrepreneurial “heroes” e.g. Rupert, mapanya 32
  33. 33. EDUCATION Entrepreneurship can be developed through education High-potential (ICT, gazelles) entrepreneurs = positive linkage Van Vuuren & Nieman E/P = M (E/S X M/S) Model for curricula development 33
  34. 34. CULTURE Culture = norms, beliefs, symbols, attitudes, behaviour, and artefacts that members of society use to cope with their world and one another = Transmitted from one generation to another Hofstede’s cultural dimensions  Power distance index  Individualism  Masculinity  Uncertainty avoidance index  Long-term orientation Hofstede’s research help us to be more effective when interacting with people 34
  35. 35. INFLUENCE OF CULTURE IN SA Africa nations have strong cultural environments that differ significantly from other nations particularly Western industialised countries Cultural attributes (as identified by Hofstede and Kanungo) and their influence on African entrepreneurship needs to be tested empirically Therefore different interventions need to be developed for different cultural groups 35
  36. 36. CULTURAL INFLUENCES ON ENTREPRENEURIALBEHAVIOUR Kanungo (1994) based on Hofstede’s work (1980) found developing countries;  High power distance  High uncertainty avoidance  Low individualism  Low masculinity 36
  37. 37. HIGH POWER DISTANCE Family, schools & work organisations believe in hierarchy of authority Authority and control based on age and kinship Denies people opportunity to participate in decision making and self- confidence Rural areas these values still very intact 37
  38. 38. HIGH UNCERTAINTY AVOIDANCE  Shun away from uncertain situations or an inherent unwillingness to take risks  Career aspirations toward self-employment very low  Fear of failure  In SS Africa failure seen as symbol of weakness and dereliction of duty  Limits initiative and creativity 38
  39. 39. LOW INDIVIDUALISM Greater predisposition towards family or group interests than individual interests Collectivism and ubuntu Extended family Collective interests does not promote spirit of independence and self reliance Diminishes capacity for individuals to make meaningful savings 39
  40. 40. LOW MASCULINITY Equals a low drive for achievement Low predisposition towards success (McClelland) Do not derive personal satisfaction from accomplishing a task Result = heavily dependent on government to provide for their needs High nAch = stimulates growth and prosperity 40
  41. 41. SKILLS REQUIRED FOR RUNNING AN SMME Strategy skills Planning skills Marketing skills Financial skills Project management skills Human relation skills 41
  42. 42. MANAGERIAL SUCCESS FACTORS Planning Knowledge of competitors and a market orientation Client orientation High quality work Financial insight and management Specific knowledge and skills relevant to the business context Making use of experts 42
  43. 43. SUPPORTIVE ENVIRONMENT Government should help to create a supportive environment  Legislation  Policies Environment should create a climate favourable to the entry of entrepreneurs  Financing by ordinary financial institutions such as banks  Venture capital access  Training and development programmes should encourage entrepreneurship (job providers vs. job seekers)  Infrastructural development prerequisite for any economic activity at an advanced level  Deregulation i.r.o. of economic activities as well as legal regulations 43
  44. 44. INFRASTRUCTUREThe basic physical and organisational structure needed forthe operation of a society Roads Water supply Sewerage Power supply Telecommunications network Industrial zones and clustersFacilitates the production of goods and services 44
  45. 45. LAWS Deregulation = creates opportunities Over regulation = restricts free trade 45
  46. 46. FINANCE Important resource Access important 46
  47. 47. BUSINESS DEVELOPMENT SERVICES Training Advice Counseling Mentoring Networking Finance Incubators Clusters 47
  48. 48. CO-OPERATIVE ENVIRONMENT  There must also be other institutions that actively promote entrepreneurship  Tertiary institutions i.r.o. education and research  Institutions giving business support, finance and / or training  Involvement through SMME development units  NGO’s and CBO’s  International aid agencies 48
  49. 49. ROLE OF ENTREPRENEURIAL EDUCATION Entrepreneurial Entrepreneurial Entrepreneurial Industry support education: education: programmes: (partners) reflective modes active modes (overcoming (lectures) (Business plan, resource case studies, field work) constraints)N. AchN. IndependenceRisk takingRole model performance Individual EntrepreneurialWork experience factors IntentionExpected unemploymentOpportunity perception 49Source: Walter, C. et al IECER 2009 Conference
  50. 50. SCOPE FOR SMALL BUSINESSES Exists almost everywhere in South Africa 8 factors that lead to higher business formation in a given geographical area:- Population growth Unemployment Wealth Workforce qualifications Business size Housing Local government Government policy 50
  51. 51. CHALLENGES FOR SMALL BUSINESS Finding and retaining qualified workers Legislation and regulation Economic uncertainty Keeping up with technology Access to capital Lack of time to plan Lack of knowledge Working hours 51