1.1 meaning of “business ideas” and “business opportunity”€¦ · web viewunit 1:...
TRANSCRIPT
UNIT 1: BUSINESS IDEAS AND OPPORTUNITIES
1.1 Meaning of “business ideas” and “business opportunity”
1.1.1. Business
A business is any economic activity that involves the production, selling of goods and services,
covering risks with an aim of getting profits.or itis any economic activity that is driven by a
desire to make profits.
1.1.2. Business idea: a business idea simply refers to any thought that the entrepreneur may
come up with to be developed into business opportunity
1.1.3 Business opportunity: can be defined as an identified situation or chance that can be
turned into a real and profitable business
An idea is called opportunity if there is evidence that the entrepreneur’s idea can be turned into
reality. A business opportunity is from a business idea.
The business ideas may be referred as the starting point when one is needing to start a business
but do not know what to start while business opportunity refers to the domain of specialization or
working chosen by an entrepreneur.
1.2 Types of business ideas
Business ideas may be completely new or modifications of existing businesses
Newbusinessideas(creative) are about bringing to the market good and service that is
completely new and therefore none provides a similar product on the market
Modification of existing business ideas(innovative)is to come up with something either
different, slight different or just packaged differently
1.3.Characteristics/Qualities ofa business ideas andopportunity
1
-Business ideas are simple
- They solve real problems
- Brilliant ideas have a market
- Specific to market niche
- Scalability and flexible
- The return on investment should be high
-Accessibility to factor inputs
- Availability of skills
- Availability of developed infrastructures
- Favorable government policy
- It should be easy and compatible with norms of the society
-Acceptable in the community
- Success with the same ideas elsewhere
1.4. Sources of good business ideas
Press(media )
Discussions and interviews
Technical skills and experience
Observation
Personal contacts
Conducting survey
Check on trends and changes taking place
visiting other companies, trade shows
Market condition
Review the imports
Study the new technologies
Analysis of production and consumption of products in a given area
Consumer taste and preference
2
Study some business which have failed
1.5 Criteria for selecting a business idea
Some of the main criteria used to select a business idea include:
1. The idea should match most of the competences of the entrepreneur. For example non-
medical person would find it very difficult to start maternity services.
2. The idea must be legal and in a sector which is attracting government support and
interest.
3. Ready and adequate supply of raw materials
4. Ready and economically large markets for the potential product
5. The initial capital requirement should be reasonable but not prohibitive
6. Appropriate technology should be available and affordable
7. If you find out early-on that the proposed business idea is not feasible, it will save you
time and money. However, if the findings lead you to proceed with the feasibility study;
your work may have resolved some basic issues.
3.6 Developing business ideas into business opportunities
A business idea to become a business opportunity should pass a series of tests that include the
following:
Marketing: can the products of such a business be successful in the market? , can they meet the
customer’s needs and compete favorably in the in the market? Will they get the customer?
3
Marketing Production Financial
Does it satisfy your personal desires / interests?
Production: are the factors to produce these products available and cheaply accessible? Can you
produce the required volume and quality of products at a profitable margin?
Financing: can you find the required funds? Would be the expected profitability of the products
or its return on investments?
Does it satisfy your personal desires/interests? Can you overcome the personal constraints
presented by the idea and successfully do it?
3.7 Identification of business opportunities
Business opportunities will be identified basing on:
1. People’s needs
2. Available resources in the community.
3. Types of consumers
4. Idle resources
5. Events
6. Existing business
3.7.1. Identification of business opportunities based on people’s needs.
A need
A need is a basic thing that an individual must have in order to survive as a human being.Dr.
Abraham Maslow (1954) observed that these needs are in hierarchical and satisfaction of one
leads to the desire for other. The categories of needs are the followings:
1. Basic, biological or physiological needs
These include satisfaction of the body for example hanger, thirst, oxygen, sleep, etc. It also
includes the basic needs of life like food, shelter, clothes, medical care, etc.
Maslow also insists that sex is biological need and that it should not be confused with love in
third level.
2. Security or safety needs
At this stage people need to safe and secure against threats and dangers of losing a job.
4
3. Social, psychological or love needs
At this stage, people want affection sense of belonging, social activities, findings, giving and
receiving love, acceptance by the society. They want to be understood, respected and wanted.
4. Esteem needs
At this level, people want recognition and respect, independence, freedom, etc. In simple terms,
people feel useful and having a positive effect on their surrounding i.e. they want everybody to
know that they exist.
5. Self-actualization needs
This is a level whereby individuals feel that they should do something that can constitute to their
society. At this level, individuals want to do more challenging and difficult tasks to ensure that
they use all their potential abilities to the maximum possible.
Maslow’s diagram (pyramid) of hierarchy of needs
Self actualization needs
Esteem needs
Social or love needs
Security or safety needs
Basic biological or Physiological needs
Lower needs have to be satisfied first, then the upper needs.
Needs and business opportunities to satisfy those needs
Categories of needs Business opportunity
Basic needs Food stalls, boutiques, houses for rent, super
5
markets, schools, water projects, restaurants
Safety needs Fire extinguishers, making burglar proof,
security companies, insurance companies
Social needs / love needs Entertainment services, floriculture, selling
flowers, decoration and tent renting business,
leisure center
Ego/ esteem needs Selling luxury goods such as cars, good
watches, houses
Self actualization needs Providing political consultancy services,
public relations, advisory services
3.7.2. Identification of Business opportunities based on Availability of resources
Resources refer to endowments that may exist in an area or a locality. Such endowments can be
used to produce goods and services needed by people (consumers).
Examples of resources/ endowments in a give community include the following:
- Human resources: both skilled and unskilled labor
- Material/ physical resources for example minerals, water, trees, animals, buildings etc
- Time; having time available for carrying out a specific activity
- Technology, the machines, equipment, tools and general know how.
- Information i.e. knowledge about different business activities.
- Financial resources; the physical money or near money that can be used to acquire all the
required business inputs.
The presence of some of the above resources is a necessary impetus to establishment of a given
business, hence their presence aids one to identify a given business opportunity for examples the
presence of oil deposits, presents a business opportunity of oil drilling, presence of lake,
presents a business opportunity of fishing and many others
6
Business opportunities based on available resources
Resources Product Need addressed Business
Clay Pots, bricks,tiles Cooking, Building,
decoration
Pottery, brick making
Papyrus Mats, baskets Bedding or material
for setting on
Roofing, decoration
Handcrafts, weaving,
construction
Land Trees, food crops,
minerals
Building,furniture,
feeding
Construction,carpentry,
farming, food
processing, mining
Water Fish, water, transport Food, recreation,
drinking, power,
transport
Fishing, rafting,
bottling water, power
station
Notethat the business idea may be identified according to the personal capacities.
3.7.3 Identification of business opportunity based on types of consumers
Business opportunities may also identify from the nature and type of consumers. Consumers are
people or institutions that purchase business products (goods and services) for their consumption
or use in their operations. Consumers can also be known as customers. There are different
categories of consumers in any area and these consumers have different needs. By identify these
specific consumers and their specific needs,one can be able to identify available business
opportunities.
Take an example, if a new college opens in an area, there comes a big number of young men and
women in the area. What are their specific needs that may create business opportunities? These
are summarized in the table below.
Needs Business opportunities
Entertainment - Cinema hall
- Video library
7
- Night club
- Sports betting
- Gift shop
- Leisure centre
Knowledge and communication - Bookshop
- Internet café
- Public pay phone
- Public library
- Stationery shop
Health and fitness - Restaurant and hotel
- Sports centre
- Clinics and laboratories
- Pharmacy
What other categories of needs are these young people likely to have and what are the
available business opportunities
3.7.4 Identification of business opportunity from idle resources
Sometimes, there are idle resources that can be used to produce goods and therefore create a
business. Having such resources in the community creates numerous opportunities such idle
resources that can be used to start a business include the following.
- Saw dust and wood off-cuts
- Plastic waste (old cups, jellicans, plates, etc )
- Waste papers
- Scrap metals (car parts, old tins, iron bars, etc)
- Waste food
- Animals remains
3.7.5 Identification of business opportunity from events
8
Various social, political and economic events create many business opportunities. They gather
many people in one place, which people will have needs that need immediate satisfaction. Such
events as school speech days, graduation ceremonies national independence days, religious
crusades and others are business opportunities.
3.7.6 Identification of business opportunity from Existing businesses
Business ideas and opportunities can also be obtained from existing businesses by duplicating or
modifying what is available or even making use of the products of other businesses. In the
process of doing a business, one enterprise may generate products or waste products that create
an opportunity. For example if julien sells plain, T-shirts, you may get the business idea to buy
the plain T-shirts from Julien, print something on them and sell them at a higher price.
Using SWOT analysis to evaluate business ideas
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A thorough SWOT
analysis will show the possibilities of success of a new business enterprise arising from a
business idea.
Strengths
These are internal attributes that will help increase the chances of success of the business
opportunity.
Examples: - important core competencies
- Financial strengths
- Innovate capacity
- Skilled or experienced management
- Protection from competitors
- Positive reputation in the market
- Proprietary technology
- Well-planned strategy
Weaknesses
9
These are internal factors that are likely to frustrate chances of success. For example;
- Inadequate financial resources
- Poorly planned strategy
- Lack of management skills
- Inadequate facilities
- Distribution problems
- Production inefficiencies
- Inadequate marketing skills
- Negative reputation in the market
-
Opportunities
These are external factors that give the business idea more chances of success. For example;
- Growing population
- Changes allowing foreign market entry
- Emerging technologies
- Potential for market growth
- Government policy
- Favourable shift in industry dynamics
- Untapped market potential
Threats
These are factors, outside the business that are possible sources of problems for the business and
may limit chances of success. For example;
- New competitors
- Bad economic times
- Sales shifting to substitute products
- Increased government regulation
- Declining population
- Rising demands of buyers or suppliers
10
- Changing customer preferences
- Slowed market growth
unit 2 : contract in business operations
2.1 business contact
11
A Contract is a legally enforceable agreement between two or more parties that creates an
obligation to do or not do a particular things. According to Salmond, a contract is an agreement
creating and defining obligations between parties.A contract is an agreement or promise which is
legally binding or enforceable by law.
A business contract is a legally binding agreement between two or more businesses.business
sign contract with workers ,customers,suppliers,creditors,banks ,goverment or other businesses
2.2. forms of business contract
2.2.1.A written contract is an agreement made on a printed document that has been signed by
both the lender and the borrower.
2.2.1.1Benefits of a written contract:
A written contract will give you more certainty and minimise your business risks by making the
agreement clear from the outset.
A written contract can:
Provide proof of what was agreed between you and the hirer.
Help to prevent misunderstandings or disputes by making the agreement clear from the
outset.
Give you security and peace of mind by knowing you have work, for how long and what
you will be paid.
Clarify your status as an independent contractor by stating that the contract is a 'services
contract' and not an 'employment contract'. This will not override a 'sham' contract, but a
court will take the statement into account if there is any uncertainty about the nature of
the relationship.
Reduce the risk of a dispute by detailing payments, timeframes and work to be performed
under the contract.
Set out how a dispute over payments or performance will be resolved.
Set out how the contract can be varied.
Serve as a record of what was agreed.
12
Specify how either party can end the contract before the work is completed.
2,2,1,2.Risks of not having a written contract
When a contract is not in writing, you are exposing yourself and your business to a number of
risks including:
The risk that you or the hirer misunderstood an important part of the agreement, such as
how much was to be paid for the job or what work was to be carried out.
The risk that you will have a dispute with the hirer over what was agreed because you are
both relying on memory.
The risk that a court won't enforce the contract because you may not be able to prove the
existence of the contract or its terms.
2.2.2.oral contract is an agreement made using spoken words.they are also called gentleman’s
agreement. They are more difficult to enforce since there is usually no proof. oral contracts can
however be proved by the witnesses and recording.
2.3.Types of contacts
1.Unilateral Contract
A unilateral contract is a legally enforceable promise between legally competent parties to do or
refrain from doing a specified, legal act or acts. In a unilateral contract, one party pays the other
party to perform a certain duty. If the duty is fulfilled, the party on the other side of the contract
is obligated to transfer the specified funds.
2. A bilateral contract is a reciprocal arrangement between two parties where each promises to
perform an act in exchange for the other party's act.
Differences between Unilateral and Bilateral Contracts
The major difference between bilateral and unilateral contract is the way both parties exchange
mutual agreements .In unilateral contract, only one party is legally bound by the contract to the
promise at the point of forming the contract. The other party enters in the contract agreement
13
only after fulfilling the act. However, in bilateral contract, both parties have duties and rights on
either side.
3. An onerous contract is a contract where costs to fulfill the terms of the contract are higher
than the financial and economic benefit that is received. Such a contract can represent a major
financial burden for an organization.
4. Gratuitous Contract is a contract in which one party promises to do something without
receiving anything in exchange. Therefore in such contracts only one person is benefited.
5. Adhesion is a contract between two parties, where the terms and conditions of the contract
are set by one of the parties, and the other party has little or no ability to negotiate more
favorable terms and is thus placed in a "take it or leave it" position.
6. Commutative contract is a contract in which each of the contracting parties gives and,
receives an equivalent. The contract of sale is of this kind. The seller gives the thing sold, and
receives the price, which is the equivalent. The buyer gives the price and receives the thing sold,
which is the equivalent.
7. An aleatory contract is a contract in which the performance of one or both parties is
contingent or uncertain event upon the occurrence of a particular event. The most common type
of aleatory contract is an insurance policy (insurance agreement)
8.Simple contracts: These are also referred to as papal contracts. It can be oral or written partly
oral or written partly oral and partly written or merely implied by conduct.
14
9.Specialty contracts: These are contracts under seal.These contracts are usually in writing and
must be properly signet if they are to be enforceable.
Examples of such contracts include: lease and sale of land, contracts of employment, money
lending contracts, etc.
Common business contract
Sales contract is an agreement between a buyer and seller covering the sale and delivery of
goods, securities, and other personal property.
1.Sales-Related Contracts
A bill of sale legally transfers the title of property and is most commonly used for items such as
cars and boats. An agreement for the sale of goods provides specific information about the goods
or services being sold. A purchase order details the exact goods or services being purchased.
Warranties are legal guarantees about goods or services sold. When a business sells good to a
buyer paying in installments, a security agreement gives the business the right to repossess the
goods if the buyer doesn't make payments.
2. Employment contract or contract of employment is a kind of contract used in labour law to
attribute rights and responsibilities between parties to a bargain.
Employment-Related Contracts
Businesses may have contracts with their employees, such as an employment agreement,
employment separation agreement,consulting agreement employee non compete agreement or
confidentiality agreement. For non-employees providing services, a business may have an
independent contractor agreement or consulting agreement
HIRE PURCHASE
Hire purchase agreements are agreements whereby an owner of assets allows a person, the
hirer, to hire assets from him for a period of time by paying installments. The hirer has an option
to buy the assets at the end of the agreement if all installments are being paid
LEASE CONTRACT
15
A lease contract is a contractual arrangement calling for the lessee (user) to pay the
lessor (owner) for use of an asset.Property, buildings and vehicles are common assets that
are leased. Leasing contract is a contract between lessor and lessee that allows the lessee
the right to the use of property owned or managed by the lessor for a period of time.
Real Property Lease - A contract to lease office, manufacturing, or commercial real
estate between the landlord and the business
Equipment Lease - Agreement to lease equipment for a specified period of time
General Business Contracts
Franchise Agreement - Outlines the relationship between the franchisor and the
franchisee, such as support, advertising, use of brand, etc.
Advertising Agency Agreement - Establishes the scope of duties to be performed by the
agency, duration, payment, etc.
Indemnity Agreement - An agreement to transfer risk from one party to another
Covenant Not to Sue - One party claiming damages agrees not to sue the responsible
party
Settlement Agreement - Agreement between two parties to end a law suit in exchange for
certain concessions (usually cash paid to the plaintiff)
Assignment of Contract - A legal transfer of the benefits and obligations of a contract
from one party to another
Stock Purchase Agreement - Contractual agreement to sell a certain amount of stock to a
name individual (often used for stock options at private companies)
Partnership Agreement - Official agreement among two or partners, including
responsibilities of each
Joint Venture Agreement - Lays out the obligations, goals, and financial contributions of
all parties involved in a joint venture
Agreement to Sell Business - Documents the terms of a business sale
IMPORTANCE OF A BUSINESS CONTRACT
16
1. Contracts provide a written document that outlines the full understanding of the business
relationship and scope of the work so that no one can claim any misunderstandings later
down the road.
2. They specify exactly what rights are being purchased and what rights you’re retaining.
3. They’re binding and legally enforceable.
4. They protect both you and the client.
5. They stipulate how and when you get paid, what needs to trigger that payment, and what
recourses you have if the client stiffs you.
6. They minimize risk.
Essential elements of a valid contract
10agreements: agreement occurs when a part at the contract promises to do something and the
other party accepts.
20Consideration: is what is exchanged for a promise
e.g.: each party must give the other something of value.
30Legality: it must be legal, in other words it should not have any provisions that are illegal or
result in illegal activities.
40Capacity: Should be made between legal entities of legally registered businesses or persons
above the age of 18 years. By law minors, intoxicated persons and insane persons cannot
enter into the valid contract, the agreement can be considered void.
50 witnesses: contract will be valid if they are witnessed by an independent party,
E.g. the witness should have no interest in what is being agreed upon.
60Genuineness of consent: A contract to be valid must have been entered into freely and
involved a meeting of minds. The agreement may be invalidated by a number of factors, such as
mistake, under influence.
Element of a written contract:
17
Address of offer, Title, parties to the contract, details of goods or services, terms and conditions
of the contract, damages in case of the breach, signatures of parties and witnesses.
Parties of a contract
A contract will exist if it has the legal persons or parties with common interest .Such parties are
referred to as parties to a contract. These parties must have the legal capacity to contract like
persons of 18 years and above and registered forms. However, there are some instances when
certain persons or business cannot enter into valid contracts as seen below:
10Minors /Infants
A minor is defined by the contract as a person who has not attained the age of 18years.
These are not allowed by the law to enter into binding contracts. However, minors can enter into
binding contracts only if such contracts are of necessities and contracts of beneficial to them.
20Insane/Persons of unsound mind
A contract entered into by an insane person is not binding unless if at the time of the contract.
Such a person was capable of understanding and appreciating the nature of the contract and the
obligations imposed.
30Unregistered businesses
Businesses which are not registered or incorporated cannot enter into valid contracts however the
owners of the businesses can do it on behalf of these businesses and held responsible/liable for
acts of the firms.
40Genuine consent (lack of genuine consent)
This means that the parties to the contract have ordinary consented to be bound by the terms as
lard down in the contract. Lack of genuine consent renders the contract invalid.
Termination/ Discharge of the contract
Discharge or termination of the contract means that the partners are freed from the mutual
obligations.
18
A contract can be terminated in various ways:
10 Discharge by performance:
This is where both parties have performed the obligations which the contract placed upon them.
Performance must be completed.
e.g. to say it must be in accordance with the terms of the contract and if the contract is complete,
the defaulting party may be sued for damages.
20Discharge by agreement:
This is where each of the parties to the contract is yet to perform his contractual obligations; the
parties may mutually agree to release each other from their contractual obligation.
30Discharge by frustration:
A contract is said to be frustrated if an event occurs which bring its further fulfillment to an
abrupt end and upon the occurrence the parties are discharged.
It is difficult to determine the frustrating events lent some examples include: destruction of the
subject matter, death or incapacity, etc.
40 discharge by breach: A contract is said to be breached when its terms and conditions are
broken.Failure to honor one’s contractual obligation is what constitutes a breach of contract.
50discharge by operation of law:
A contract may be discharged by operation of law in certain cases. Like, lapse of time, where a
contract made for a specific period then after the expiry of that period the contract is discharged,
and death of either party to the contract becomes bankrupt and substitution, where a contract is
substituted with another contract
Remedies for breach of contract
19
Breach of contract refers to a party’s failure to fulfill the terms and conditions of a
contract.There are different remedies for breach of contract. The remedies depend up the contract
and the circumstances of the breach.
Damages: when a contract has been breached ,the party who suffers by such breach is entitled to
receive damages from the party who has breached the contract
Compensatory Damages: These are damages for a monetary amount that is intended to
compensate the non-breaching party for losses that result from the breach. The aim is to "make
the injured party whole again"
Liquidation Damages: Damages that are specifically stated in the contract. These are available
when damages may be hard to foresee and must be a fair estimate of what damages might be if
there is a breach. Both parties determine what would be an appropriate amount during contract
negotiations
Punitive Damages: These are damages that are intend to punish the breaching party and to deter
him or her from committing any future breaches .
Specific Performance: A court decree that requires the breaching party to perform their part of
the bargain indicated in the contract. For example, if one party has paid for a delivery of goods,
but the other party did not ship them, a specific performance decree might require the goods to
be properly delivered.
Contract Rescission: The former contract which is the subject of dispute is "rescinded"
(cancelled), and a new one may be formed to meet the parties’ needs. This is a remedy typically
given when both parties agree to cancel the contract or if the contract was created through fraud.
Contract Reformation: The former contract is rewritten with the new contract reflecting the
parties’ true intent. Reformation requires a valid contract to begin with and often is used the
parties had a mistaken understanding when forming the contract.
Business disputes and their resolutions.
A business dispute refers to a disagreement over the existence of a commercial legal duty or
right, or over the extent and kind of compensation that may be claimed by the injured party for a
branch of such duty or right.
Disputes toward customers
20
Disputes may rise with customers over the quality of the products, price agreed up on and the
price charged, calculation of discounts,delvery delays,errors in the accounts and non functional
products.
Disputes with suppliers
Non payment for supplies
non return of containers and packaging material.
sudden cancellation of orders
delivery of damaged products
delayed delivery
Disputes with employees
Employees disputes normally concern the following issues:
Non payment of salaries and wages
illegal termination of employment
discrimination based on sex, race tribe
poor working condition
absenteeism
misuse of business property and facilities
unfair dismissal.etc
Disputes with contractors
Business sometimes contract other individuals or companies to perform certain
duties for them.in performing this duties, disputes between business and its
contractors may arise.such disputes may be related to :
terms and time of payment
delayed completion of work
use of sub standard materials
extent or scope of the work to be done
Business to businesses disputes
21
business to businesses Relationships are good because they created a bigger deals and create a
good working relationship. such relationship can however create disputes .such business to
business disputes may include :
disputes over payment for supplies
delayed payment
non returned machinery breach of contract
non payment of services
partnership disputes
These are dispute within the ownership or leadership of an enterprise. Partnership disputes
normally rotate around the following:
change of leadership: some member may want to change the leaders while other
may not.
disagreement by the directors
employees disputes( employing relatives and friends)
financial disputes( sharing profit, losses and withdrawal may cause disputes)
some partners may notgive business time
Solving Conflicts with business dispute resolution clauses.
To solve conflicts business makes sure if is doing all it can to avoid disputes. The tools used are
the following:
Use of well written contracts (the most commonly used tool): contracts spell out
exactly what the business is to perfom and what the customer is to expect.
Working without contract is risky because each party assumes to know the expectations
of the other.
Seek ways to disregard small things: A simple example of this is when a customer
raises an issue over just a few francs, while you should not always give in, sometimes
having a dispute over a small amount just is not worth losing a customer who places
many orders with you. Every situation is different but if you can avoid a big dispute over
a small amount then it might be better for you in the long run.
22
Talking face-to-face: this is also called negotiation and it is the least expensive way to
come to a solution. The desired outcome of negotiation should be a new written
agreement that should end the dispute.
Medium: is a way to use a third person to help the negotiation process.
A neutral third person will facilitate the communication between the disputing parties and
hopefully a solution will be reached. As a mediator he does not make any decision and
process is not admissible in court should it go that far. An arbitrage is where the third
party makes a binding decision.
ARBITRATION
Arbitration is the submission of a disputed matter to an impartial person (the arbitrator) for
decision. Arbitration is typically an out-of-court method for resolving a dispute. The arbitrator
controls the process, will listen to both sides and make a decision. Like a trial, only one side will
prevail. Unlike a trial, appeal rights are limited.
Through judicial proceeding: judicial proceeding results in a judge rendering the decisions for
a solution but often times the dispute is resolved by an out-of –court settlement. It requires both
sides to have a lawyer.
Reconciliation refers to a large number of activities that help turn the temporary peace of an
agreement which ends the fighting into a lasting end to the conflict itself.
UNIT3: TAXES IN BUSINESS
3.1.definition
23
A tax is a compulsory financial contribution imposed by the government to its citizensor
company so as to rise the national revenue and therefore be able to achieve its desired social and
economic development goals.
A tax is non-quid pro quo which means that it is not something given or returned as the
equivalent of something else. A tax therefore bears no direct relationship in terms of payment for
all the goods and services rendered by the government. You cannot refuse to pay tax on grounds
that you don’t use public goods and utilities provided by the government.
Taxationis a system of raising money or revenue by the government from individuals and
companies by law through taxes
3.1.1Terminologies and Role of Taxation in Rwanda
1. Tax burden: This is the effect of a tax on the taxpayer
2. Tax incidence: This is the final resting place of a tax or the person or company that actually
pays the tax.
3. Tax base: This refers to the items/ activities or incomes on which tax can be imposed to
raise the revenue or activities/incomes covered by the tax system in an economy. The t ax
base can be narrow meaning that the economy has few items/activities it taxes and wide in
case the tax system covers a wide range of activities and income or commodities.
4. Taxable income: This is a portion of an individual or country’s income that is subject to
income taxation (payee) after all free allowances have been deducted from the original
income.
5. Taxable capacity: Taxable capacity of an individual refers to the extent to which a taxpayer
is able to pay the tax assessed on him and yet remain with enough disposable income
(income after deducting all relevant taxes), which can sustain him at average standard of
living.
The taxable capacity of an individual is determined by:
Level of income or wealth; the poor have low taxable capacity
Level of dependence burden; high dependence burden, lower taxable capacity
Type and rate of tax levied’; higher tax rate reduces taxable capacity
24
Taxable capacity of a nation refers to the percentage of a country’s Gross Domestic Product
(GDP) that is within the capacity of that country to contribute to the public revenue by law of
taxation. It also means the ability of the government concerned to realize from the taxpayers the
revenue due to it from the taxes imposed.
Taxable capacity of a nation depends on the following:
The wealth of a country or size of GDP.
The types and rates of taxes charged.
The level of income and wealth distribution; equitable income distribution generates more
tax revenue.
The political situation in the country.
The level of economic development in the country.
Tax evasion (tax defaulting): This is where the taxpayer uses illegal means to escape part or
whole tax imposed. A tax payer can for example understate or refuse to declare his income or
wealth, hide at the time of collecting the tax, hide commodities subject to taxation at entry
points/border such that customers/import duties on them are not paid (smuggling), such acts
are illegal and punishable by law.
Tax avoidance: This is where tax payer uses legal means to escape paying part or whole tax
liability expected of him. The taxpayer avoids tax by using loopholes or weaknesses in the
tax system.
A person can for example avoid graduate tax by going to school since students don’t pay
graduated tax or avoid indirect taxes such as VAT by refusing to buy commodities on which
they are taxed.
Tax exemption: This is the exemption or allowance given to a person/corporation from
paying tax due to a given status say the lame, house wives, blind exemption can also be made
on commodities either produced locally or imported depending on the government’s
intentions.
Tax shifting: This is the transfer of either part or whole amount of the tax imposed on a tax
payer to another party. It is the transfer of the tax burden to another party. This is mainly with
indirect taxes where the producers or sellers usually shift the burden to the consumers by
25
increasing prices of commodities on which they are charged. The amount of tax shifted
depends on the price elasticity of demand and supply. A tax can be shifted either backward
or forward. Backward tax shifting involves the producer/seller transferring part or the
whole amount of tax imposed on him to his suppliers of raw materials/inputs or commodities
by reducing input/commodity prices paid to the suppliers. Forward tax shifting may for
example involve the producer transferring the tax (part or full amount) to the consumers by
increasing the prices of the commodity/output.
Withholding tax: Money taken from a person's income and paid directly to the government
by their employer.
Tax exile: A rich person who has moved to another place where taxes are lower than in their
own country. The island is a haven for tax exiles.
Tax haven : A place where people pay less tax than they would pay if they lived in their own
country
Tax-free: If something is tax-free, you do not pay tax on it.
Tax return: A form that a self-employed person must fill in to give information about how
much they have earned in a year
Sales tax (VAT): A tax paid by people when they buy goods or services.
Tax relief: The system of allowing someone not to pay tax on a part of their income
Tax Identification Number is a unique number by which that tax payer is identified. It is a
number that identifies one taxpayerfrom another.
3.1.2.Characteristics of taxes
a. It is compulsory
b. It is imposed by the state on the public
c. It should reflect a person’s ability to pay
d. Taxes are called ‘non quid pro quo payments’, which mean that they are not
direct payments or contributions to government services. A tax payer may receive
more or less services than the taxes actually paid. A tax payer cannot refuse to pay
taxes because they do not use government services like public schools and
hospitals.
26
3.2.Principles of taxation
A good tax system should be:
1. Simple: easy to administer and collect
2. Certain: date, amount, and where to pay it must be communicated before to the
taxpayer
3. Equitable: the rich must be taxed more and poor must be taxed less
4. Flexible: tax must respect inflation
5. Convenient: place of payment,time of payment, methods of payment should be
convenient to both parties state and taxpayer
6. Economical : a good tax should be cheap to assess ,collect and administer . the total
cost of collecting taxes should not in any case exceed 5% of the total tax revenue
7. Elasticity: the tax rate should also change in response to changes in the income or tax
base of the taxpayer
8. efficiency:the tax imposed should have little excess burden .excess burden is the
change in behavior caused by the taxes
9. productivity:The productivity of a tax is its ability to achieve the purpose for which
it is imposed.a tax imposed to limit importation of certain products is productive if it
succeeds in limiting the volume of imports of the targeted commodity.
10. neutrality
3.3. benefit of paying taxes(Importance of tax)
1º Source of Government income:various types of taxes are imposed so that governement
collects the required amount of revenue for financing public activities like schools, roads,
hospital, agriculture, industries, etc.
2º Protecting domestic industries from competition : taxes on imports provide the protection
to localal industries.high taxes on imported product discourage imports and give the chance to
local infant industries to expand and develop.
3º Can be used to reduce income inequalities:taxation redustributes a country’s wealth by
imposing heavier tax barden on the rich in order to fund services for the poor.
27
4º to control inflation taxation withdraws money from public hands which has the effect of
reducing demand and hence reducing inflation.during times of inflation ,tax rates are raised so as
to reduce purchasing power.
5º.Control monopoly power :Taxes imposed on monopolists reduce abnomal profits enjoyed by
such monopolist and hence reduce their dominance of the market.
6ºcorrect the balance of payment problems:this problem exist when a country persistently
export less than what it imports.taxes on imports limit the consumption of imported products
and hence reduce the imports.
7º.to discourage dumping :dumping is selling the product at cheaper price in a foreing market
than in home market.taxes on such goods increase their prices such they do not out compete
local product
8º.Control consumption of undesirable commmodities
9º.Strenghening foreign relation
10º.Protect the environment :government may put very high taxes on certain products and
activities to protect the environment.high taxes on such commodities make the expensive and
unffordable by some people hence reducing their consumption.
3.4.Rights and obligations of a taxpayer
1. Rightsis a general and abstract offer that indicates what has to be done under certain
circumstances
- Right to confidentiality it is forbidden for any person who takes part in taxation
process to disclose to anybody any information on tax payer’s tax situation.
- Tax pay must be informed about the commencement of next payment
- To be explained about how tax is used by the state
- Has right to claim if any over taxation
- Rights to be represented by a lawyer in case of tax disputes
- To participate in the formulation of national tax policy
2. Obligations is a term used to refer to a regal link created by the effect of the law or
will of the one who commits himself to provide or receive a good or a service.
- To pay tax on time
28
- Has to give all information if asked (information about income and business
profits to RRA)
- To register for tax before seven days
- Respect the state tax law
- To use tax identification numbers in all tax related documents
3.5.Types Taxes imposed on different tax base in Rwanda
Government impose many types of taxes, for example individuals pay income tax when they
earn, they pay consumption tax when they spend and property taxes on house and land they own.
These and other types of taxes can be put into various categories depending on :tax rate and
tax incidence
3.5.1.Types of taxes according to the tax rate
1. Proportional income
Proportional income is a type of tax where the tax rate is constant for all level of income.
people with low income and people with high income pay the tax at the same rate.
2. Progressive tax
Progressive tax :A tax is progressive if tax rate increases as the income increases. as income
increases the the tax rate increases
Example:
Income Tax rate
0- 30000 0%
30000-100000 20%
100000-above 30%
3. Regressive tax
29
Regressive tax : A tax is regressive if the tax rate reduces with increase in levels of income.as
income increases the the tax rate reduces.for example a person earning 100000rwf pays 10% of
his income and a person earning 200000 Rwf pays 5% of his income.
3.5.2.Types of taxes according to incidence of tax
3.5.2.1.Direct tax:
Direct taxit is a form of tax where the impact of tax is on the same person or tax base and
cannot shift to another person
1.Trading licence
The trading license tax is a tax paid by any person who deals with a profit-oriented activity in
Rwanda.
Tariff or tax rate For the taxpayer registered for VAT, the trading license tax is based to their
respective turnovers of the previous year, as follows:
Turnover Tax due in Rwf
From Rwf 1 to Rwf 40,000,000 60,000
From Rwf 40,000,001 to Rwf 60,000,000 90,000
From Rwf 60,000,001 to Rwf 150,000,000 150,000
Above Rwf 150,000,000 250,000
For others not registered for VAT, the trading license tax depend on the type of activity and
location, as shown in the table below:
Type of ActivityRural area
Rwf
Towns area
RwfCity of Kigali
Vendors without shops, small scale
technicians who do not use machines
Sewing machine4,000 6,000 8,000
30
B) Transporters of people and goods on
motorcycles4,000 6,000 8,000
C) Traders and technicians who use machines 20,000 30,000 40,000
D) All other vehicles besides bicycles40,000 on each
vehicle
40,000 on each
vehicle
40,000 on each
vehicle
E) For transport activities by motor boat20,000 on each
boat
20,000 on each
boat
20,000 on each
boat
F) Others profit - oriented activities 20,000 30,000 40,000
Exemptions
Exemption: The following are exempted from trading license:
The Rwanda state and its provinces/ Kigali city and districts for non commercial
activities.
Legal entities or organizations exempted from tax on companies.
Natural person or legal entities which carry out an agricultural or animal husbandry
activity.
2.Personalincome tax
Personal income tax is often collected on pay- as- you- earn basis, with small corrections made
soon after the end of the month or a year.
It is a total tax which is generally progressive and deducted by the state. It is applied to salaries,
industrial and commercial profits of entrepreneurs who are not subjected to corporate income
tax, to financial incomes, to land incomes.
Tax rate
Annual taxable income (rwf)
Monthly Annual
Tax band Tax Amount Tax band formula
31
rate
0-
30000frw
0% T=30,000*0% 0-360000RWF 360000*0%
20% T= (100000-
30000RFW)*20%=14000RWF
36001-1200000 (1200000-
360000)*20%
30% T=(TI-100,000)*30%= (TI-1200000)*30%
Exemption: The following payments are excluded from calculations of taxable employment
income:
Payment or repayment of fees invested by the employer.
Retirement pensions paid by the social security fund of the state.
3.Professional tax on income
A professional income tax applies to the following types of income from professional activities
carried out in Rwanda
Profits of all industrial, commercial, artisan agricultural or property firms including
profits of activities associates in companies
Various payments for any person remunerated by third party with whom he/she has no
contractual link.
All profits, irrespective of their designations of the professions
All profits, irrespective of the nature of jobs.
Tax base:a monthly employment income, including exceptional payment and in kind advantages
are concerned by the pay as you earn tax according to the following scale:
Taxable monthly income (rwf) Tax rate
From To
0 30,000 0%
30,001 100,000 20%
100,001 Above 30%
32
Illustration 1: Computation of tax
a) The tax on a taxable income of FRW 100,000 a month is computed as follows:
exemption amount :30,000 times 0% = 0
tax paid at 20%:(100,000 – 30,000) times 20% = FRW 14,000
Total tax = 0+ 14,000 = FRW 14,000
b) calculate the professional income tax on t taxable income of FRW 250000 per month .
a) Exempted amount :30000*0/100= 0
Remains amount after exemption =250000-30000= 220000 RWF
b) Tax will be paid at 20%=(100000−30000 )∗20
100=14000RWF
Remains amount =220000-70000= 150000RWF
c) Tax will be paid at 30%=150000∗30
100 =45000 RWF
d) TOTAL MOMTHLY TAX= 0 + 14000 + 45000 =59000RWF
Illustration 2 – Balance payable with annual calculation:
Assume that by the end of the year, the total annual taxable income of an
employee was FRW 4,000,000. The tax on the annual declaration is computed as
follows:
a) exempted amount :30000RWF
b)For the annual income of up to FRW 1,200,000 (1,200,000 – 360,000) X 20%
= FRW 168,000
c) For the portion of annual taxable income greater than FRW 1,200,000 =
(4,000,000 – 1,200,000) X 30% = 2,800,000 X 30% = FRW 840,000
d) Tax due= a + b = 168,000 +840,000 = FRW 1,008,000
Deduction on other incomes: A deduction of 15% is applied to the following payments carried
out by resident entrepreneurs or entities including the entities that are exempted from tax.
Dividends
33
Dues
Payments of interest on deposits
Shopping and technical services and management fees
The payment for a performance by an artist, a musician or an athlete, whether they are
paid directly or through an intermediary of an entity that does not reside in Rwanda.
Profits from lotteries and other games of chance
Payment of incomes at source on imports and public markets.
An advance on a deduction of 5% of cost, insurance and freight of imported commercial goods is
applied before clearing through customers of these goods. A deduction of 3% of the bill, VAT
excluded.
Exemptions: The following tax payers are exempted from payment of income tax:
Tax payers whose business profits are exempted
Tax payers who have a tax discharge delivered by the commissioner general of the
Rwanda Revenue Authority.
4.Rental income tax base
The rental income tax is charged on the total amount of rental income earned during the previous
tax year.
Tariff or tax rate
The rental income tax is calculated progressively by revenues brackets as follows:
0% on the bracket lower than 180,000 Rwf ;
20% from 180,001 Rwf to 1,000,000 Rwf ;
30% above 1,000,000 Rwf.
Points to note
The taxable income is obtained in one of 2 ways:
34
Deducting from the gross rental income 50% considered as the expenses incurred by the
taxpayer;
Deducting from gross rental income 30% considered as the expenses incurred plus bank
interest paid if the tax payer has proof of paying bank interest on the rented fixed asset
during the tax year.
The copy of the rental contract has to be submitted to the decentralized entity where the
asset is located within a period not exceeding fifteen days (15) following the date the
contract was signed.
When a rental contract is expired or is amended, the taxpayer has to notify the
decentralized entity within thirty (30) after the contract is terminated or amended.
Practical examples
Example 1.
Paul owns 3 houses located at Kicukiro district. For the year 2011, he received rental income of
12,000,000 Rwf for each house.
Required:
Calculate the tax on rent payable for the revenues received in year 2011;
Indicate the deadline of the tax declaration and payment.
Calculation of taxable net income:
Total taxable income: (12,000,000 Rwf* 3) = 36,000,000 Rwf
Taxable net income: 36,000,000 Rwf - (36,000,000*50%) = 18,000,000 Rwf
Calculation of tax:
0% on the bracket lower than 180,000 Rwf = 180,000*0% = 0 Rwf
20% between 180,001 Rwf and 1,000,000 Rwf = 820,000*20% = 164,000 Rwf
30% above 1,000,000 Rwf = 17,000,000*30% = 5,100,000 Rwf
Total tax payable ………………………………… .................................5,264,000 Rwf.
5.Property tax:
35
a property tax is a tax on an individual’s wealth; it is a tax on the physical possessions of a
person. It is based on the value of the person’s assets, such as houses, equipments, machinery,
etc
6. Import duties:
Entry duties customer’s duties (customer’s rate)
Customer’s duties or ad valorem is a tax imposed on imports in percentage or in value. This tax
is paid by national consumers and is collected by the state.
Exemption
The following goods are relieved totally or partially from payment of import duties when they
are released from home use.
The things transported by travelers in the individual luggage.
Equipment of private teaching institutions, specific technological or cultural objects.
Equipment and instruments which are solely used in environmental conservation or
protection.
Equipment intended for national defense and security.
Consignments of negligible value
Educational, scientific technological and cultural materials.
Goods for charitable or philanthropic organizations.
Articles intended for handicapped persons
Donations to the state
Awards
Goods imported for examination, analysis or test
Coffins containing dead bodies
Fire extinguisher vehicles.
7.Corporate income tax :
36
Corporate tax is a tax deductable by the state on industrial and commercial income achieved by
the firms working as commercial companies it is generally proportional to the firm’s income and
it is taxe at 30%.
Example. Alpha ltd compony has obtained an accounting income of 960000RWF.morever the
other expenses that are not deductable amount to 90000RWF.35% of the profit put in the reserve.
Question
1. Calculate fiscal(taxable) income of Alpha company?
2. Calculate corporate income tax (at the rate of 30%)and the net accounting profit?
ANSWER
a)net profit before tax=960000- 90000=870000Rwf
reserve= 870000 X 35
100 =304500Rwf
Taxable income =870000-304500=565500Rwf
b) corporate income=565500 X 30
100 =169650Rwf
net profit After tax =565500-169650=395850RWF
3.5.2.2.Indirect tax:
Indirect taxis a type of tax in which the incidence of tax can shift from one tax payer to
another tax payer.They are levied upon commodities or on things which are not table
In this type of tax we will analyse Value Added Tax is a tax mposed on value added on row
materials by the business and consumption taxis imposed on some products like tobacco and
alcohols
1.VALUE ADDED TAX
The Value Added Tax is paid by the final consumers of taxable goods and services
imported or locally purchased. It is thus an indirect tax.Rate :The standard tax rate is
18% to all taxable goods and services
Value added = value of outputs – value of inputs
37
1.Input taxis the VAT you are charged on your business purchases and expenses
2.Output VAT is the tax charged in respect of the supply of goods and services by a
vendor
Example
Alexis purchased 200tons of rice from XWY ltd company worth 85000000RWF, in this
amount VAT was exclusive. He anticipated a profit of 5000000RWF then calculate
tatal taxes he owed to RRA ?
Solution
In put VAT= 85000000 X 18
100 =15300000Rwf
Total cost of rice =85000000+ 15300000=100,300,000Rwf
Alexis’taxable income =85000000+5000000=90,000,000Rwf
Out put VAT=90,000,000 Rwf∗18
100 =16,200,000Rwf
VAT ,He owed to RRA= 16200,000rwf-15300,000rwf=900000Rwf
Total taxes he owed to RRA is 900,000 because other VAT was paid by XWY ltd
company(15300,000rwf)
2.Tax on consumption: an indirect tax duty is a specified tax not general like VAT. It is
imposed only on certain products such as (alcohol, tobacco).
PRODUCT TAX RATE
Juice and soda 39%
Mineral water 10%
brews 60%
Wines,liquor and whisky 7%
38
cigarettes 120%
Gasoline,oil and gas-oil 37%
powdered milk 10%
Telephone communication 3%
The difference between direct and indirect taxes
Direct Indirect
1º Usually imposed on incomes and property;
2º Incidence is not intended to be shifted on
other persons;
3º They are directly collected by the
Government;
4ºThey tend to be progressive: They increase
with increasing incomes
5º They are compulsory as long as one has
property or income.
-Usually imposed on commodities and
expenditures.
-Incidence is intended to be shifted on other
persons.
They are collected by the Government
indirectly though business people
-They tend to be regressive: tax payers pay --
equal amount irrespective of one’s income,
others are proportional.
-They are not compulsory. They can be
avoided by not consuming the commodities
on which they are imposed.
Sanctions of not paying taxes Some business people try to avoid paying taxes mostly because they think taxes reduce their working capital and profits. However, the business person may face the following problems and sanctions by not paying taxes.
- In Rwanda, any business who carries out taxable business activities without registering with the tax authorities is liable to be charged a fine of Rwf 10,000 to Rwf 30,000
- Once found out, it damages the image and prestige of the business person. The defaulting (nonpaying) tax payer loses respect in the community
39
- Fines and penalties are imposed when found out that the business person ends up paying more money
- Once found out, the business may be closed. - The business person may lose business contracts because in some cases, one is asked for tax
clearance certificates before being given tenders. - Once found out, the goods may be confiscated
All books and documents have to be kept in the premises of the taxpayer or in another fit place located in Rwanda for a period of at least ten years
3.6.Tax conflicts and resolution In some instances, tax related disputes may arise between tax payers and tax authorities. In some tax conflicts arise under the following circumstances;
- Disagreement on the law. How the law is interpreted in relation to taxes - Disagreement on the tax rates and amount to be paid by the taxpayer - Disagreement on exemptions. Tax payer may claim an exemption but tax
collectors reject it.- Disagreement on time payment - Disagreement on method of payments - Disagreement on non payment
When such conflicts arise between the tax payer and tax authority and a mutual settlement is not
reached, then the case is referred to Tax auditors, tax tribunals or commercial courts.
The list of non fiscal incomes
The non fiscal incomes
Fines and penalties on road offences
Fines
Certificate fees
Incomes from certificates delivered by the districts.
Incomes from investments done, their interests, and those from income generating
activities.
Loans
Fees from the service provided
Gifts and legacy.
Fees that are paid to renew registration certificate for buildings.
Optional dues taken from the value of the building sold by the public auction.
40
Fees from rent or selling of plots.
Tax payment and penalties: Charges that are paid on a monthly basis are paid on the account of
the district not later than 15th day of the following month.
The charges that are paid on an annual basis are paid on the account of the district in the 3
months following the end of a fiscal year.
However, he/she who starts activities during the year will pay taxes only for the remaining
months of the year.
Fines and penalties: when charges are not paid, are paid later or paid partially, the tax payer
pays a fine of 40% of the amount due plus lateness interest of 1.25% for each lateness month.
3.7.Subscribing to tax system Conditions, - Filling in a registration form - Legal form of the business - Indicate all types of taxes one owes to the RRA, etc
Documents, - Certificate of registration: It is a title obtained by persons matriculated at the Rwandan Agency for commercial registration by which a copy is transmitted to the ministry having commerce in its responsibilities that fixes, through a decree, its model.-Documents showing types of taxes: A taxpayer Identification Number (TIN) Every trader
matriculated in the commercial registry receives a number called Taxpayer Identification
Number.
-Memorandum of understanding (articles of association) :Memorandum of understanding or
constitutional acts is a constant document showing the creation of a company. It must have been
done in a form of an authentic act i.e established by a public authority (notary for example) to
constitute a proof of the existence of the company
- His/her identification(ID)
41
3.8.Cancellation or suppression at the trade Register
Suppression is the fact of removing the matriculation or inscription at the trade register. In
order to be suppressed from the trade register, the petitioner must:
Address a written letter to the general registrar with a copy to the Rwanda Revenue
Authority,
Present a clearance certificate of the Rwanda Revenue Authority ,
To present a pay-in slip from the National Bank of Rwanda,
UNIT4:RESEARCH IN BUSINESS
4.1.Meaning
a. Reseach
42
The word research ‘Research’ refers to the detailed study of something in order to discover new facts. It is sometimes considered as the way of finding information (analyzing them and making decision) about a subject by using various research methodologies and techniques.
b.Business research
Business research is the process of collecting and analysing information in order of initiating, or establishing, modifying or terminating a particular business activity.In general, business research refers to any type of researching done when starting or running kind of business. For example, starting any type of business requires research into the target customer and the competition to create a business plan (document used to detail plans for a start-up or existing business).Business research is a systematic and organized effort to investigate a specific problem encountered in the work setting that needs a solution. 4.1.1.Characteristics of a good business research
- a realistic possibility of accessing the data- achievable in the time available- Entrepreneurs capabilities and interest - Financial support- Value of the research (increases motivation attracts more attention)
4.2. Role/importance research in business
Entrepreneurs use business research in several ways ; some of these are the following: 1) Developing new products. Business research is used to help the business develop/create
new products. 2) To innovate: business research helps business to improve or modify on existing
products. 3) To determine the acceptance of business products. Research helps entrepreneurs to
foresee whether the business products are needed by target customers.4) Evaluate the viability of a business idea. Business research helps the entrepreneur to
determine if the business is viable or feasible and therefore worth doing or not.5) To identifying proper distribution channels and effectiveness of
distributionchannels. Businesses conduct research to find the market reach and penetration of their products. This is even more important when the products are distributed through agents. The company will conduct research so that it is able to identify where more effort is needed, where agents are not committed and the means if improving sales.
6) To monitor effectiveness of business activities. Research may be used to measure the effectiveness of an advertising campaign. For example, a company producing books may
43
want to know what percentage of the population in a given district viewed its most recent advertisement on television.
7) Testing new products. Business research helps a business to test the potential success of new or changed products. Business needs to know the type of products and services highly demanded by customers.
8) To explain certain phenomenon. Research is used to find out and explain why certain things, behaviours are the way they are. This means identifying and explaining a problem. For example, to understand why sales in a particular region have fallen, a business will conduct research to explain the cause of this problem.
9) To study the competition. Businesses use research to study the products and activities of their competitors. This is important if the business wants to increase market share and compete more favourably in the market.
10) To find the size and pattern of demand. Research helps entrepreneurs find th size of the market and the patterns of that demand. This helps entrepreneur produce the right quantities at the right time and distribute them to the right locations.
11) To predict future events and behaviour. Research findings are used to predict what may happen at a future date. This helps the entrepreneur to plan business activities aware of the possible outcomes,
12) Identifying market gaps. Entrepreneurs use business research to find market gaps that can be used to identify business opportunities. Business research is therefore important for entrepreneurs to identify business opportunities.
13) Research is important for decision making. Business research helps the business managers get the right information to make the right decisions.
4.3.Types of Business Research
Research may be qualitative or quantitative.
Quantitative research is a formal, objective and systematic process in which numerical data is obtained and analyzed.
Quantitative research
Quantitative researchis therefore the gathering and analysis of data that can be expressed in numerical form. For example, if you collect data about prices, population of an area or the amount of money people spend per month.
Qualitative research
Qualitative researchdeals with the collection and analysis of non numerical data. For example to find people’s opinions on a particular product cannot be measured numerically, because they are just opinions based on individual’s perception and beliefs. It deals more with words, observations, opinions and description rather than numbers.
44
Primary research
Primary research is also called field research. Primary research is the process of conducting research and gathering data directly from the target groups. It involves the collection and use of data that does not already exist. It uses original data.
Secondary research
Secondary research is also known as desk research. Secondary research means the summary, collection and synthesis of existing information. As compared to primary research where new information is generated, secondary research uses and analyses existing data and information.
Advantages of primary research
i. The method is able to address specific issues because the researcher has full control of the research design to fit specific needs.
ii. The researcher is able to control how the information is collectediii. Data interpretation is better. The collected data can be examined and interpreted better
based on the needs of the business rather than rely on data interpreted by others. iv. Primary data is usually more recent and up to date compared to secondary data.v. The user trusts their own information rather than depend on information from other
sources.vi. The information can be kept secret since it is gathered and analyzed by the user rather
than depend on information available to even competitors.
Disadvantages of primary research
i. Primary research is very expensive and may not be affordable for small business enterprises. This involves payment of researchers, field visits, design of questionnaires, etc.
ii. It requires more time to get the required informationiii. It requires skills that may not be readily available in the business. iv. It may divert business personnel from their primary duties of conducting or facilitating
the research
4.4.Key Steps in research
The research process follows well defined sequence of steps. These are illustrated below:
1) Formulate the research problem: in every business there are many situations that need to be improved. There are situations that need solutions. It is such situations that need solutions and because solutions can only be got with appropriate information, this creates a research problem.
45
2) Formulate Research purpose/objectives and research question:the research purpose answers the question of why the research is being done. The research objective must be closely related to the research problem.
3) Selecting research technique. To decide whether to use primary research or secondary research and or use of both.
4) Constructing an instrument for data collection. Decide on the methods for collecting data (observation, interview, questionnaires, and experimentation, documentation).
5) Select a sampling method: Decide how each respondent is to be selected. Say whether to use probability or nonprobability method
6) Collecting data. Having formulated a research problem, developed a study design, constructed a research instrument and selected a sample, you then collect the data from which you will draw conclusions for your study. At this stage you actually collect the data.
7) Data analysis and interpretation: Data analysis involves working with data, organizing them, breaking them into manageable units, synthesizing them, and searching for patterns discovering what is important and what is to be learned, and deciding what you will tell others. After the data have been analyzed, it is time to interpret the results; simply interpretation is the process of bringing meaning to the data.
8) Write a research report. Writing the report is the last step of the research process. This report informs the world what you have done, what you have discovered and what conclusions you have drawn from your findings.
4.4.2 Data types, sources and collection
A. Types of data
1. Data Types, Sourcesand collection
a) Data types
Data are the facts or information used for making decision. There are two main types of data
in business research and development
Internal data: these are data arising from book keeping practices, standards operating
business procedures, or planned experiments by research division within company.
External data: these are data obtained from sources outside the firm. They may be of
two types:
46
- Primary data: means data obtained from organization which originally collected them.
(EX: Population data)
- Secondary data: these are data come from a source other than the one which originally
collected them. Ex: data from annual Reports of other business
Qualitative data: these are data that based on words. eg: Color, sex, rank, etc
Quantitative data: these are data that based on numbers. Eg: the number of people who
consume our products in our business. Quantitative data can also be subdivided into two
categories: Discrete data and continuous data
- Discrete data: these are data that can assume only fixed known values which are unique,
distinct and identifiable. Eg: the number of the daily customers
- Continuousdata: these are data with no single value. These are data that can be
identified within a range or interval. Eg: ages of students. A student who claims to be 20
years may actually be 20 years and 8 months.
Cross - sectional data: these are data collected at the same or approximately the same
point in time
Time – series data: are data collected over several time periods
Primary data has the following advantages:
It is more valid than secondary data because it is not yet manipulated and tempered with Authentic. Primary data is more authentic if is collected in the right way. It is not biased. Reliable. Primary data is more reliable since it is specifically collected for a specific
research problem.
Secondary Data
Secondary data is data that is already in existence and available to the public in form of books, newspapers, directories, government publications, journals, etc. Secondary data is data that is being reused. Research where one gathers this kind of data is referred to as desk research.
Advantages of secondary data
Sometimes, it not possible to obtain primary data on certain subjects and you can only rely on secondary data.
Getting secondary data is cheaper and quicker. This is because it already exists.
47
Secondary data could cover more area or population than primary data. Secondary data helps to make collection of primary data more specific.
In determining whether to use secondary data, four basic elements must be considered:
Availability. The data needed must be available Accuracy. The data should be accurate. Relevant. The data should be able to meet the requirements of the research problem. Sufficient. The data should be enough or adequate.
Comparison of primary and secondary dataPrimary data Secondary data Collected by researchers Already in existence Specific to research topic Not for specific to research topicOwned by the researcher It is public and anyone can access it.Collected using the scientific method that begins with a hypothesis
Does not start with a hypothesis because it is already available
Expensive to collect Cheaper to collect
B. Sources of data
Primary sources and secondary sources
Secondary sources: These are the sources containing data that have been collected and compiled for another purpose. They include census reports, annual reports and financial statements of companies, annual reports on currency and finance published by BNR, etc.
Primary sources: are original sources from which the researcher directly collects data that have not been previously collected.
Methods of collecting primary data (sources of primary data)
a) Observation: a systematic viewing of a specific phenomenon in its proper setting for a specific purpose of gathering data for a particular study. Types of observation
Participant observation: is when you, as a researcher, participate in the activities of the group being observed in the same manner as its members, with or without their knowing that they are being observed. You might want to study the life of prisoners and pretend to be a prisoner in order to do this.
48
Non participant observation, on the other hand, is when you, as a researcher, do not get involved if in the activities of the group but remains a passive observer, watching and listening to its activities and drawing conclusions from this.
Advantages of using the observation method
the information is gathered for a specific purpose and therefore relevant to that particular subject
the observed people and events may not be aware and as such may not pretend or deliberately mislead the researcher
it is a cheap way of collecting data if the researcher observes and records events, it not necessary to rely on the willingness
of respondents since they are observed without knowledge.
Problems with using observation as a method of data collection
When individuals or groups become aware that they are being observed, they may change their behavior. Depending upon the situation, this change could be positive or negative, it may increase or decrease, for example their productivity.
There is always the possibility of observer bias. The interpretations drawn from observations may vary from observer to observer.
b) Mail survey (Questionnaire): This involves sending question to the respondents with a request to complete them and return them by the post.Advantages of a questionnaire
i. It is less expensiveii. It offers greater anonymity. As there is no face-to-face interaction between
respondents and interviewer, this method provides greater anonymity. When sensitivity questions are asked it helps to increase the likelihood of obtaining accurate information.
iii. Large amounts of data can be collected from vey many people in a relatively short time.
iv. Permanent record written questionnaires are permanent record that can be stored and reviewed over and over.
v. Easy to analyse. They are easy to analyse. Entering and tabulating data from questionnaires is much easier.
vi. Questionnaires reduce bias.vii. Enough time. Questionnaires give the respondents enough time to understand the
question and think through the answers.
Disadvantages of a questionnaire
49
i. Application is limitedii. Response rate is lowiii. Not everyone who receives a questionnaire returns it, so there is a self-selecting bias.iv. Opportunity to clarify issues is lackingv. The response to a question may be influenced by the response to other questions.vi. It is possible to consult others.vii. More skills to prepare questions.
c) Interviewing: two way systematic conversations between an investigator and an informant, initiated for obtaining information relevant to a specific study.
Advantages of the interview
i. Information can be supplementedii. Questions can be explainediii. Interviewing has a wider application (children, handicapped, illiterate or the very old)iv. It is very appropriate where respondents are not fluent with written communicationv. It is quicker and data can be obtained in a very short timevi. Interviewers can explain the purpose of the interview and motivate the people being
interviewed.
Disadvantages of the interview
i. Interviewing is time consuming and expensive.ii. The quality of data depends on the quality of the interactioniii. The quality of data depends on the quality of the interviewer.iv. Interviewees may at times feel intimidated by the researcher and they may not give
accurate information.v. There is limited confidentiality since the respondents must physically answer the
questions.
d) Experimentation (testing): a research process used to study the causal relationships between variables
e) Projective technique: Presentation of ambitious stimuli to the respondents for interpretation. In doing so, the respondents reveal their inner characteristics. The stimuli may be a picture, a photograph (a picture produced using a camera) or an incomplete sentence.
C. Data collection
Data collection is a term used to describe a process of preparing and collecting data. The purpose of data collection is to obtain information to keep on record, to make decisions about
50
important issues, to pass information on to others. Primarily, data are collected to provide information regarding a specific topic.
Prerequisites for data collection:
Motivation to share the required information, Clear understanding the questions, Possessions of the required information.
Problems in data collection:
Fear Error in procedures Missing of data Problem of poor infrastructure Limited time It is costly
Terms used in business research
- Sampling: refers to the using a group of people in order to get information about a larger
group or about the whole population.
- Sample: isa part of a population in which the population characteristics is studied so that
references may be made from the sample study about the entire population
- The sample size: refers to the number or fraction of population to be considered for
collecting data.
- Population is the entire collection of items of interest in research
- Data: data are the facts and figures that are used collected and summarized for
presentation and interpretation
Types of sampling
A. Probability Sampling
A probability sampling method is any method of sampling that utilizes some form of random selection.In order to have a random selection method,
51
you must set up some process or procedure that assures that the different units in your population have equal probabilities of being chosen.
Humans have long practiced various forms of random selection, such as picking a name out of a hat, or choosing the short straw. These days, we tend to use computers as the mechanism for generating random numbers as the basis for random selection.
Probability sampling methods
Simple Random Sampling
The simplest form of random sampling is called simple random sampling.
The term random has a very precise meaning. Each individual in the population of interest has an equal likelihood of selection. This is a very strict meaning -you can't just collect responses on the street and have a random sample.
Stratified Random Sampling
A stratified sample is a mini-reproduction of the population. Before sampling, the population is divided into characteristics of importance for the research.For example, by gender, social class, education level, religion, etc
Cluster (Area) Random Sampling
B. Non-probability Sampling
Non-probability sampling designs do not follow the theory of probability in the choice of elements from the sampling population.
Non-probability sampling designs are used when the number of elements in a population is either unknown or cannot be individually identified.There are four non-random designs, each based on different considerations.
Quota sampling
Accidental sampling
Judgmental or purposive sampling
Snowball sampling
Quota sampling
The main consideration directing quota sampling is the researcher’s ease of access the sample population. In addition to convenience, he is guided by some visible characteristics, such race or gender, of the study population that is of interest to him. The sample is selected from a
52
location convenient to the researcher, and whenever a person with this visible relevant characteristic is seen that person is asked to participate in the study. The process continues until the researcher has been able to contact the required number of respondents.
Let suppose that you want to select a sample of 20 male students in order to find out the average age of the male students in your class. You decide to stand at the entrance of the classroom, as this is convenient, and whenever a male student enters the classroom, you ask his age. This process continues until you have asked 20 students their age.
There are disadvantages and advantages with this design.
Advantages are: It is the least expensive way of selecting a sample; you do not need any information, such as a sampling frame, total number of elements, and their location. The disadvantages are: as the resulting sample is not a probability one, the findings cannot be generalized to the sampling population; and the most accessible individuals might have characteristics that are unique to them and hence might not be truly representative of the total sampling population.
Accidental sampling
Accidental sampling is also based upon convenience in accessing population. Whereas quota s sampling attempts to include people possessing an obvious/visible characteristic, accidental sampling makes no such attempt.
This method of sampling is common among market research and newspaper reporters. It has more or less the same advantages and disadvantages as quota sampling.
As you are not guided by any obvious characteristics, some people contacted may not have the required information.
Judgmental or purposive sampling
The primary consideration in purposive sampling is the judgmental of the researcher as to who can provide the best information to achieve the objectives of the study. The researcher only goes to those people who in his/her opinion are likely to have the required information and be willing to share it.
Snowball sampling
Snowball sampling is the process of selecting a sample using networks. To start with, a few individuals in a group or organization are selected and the required information is collected from them. They are then asked to identify other people in the group or organization, and the people selected by them become a part of the sample.
1.3.3. Data analysis and interpretation
53
1. Data analysis
Data analysis is the process of systematically searching and arranging the interview transcripts (an exact written copy of something), field notes, and other materials that you accumulate to increase your own understanding of them, and to enable you to present what you have discovered to others.
Analysis involves working with data, organizing them, breaking them into manageable units, synthesizing them, and searching for patterns discovering what is important and what is to be learned, and deciding what you will tell others.
Quantitative data analysis
If most of the information you collected contains numerical (quantitative) data, then descriptive statistics can be used to characterize your data.
Some of the more commonly used descriptive statistics are mean, mode, standard deviation, and frequency.
Definitions
Mean: The average score of the sampleMedian: The score halfway between the high and low scoreMode: The response given most oftenStandard deviation: The distance from the mean Frequency: How often a particular response was given
1.1. Qualitative data analysis
If most of your data collection was done using individual interviews, focus group interviews, or case study, then your data will be in the form of words. Unlikely being able to use a hand calculator or computer program to analyze your numerical data, the qualitative data of words need to be analyzed initially by reading.
Researchers who specialize in qualitative analysis use a method called content analysis. This process will include carefully reading the information, and then identifying, coding, and categorizing the main themes, topics in the information.
Coding is simply attaching some alpha, numeric symbol to phrases, sentences, or strings of words.
2. Interpretation
54
After the data have been analyzed, it is time to interpret the results;simply interpretation is the process of bringing meaning to the data.
1.3.2. Sampling
Sampling is the process of selecting units (e.g.people,organizations) from a population of interest so that by studying the sample we may fairly generalize our results back to the population from which they were chosen.
Unit Business growth and development
a) Meaning
Business growth
Business growth simply means the expansion of the business. Business growth refers to the process of which business enterprise increase their productivity, Profitability and size. Business growth refers to a business that generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy.
Business development
Business development can be summarized as the ideas, initiatives and activities aimed towards making a business better. This includes increasing revenues, growth in terms of business expansion, increasing profitability by building strategic partnerships, and making strategic business decisions. Business development is the creation of long-term value for an organization from customers, markets, and relationships.
Motives of business growth
The following are some of the reasons why business enterprises need to grow.The same factors also explain why entrepreneurs strive to grow their business enterprises.
i. Profit growth: businesses desire to grow so that they can earn more profits for their owners.
ii. Economies of scale. This may also be called the cost motive for growth. As the business grows it enjoys the economies of scale. Economies of scale are the benefits that a firm enjoys from large scale production. The economies of scale lead to reduced cost per unit of output. Growth therefore, helps the business to produce at a lower cost.
iii. To increase market share: as the business grows, it is able to serve a wider market. This increases its market share. As the market share grows, the business is able to become a dominant and able to influence price. A business can even grow and become a monopoly.
iv. To attract investors: investors are attracted to growing businesses. If the company is growing, it can easily attract investors by selling shares.
55
v. Customer confidence. Growing businesses attract the confidence of customers. With this confidence, customers are able to place bigger orders which cannot be given to small businesses.
vi. Growth diversifies risk. When business grows, it is able to diversify its risks across many products and markets. When one product is not doing well, then the business can rely on another. When sales of one product declines, the business can depend on another line of products.
. Business Growth indicators
Indicators/variables that show whether a business has grown
1) Growth of assets: as the business grows, it acquires more assets. There is enough amount of money to purchase additional equipment, invest in other business opportunities and support the rest of the growing operations.
2) Number of branches: growth of an enterprise is also related with the establishment and opening of more branches. More branches are an indicator that the operations of the business are covering more areas and serving more customers.
3) Tax paid: the amount of taxes paid by an enterprise may also be used as an indicator to estimate business size. Small businesses normally pay smaller taxes. If the taxes paid are increasing, then that may be an indicator that the enterprise is also growing.
4) Level of profits. When the business profits are growing, then we say the business is also growing.
5) Number of employees. The number of employees may also serve as an indicator of business growth. When businesses grow, they normally increase the number of departments and employees.
6) Market share: the market is always made up of many enterprises all targeting the same customers. When the market share of the enterprise is growing, it is an indicator that the enterprise is growing because it is serving more customers and more likely it is getting more sales revenue.
7) Level of technology. Most businesses start with simple technology but as the business expands, they buy and use more advanced technology.
8) Number and range of products. As the business grows, its production increases.9) Capitalization. The amount of capital employed by the business is also an indicator of its
size and so if the capital is increasing, then it is an indicator that the business is growing. 10) Sales. The sales figures in terms of volume and sales revenue may also be a good indicator of
the progress being made by the enterprise. If the total amount of money collected from sales is growing, then this shows that the enterprise is growing.
11) Support activities that result in increased control over income. 12) Increase of management skills of entrepreneurs.13) Provide business skills training to help build entrepreneurial capabilities.
56
14) Increasing clients’ access to information and and other needs of clientele extension services.
2.4. Business growth strategies.
There are two main ways in which a business can grow. It can grow internally or externally. The source of business growth may be from within the business itself (internal growth) or from outside the business (external growth).
Internal business growth.
Internal business growth is also called organic growth. This is the expansion of a firm without depending on external resources. This business expansion is done using internally generated resources and internally implemented strategies.
Internal business growth strategies.
1. Bundling product/ service. This is a sales strategy where a bundle of products are sold as one kit. The products being sold are usually related products that are used together and instead of the user buying each separately, they are sold together as a bundle.
2. New distribution channels. This involves opening new branches, appointing additional agents, making products available in new outlets.
3. Promotions of business products: activities carried out by the business in order to attract customers to buy business products.
4. Introducing new products. And innovation. A business can grow by introducing new products on the market. This strategy may also involve modifying existing products to suit different market segments.
5. Human resource development. A business may also seek to grow by improving the quality and efficiency of its staff.
6. Customer service and satisfaction are top priorities7. To sell more its current products to its current customers8. Locate the business in convenient place
9. Market research10. Well planned strategy11. Quality is the name of the business game and always will be.12. Diversification
External growth of business
External growth of a business occurs when a business grows by using external resources. This happens in a number of ways including buying other companies, merging with other companies and franchising.
57
1. Mergers. Mergers are mutual agreements between companies to join together and form one bigger company. This is normally done if the companies are producing and selling the same good or service and want to reduce competition amongst themselves.
Reasons why companies merge:
To gain economies of scale It is the quickest and easier way to expand To asset strip. Some companies buy other companies in order to sell off the most
profitable assets of the acquired business and make a profit. It may be cheaper than growing internally Simple survival. To continue in the market the company may need to grow and the
easiest way is to buy other firms. Investment purposes. Buying up other businesses is a form of investment.
Types of mergers
Horizontal merging (integration). It occurs when two firms in exactly the same line of business or stage of production join/ merge into one. For example if two restaurants joined together to form one bigger restaurant.
Forward vertical merger. A forward vertical merger is where a business merges with another business at the next stage of the production process. For example a furniture maker merging with a furniture retail shop.
Backward vertical merger. Is where a business merges with another business at a previous stage of the production process. For example the business making furniture may merge with the one that supplies timber from which the furniture is made.
Lateral merger. Is where a firm merges with another firm that makes similar goods but who are not in competition with each other.
Conglomerate merger. Is where firms in completely different industries merge together, for example, if restaurant merges with a studio.
2. Joint ventures
Joint ventures are non permanent arrangements under which firms come together to share the cost of a project because it too expensive for one business, or to share expertise of staff and equipment.
The following may however arise from joint ventures:
Individual firms may lose their identity. Each business can specialize in its field of expertise.
58
Expensive costs of mergers are not incurred. Mergers can be unfriendly and staffs are concerned about job losses. Competition may be reduced due to joint venture.
3. Franchising
A Franchise is an agreement where one party gives another party the weight to use its trade mark or trade name and business processes to produce and market.
Franchiser: The owner of the name, logo and business model that sells it for use by third parties.
Franchisee: the person or company who buys another company’s name, logo for use in their own business.
A company can use franchising as a business growth strategy in two ways:
By buying a franchise from well known and reputable companies By selling the franchise.
Advantages of franchising.
Chances of success are higher It enables you to use an already well known logo, trade name and colours. You are
therefore able to attract customers who are already familiar with the name and logo. You can get ideas from other business people who operate similar franchises. The owner of the franchise normally provides support, training and advice to the
franchise. This includes advice and tips on how to operate the business. A franchise normally gives you exclusive rights to sell the product or service in your
region. This reduces wasteful competition and increases sales and profits. Banks can easily lend you money to buy a franchise that has a very good reputation.
Disadvantages of franchising.
The franchise includes strict guidelines and restrictions on how to run the business. This means there is no flexibility; you are not able to make changes to suit your local conditions.
Profits may have to be shared with the franchiser whose name, logo and business model you are using.
In case you want to leave the business, it may be very difficult to sell the franchise to someone else since the buyer must be approved by the franchiser first.
Costs of a franchise may be high. If the franchiser runs out of the business or the reputation declines, it affects the entire
business. The process of buying franchise involves a long legal process which is also costly.
59
2.5. Constraints of business growth
1. The Market Constraint:While it’s a tried and true principle of business to focus on a target market, both the size of that market and the degree to which a company’s success depends on that one market can be constraints to growth..
2. The Capital Constraint: Inadequate access to capital will limit an organization’s ability to develop existing business and pursue new business opportunities.
3. The Strategy Constraint: Depending on the business and market, the strategy a business employs (or the failure to employ a strategy) can limit a business’ potential for growth.
4. The Competitive Constraint:Excessive competition for a market, or the existence of more powerful competitors, can hamper business growth.
5. The Organizational Constraint: A company is a collective of people and processes, assets and attitudes. An organization that is poorly designed or lacks the talent, processes or culture to innovate will eventually be hampered in its ability to grow.
6. The Leadership Constraint: Any business can only grow as large as the mind and/or vision of the man or woman in charge. It can certainly be smaller, depending on the business’ maturity, market conditions, capital, etc. But it will never be bigger than the mind and/or vision of the leader.
7. The Followership Constraint: Many businesses grow in the shadow of an industry leader and generally innovate in the safe shelter of another company’s innovation. Followership (the act of doing what others do) generally constrains the company’s potential for growth.
In short: constraints = Factors that lead business to fail
1. Insufficient capital/ capital constraint2. Unfavourable government policy3. Bad location of the business4. Excessive drawings5. Lack of the market/ market constraint for the business product6. Poor management of the business7. Bad debts8. Theft of the business assets9. Lack of customer satisfaction10. Inexperience (lack of experience and knowledge about the business)11. Excessive expenses12. Overstocking (stocking with slow moving goods)13. Competitive constraint.14. Inadequate marketing skil15. Poorly planned strategy16. Negative reputation in the market.
60
17. Natural calamities.
Common management mistakes that cause business failure
Uncontrolled giving of credit facilities to customers Lack of record keeping Poor customer care Neglect of business by the owner Incompetence of both entrepreneur and employer Business interference by the family members.
Determinants and constraints of business growth
Determinants of business growth
Many factors may cause a business to succeed or fail. Some of the factors that may influence the growth or failure of business are below.
1º Location of the business
A business is likely to growth. If it is located near the customer. In addition, a business may succeed if it is located in secure place without robbers. Location of business also allows it to get cheap labour, cheap raw material, good roads of transport, electricity supply and many benefits.2º Market:The market plays a big role in determination of the growth of a business.A big and reliable market helps more sales, more revenue for the business.3º Proper business planningWell planned business succeeds compared to businesses without plans.Planning enables the business to see targets and properly control its resources and time.5º having well defined and clear objectivesThe business should have laid out objective that it intends to achieve within a given time.When objectives are clear, the entrepreneur and the workers strive to achieve them. 6º Presence of business support serviceBusiness support services are provided by banks, insurance companies, transport companies and telecommunication companies. These services help the business to operate properly and to grow different business support services play different roles in the success of business.7º Good government policiesGovernment policies may favour or discourage business. Government policy therefore determines whether a business will grow or not. Examples: Favorable government policies that may lead a business to grow include low taxes, subsidies, and tax exemptions on raw materials.8º Economic environmentThe economic environment and economic climate also determine the growth of the business.
61
For example, when the economy is facing a recession, price is very low and therefore business will fail to get market for their goods and will not grow.
Constraints of business growthSome businesses fail other succeed. (if there are no customers).Even when businesses are started at the same time, in the same location, with the same amount of capital, one business may grow and other fails to grow. Some are the constraints of business growth:1º poor customer care:Customers are very important in any business. It there are no customers, and then there is no business. When customers are poorly handled, the business will lack customer, market and will inevitably collapse. Customers are lifeblood and backbone of a business.2ºLack of market.A business aims at selling goods and services. It is by selling goods and services that a business is able to get profit to enable it continue running and expanding. When the business lacks sufficient market for its products, it will collapse.3º Poor location of a businessThe location of a business is very important for success of the business. If the business is located in bad area with a poor road network, no electricity, very few buyers, the products insecure, then the business is likely to fail.4º Poor management.Most of businesses fail because of poor management.When the business is poorly managed, workers will be inefficient, business assets are increased and lost, workers will waste time because there is no supervision and the various departments are not properly co-ordinate. This will hinder the business growth.
5º Death of the entrepreneur / business owner:Most businesses owned by individuals depend on their personal effort.When the entrepreneur who has been running dies, the business will most likely fail.6º Bad debtors:If businesses allow some customers to take products without paying cash and promise to pay later. When such customer fail to pay for a long periods. They are called bad debtors.7º Low quality products:If products sold by a business are of low quality, many people will not buy the products and this leads to the collapse of the businesses.The business will sell less, get low profits or even make losses and eventually collapse.8º Failure to manage stockProper stock management includes making sure the products are not stolen,nor shortage but only the right quantities are stocked.9º Political instabilitiesPolitical instabilities like civil wars, strike Can cause businesses to fail.
62
When there is political instability, people lost property, turns down buildings and vehicles.When a lot of the businesses property is destroyed, the business may collapse.10º Embezzlement and loss of business fundsMisuse of business funds is one of the most common causes of business failure. 11º Natural calamities:Natural calamities like floods and earthquakes, droughts, can cause business failure, this is because such calamities cause businesses to lose properly and stock. When the losses.12º Excessive competition:At times, businesses fail because of stiff competition. This may happen if a new and bigger company or individual joins the business and is able to produce better quality product, provide better service and even change a lower price13º Change in consumer tastes and preferencesCustomers may change their taste and preferences. People who used to buy the business, products may change tastes and start consuming something different.
UNIT6: TECHNOLOGY IN BUSINESS OPERATIONS.
63
I.Meaning of Technology in business
a) Technology is the complete set of knowledge haw to produce in an economy at a point in time ,Including techniques of production that are available but not economically viable
b) Technology in the application of scientific knowledge in business or industry .It refers to the equipments and tools that are used to the quality of goods and services.
II. Types of technology
Capital intensive technology Labour intensive technology Intermediate technology
a. Capital intensive technology
1. Meaning.
Capital intensive technology is a method of production which uses more capital than labour. Or production relies on using capital resources.
Forexample:
The use of machines and Oil extraction and refining.Car manufacturing and Web hosting.Intensive arable farming and Transport infrastructure.
It is appropriated in developed countries where capital (machines are many/abundant than lab our).
2. Advantages of capital intensive technology
Machines are easier to control than labour. Labor may ask for wages and need incentives, which increases total costs and princes. Also labor may not be cheaper at all it you consider costs of training, wages, supervisions, etcThere are some industries where labour-intensive technology is not applicable e.g : In heavy manufacturing.It encourages training of skilled labour to use machines. e.g.: workers to use computers, tractors,It produces standard commodities which complete on the world market in quality and prince.It is advantageous in countries where labour is relatively scarce and costly.In agriculture, it encourages the use of modern methods of farming.
64
e.g.: use of fertilizers.
It facilitates optimum exploitation of resources. labour efficiencyBetter quality products are producedIt facilitates mass production of goods and services.It minimizes the size of wage since it reduces the number of labour.it leads to the development of human skillsit facilitates infrastructure development in the country,it is appropriate where labour is scarce.it is time saving as the process is quicker. .
3.Desadvantages of capital intensive technology
Leads to Uunemployment (technological in employment) where machines replace men.Requires complex skilled that may not be ready or available in LDC’s. Mass production may not find the market as in LDC’s people is poor.Leads to income inequality due to small number of people employed. Costs of maintenance of machines may be high.It is not used/applicable at every stage in production process Encourages over exploitation of resources. It has social costs such as noise, pollution, anterior action of environment, etc.Requires heavy infrastructuresImportations of machines may leads to bop problems.
b. Labour intensive technology.
1. Meaning.
Labour refers to the method of production which uses proportionately more labour than other factors especially the capital
Forexample:
Food processing processing and Hotels and restaurants,Fruits farming and Hair dressing.Coal mining.
2. Advantages of Labour intensive technology in LDC’s.
Labour is abundant and cheap in LDC’sIt solves the problems of technological unemployment (where machines replace men).
65
In LDCs lack capital and skilled labour to operate complicated capital equipment. So they should use less capital and more lab our.It is cheap because there is less expense incurred e.g.: In purchasing spare parts,labour intensive technology reduces incase inequalities since it employs many people.In agriculture, labour intensive technology is applicable at all stages of production, in all seasons and in all ecological environments:It does not encourage employment of foreigners and foreign ownership to manage it.It leads to increase in effective demand since it increases wage earners.It encourages small scale production and it can easily be extended to the rural areas this reduces rural urban migrations
3. disadvantages of labour intensive technology.(discussion and presentation).
N.B.Since both labour-intensive and capital intensive techniques have advantages and limitations; there is need for research on appropriate technology.
Figure of Capital Intensive technology and labor intensive technology curves
K1L1 is the level of high capital and few labours.
K2L2: is the level of low capital and high proportion of labour.
66
c.Iintermediate technology in development of LDC’s
1.Meaning.
Intermediate technology refers to the method of production which is neither so advanced nor so primitive and using equipment which is efficient, in both technical and economic sense.
Efficient technically or technically efficient technology: which produces best quality products in a short time?
Economically efficient technology: which produces goods and services at low costs and helps to solve economic problems like unemployment, income disparities, etc
Example of intermediate technology
There are some industries which use local resources to create employment and to produce products and services at low costs.
Eg: - Biogaz and Biomass in IRST.
- Ox-draw ploughs in ISAR society (where cows are used in agriculture).- Rice polishers in MUHANGA, GISAGARA and Huye, etc. Uganda waragi in Uganda Ox-draw ploughs, groundnut schellers, sorghumum polishers in Tanzania research
are oriented crop storage, fishing, production of beverages, etc.
2.Qualities of the intermediate technology(advantages)
It should not requires much capital and skills which are scarce in LDC’s ,It should employ the abundant labour in LDC’s. However, it should be low cost and efficient,It should be cheap to construct and easy to maintain and use,It should be designed to use local resources.
E.g: raw materials, and labour.
Preferably it should concentrate on agriculture as first priority.
It should be easy to build and repair locally.It should lead to further research and development. It should also encourage local discoveries. (renewvaluable energy) case of IREST.
3.Problems of intermediate technology in LDC’s.
It requires much investment in research,It requires capital to start and this may not be available,
67
It may not be applicable in heavy industries, It may produce inferior goods which cannot complete favorable on the world market. It may be limited to only LDC’s since heavy machines are appropriated and cheap for developed countries.
III.Choosing appropriate technology(which fits with the level of technology or the environment conditions)
- Benefits of the technique.- Prevailing conditions in the country.- Efficiency of the technique (cost minimization).- Relative advantages and disadvantages of techniques available.- Health, it should not pose problem to those who use it.- Environment: it should be friendly to nature, pollute and distroy the environment.- Social: it should be designed to use local resources.- Ecnomic: cheap to be constructed and easy to maintain.- Technological:should to research and develop.- Institutional: should promote linkages between sectors.
Qualities of good technology for LDC’s
Should be a small scale technology and must not be expensive.Production methods should be simple so as to minimize the demand for high skills in the production process.Productions should be appropriate and relevant to the living standards of the economy.Inputs should be easily available in the economy
IV. Technology in business.
Technology in business plays important role through:
1.Communication.
Communication is important in business because of the following:
It helps the entrepreneurs to know when, how and where to meet customers, It helpe the entrepreneurs to keep good relationship with business customers. It helps to pass relevant information to the staff of the business. It helps entrepreneurs to implement their policies. It important in recruiting the suitable workers for the business.
68
It increases the sales of the businessby informing the customers a bout the presence of goods
It coordinate operations of different business departments. It promotes good relationship between the employees and entrepreneurs.
2.Management:
Information technology is essential partner in management regardlessof the kind of entreprise oprated. Business needs computersfor storage, transfer, retrieval or transmission of information, business can be managed with greater accuracy and efficency with the assistance of information technology and computre applications.
3. Accounting.
Information technology is essential in E-accounting.
E-accounting is perception of enabling management of all activities more efficiently, affordably than before through facilities of internet.
All parties of the activity (employee-manager-customer-publicbody-businesspartner-supplier) are real-time users of the system and those sharing up-to-date information instantly.
4.transport:
Technology in business transportation plays the following role:
Intelligent transportation systems (ITS):that make driving and traffic management better and safer for everyone.
Transportation typifies the FutureStructure framework: (FutureStructure is a sister publication of Governmet Technology.)
Soft infrastructure: rapidly evolving to accommodate the demand for global investment in hard transportation infrastructure.
Bridging the two as vehicles and the infrastructure on which they operate, become increasingly connected.
Traffic and population growth which create demand for more transportation infrastructure.
v. ICT in business.
Meaning of ICT(information and communication technology).
69
The ICT is the integration of information technology(computers devices,the internet,etc) and telecommunications technologies(telephones,radio, TV, Fax,etc)for purposes of creating, processing, transmitting, presenting and accessing information.
Due to the efficient and quick communications created by ICT, the world has become a global village in which information can move from one end of the globe to the other within a very short time. People can communicate with each other across the world as if they were living next door.
VI. Tools of ICT.
The following are the tools of ICT:
Computers,Telephones, radios, televisions, satellites, printers, fax machines, e-fax machines, automated teller machines(ATMs), Electronic billing machines(EBMs), scanners,internet network,E-mail systems,Video conference and Data projetors.
VII. ICT and business.
Business publicity:
Information and communication technology can be used in various ways as tool of publicity in business using various methods among which include the websites and short message sevice (sms). Bunesses create web pages on which they post images, texts and videos that provide information to customers.
Using short message service (sms):This is written text information or audio recorded in information on mobile phones,fixed phones.
Financial management:
Financial management refers to the routine functions and activities that are performed within an organisation to ensure efficient use of money.
Information and telecommunication technology plays a very important role in financial management in the following ways:
It enables business to scan and store documents electronically, Using accounting software like Tally,quickbooks,pastal,etc, it enables entrepreneurs to
balance off accounting books easily and accuratly better than doing it manually, Entrepreneurs get money easily though financial technological tool such as ATM cards,
Electronic money transfer(EMT) and now commonly used mobile money and Tigo cash,MTN money transfer,etc.
It is used to prepare financial statements like financial reports, final balance sheet,etc. Information can be moved from one department to another outside the business,etc.
70
VIII. Role of ICT in business.
It makes work easier, It helps to produce better products, It helps companies to sell globally: people are able to sell and buyproducts online and
receive payments electronically hence promoting global business. It improves on stock control, It enables people to communicate nationally and inernationally with business
correspondents for example a person in rwanda can call a business partner in kenya and arrange for an exchange of products.
IX. Problems associated with using ICT.
Need for traning: introduction of ICT could be of limited use unless staff is trained and able to use it properly,
Incompatibility, Mass unemployment: increased use of ICT reduces the amount of labour employed by
organisations therefore labour becomes technologically unemployed. Use of ICTis very costly to manage: for example business have to buy expensive ICT
tools like computers,etc.
X. E-commerce/on line business
a. Advantages of E-commerce.
Cheaper to buy goods and services since it reduces som costs such as transport, Virtual goods can be delivered instantly,etc. Faster buyingor selling procedure, as well as easy to find products. Buyiny 24/7 , 365 days, buying and selling is continous throughout the whole year. Global research to customers, there is no theorical geographic limitations. Low operational costs and better quality of service. No need of physical company st-up. Easy to start and manage business. Customers can easily select products from different providers without moving around
physically. Easy to compare, when products are placed online, they come with all the specifics and
they want you to compare them with others, know they have the best optins and come back for more.
b. Disadvantages of E-commerce.
Any one, good or bad, can start a business. The is no guaranty of products quality. Mechanical failure can cause unpredictable effects on the total processes. As there is minimum chance of direct customer to company interactions,customer loyalty
is always on check.
71
Delay in receiving goods: although delivery of products is often quicker than expected, there is a chance that your product may be lost or delivery to the wrong address
Need access internet: internet access is not free. Lack of personal interaction,while the rules and regulations of each E-commerce business
is laid out for you to read, there is a lot to read and it may be confusing when itcomes to the legalities.
Extra-expenses and expertise for E-commerce infrastructure: to be sure an online business is running correctly, money will have to be invested by the government and private users. As an owner, you need to know transactions are being handled properly and products are represented in the most truthful way.
XI. ICT as a source of business opportunities.
Designing and maintaining websites for individuals, organizations and companies. Developing software. Starting and managing on lineshop: you start an online shop to sell goods and service. Starting programmes for people who want to use computer to do different activities. Designing websites on which campanies can advertse can advertise their products. Computer maintainance. Bulk sms for people inviting guests for functions like weddings. Meeting, school visitations,etc.
UNIT7: INTERPERSONAL COMMUNICATION.
1.LISTENING AND SPEAKING EFFECTIVELY.
a. Meaning of interpersonal communication
Communication involves very important aspects include listening and speaking effectively.
If you are to communicate any message to any person, institution or a group of people, you must be able to talk very well and at the same time you provide relevant feedback because you have been listened to and also you have listened very well. Every person should be able to use these two important aspects during the process of communication.Therefore Interpersonal communication is a communication between two persons or goup of persons.
b. Cooperating with others and teambuilding:1. characteristics or feature of a good team are the following:
everyone participates actively and positively in meetings and projects, teams goals should be understood by evry member, everyone takes initiative initiative to get things done, each teammate trusts the judgement of the others, the team is always ready and willing to take risks,
72
there is plenty of communication between team members, team decisions are made using organised logical methods, members are carefully listened to and receive thoughtful feedback full team acceptance is expected as decisions are made, every member should be focuced on the ultimate goal of the business.
2. Behavior of an effective team member: Team members must demonstrate behaviours that promote positive team
morale. Be responsible for policing yourself. Ensure you follow the rules, policies &
procedures. Have the ability to admit when you are wrong. This is an admirable trait in
any team member. The inability to admit when you are wrong inhibits personal growth and impedes your team’s ability to innovate. A sincere, friendly greeting goes a long way to promote positive relationships. If I show you I’m genuinely happy to meet you, you’ll instantly start to like me.
If you are a team leader, be clear and effective in all forms of communication. Cliques, gossip, favouritism, pettiness and disrespect, can destroy team morale and promote distrust. As a team leader, you have the added responsibility of trying to diffuse situations before they escalate into problems and report them through the appropriate channels, if needed.
Both team members and leaders need to listen (non- judgmentally) and be open to complaints, concerns, and suggestions to improve team progress and relationships.
Recognise and value that our diverse backgrounds and experiences make us who we are. Every member of a team has a different personality, different perspective on life, and may react to or interpret your behaviour differently than you expect.
Be open to other opinions, don’t always assume the worst. Treat people how “they” want to be treated, not necessarily how you want to be treated.
When interpersonal conflicts arise (and they will) first try to talk out your concerns with the individual, privately. Make them aware that he/she is offending you. Give him/her the opportunity to correct the behaviour before assuming it is intentional. If you cannot resolve the issue at this level, report the problem to your team leader or supervisor before it escalates any further.
Behave professionally, recognise that inappropriate conduct, impacts all members of the team and the organization as a whole. Be known for your consistent principles
Team building in businesses:a) Meaning:.
Team building refers to the various activities undertaken to bond and motivate team members and increase team performance. Under team building individuals cease to be seen as individuals but as members of inter dependent instead of looking at them as individual workers. Forexample: business team, religious team, schoolteam or professional team. This forms a team management.
73
Team management: refers to techniques, processes and tools for organizing and coordinating a group of individuals working towards a common gaol.
b) Building effective teams.
The following guidelines can be used to develop effective teams:
Set clear goals for the team.
The goals for each team should be SMART, that is (specific, measurable, achievable,relevant,timebound)
An example of such goals could include “to collect at least 90% of all debts by end of the mouth”
Define a mechanism for clear communication among team members.
Team leaders often make the assumption that all team members knowwhat the team leaders known and what the team members want. Consistent and clear communication is important for any effective team such communication can be delivered to team members through meeting, notice board, e-mail, newslettersand using collaboration tools such as an internet.
Define a procedure for team members to solve problems and make decisions.
Forexample, the procedure could incase that if no consensus on a problem is reached with in one day then voting is done and majority decision taken and if voting is not concluded with in a day then the team leaders take a decision.
Define staffing procedures.
Effective teams have well defined procedures and how group members go through a systematic process to join the group. The group also knows what skills and expertise they need in the group.
Monitor and report on team members.
An effective team has a mechanism to monitor the contribution and work of each team members towards common goal. Whengoals and plans change team members should adjust.
Assign team leadres.
Each team should have a leader who focuses on the team practices and procedures rather than focusing on individual team members. The leader ensures that all members are active in achieving the team goals.
74
3. Importance of team building.
Some of the team building are:
To identify and effectively use the strengths of team members. To improve team productivity To involve every member in goal seeting To make the work place comfortable and attractive To improve communication among team members. To motivate team members.
c. Customer care.
The work of looking after customers and ensuring their satisfaction with one's business and its goods or services.
Here are a few ways that listening is important to customer service:
1. Empathy Begins with Active Listening
When customers don’t believe that a representative is truly engaged in trying to understand their problem, they’re much more likely to walk away.
When customer service professionals assume they know what a customer is feeling instead of listening for the language and cues that can truly signal the customer’s underlying emotions, empathy is impossible to achieve.
2. Active listening techniques .
such as eye contact and body language, can signal to the customer that we are engaged in the conversation and help us empathize with the customer by mirroring their presence and relating to their state
3. Listen as Customers tellus how to rsolve their issues.
When service breakdowns do occur, every company dreams of using the experience as an opportunity for service recovery (which can leave the customer with more positive feelings than if no issue had occurred).
Many times, when a customer is explaining what went wrong and what they expect, service employees can read between the lines of the conversation and determine exactly what it will take to “wow” them and win them back.
We just need to remember that the first step in customer service listening is to stop speaking.
75
4. Listening Keeps the Focus on the Customer Experience.
Customer service conversations shouldn’t be about us, our skills, our organizations, or our products; they should always be about the customer’s experience.
Committing our full attention throughout the conversation keeps the focus squarely on the customer and ensures that the interaction proceeds with their needs as the primary driver.
5. Reduce Instances of Miscommunication
Miscommunication breeds frustration and what may seem like a harmless error to us could be the last straw for a customer who feels like nothing is going their way.
Proactively listening to our customer before taking action allows us to gather all of the information we need to help prevent miscommunication and the resulting service issues that come from not understanding what the customer is trying to tell us.
6. Listening is an Improvement mmechanism.
One of the most powerful ways to improve the performance of our teams is to train our team members to not only listen carefully but to document what they’ve learned from their conversations with customers. Our customers are our best source for details about our successes and failures and often it is the unscripted, unstructured feedback data that provides the best insights into the experience we are providing.Often some of our best data comes from conversations on the front lines.
Characteristics of a good customer service:
Prompteness, Politeness, Professionalism, Personalization.
2. EFFECTIVE COMMUNICATION.
1. meaning:
communication means to share information. it comes from latinword “communo” which means to share.
Communication is the process by which information is trasmitted from one person to another through a defined medium.
The medium of communication is the means by which information is sent from the sender to the receiver.
76
Effective communication takes place if the receiver of the message is able to understand it and respond to it approprietely. If the message is not well understood and not properly responded to, then there, is ineffective communication.
2. communication process.
Communication process involves the sender,transmitter and receiver .
If one of the steps is missing, then the communication process is incomplete and communication cannot take place.
Communication process figure.
7. The transmitter or sender: person who starts the communication process by sending a message. When sending the message, the sender first encodes the message. Encoding there refers to the process of transforming the ideas into a message that the receiver will understand.
8. The medium of communication: is the method by which a message moves from a sender to a receiver.eg, a letter, memo, noticeboard,ect.
9. The receiver: this the person who receives a message. When the message is received, the receiver decodes it. Decoder means that the receiver converts the message of the sender to uncover the meaning, feelings and attitude in which the sender has converted the message so as to determine the feedback.
10. Feeback(response): this is thea reply from a receiver of a message that is sent back to the sender. This ensures that a message has been received and understood and if necessary, acted upon.
11. Noise:is anything that has a disturbing influence on the message. Since noise hinders communication, the sender should choose a channel that is free from noise. Noise may occur at the sender’s end, during transmission, or at the receiver’s end.
Examples of noise include:
Ambiguous symbols that lead to faulty encoding
77
A poor telephone connection An inattentive receiver Faulty decoding (attaching the wrong meaning to the message) Prejudices obstructing the poor understanding of a message Gestures and postures that may distort the message.
Communication process without noise.
Example. Linda writes to Gatete instructing himto supply 4000 kilograms of salt.
Linda is the sender,Gatete is the receiver and a letter is the medium.
3. Internal and external communication.
1). Internal communication.
Internal communication is when the message is shared by people within the same business enterprise. The sender and the receiver of the information are wiyhin the same business enterprise.
The following are examples of internal communication:
78
The general manager sends a memo to all staff within the company. Security guard calls manager on mobile phone. Accountant posts a noe on the notice board to all staff to come for payment. Secretary sends an e-mail to the marketing manager.
Internal communication may be horizontal or vertical.
a. Horizontal communication.
This occurs when the sender and the receiver of the message are the same level in the organisation hierarchy. Forexample, when one accountant communicates to another accountant or when one sales executive communicates to another sales executive.
b. Vertical communication: occurs when information moves from a senior to a junior staff and vice versa. For example, when the production manager communicates to the production executives or when the cashier communicates to the accountant. Vertical communication is said to be downward communication if the informationis moving from a senior to a junior staff and it is said to be upward if the information originates from a junior staff and the receiver is a senior staff in the organisation.
2). External communication: occurs when information is shared with an external entity. The receiver of the information is from a different entity compared to that of the sender.
The following examples illustrate external communication.
A customer sends a letter of inquiry to the sales manager. Bank sends a bank statement to a customer. Sales manager sends an invoice to a customer. Customer calls the customer care department to complain about undelivered goods.
4. Essentials of effective communication.
The essentials or principles of effective communication are summed up the 7cs of communication.
For any effective communication to take place, one should consider the following principles:
Clear: The message should be clear and easy to understand. It should not be ambiguous. The sender should use the language the receiver understands.
Courteous: The sender should communicate to the receiver in a respectful way. Concise: The message should be as brief as possible so that it contains only the
information that is required. It should not contain lots useless and irrelevant details.
79
Considerate: The sender should consider the receiver’s feelings, religious and cultural beliefs, age,sex, tatus,etc. If the message is not considerste,it may not generate the the required response.
Concrete: The message should be based on facts and the sender should be able to provide evidence of such facts.
Correct: The information should be correct and accurate with a rigth address so that it is received by the right person.
Complete: The message should be complete by includeing all relevant details that the receiver needs to be able to understand the message.
If the message is not complete, effective communication will not take pace. There for, in order to ensure completeness in any communication between the sender and the receiver, the parties involved in the communication should ensure that the proved 5Ws of communications are taken care of that is the answers to the 5Ws are provided(what, when, where,who and why).
5. Forms of communication.
1. verbal communication.
a), Meaning.
Verbal communication is the use of spoken words to communicate. The message is delivered by the use of spokenwords.
b). Media or medium for verbal communication.
Telephones(mobile phones or satellite phones) Radio calls(communication by words) Radio(radio broadcasts: announcements and news are for the listeners who cannot
immediately reply to them) Sounds(drums, gan shots,clapping,etc): during sports event,a sound as a gunshot is
usedto communicate start.clapping may also usedto communicate welldone or thinkyou.
Voice over internet protocol(VOIP) : New technology that enables people who are connected to internet to talk to each other.
Face to face talking(for example, when you meet someone on the street and say something. This is normally two way because when you say something to someone,he or she may respond immediately).
C). Advantages of verbal communication.
It allows immediate response and feedback . it is very appropriate for two way communication.
It is very fast and therefore suitable for urgent information.
80
It is very flexible and the message can be adjusted during the process of trasmitting it. For example, if you discover that the receiver of the message is not interested, you easily change the topic.
Its easy and natural. It doesn’t required learning anything. If it is by word of mouth, it is free since you do not have to pay anything to speak. Message can be given out of many people at once. For example, during the meetings,
a manager can give the same information at once to all the people in the meeting. Since information is not stored, it can be used for very sensitive information. Other
people cannot get a copy of the same information as it is with letters.
d). Disadvantages of verbal communication.
There is no recoerd of the message for later use. Communication may be distorted unusual bpronunciation or if the speaker is very
fast. If thereceivers of the message are many,all them may not follow at the same rate. If it is by use of electronic gadgets like telephones and computers, it requires
learning by both the sender and the receiver. Noise may interfere with the sending and receiving of the message. Breakdown of equipment may stop the communication process.
2. Audio-visual communication.
a. Meaning.
Visual communication: involves the use of eyes to receive the information.
In some cases, some forms of communication combine the use of soud and sight hence the name audio-visual communication.
Information that can be received visually is available on billboards, signs and gestures, televisions,charts, photographs, signposts, maops, films and power point presentations.
b. Advantages of audi-visual communication.
The same message may be used to reach thousand of receivers at the same time. Such messages can be easily remembered. The message can be made very interesting, entertaining and appealing which makes
many people want to listen to it.(films, documentaries and music). The same message can be received over and over again. For example, when you put
a billboard at the roadside, the same billbaord can be seen over again.
c. disadvantages of audio-visual communication.
The message may be interesteing that the receiver gets so excited and misses the information.
81
The message costs a lot of money to produce and send. You may require special equipment to send and receive the message. At times, it is difficult to know the people who receive the message.(as meany have
people seen a billboard or watched a television film).
3. Written communication.
a. Meaning .
Written communication is being used inthese notes book. This involves use of text that can be read and understood. For example, written communication includes letters(formal and informal letters), memos(an abbreviation for memorandum), circulars, newspapers, e-mail, reports,notices, faxes and posters.
b. advantages of written communication.
The message can be stored and used again at later date in case there is need for reference.
It is most appropriate for detailed communication like graphs, maps, technical drawings and others.
It is suitable when there is need to use the informaytion later on in case of court cases.
Can easily be reproduced by photocopying and and then distributed to many people. It is suitable for communication information where the receiver must acknowledge
that the message has been received. The same message can be used by very many people. For example, a notice on the
company notice boarbd can be read by all.
c). Demerits of written communication.
Messages can only be sent and received by people who know how to read and write. The blind may not be able to send and receive written communication except by use
of specialised equipments. The time of delivery can be long and this may delay import information and
decisions. There is no immediate feedback. It is therefore, not suitable emergncies. The process of sending written communication may be expensive because of the
cost of paper, pen and postage. There is no personal contact between the sender and the receiver of the message.
6. choosing a communication channel.
The following factors should be considered in choosing the appropriate communication channel or medium of communication.
Speed: for a message which is urgent, the most speedy channel should be used.
82
Distance: distance between the sender and the receiver determines the choice of communication channel.
Reliability:the channel of communication should be reliable so that messages are not interrupted, lost, distorrted or delayed.
Nature of the message: some messages are sent through specific media mediums than others. For example, a message to demand for payment is best throug written docuemnts than over the phone.
Colour: this related to who should access the message. Cost of the medium: this refers to the amount of money spent on using the channel
of communication.For example, a television advert is vry expensive compared to a radio announcement.
Need for accuracy: some channels are accurate,accurate and more suitable for certain kind of messages. For example, you can not use telephone to explain the accounts of a business.this would not be suitable and accurate instead,a fax or e-mail would be more suitable.
Legal consequences: some forms of communication may not be legally binding and therefore not be suitable for certain informations. For example, when appointing someone to a job,the information should be communicated in writing in form of an appointment letter so that at a later date, one can be able to prove it.
The receiver: it is very important to consider the nature of the person receiving the message. The receiver may be able to understand one channel of communication and not another. For example, writing a letter to bind person may not be effective as a the communication channel. The personal characteristics of the receiver need to be considered.
7.importance of communication in business.
Communication is important in the business because of the following:
Communication helps entrepreneurs to know when, how and where to meet customers.
It helps the entrepreneurs to keep a good relationship with business customers. For example,entrepreneurs get complaints from customs about the quality of products and services. This enables entrepreneurs to adjust and be able to serve the customers better.
Communication helps to pass relevant information to the staff of the business. Communication heps entrepreneurs to implement their policies. For example, when
an entrepreneur makes a decision, she or he hase to communicate it to the staff so that they can implement it.
Communication important in recruiting the suitable workers for the business. The business communicate the need for saff trough job advertisements.
Communication increases the sales of the business. By informing customers about the presence of goods through advertising,sellers increase demand for their products and get more profits as a result of the increased number of customers.
83
Communication coordonates operations of different buniss departments. For example, when customers complain about packaging of a products,the marketing department communicates to the production department.
Communication promotes good relationship between the employees and the entrepreneur. For example, by communicating with the entreprenuer and making suggestions, employees develop a sense of belonging to the business which in turn improves their morale and improves production and profitability of the business.
8. barriers to effective communication.
1.Communication barriers related to the sender.
Sender using difficult,technicallanguage to the receiver that does not have such knowledge.
Failure to plan and arrange the message before sending it. Sender not being clear and specific. Sender speaking so fast.
2.communication barriers related to the message.
The message being too long and too detailed. Message sent at a wrong time. Message being incomplet. Message getting lost during transmission.
3.communication barriers related to the medium.
Medium is not functioning(telephone is off....). Medium may not be popular-wrong medium. Medium is slow. Medium distorts the message( eg, you send someone to deliver information and the
person forgets some of the infomation he/she is supposed to deliver) Receivar not conversant or not having access to the same medium(eg, putting
announcement on the internet for rural farmers who have no access to computers and internet).
4.communication barriers related to the receiver.
Receiver is not attentive or something else is attracting his /her attention. Receiver is sick. Bias about the source, the medium and the message. Resceiver does not have trust in the sender of the message.
5.communication barriers related to the environment.
Noise.
84
No light to read the messages. Other distractions.
The most common barriers to effective communication are summarised in the table below.
barrier desription How to overcomeDifficult language Using difficult terms and
jargons.Use simple languages, avoid jargons and slangs.
Message send to wrong person.
Wrong message to a wrong person.
Make sure the message is sent to the rigth person.
Message being incomplet Calling for a meeting without showing or indicating the date.
Include the detail such as time,day,date,month and year.
Receiver not interested. Receiver not listening Emphisise the importance of the message.
Noisy environment Receiver not able to hear message properly.
Communicate in less noisy environment.
Ineffective medium of communication
For example, a letter to an illitrate person
Select a medium that is easily understood by the receiver.
Message not attractive An advert on a billboard with dull colours.
Message should be attractive to arouse interest of the receive.
Bad timing Sending a business message at night.
Send the message at the right time(convenient time of the receiver)
Message being too long Too many details confuse the receiver.
Message should be brief and to the point.
Message getting loss Message does not reach the receiver
Use trusted medium and insist on feedback
Use of inappropriate channel Putting a very important message on a crowded notice board.
Sener should select appropriate channel depending on the receiver.
3.PUBLIC RELATIONS/ CUSTOMER CARE.
1.Meaning.
Public relations is the practice of managing the flow of information between an organisation and the public.
The public includes the following:
Employees. Investors and share hilders.
85
Neighbours to the business. Contractors. Service providers. Customers.
2.Functions of public relations
The public relations department performs a number of functions which are summarised below:
Educate public: Mitigate negative publicity Represent the business Monitor the media Manage crisis Provide accurate informative Pnforce community relations. Fosters employee relations.
4.Indicators of a good public relation
- Honest to customers - Pleasantness - Prompt service - Handling customer complaints - Excellent knowledge of the product
Public relation and advertising
The differences between advertising and public relations are as follows:
- Audience: advertising is tailored towards the target audience while public relations may be tailored to the media so that it relays it to the public
- Control and non control: with advertising, the business has full control of what goes into the advertisement but with public relations, you have no control over how and when the media presents the information
- Paid space and free coverage (cost): in advertising, the company pays for the space or time in the news papers, radio, television or internet but with public relations, the purpose is to get free coverage especially when business activities or products are freely covered by the media as news.
Tools of public relations
- Press release -Photographs - Advertorial -Interviews - A brochure -Letters to editors - Conferences -Print media - Internet -Newsletters and publishers
TOPIC AREA: BUSINESS OPERATIONS MANAGEMENT
86
UNIT 8: Office procedures Personnel managementPersonnel management is an administrative function of organization that exists to provide the personnel needed for organizational activities and to manage the general employee-employer relationship or Personnel management focuses on personnel administration, employee welfare and labor relation.A typical business organisation may consist of the following main departments or functions:
Production. Research and Development (often abbreviated to R&D) Purchasing. Marketing (including the selling function) Human Resource Management. Accounting and Finance.
The Production function
The Production function undertakes the activities necessary to provide the organisation’s products or services. Its main responsibilities are:
production planning and scheduling control and supervision of the production workforce managing product quality (including process control and monitoring maintenance of plant and equipment control of inventory deciding the best production methods and factory layout.
Close collaboration will usually be necessary between Production and various other functions within the organisation, for example:
Research and Development, concerning the implications of product design for production methods and cost
Marketing, concerning desired product functionality, appearance, quality, durability and so on
Finance, concerning the availability of funds for purchase of new equipment and the acceptability of inventory levels.
Human Resource Management, concerning staff motivation implications of job design and production methods.
The Research and Development function
The Research and Development (R&D) function is concerned with developing new products or processes and improving existing products/processes. R&D activities must be closely
87
coordinated with the organisation’s marketing activities to ensure that the organisation is providing exactly what its customers want in the most efficient, effective and economical way.
The Purchasing function
The Purchasing function is concerned with acquiring goods and services for use by the organisation. These will include, for example, raw materials and components for manufacturing and also production equipment. The responsibilities of this function usually extend to buying goods and services for the entire organisation (not just the Production function), including, for example, office equipment, furniture, computer equipment and stationery
The Human Resources function
The Human Resources function is concerned with the following:
Recruitment and selection. Ensuring that the right people are recruited to the right jobs. Training and development. Enabling employees to carry out their responsibilities
effectively and make use of their potential. Employee relations. Including negotiations over pay and conditions. Grievance procedures and disciplinary matters. Dealing with complaints from employees
or from the employer. Health and Safety matters Making sure employees work in a healthy and safe
environment. Redundancy procedures Administering a proper system that is seen to be fair to all
concerned when deciding on redundancies and agreeing redundancy payments
.7 The Accounting and Finance function
The Accounting and Finance function is concerned with the following:
Financial record keeping of transactions involving monetary inflows or outflows. Preparing financial statements (the income statement, balance sheet and cash flow
statement) for reporting to external parties such as shareholders. The financial statements are also the starting point for calculating any tax due on business profits.
Payroll administration Paying wages and salaries and maintaining appropriate income tax and national insurance records.
Preparing management accounting information and analysis to help managers to plan, control and make decisions
Organizational structure
An organizational structure is a prescribed pattern of a work related deals, which is established
88
for the accomplishment of organizational objectives.
It serves as instrument for introduction of logical and consistent relationship among various functions, which make up the organization.
An organizational chart is a graphic representation of firm/enterprise hierarchy of authority.
Note that an organizational structure is primarily represented by an organizational chart.
The structure refers to designed relationship among resources of the management system.
The structure department
Any organizational structure must be departmentalized i.e. division of responsibilities.
Departmentalization can be done through 4 ways such as
1. By functions 2. By product 3. By geography 4. By type of customers
Roles of an organizational structure
1. Facilitate the use of available resources2. It facilitates a company to easily achieve its objectives3. It leads to specialization and coordination4. It maintains the relationship between all organizational resources.5. It facilitates managers to arrange and locate different works
Human resource management
Human resource management involves basic personnel process like recruiting
employees ,training ,ensuring welfare and carry out performance appraisal , providing
information through communication ,negotiating ,settling disputes ,transfer ,promotion,
demotions and contract termination
RECUITMENT
Recruitment refers to a process of filling in vacant positions in an enterprise. It involves
identification of the vacant post, advertising, short listing and interviewing the applicants in
order to get best candidates.
Terms used in recruitment (Personnel requirements of the business; there are four personnel
requirements of a business. These are explained below)
89
a. Job analysis: A job refers to a collection of specific tasks, duties which a person performs as regular assignments to earn a living.A duty refers to a collection of tasks performed regularly by a person as his or her assignments to earn a living.A task is a work activity that is observable performed within a given period of time whose outcome is a product.Job analysis is a process of collecting or getting information about jobs especially what the worker does, how or she gets it done, why he or she does it, skills, education and training required relationships to other jobs, physical demands and environmental conditions. In the words of Edwin B. job analysisis a detailed and systematic study of information relating to the operations and responsibilities of a specific job.For example, the job of a secretary would require knowledge of secretarial studies typing, shorthand, and office management and also knowledge of English for Rwanda’s case.Components or parts of job analysis:
Job description Job specification Job grading or evaluation
Job performance standards or personal assessments
Job description: this is a written statement which outlines the duties and responsibilities
involved in performing a particular job. It includes information on duties and responsibilities, job
title, a brief summary of the job duty station, working conditions, pay and benefits.
Job specification: This specifies the characteristics of the individual who should occupy the job.
They include both the physical and Psychological characteristics for example the
qualification,experience ,responsibilities, general health, skills , learning ability, vision, fluency
in speaking, emotional stability and trainings.
Job grading: This involves the rating of jobs in order of value. They are then divided into
groups (grades) in order for each to have a basic pay rate or range. This is followed by the
working out of salary grade for each group basing on broad characteristics of each grade in terms
of knowledge and qualification, skills. Here, terms of employment are normally reached at
through collective bargaining.
Job performance standards: this mainly looks at what is expected to be the output for a given
job. It involves the evaluation of one’s duties. If one does not perform as expected then he or she
has failed.
Performance appraisal
90
Performance appraisal is the judgment of an employee’s performance in his job based on various considerations other than productivity alone.
Methods used in carrying out performance appraisal
Ranking methods: This involves the judgment of an employee’s performance in order of their performance. This is usually based on their total ability on their job but sometimes it is according to a few characteristics.
Grading: it involves categorizing employees in grades according to their performance. This may be based on quality, quantity and output.
The rating scale: this is the most commonmethod used in carrying out performance appraisal. It consists of a list of personal characteristics features against each: of which there is a scale usually of five points for the manager to mark his assessment of the employees.
The open ended method: this is a comparatively recent innovation introduced because of the dissatisfaction with the rating scale.It emphases the way that the job is performed and the manager is expected to write a few sentencesabout the subordinateand also hints on the employees’ performance.
The behavior expectation scale: this is sometimes referred to as behaviorally anchored rating scale (BARS) technique. It mainly looks at the behavior of the employee in the aspect related to his or her job.
The recruitment process should follow the following steps: job description and job specification
design, announcement of recruitment, selection, short listing, written examination, interview,
orientation and evaluation
How an announcement for the job vacant should be done
Example
You have obtained a loan of 20 millions Rwf to start Mushroom Project. Design an advertisement for the post of a project manager.
Answer:
Advertisement for the post of a project manager of Mushroom project
- Project background: this project has been introduced in order to supply mushroom to population, because this one provides vitamin within human body. This project is located in Nyanza District.
- Job title: Project manager
91
- Key responsibilities: he/she will plan for the business, organize work, motivate workers, prepare budget annually, communicate, control workers, coordinate workers, etc
- Skills required: he/she should know English, French and Kinyarwanda, possess computer skills,
- Experienceandqualification: he/she must have a Bachelor’s degree in Management, accounting or economics and experience of 2 years
- How to apply: applicants will bring their CV , application letter, photocopy of ID, photocopy of degree to the headquarter of the project in Nyanza district not later than 23rd January, 2013
How to write an application letter and curriculum vitae
Example
RWESERO Enterprise advertised in new times on 15/10/2013 inviting sales representatives in every sector in Rwanda, the deadline of submitting the application documents is 20 /11/2013. Mahoro John is a pre-finalist of advanced secondary level in Ngarama Secondary school where he studied from Primary to Secondary and in holidays he leaves in Ngoma district. Remwmber that in last EXPO 2013, Mahoro John worked as a customer care of URWIBUTSO –Nyirangarama Enterprise.
You are required to write an application letter for the job and attach your curriculum vitae in the name of Mahoro John as specified in the advert.
92
Mahoro John Po.Box Eastern Province
On 20th Nov, 2015The Manager, RWESERO Enterprise Po.Box 1234 Kigali
Dear Sir / Madam
RE:APPLICATION FOR A VACANCY OF A SALES REPRESENTATIVE
I humbly submit my application for the post of sales representative that was advertised in the New Times on 15/10/2013
I am a Rwandan, aged 18 and finished my senior six this year in Ngarama Secondary School
Basing on the skills I acquired from school in the entrepreneurship subject and my previous post as a customer care of Urwibutso-Nyirangarama Enterprise, I will do the job well (a C.V and other academic documents are attached)
Curriculum vitae
1. Personal data / information - Names: Mahoro John - Date of Birth: - Status: Single - Address:- Contact - Sex - Parents names - Place of birth
2. Education background and qualification
Years Institutions Award 2011-2013 Ngarama sec.school Pre-A level finalist2008-2010 Ngarama sec.school 0 level certificate2002-2007 Ngarama sec.school Primary certificate
3. Working experience - Worked as a customer care of Urwibutso-Nyirangarama Enterprise in Expo 2012
4. Skills acquired - Marketing skills - Leadership skills - Communication skills - Computer skills
5. Hobbies - Swimming - Football
93
Mahoro John Po.Box Eastern Province
On 20th Nov, 2015The Manager, RWESERO Enterprise Po.Box 1234 Kigali
Dear Sir / Madam
RE:APPLICATION FOR A VACANCY OF A SALES REPRESENTATIVE
I humbly submit my application for the post of sales representative that was advertised in the New Times on 15/10/2013
I am a Rwandan, aged 18 and finished my senior six this year in Ngarama Secondary School
Basing on the skills I acquired from school in the entrepreneurship subject and my previous post as a customer care of Urwibutso-Nyirangarama Enterprise, I will do the job well (a C.V and other academic documents are attached)
- Making research - Betting
6. Languages spoken - English - Kinyarwanda - French - Swahili
7. Referees: - Marketing manager in Urwibutso enterprise
Methods and sources of recruiting personnel
There are two main sources; internal sources and external sources. These sources are divided into
the following sources:
- Transfers: transfer of a worker from one job to another within the same business can be used
as a source of recruitment to meet personnel demand at the place where a worker is transferred
- Promotions: promotion refers to appointing an employee to a position of greater or higher
responsibility or authority. Promotions can be based on seniority or merit of workers. It is an
internal source of recruitment
- On line websites: the job announcement has been written on internet and job applicants apply
on internet
- Internships: it is a situation where a company recruits people who have carried out
internship in that company
- Institutions of higher learning: it is a situation where in a university or technical institutions,
the best performers are interviewed and recruited in the organization
- Advertising: it is job announcement through various media such radios, news papers,
television, etc. the advert gives various details about the job
- Previous applications: for candidates who may not have been considered for the jobs when
they applied before. The employer simply goes through such applications and the best
candidates are interviewed and recruited
- Employment agencies: these are institutions that specialize in the recruitment of workers for
different employers. The employer gives them the job description for the position to be filled
94
and the applicable terms and conditions. The institutions then took for and recruit an
appropriate candidate for the employer.
Factors to be considered when recruiting employees in a business (Criteria for selecting
people to work with)
Age of the employee: different jobs have different requirements for example the youths between
25-45 years of age worth with physical conditions
Working experience: in most cases employers are interested in experienced people who will be
efficient and increase business output
Cost of the employee: cheap labour is always wanted by the employers to minimize on the wage
bill of the workers and hence, maximize profits.
Language spoken by the employee: Some employers want workers who speak many
languages. This would increase customers because of enhanced communication.
Health status of the employee: Employers want workers with good health conditions because
they are always to be at work at all times.
Marital status: some employers prefer workers who are single because they are always
committed to work and are easily flexible than married people especially when shifting them to
others stations
The nature of the job: some jobs are too physical and require very strong workers or males
while others are not
Skills or ability required: Every job has specific skills or abilities required to perform it.
Employers always consider such skills and abilities when recruiting employees.
Sex of employee: some employers prefer employing women accountants than men expecting
them to be more honest than men
Sizes of the business: Some businesses are small and need few workers while some are big and
need many workers. At recruitment therefore, the size of the business is considered since it
determines the number of employees required
95
Process of recruitment an employees in a Business
Identify the vacancy: This steps involves identifying the post to be filled, the number of persons needed.-Job description -receiving application -Job specification - short listing or pre-selection -Advertising - written exam -publication of results - oral exam or written-selection for successful candidates -orientation /induction -contract signing - personal file
Office support services Equipment OFFICE PRACTICE
Office practice is that part of organization which is related to the clerical activities including the procedures and methods of performing these activities in an efficient manner. Clerical activities consist of communication, maintenance of office records, and preparation of reports, routines procedures and necessary calculations. An office is space set aside for administration and coordination functions of an organization.
Common Office equipment used in general office
The following office equipment are common any office for example in the typing pool, accounting section and computer room.
- punching machines this is for making suitable holes in paper for filing, stapling machine this is for fixing letters and enclosures or other pages together, Stapler remover to remove pins from papers, scissors to cut papers ,photocopies, Note counter ,Typewriter ,Cash register ,Binders ,Telephone, fax machine, Projectors ,Notice boards ,flip chart ,Filing cabinet ,Calculators ,Office trays ,Money safe box ,Paper shredder ,Rubber stamp
Typing pool machines
Type writers: these may be manual or electric. This letter requires little physical effort to use and the typist can do continuous work without getting tired.
Automatic type writers: these use work prepared on a per punched tape, edge punched cards or tabulating cards or record on magnetic tape sheet or desk which is played back on the automatic type writer
Portable type writers: there are type writers for travelling workers like sales men
Accounting machines: they handle accounting records using storage and counting registers to carry out ledger posting and analysis work.
96
Calculators: these may be manual or electric. The simplest one will add and subtract. The more complicated electric calculators will add, subtract, divide, and multiply and give subtotals and totals.
Photocopiers
These photocopying machines are used to photocopy reports, correspondence from the suppliers and clients and other office related assignment firms now send photocopying jobs which are bulky to the various photocopy centers like electro in Kigali but the day to day photocopies are done within the office.
Laminating machines
These are used for laminating simple documents like licenses, identity cards, and certificates. These are helpful to keep important documents safe as they become dust and water proof. The document is inserted is a plastic pocket and passed through the machine which seals it with the heart as it is connected to the electric switch, after it is sealed, the user can either keep it in the file or display on wall.
Binding machines
These are used for binding meeting reports, sales reports, lists of customers any other document for the office. These are done by compiling together the necessary documents and punching holes in them with use of a special machine.
A computer is a valuable tool for business as it is both easy and convenient to use. A computer is usually placed on desktop or on a special; computer desk which is available in the market at a price. Computer can be used for stopping files, computation, of pay all the budget for the company checking purchases and stock, expenditure and sales figures.
Cash office equipment
A cash register type machines are used when a printed receipt is required simultaneously with a posting slip and sales analysis, these include:
- Cash register: to record cash receipts and print out cash sales slips.
- Cheque writing machine: this machine is generally used for writing cheques and it used by banks in most cases
- Coin counting machines: this is a machine that is used for counting coins. It is always used by the banks and the forex bureaux
- notes machines: this type of machine is used for counting money in form of notes it is also used by bankers
97
- cheques signing machines machines: this type of machine is used for signing thhe checks
Mail room equipment
Some very useful and more common types of machines found in a mail handling office are:
- stapling machine: this is used for fixing letters and enclosures or other pages together.
- letter opener: this could be a hand operated device shaped like a knife, or an automatic device which trims a narrow strips off one edge of envelopes. Many openers will trim several envelopes at one time. Core should be taken when using the device not to destroy the contents of an envelope.
- Letter or parcel scales: to weight correspondences to ensure correct postage stamp moistering device for wetting stamps or envelopes to fix seal. It is usually a moisture sponge in a container.
A date stamps which records the date on which the letter was received. It is also stamps a number on the letter.
- shredding machine: this machine destroys secret and confidential material if no longer required.
- Punch: used to put holes in a document ready for filing
- addressing machine: used to print names and customers or correspondents small plated bearing the name and address are prepared as stencil or metal plates. They are then passed through the machine for printing on envelopes.
- franking machine: used to print postal stamps impressions on the envelopes well arranged can also be used to print advertising slogans, and trimming papers to the required size.
- Composite machine: this performs three functions; fields documents, inserts them in envelopes and seals the envelopes
Telephone
Telephone is very important these days, it is used to convey messages. It is a very effective and fast source of communication. Telephone equipment is provided by Tigo, Mtn or can be bought from other firms. It includes telephone receiver, telephone wires and switch board.
Factors influencing choice of office equipment
There is a wide range of office equipment, machines, and office stationary. A choice is to be made out of the diversified items. The factors which influence the choice is to office equipment, machinery and stationary are given below:
98
- Cost - Quality
- Durability - Extent of use
- size of firm - training facilites
TELECOMMUNICATION DOCUMENTS
TELECOMMUNICATION is the exchange of information over significance distances by electronics means. A complete single telecommunication circuit consist of two stations, each equipped with transmitter and areceiver.The medium of signal transmission can be electronical wire orcable, optical fiberor electromagnetic fields.Telecommunication equipmentThere are many electronic equipment used in telecommunication but there are common used in telecommunication which are:-computer/ internet -fax machine -telephone-cell phone -answering machine
Advantages of telecommunication
Efficiency
The latest telecommunication devices combine a wide range of functionality on a single handset. Employees can use smartphones linked to a network to make conventional voice calls, send emails, visit websites, join a videoconference, access data, or work on documents. Using a single device improves efficiency and productivity, in addition to reducing equipment costs.
Collaboration
Telecommunication helps employees in different departments or separate locations work together more effectively. Employees can use networked telecommunication systems to send and receive emails, share documents, and collaborate via videoconference or teleconference. This can speed up decision-making and reduce the time to complete projects, such as new product development programs.
Time
Telecommunication systems reduce the time it takes to find information or contact colleagues. The latest telecommunication systems incorporate a feature called “presence,” which enables callers to determine if the person they wish to contact is available via email, telephone, instant messaging, or another communication channel. Employees post their status on the telecommunication system with messages such as “free for calls," "busy," "away," or "do not disturb.”
99
Customer Relationships
An efficient telecommunication system can strengthen customer relationships. By using call-center facilities such as call management, call routing, or interactive voice response, customer service teams can make it easier and more convenient for customers to contact a company. The contact center can then provide an efficient response for service requests, telephone orders, requests for information, or complaints. Agents in a call center can use quiet periods during shifts to make courtesy calls to customers to update them on new products or ask if they were satisfied with the service they received from the company.
Flexibility
Mobile telecommunication increases flexibility and choice for employees. If they wish to work from home or join meetings while they are away from the office, they can use smartphones to participate in video conferences or carry out work that requires secure access to a corporate database. Mobile telecommunication also reduces travelling costs, as employees no longer have to travel to meetings or visit the office to carry out computer-based tasks.
Disadvantages:
-Cultural Barrier-Misunderstanding-Prank calls-Can also be a source of low grades if abused-Sometimes expensive-high electric bills
Remote areas do not have access
Remote areas may not be able to afford necessary equipmentCannot see whom you are speaking withCannot see facial expressions, therefore leads to misunderstandingsCultural barriersPoor connections or downed powerlines during/after storms
Business documents and payment procedures
Types of business documents
- Documents for external use (issued and used by different organization eg: customer invoice)
- Documents for internal use (issued and used within the same organization eg: an internal memo)
- Optional documents (those that one may or may not produce or use )- Compulsory documents (documents that must, by law be produced or used by an
organization eg: trading licence is a compulsory business document)
100
Characteristics of business documents
Every business document should have the following details:
- Name of the organization - Address of the organization - Date when the document is issued - Name of the person or organization that receives the document - Reference number of the document - Stamp or seal - Signature - Copies of the document
Samples of office documents
1. RECEIPTS SLIP: A RECEIPT IS A WRIITTEN acknowledgment of having received
or taken into one’s possession a specified amount of money or services.
2. An invoice document sent by the seller to the buyer showing a description of goods
sold,it shows the quantity,the quality,unit price, total price ,discount if any and the latest
date when settlement of debts should be affected.
3. Purchase order:this is sent by the buyer to show a proof that commitment have been made to
buy from a named supplier.
4. Delivery note:document sent by the seller to the buyer to verify that the goods and services
have been delivered and the customer has received them.
5. Goods received notes : is a document recognizes that the goods have been received by
storekeeper or organization .
6. Credit note: this a document sent by the supplier to the customer to show that there is a
reduction in the amount that is owed it normally happens when some of the goods
purchased are returned
7. Debit note: this is a document sent by a seller to the buyer to correct an under charge on
original invoice.it is also called a <<supplementary invoice>> for instance, it can be sent to the
buyer who failed to return the packaging materials which were not accounted for an original
invoice.
8. Bank deposit slips:this document confirms that cash or a cheque has been deposited into the
named bank account.
101
9. Stock record card : this is used to record all goods purchased and taken into stock and goods
issued out for sales
10. Bank statement this is a document issued by the bank to a customer for a specified
period showing the details of deposit and withdraws made by the account holder.it also
shows interest paid orearned, ledger fees, etc
11. Application letters: these are letters written requesting for jobs, posts, and vacancies in an organization
12. Contracts: is a legally binding agreement or promise between two or more parties 13. Appointment letters: this is a document that confirms the appointment of some one for a
certain post say teachers, policeman, auditors, etc14. Licences and permits: this is authorization document like registration certificate
Information and record handling Records management
Records are very important in modern business. The office is responsible for maintaining the records for future reference. A good and systematic preservation and maintenance of letter and records received and copies of outgoing correspondence for future reference is known as filing. Filing is nothing but systematic record keeping.
All office communication is done orally or through written massages. Information received in the office may be in the form of enquiries, orders, invoices, complaints, contracts of the business. It also includes the internal accounts payments, progress report, stock records, sales and purchases. Past records of the business are maintained.
Importance of office documents
Account of progress are kept in an orderly way: if a patient visits a doctor, it is usual that the patients past history is needed to diagnose the disease properly in the same way to measure the progress of the concern or to find out other facts but a history of the film is needed.
Proper study of the position of the firm: records of past transactions are the basis on which further study can be made. The preserve record are contributory factors without which a good. And proper study of the position of the firm cannot be made and therefore a statement cannot be prepared.
Comparison of business: past records makes it easy and possible to compare performance of one period with that of another period, one place with one another, one result with another. By comparison one can know whether there is progress or not.
In case of disputes: The needs for referring to these records or documents often arise for the settlement of disputes in transactions. All information cannot be remembered.
102
Policy making: past records, events are very necessary to decide future policies and plans. In the absence of records, the policies and plans may not be successfully.
Legal requirement: Certain records are to be kept for a number of years from the legal point of view.
Evidence: records are good evidence in the court of the law in case of suits.
General use: some customers may simply refer to the previous correspondence by quoting the number and date. In such case, if the letters have been filed properly, it is easy to comply with the needs of the customers otherwise there can be wastage of time and money.
Records are written date that are made for possible future use. The records may be classified into:
- Verification: records can be verified whenever needed
- Justification: records must be maintained by some justifiable purpose otherwise it will be waste of money, space and time.
- Classification: Records must be classified according to their use. It may be classified according to time or chronology or subjects.
- Information: The required information must be available whenever needed.
- Elasticity: The record system must be elastic in capacity so that expansion or contraction of record is possible.
- Reasonable cost: The cost of record management must be a reasonable one. For more important records larger amount may be spent and for less important records only small amount should be spent.
- Record management should be simple, accurate, economical, and useful for the organization.
Filing
Filing is concerned with the work of arranging and preserving the records or copies of records kept in an organization so that they are readily available when required
There are two ways of filling
- decentralized filing system: this is also called a department filing system and it is where every department within the firm has its own filing system
- Centralized filing system: this is also called a registry. This where the records for several people or units are located in one central location and under the control of a
103
specific person. That person is called a records officer and the room is called records office
Advantages of centralized filing system
- Related data is kept together -Uniform service - Effective use of equipment -Specialization - More security -Uniform eases work - Better control -Responsibility is placed
Disadvantage of centralized filing system
- Records may be too distant from staff for adequate service - In case of fire or other damage, the risk of loss and damage is greater - Can result in increased personnel filling systems - Require full time staffing - May require investment in more efficient filing equipment and or automation
Advantages of decentralized filing system
- Records located near staff. Its quicker to create, find and use files- There fewer files and therefore easier to find - Does not require full time staffing - Staff feels more comfortable knowing they are in control of their own filing and retrieval - Confidential documents are not exposed to filing clerks and records officers in the
records office - The risk is reduced in case of damage like a fire outbreak. Some documents may be saved
Disadvantages of decentralized filing system
- Lack of uniformity - Lack of technical skills - Fragmented documentation - Confusion of documents
Importance of filing
In modern organization, the importance of filing has increased because of growing correspondence and documents. These cannot serve without proper arrangement. Previous letters and documents are necessary for preference so a systematic preservation of various types of records is possible only by a filing system.
Advantages of filing
An efficient filing system has the following advantages
104
- Often customers refer to their post letters or an order by writing only the date such cases filing serves the purposes of ready references.
- When past records are maintained through a good filing save time and also increase efficient.
- A proper filing system safeguards the documents against loss
- Old or past records serve as a reliable basis for future planning and action
- Past records are good evidences in case of disputes
- Certain documents have to be kept in order to fulfill legal obligations
- A proper control is facilitated according to the importance of letters they can be disposed of quickly.
Procedures of keeping documents
The documents are kept in a folder or file. These documents are arranged in a specific manner. These documents are first classified under headings like orders, Invoices, correspondences. After this they are filed in respective files in the basis of classification system followed by the organization.
Classification
The classification system refers to the basis of arrangement of documents can be classified by five main methods alphabetical, numerical, subjects, geographical chronological or some combination of them. There are explained as below:
1. Alphabetical
This is where documents are filed according to the first letters of either the name of the sender or the subject. The arrangement is similar to words on the English dictionary or names in a telephone directory. If a number of files are kept, each is given a title and the files are arrangement in the alphabetical order in the filing cabinet.
2. Numerical
As the name implies, correspondences are arranged according to numbers rather than letters. This system is useful for filing orders other items kept in numerical sequence. And index is necessary for locating the correct file.
3. Geographical
Under the system files are divided according to their places of origin for examples in countries provinces or districts files within each group are arranged alphabetically.
105
4. Chronological
Under this system all document is filed in order of their dates of receipt. This system is so well rarely used absolutely but it is the usual method of filing papers inside each folder.
5. Subject classification
Files are classified according to subject heading or topics main heading and subdivision items are in alphabetical order.
Factors influencing choice of a filing system
The method of classification to be used depends on the needs of the business concerned. The following are general guidelines for any organization to choose a classification system.
- The number of files and documents that needs to be retained- Simple to use and easy to explain to a new employee. It should be one which can take up after
a brief explanation for example alphabetical filing.- There should be room for expansion and capacity to accommodate new files without the need
to change the existing document (their sequence order)- There should be easy reference and minimum possibility of misfiling- A document need not to have more than one file or filed under different subjects.- The cost of keeping files should be economical filing classifications have different equipment
and maintenance cost of keeping them.
Filing equipment
There is a wide range of equipment available for the storage of information in an organization filing equipment consists of covers, folders, Filing cabinets filing should serve the following purposes.
- Protections of documents against any loss through careless handling damage by fire are water and deterioration through dust.
- Preservation against theft or unauthorized use- Insertion, location and extraction of documents must take less time or effort.
Various types of filing equipment are explained below
A file is a collection of papers or documents dealing with one person or topic. The equipment in which they are kept is known as a file cover or binder.
Filing equipment includes file covers and filing cabinets. There are different types of files covers. Some of which include the following:
- Box files
106
- Lever arch files
- Concertina files
Filing methods
This refers to how file covers or filing cabinets. The main filing or method are:
- Vertical filing - Horizontal filing
- Suspension filing - Lateral filing
Indexing
An index is a device for finding the position of a document of file in a system quickly and easily. In other words, an index means to guide something. Index indicates the page number, where the particular subject is dealt with.Therefore, to locate the files, the index as an indicator is inevitable.
Types of indexing
- Page index: this is when the contents of a particular folder or cabinet are summarized on a piece of paper together with their positions and placed at the front of the folder. It is like one found in the back of book.
- Loose card index: this is a small card showing the names of all correspondents and the files where their information is filed. The card is kept together and whenever a file or document is required, references, is first made to the cards which guide where it is located.
- Visible card index: the cards are filed together with the documents and overlap, so that one line of entry on each card projects and is visible thus forming as one line index.
- Strip indexes: it is the method of recording information on a strip of paper for quick reference. The strips are bound together, one on top of the other with a portion of each one being visible.
- Vertical card index: under this method, the cards stand upright in cabinet drawer boxes. The name and other identifying features are exposed to view the cards are sub divided into sections using letter of the alphabet which is removed frequently for reference. Classification may be used by coloured cards.
- Punched card indexes: by a series of holes are punched in the edge of each. Each hole represents an item of information such as department, age, sex.
107
108