Training Manual

TRAINING MANUAL
FOR
2JIAJIRI PROGRAM
1|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

ENTREPRENEURSHIP
CHAPTER ONE
INTRODUCTION TO ENTREPRENEURSHIP
There is not a commonly accepted definition of entrepreneurship or entrepreneur and there are
different understandings of the phenomenon. One definition is that “entrepreneurship is a
phenomenon in the economy by which individuals or companies assume risks to create something
new in order to reap the benefits from the new venture”. This very broad definition would also
allow the inclusion of aspects such as intrapreneurship (entrepreneurship possibilities within a
given company).
Definitions used by countries to collect and or disseminate data on women’s and men’s
entrepreneurship include concepts such as owners, managers, self-employed, and employers but
different approaches are often used when these concepts are defined and put into the context of
entrepreneurship.
An entrepreneur may be defined as the owner or manager of an enterprise, its executive director,
or a member of its managing board. Self-employed people are also commonly considered to be
entrepreneurs, but not all data sources include self-employment in their definition of
entrepreneurship. Self-employment itself can be defined in multiple ways according to the
different goals of various sources. For example, not all countries in the UNECE region use the
standard guidelines of the International Labour Organization (ILO) for defining self-employment.
The lack of a common framework for defining entrepreneurs and entrepreneurship makes it
difficult to have one internationally recognized definition. Different countries pursue different
objectives through entrepreneurship so no single definition would satisfy all. The links between
entrepreneurship and the objectives that countries pursue through entrepreneurship should be clear.
The Role Of Entrepreneurship In Economic Development Of A Country
Wealth Creation and Sharing

By establishing the business entity, entrepreneurs invest their own resources and attract capital (in
the form of debt, equity, etc.) from investors, lenders and the public. This mobilizes public wealth
and allows people to benefit from the success of entrepreneurs and growing businesses. This kind
of pooled capital that results in wealth creation and distribution is one of the basic imperatives and
goals of economic development.
Create Jobs
Entrepreneurs are by nature and definition job creators, as opposed to job seekers. The simple
translation is that when you become an entrepreneur, there is one less job seeker in the economy,

and then you provide employment for multiple other job seekers. This kind of job creation by new
and existing businesses is again is one of the basic goals of economic development.
This is why the Govt. of India has launched initiatives such as StartupIndia to promote and support
new startups, and also others like the Make in India initiative to attract foreign companies and their
FDI into the Indian economy. All this in turn creates a lot of job opportunities, and is helping in
augmenting our standards to a global level.
Balanced Regional Development

Entrepreneurs setting up new businesses and industrial units help with regional development by
locating in less developed and backward areas. The growth of industries and business in these
areas leads to infrastructure improvements like better roads and rail links, airports, stable electricity
and water supply, schools, hospitals, shopping malls and other public and private services that
would not otherwise be available.
Every new business that locates in a less developed area will create both direct and indirect jobs,
helping lift regional economies in many different ways. The combined spending by all the new
employees of the new businesses and the supporting jobs in other businesses adds to the local and
regional economic output. Both central and state governments promote this kind of regional
development by providing registered MSME businesses various benefits and concessions.
GDP and Per Capita Income

India’s MSME sector, comprised of 36 million units that provide employment for more than 80
million people, now accounts for over 37% of the country’s GDP. Each new addition to these 36
million units makes use of even more resources like land, labor and capital to develop products
and services that add to the national income, national product and per capita income of the country.
This growth in GDP and per capita income is again one of the essential goals of economic
development.
Standard of Living
Increase in the standard of living of people in a community is yet another key goal of economic
development. Entrepreneurs again play a key role in increasing the standard of living in a
community. They do this not just by creating jobs, but also by developing and adopting innovations
that lead to improvements in the quality of life of their employees, customers, and other
stakeholders in the community. For example, automation that reduces production costs and enables
faster production will make a business unit more productive, while also providing its customers
with the same goods at lower prices.
Community Development
Economic development doesn’t always translate into community development. Community
development requires infrastructure for education and training, healthcare, and other public
services. For example, you need highly educated and skilled workers in a community to attract

new businesses. If there are educational institutions, technical training schools and internship
opportunities, that will help build the pool of educated and skilled workers.
Increase per capita income

Entrepreneurs help to increase the per capita income of the country in various ways and facilitate
development of backward areas and weaker sections of the society.
Capital formation
A country can attain economic development only when there is more amount of investment and
production. Entrepreneurs help in channelizing their savings and savings of the public to
productive resources by establishing enterprises. They promote capital formation by channelizing
the savings of public to productive resources.
Growth of infrastructure
The infrastructure development of any country determines the economic development of a country,
Entrepreneurs by establishing their enterprises in rural and backward areas influence the
government to develop the infrastructure of those areas.
Economic Integration
Entrepreneur reduces the concentration of power in a few hands by creating employment
opportunities and through equitable distribution of income. Entrepreneurs promote economic
integration in the country by adopting certain economic policies and laws framed by the
government. They help in removing the disparity between the rich and the poor by adopting the
rules and regulation framed by the government for the effective functioning of business in the
country.
TYPES OF ENTREPRENEURSHIP
Broad categories
Craft entrepreneurship
Exploits and utilizes personal skills to start a business without thinking of growth or Expansion
objectives.
•There is no expanding even after a long time.
•Craft entrepreneur is not business expansion oriented.
•The skill can be technical skills, professional skills.
Opportunistic entrepreneurship
This is whereby a person starts a business, acts as a manager and with view to expand the business
to maximum. He might not have the skill to profession but he has the opportunity to start and
direct others. He sees beyond and he has the abilities to initiate and venture into business that will
expand and grow. Innovative – somebody who is able to delegate activities to others, ready and
able to see, scan the environment. In situations of competitiveness, the craft entrepreneurs have a
very high mortality rate than opportunistic entrepreneurs, so far greater chances of survival in this
competitive world is better to expand and grow becoming opportunistic entrepreneurs.

Social entrepreneurship
The Skoll Foundation defines a social entrepreneur as "society's change agent: a pioneer of
innovation that benefits humanity." A social entrepreneur recognizes a social problem and uses
entrepreneurial principles to organize, create and manage a venture to achieve social change (a
social venture).
Whereas a business entrepreneur typically measures performance in profit and return, a social
entrepreneur focuses on creating social capital. Thus, the main aim of social entrepreneurship is to
further social and environmental goals. However, whilst social entrepreneurs are most commonly
associated with the voluntary and not-for-profit sectors, this need not necessarily be incompatible
with making a profit. Social entrepreneurship practiced with a world view or international context
is called international social.
Political entrepreneurship
There are several definitions of the term political entrepreneurship, one use is as follows: A
political entrepreneur is a business person who utilises political systems or seeks support from
political bodies in order to promote and further and profit from their own commercial ventures.
A political entrepreneur refers to a political player who seeks to gain certain political and social
benefits in return for providing the common goods that can be shared by an unorganized general
public. These common goods that political entrepreneurs attempt to provide to the populace
generally include foreign- and domestic-related public policy, while the benefits they hope to gain
involve voter support, public recognition, and personal popularity.
Intrapreneurship/corporate entrepreneurship
Intrapreneurship is the equivalent of entrepreneurship practiced within an existing business
structure. Such a business has the financial resources, business skills, marketing and distribution
systems, etc. Yet, the bureaucratic structure, emphasis on short-term profits and highly structured
organization inhibit creativity and prevent new products and businesses from being developed.
This leads many intrapreneurial individuals to leave their positions in the corporations to create
their own ventures.
In recognizing this, large corporations attempt to establish an intrapreneurial spirit in their

organizations. An intrapreneurial individual in a corporation does not raise any funds and does not
fully bear the risk involved in the enterprise.
SPECIFIC TYPES OF ENTREPRENEURS
Inventor Entrepreneurs
Those with the ability to invent new products, process or service and then create companies to
develop, produce and sell the items
Opportunistic Entrepreneurs
A person who starts a business acts as a coordinator as manager with views to expand create,

innovative and spot opportunities to make the business grow in order to be able to hire other
employees.
Pattern multiplier Entrepreneurs

Those who look for ideas, products, etc with others have come up with, and then create their own
business based on following another person’s model.
Speculators Entrepreneurs
Those who purchase a commodity and resell it for a profit
Acquirers Entrepreneurs
Those who take up a business started by another and use their own means to make it successful.
Craft Entrepreneurs
Those who exploit or utilise personal skills to start a business without thinking of growth and
development (skills could be technical)
Economy of scale exploiters Entrepreneurs

Those individuals who sell large quantities of products by offering discount prices and have low
overhead expenses
Buy and sell artists Entrepreneurs

Those who buy a company for the purpose of improving it before selling it for a profit
Characteristics & Qualities Of Successful Entrepreneurs
1. Integrity
Someone once said, “Right is right even if no one is doing it, and wrong is wrong even if everyone
is doing it”. We all hear the news stories about corporate greed and corruption. However, the truth
is, successful entrepreneurs and millionaires rated “being honest with everyone” the number one
factor of their success.
2. Self-discipline
To become a successful entrepreneur you have to be highly disciplined. If you are trying to build
a business from the ground up, a lot of times you’ll be faced with doing all the job functions of a
company, such as accounting, marketing, web design, and customer service. You have to develop
the ability to get things done, even when you don’t feel like it. Luckily, you can learn self-discipline
with the right information and conscious effort.
3. People skills
Another critical factor among successful entrepreneurs is having good people skills. You should
make an effort to genuinely like, respect, and appreciate other people. The ability to win people
over will carry you far in all walks of life, especially your own business.

4. Supportive spouse
Don’t worry all you singles; I’m not suggesting that you get married before becoming an
entrepreneur. But you should know that having a supportive spouse is another big success factor
for entrepreneurs. Many times as a business owner, you’ll face tough and risky decisions.My wife
is amazingly supportive and I don’t know what I’d do without her. I’ve made enough business
mistakes over the course of the last two years to fill up a book, and she still stands behind me
100%. Having a spouse that truly believes in your goals, dreams, and abilities is priceless.
5. Strong work ethic
There’s no substitute for hard work when it comes to becoming a successful entrepreneur. Most
people want to do the fastest and easiest solution when it comes to work. If you want to be a
success, dedicate yourself to persistent, productive, old fashioned hard work.
6. Passion
It almost goes without saying that in order to become a successful entrepreneur, you need to be
passionate about your business. That doesn’t necessarily mean you have to build a business around
something you love. You can (and should) identify a profitable market and then build your
business.
Ed dale talked about this in the 30 Day Challenge when he brought up the niche market of trout
fishing. He pursued it because of its profit potential. He admits that he didn’t know anything about
trout fishing prior to starting a website about it. He became passionate about his niche and learned
all he could. Now it’s one of his most profitable businesses.
Loving your business will also make it easier to get through the start-up phase, and other future
obstacles.
7. Strong leadership qualities

Being able to communicate effectively, motivate others, sell your ideas, and be decisive, are just a
few of the qualities of a good leader. In order to become a successful entrepreneur you must
dedicate yourself to improving your leadership skills and abilities.
8. Competitiveness
Competition is everywhere. In business, it’s the survival of the fittest. If you can out-market and
outperform your competitors, your chance of being a successful entrepreneur will be much greater.
Play to win, but never sacrifice your integrity for the sake of a few bucks.
9. Well-organized
I struggle with this one myself. But I’m constantly trying to improve my organizational skills. One
of the main reasons small businesses fail is a lack of organization. If you too are unorganized,
don’t worry too much. Everyone can learn organization skills with enough hard work, practice,
and persistence.
10. Sales ability

The ability to convince others to make a conscious buying decision is a key becoming a successful
entrepreneur. Sales guru Zig Ziglar says, “People don’t buy for logical reasons. They buy for
emotional reasons”. Being able to appeal to other people’s emotions is the key to selling your
ideas, products, or services.
MYTHS OF ENTREPRENEURSHIP
Those that are new to entrepreneurship may have misconceptions on what it is all about. However,
there is great need to know what myth is and what fact is so that success can come.
This is a look at the top ten myths that need to be dispelled:
1. The first myth is that it takes much money to start. This is far from the truth because it is
all about using the little resources to make the most out of it.
2. Another myth that entrepreneurs need to do away with is that venture capitalists are a good
place to go for start-up money. This source is suitable but to some ventures and people need
to keep this in mind. This source is mainly suitable for people who start biotech or computer
companies.
3. Another common myth is that those who make it are those with rich backups. This could
not be further from the truth because people who are not privileged continue to make it big
in this sector even after starting from scratch with no special favors or advantages.
4. Another one is that start-ups cannot be funded with debt. Unlike what many might think,
the fact is that debt is more prevalent than equity. Therefore, for those with solid plans, it
does not matter the source of finance provided the vision and the plan is clear for the future
of the business.
5. Some people go about thinking that banks do not lend to those who wish to start up
businesses. This is not true because up to 16% of all financing comes from banks and those
starting need to approach banks in the right way. Trade creditors are also known to finance
start-ups and make up a bulk of financing.
6. Another common myth or misconception is that those who start will do it in very attractive
industries. This might seem to be the case but is not true at all. Many entrepreneurs have
actually been seen to go to the worse industries there are. Statistics show that many will
actually pick the areas they will most likely fail.
7. Many actually believe that the talents and abilities of the entrepreneur have the power to
ensure success unlike what the environment of the business is like. This is not true because
the general factors will outweigh the qualifications of an entrepreneur and they have to
look further than to talent to survive.
8. Another myth is that all entrepreneurs are rich and have financial success. Even if they
make good profits, this does not make them rich because there is uneven distribution of
this wealth which might nullify the statement.
9. Many entrepreneurs achieve the sales projections and attract investors to their start-ups.
This statement is not true at all. From the hundreds of thousand who start up, only less that
200 will meet these sales projections that may be targeted to a million. In six years, only
that number is able to reach here.

10. Finally, many think that starting a business is easy. This is a myth and it should be known
that it is difficult and getting it running will take a lot. Otherwise, most people who start
give up along the way just because they do not meet their targets.
CHAPTER TWO
BUSINESS IDEA GENERATION
All entrepreneurs are business people but not all business people are entrepreneurs. Entrepreneurs
tend to be more innovative than just ordinary business people. Even the process of developing
business plans, entrepreneurs have always more than one.
Means of Generating Business Ideas

1. Identifying a need
2. Brainstorming
3. Building on your skills, hobbies or interests
4. Spotting a market niche
5. Listening to what people say
6. Attribute listening
7. Gaining from waste
8. Look to see and listen to hear
9. Research
10. Importing an idea
11. Day dreaming
12. Spin off from employment
1. Identifying A Need
A need can be an opportunity and indeed a consumer buys to satisfy a need. Abraham Maslow in
his humanistic hierarchy of needs raging from very basic to the high needs, physical needs to very
high personalized needs. Therefore, identifying an unidentified or unserved need is a sure way of
generating business ideas.
Maslow’s Hiearchy of Needs
Basic needs
Food, shelter, clothing, sex
Safety and Security Needs

Human beings require these and entrepreneurs can generate ideas in the process of satisfying them,
eg, security firms, watchmen etc.
Social Needs
Generally the need to be accepted. Goods and services which are included here are: membership
for clubs, companies which offer such services, banks for socializing, mainly members only.
Clinics such as for guidance and counseling, golf clubs, deodorants, perfumes assist one to be
accepted in a social group. Gift shops. Number of success one receives.
Self Esteem or Ego

Need to be recognized. Ideas can be generated by entrepreneurs to suit its need eg, luxury cars –
BMW, Designer clothes, business cards (perfumed), cellular phones, gold filled pens.
Self-Actualization
The need to prove the ability of oneself – self fulfillment, eg, being a member of a certain club one
wanted to be – research institutes, getting opportunities to do something of your ability, eg,
publishing, creativity.
2. Brainstorming
Is a process of detaching analysis of ideas from the actual devit of ideas. The idea may or may
not be related to a given product. In the process of brainstorming even silly and stupid ideas may
be generated but may be quite likely lead to high profitability ideas. In brain storming, you are
ideally answering questions such as:
• What can we do with this product?
• How do we improve our performance?
Flower
 Flower gardening – manure Flower export and import
Egg
 Chicken rearing Feeding troughs
 Chicken feed Egg tray
3. Building On Your Skills, Hobbies, Or Interests

List as many of the interests and skills you can think of and for each list down or think of any
business ideas.
For example:
(a) Interests and Hobbies interests/hobbies
Business idea
1. Stitching - Dress making/tailoring
- Embroidery
- Training
(b) Copy or improving somebody’s ideas (skill)
Many successful businessmen are based copying or improving the original.
Procedure
1. List the business in your locality and group them into two – the successful and the
unsuccessful.
10 | P a g e D e v e l o p e d B y N d e v e n i M . J o n a t h a n F o r © M I C / K C B - F 2 0 1 8
- Go deeper into that successful business and see what they are.
2. Identify why the unsuccessful businesses are what they are.
3. Think of what you can do to make those successful businesses more successful and even
those unsuccessful to be successful.
c) Analyze the weaknesses of the existing business and look for solutions.
d) Combining two existing business ideas in a new way.
Christian Disco Bar

Play, sell gospel music
Dance the gospel
Sell sodas and milk
4. Spotting A Market Niche

Entrepreneurs usually look for gaps in growing markets. They try to identify needs for sections of
markets, which are not being utilized for existing business (market segments). However, spotting
a gap in the market may not be reasonably easy. One way is to identify trends and translate them
into business ideas by identifying a possible need associated with the trend. Trends may be social,
cultural, technological, economical etc.
Trend Need Business ideas

1. Rural – Urban exodus .Housing, employment• Low cost housing
• Employment bureau
2. Change in lifestyle Flashy wedding
• Video filming
• Outside catering
5. Listening To What People Say
If you listen very well and very hard you may hear people say:
If only I could find a cheaper ---
If only there was decent bus service to ---
If only one could rely on the ---
Why don’t they open longer?
6. Attribute Listing
This method of generating business ideas is based on changing the way you look at something in
order to find new uses for it. It also attempts to answer the question – what do we do with this
product?
Product: used types
Attributes: shape – round Business idea
Color – black - swings
Texture – strong - black
Weight - sandal
Texture – Bruyat - whips
7. Gaining From Waste

If you look closely at what appears to be waste, it may not be waste at all. It could be recycled or
be made to produce a useful product.
‘Waste’ Business idea
Saw dust - Chip boards
- Chicken poultry
- Briquettes
8. Look To See And Listen To Hear

Business ideas can be solicited. You may interview consumers on what they need and they don’t
have. Producers may also be lacking some inputs. Reading newspapers, magazines and
reviewing journals or simply observing business environment can really be a rich source of
business ideas. Closely associated with this method is the idea of importing a business idea.
Putting Your Ideas into Action

Great ideas are worth nothing, unless you do something about them. However, you might have
to do some more. Market research and assessing your resources
SCREENING A BUSINESS IDEA
After generating business ideas, you need to do some evaluation for screening to make a decision
on which idea to pursue. This means you systematically evaluate the most Suitable and select the
best. Screening must be done carefully, objectively, soberly and without emotions. Business ideas
screening is required even when there is only one idea to consider. This is because there is a stage
of starting a business that may not be profitable or may be difficult to run due to a variety of
reasons.
There are 2 broad categories of factors that may affect the choice of business to start.
These are: i) Personal considerations
ii) Business considerations
(i) Personal Considerations
Your objectives if group to business

A good entrepreneur usually sets personal objectives for going to business. The entrepreneur then
tries to answer the questions.
- Does the business idea agree with my business objectives?
One may have only one major objective but its possible to have more than one and prioritize them,
eg, survival may be a major objective until the business breaks.
- Even then suitability sets in. to judge the compatibility of the idea with objectivity a tabular
approach may be useful.
Your skills
Can you do it? Some businesses require certain specialized skills to start and run. Each idea
should be screened in relation to whether it will require you to acquire specialized skills –
Accounting firms, law firms, medical clinics are some of the businesses which cannot be run by
anybody but those with relevant skills.
If you have no skills, you may be advised to obtain through a course or seek employment
temporarily to gain experience first hand.
Your interest
A very important question to ask yourself is, Will I like this business I am undertaking? There is
no point choosing a business idea that you will not enjoy. Therefore, each idea you generate try to
identify what activities are involved, eg, involves waking up early, closing late, your presence
always.
Your commitments
Are you committed to your family, friends etc? Will the business interfere with these
commitments? It may be extremely important to have the support of your family and friends. If
for example, it may be impossible for them to support you especially your family, to help your
business grow and develop, then, it is advisable to choose a lesser committing business that does
not take much of your time. Support from spouses is very vital in the business success.
Your personal SWOT Analysis
This is the analysis of one’s strength, weaknesses, opportunities, threats.

The SWOT matrix:- Matching the matrix contents of an organization in relation to achieving
desired goals.
S - Relates to an organization’s internal capacity.
W - They are subjective.
O - Relates an organization’s external environment.
T - They are objective.
Importance:
1. Development of organization’s strategic profile.
2. Provision of framework to assess current and future plans.
3. Acts as control technique when conducted periodically – weaknesses, strengths.
4. Gives realization (reality) to organization’s activities.
SWOT Components
Strengths: Positive internal conditions – skills, finances, competence etc.
Weaknesses: Negative internal conditions.
Opportunities: Favorable environmental conditions.
Threats: Unfavorable environmental conditions. Things that might hinder you from undertaking
the idea
Schematic comparison of external threats and opportunities with internal strengths and weaknesses
enables the matching of these to produce (generate) a SWOT matrix of strategies.
Procedure:
1. List external opportunities
2. List external threats
3. Match strengths with opportunities – record results
4. Match strengths with opportunities – record results
5. List internal strengths
6. List internal weaknesses
7. Match strengths with threats – record
8. Match weakness with threats – record
Entrepreneurial Self Concept: The process of establishing one’s entrepreneurial potential.

First, one has to understand himself, ie, entrepreneur characteristics to be able to understand
strengths and weaknesses regarding behavior.
• The idea is to understand ourselves – SWOT analysis so as to know how good or bad we
are in entrepreneurship.
• After this look at solutions towards the week points.
SWOT – look at background, experience, education, family relationships, life and behavior
patterns eg, persistence, self reliance, dependence etc.
(ii) Business Considerations
Market Availability
There is no sense as starting a business if there is no assurance of adequate market. Indications of
the availability of the market include:
• The existing demand is not at present adequately served by existing businesses.
• Existing demand is presently served by imports only.
• Existing demand is presently not served at all.
• Supply of the product/service is currently not reliable.
• Demand of the product/service is expected to increase significantly in the future.
• Your business idea has significant uniqueness or unique selling feature such as more
desirable features, better quality, more durable etc.
Availability of Raw Materials

The availability of raw materials may be indicated by:
• Raw materials are available in adequate quantity and quality locally.
• There is reliable supply (local or imported).
• Prices or raw materials are reasonable.
• Future increases in price for raw materials are perceived to be reasonable and predictable.
Availability of Technology
Availability of technology can be evaluated in terms of the following indications:
• Technology to be used is proper.
• Reasonably priced technology is available.
• Available technologies are appropriate for the level of production investment and product
quality.
• The business will not suffer from technology obsolescence.
Availability of Skills
Availability of skills can be ganged by the following factors:
• Different skills needed by the business are available.
• The supply of the skills is steady.
• The cost of hiring the skills is reasonable.
Government Policy
The following considerations will indicate if the government policy is conducive:
• The area of the business is a government priority.
• Business in this area receive government incentives.
• Future government plans stress this area of business.
DEVELOPING SUCCESSFUL BUSINESS IDEAS
Many new business fail not because the entrepreneur didn't work hard but because there was no
real opportunity to begin with, developing a successful business idea include
 Recognizing opportunities and generating ideas
 Feasibility analysis
 Writing a business plan
 Industry and competitor analysis
 Development of an effective business model
Source Of Business Ideas

It is important to understand that there is a difference between an opportunity and an idea
An idea is a thought, an impression, or a notion- An idea may or may not meet the criteria of an
opportunity.
 Work experience ,Hobby or personal interest ,Family and friends
 Education and expertise ,Technology transfer ,Chance happening – (Paying attention to what
goes on around and most people miss the chance discovery made by someone with a prepared
mind
NOTE: Before getting excited about a business idea, it is crucial to understand whether the idea
fill a need and meets the criteria for an opportunity.
Therefore, the search and capturing of new ideas that lead to business is called opportunity
recognition (This process often involves creative thinking that leads to discovery of new and useful
ideas. The exact reasons why entrepreneur seem to be better able to find ideas that work are unclear.
However, the notion of entrepreneurial alertness is captured in the field of entrepreneurship. This
means that, having ability to notice things without engaging in deliberate search.
Techniques For Generating Ideas
 Brainstorming
 Focus groups
 Survey – a method of gathering information from a sample of individuals.
 Other techniques -Customer advisory boards
Assessing Viability
The primary areas you should consider when evaluating an ideas include; revenue – generating
ability, people, resources and information.
 How viable is the idea? With what are you are planning to guarantee actual revenues?
 Who are the people behind the idea?
 What resources are needed to take the idea and sell it to the customer?
 What do you need to know about the industry and market for the idea?
CHAPTER THREE
BUSINESS OPPORTUNITIES
Identifying Business Opportunity

A business opportunity is an attractive project idea, which an entrepreneur accepts as a basis for
an investment decision.
Good business ideas must be capable of being converted into feasible projects.
Thus, two ingredients of a business opportunity are: -
1. Good market scope
2. An attractive / acceptable return on investment
There is need to analyze its viability in areas such as technical, production, commercial and
managerial. So selection of right business opportunity requires:
(a) Understanding one’s own capabilities, strengths, limitations and preferences.
(b) Exploring all possible opportunities available within existing conditions and environment
and
(c) Making a final decision after comparative analysts of opportunities available which are
consistent with entrepreneur’s capabilities
Ideas about projects may be generated by: -

(a) Thinking of new products/services not existing in the community.
(b) Altering the products/services which are already on the market
Assessing Business Opportunities

Certain indicators or guidelines may help to identify and assess business opportunities
i) Environment
- Basic features of an area and its resources
- Population, its composition occupational pattern, social-economic background
ii) Current business scene
- Present pattern of trading and business activities in the area with references to inter-
regional flow of commodities; local consumption and needs for industrial goods as well as
services.
- Emerging trends and patterns of trading and business activities in terms of new demands
for consumption of goods and services in the area.
iii) Technology change
Anticipating new opportunities because of technology change like computers.
To help in identifying business opportunities some of the idea sources are: -

1. Resources based ideas
- Industries based on mineral, agricultural, marine and forest resources.
- Waste-based products such as agro-waste, wood-waste and metal waste.
2. Linkage related ideas
- Industries arising out of various types of linkages such as backward and forward integration
from existing lines of manufacture
3. Export/import related ideas
- Export oriented activity
- Import substitution
4. Market shift or growth related ideas
This is applicable for consumer and industrial products that have growth potential as a result of
increased population or changes in composition of population purchasing power of changes is
living style.
5. Service sector ideas
e.g. household repairs and maintenance service facilities / workshops/ establishments to cater to
industrial and household needs.
6. Government policies, priorities and plans
By knowing the plans, priorities and policies set by the government one may identify a business
opportunity.
Assessing Product Demand
The existence of unsatisfied demand for a product or service provides the best opportunity for an
entrepreneur to exploit.
However, such a situation calls for systematic assessment of the market situation to establish
whether the demand is real or imagined and this can be achieved through conducting a market
survey.
Market Survey
This is a systematic tool, which can be used to reduce risk and improve the probability of
entrepreneur’s success.
The following steps are sued in conducting a market survey: -

1. Defining objectives of the study and specifying information required.
2. Working out details of the study such as: -
- Identifying the kind of data needed.
- Identifying sources of obtaining information
- Time and cost involvement for the study
- Working out methodology and plan of action
3. Selecting samples and deciding what contacts and visits should be made.
4. Preparing questionnaires and plans for surveyors and interviews.
5. Collecting and analysis data
6. Preparing a report of the findings
Before one commits resources to the business it is vital to attempt to measures whether there is a
sufficiently large unsatisfied market to exploit. A starting point is to identify what your
competitors are doing in ones proposed area of business and the following questions need to be
answered.
1. Is the total market growing at a sufficient rate to allow another new business to develop.
2. Is the market static or declining? In which case to survive you are going to have to capture
business from your established competitors.
3. What are you going to do which is significantly different from what is already being offered
by your competitors?
4. Have you identified a segment with needs which are not presently being met?
Consumer Assessment
This is important aspect to consider also when assessing product demand. These are attributes
which an entrepreneur should consider to satisfy consumer needs effectively. These include:
• Who is the consumer?
• What does the consumer require?
• Where is the consumer?
• How does the consumer buy?
• Why does the consumer buy?
When does the consumer buy?
Competition Assessment
This can alter an entrepreneur’s marketing decisions.
To market effectively you must know your competitors and advantages they offer.
Identifying strategies to take so as to gain a competitive advantage is key.
THE ENTREPRENEURIAL PROCESS

It consists of four steps
i. Deciding to become an entrepreneur
To be in control (boss), to pursue ideas and realize financial rewards usually a trigger event
prompts and individual to become an entrepreneur e.g. loss of job, inheritance, lipua
million, lifestyle issues.
ii. Developing successful business ideas
Business fail not because the entrepreneur didn't work hard but coz there was no real
opportunity. Thus this stage involves opportunity recognition, feasibility analysis, writing
a business plan; industry analysis and development of an effective business model.
iii. Motivating from an idea to an entrepreneurial firm.

Ownership- proper ethical and legal foundation for a firm, assessing financial strength and
viability, building a new venture team and financial management
iv. Managing and growing an entrepreneurial firm.
It includes marketing issues, intellectual property, characteristics and behaviour of
successful firms and strategies of growth.
Personal Characteristics That Make Some People Better At Recognizing
Business Opportunities Better Than Others
1. Prior experience
It helps to spot an undeserved market, building a network of social contacts that can
give insights.
Cognitive factors
Some individuals have the sixth sense known as entrepreneurial alertness – which is
formally defined as the ability to notice things without engaging in deliberate search.
2. Social networks
The extent and depth of an individual's social network affects opportunity recognition.
People who build a substantial network of social and professional contacts will be
exposed to more opportunities and ideas than people with sperse networks
3. Creativity. Its the process of generating a novel or useful idea. Opportunity recognition is a
part of creative process.
Creative process can be broken into 5 stages
 Preparation
This is the background, experience and knowledge that an entrepreneur brings to the
opportunity recognition process..
 Incubation
Its the stage during which a person considers an idea or thinks about a problem
(consciously or unconsciously).
 Insight
Its the flash of recognition when the solution to a problem seen or an idea is born. It is
when the entrepreneur recognizes the opportunity. The entrepreneur may recognize
the potential for an opportunity but feel more knowledge and thought is required before
pursuing it. This may push the process forward or prompt the return to preparation
stage.
 Evaluation
At this stage the idea is subjected to scrutiny and analyzed for its viability. Its a
challenging stage coz there is need for detailed scrutiny.
- Elaboration
The creative idea is put into a final form. The details are worked out and the idea is transformed
into something of value such as a new product, service, or business concept
Common Mistakes Most Entrepreneurs Make
An entrepreneur is also prone to make mistakes in running his or her venture. After all, he or she
is human. But making mistakes in business can prove to be an expensive affair. Lot of money is
involved.
Organizing a business venture requires skills and talent to ensure that profits flow in easily. A
businessman or woman requires a sharp mind, willing to take risks and intelligent enough to ensure
that his or her product is sale able in the market to fetch high money returns.
Business is not always a smooth affair. Ups and downs are there. An entrepreneur at times makes
mistakes, which can cost him or her lot, monetary wise. Let us observe what these mistakes are:
 Using business money for personal works. This must be avoided at all costs. Many times,
entrepreneurs are in need of money for personal use. And borrow this amount from the
amount set aside for business .Such habits can lead to losses. One must be strict in money
matters.
 Bad staff relations – Often a businessman or woman fails to meet up to the expectations
of a staff member. The staff has to be taken care of in terms of good salary and other work-
related benefits. An unhappy staff cannot perform well. Many times, an entrepreneur fails
to appreciate the sentiments of his or staff and does not share his or her profits with them.
In fact, they may be even treated badly.
 Wrong investment – Although this is rare, at times an entrepreneur fails to make the right
investment. His or products may not be very saleable in the market. The competition may
be so stiff that his or product may not be of superior enough to face up to the competition.
His or calculation may not be right. Small ventures face this problem often as they are
unable to compete with the larger establishments. The latter have more money, technology
and manpower to run their business successfully.
 Selection of staff member may not be right – A business may fail if their staffs are not
productive. Often the employer may not select the right candidates for his or her work.
They may be lacking in skills and education. Perhaps the employer wants to pay less and
may compromise on quality. Such decisions affect profits.
 Not adopting new technology – A businessman or woman may fail to adopt new
technology either due to lack of funds or sheer lack of initiative. This would also lower the
profit level.
An entrepreneur also tends to make mistakes while running his or her business. The mistakes can
prove to be very expensive.
What Makes Entrepreneurs Successful
The success of a business depends much upon the entrepreneur. Certain qualities are required for
an entrepreneur to make a go of his or her venture. Just the thought of doing business does not
help. One must be cut out for it. What makes entrepreneur successful? – What qualities are
essential to make a businessman successful?
 The inner drive to be a success – The businessman or woman should have the desire to
churn out profits and to ensure that his or her business does well. The need to be ambitious
and set up goals, which they should strive hard to reach.
 Confidence in their abilities – They must believe in themselves and have confidence in
their abilities. They must be assertive and be able to achieve their set targets with complete
optimism. The air of self-confidence may appear as arrogance at times, but that is the way
with businessman.
 Open to new ideas and concepts – A successful businessman has to be innovative and
open to new avenues of business. He or she has to also be willing to change outmoded
ways of doing business and adopt new techniques.
 Motivated and very energetic – The zeal to do business must be strong. The businessman
should be well motivated to carry out the task on hand. His or her energy levels must be
high. The urge to succeed must be strong.
 Competitive spirit – Successful businessmen need to be willing to face competition. In
fact, they cannot do without competition. Outwitting another businessman is what the game
is all about. They are able to deliver better when they are in competition.
 Acceptance of healthy and constructive criticism as well as rejection. A businessman
should be able to take criticism and change plans accordingly. Constructive criticism helps
to build up business. It needs to be taken in the right spirit. Plans may get rejected at times.
This may be good sometimes in case the criticism is correct regarding the feasibility of the
plan. A new plan may have to be chalked out, which the entrepreneur has to come up with
for his or her own good.
 Be innovative – A successful entrepreneur has to be innovative. He or she should be able
to come up with new plans. He or she must be full of new ideas and concepts.
 Willing to take risks – In order to be successful, a businessman or woman has to be willing
to take certain risks. His or her investments may be high, but unless and until a person takes
some risks, he or she cannot make profits. One might be sure of things at the initial stage,
but in due course one will find the results will turn out to be good.
 Business acumen – One needs to have the acumen to undertake business. One must be
intelligent enough to make the right kind of investments in order to make the maximum
profits.
 Adept at taking decisions – A successful businessman or woman must be able to take the
right decisions, be firm about them and not vacillate. At every stage of the business many
decisions have to be taken.
A businessman or woman in order to be successful in their respective venture need to possess

certain qualities. Doing business and being successful at it, is not an easy proposition.An
entrepreneur has to have certain cultivated and inherent qualities in him or her in order to make a
success of his or her venture. Not any person can be a successful businessman or woman. Hard
work and determination to win have made many successful business people to reach their aspired
goals.
Personal Competencies Of A Successful Entrepreneur
 Leadership qualities – A businessman or woman must be able to lead his or her staff
members as well as other associates. He or she must be able to guide others in carrying
out business and make a success of it.
 Decisive – A successful businessman or woman has to be very decisive. He or she has to
take many decisions sometimes on the spur of the moment. Any vacillation in decisions
could affect their business. They have to be very firm in their decisions. Also, while
taking decisions they must not get influenced by others. They should be able to take
decisions independently.
 Risk-taking – Business involves many risks, which a business person must not hesitate
to take. Lot of financial involvement is there and obviously one has to be careful with
investments. Yet risks have to be taken in money matters as well. Sometimes a
businessman may lose out on his or her venture, but when he or she make a success of it
then he or she has much to gain, both financially and from a personal satisfaction point of
view.
 Confident – Achieving success in business requires confidence. A businessman or
businesswoman has to be sure of him or herself about reaching the set targets of success.
Diffidence does not help. Self-image is enhanced, when one is confident.
 Willingness – A businessman or woman must be willing to undertake any matters
concerning their business venture. He or she must not hesitate for personal or other
reasons. Willingness to extend a helping hand is very essential.
 Enterprising – One has to be enterprising in order to achieve significant results in
business. He or she has to have the zeal to do things. A laid- back approach will not help.
 Innovative – New ideas help make a business venture successful. A successful
businessman or woman must be innovative and always strive for something better. New
concepts must be formulated and new ways of doing business must be thought of.
A businessman or woman has to very competent to achieve scale the ladder of success. Certain
attributes are essential for him or her to establish their business on sound footing.
CHAPTER FOUR
MANAGING AND GROWING AN ENTREPRENEURIAL VENTURE
Unique marketing issues

 Selecting a marketing and establishing a position
 Segmenting the market
 Selecting a target market
 Establishing a unique position
 Key marketing issues for new ventures

 Selling benefits rather than features
 The 4Ps of marketing for new ventures

 Product
 Price
 Promotion
 Place
Preparing for and evaluating the challenges of growth

 Preparing for growth
 challenges of growth
 Attribution of successful growth in business
Strategies for business growth

 Internal growth strategies
 External growth strategies
The importance of intellectual property

 Patents
 Trademarks
 Copyrights
 Trade secrets
Managing entrepreneurial growth may be the most critical tactics for the future success of business
enterprise. After initiation of a new venture, the entrepreneur needs to develop an understanding
of managerial change. This is a great challenge because the often encompasses the act of balancing
many factors that the entrepreneur possesses both strategic and tactical skills and abilities which
specific skills and abilities are needed depend in part on the ventures overall development.
The growth stage often requires major changes is entrepreneur strategy, competition and other
market forces call for the reformulation of strategies. For example, some businesses find
themselves ''growing out'' of business because they are unable to cope with the growth of their
ventures.
Highly creative entrepreneurs sometimes are unable, or unwilling to meet administrative changes
that accompany the growth stage. As a result, they leave the enterprise and move on to other
ventures. This growth stage presents newer and more substantial problems than those the
entrepreneur faced during the start-up stage. The newer challenges force the entrepreneur into
developing a different set of skills while maintaining an ''entrepreneurial perspective'' for the
organization. The growth stage is a transition from entrepreneurial one person leadership to
managerial team-oriented leadership.
SMALL BUSINESS MANAGEMENT
Definition of a small business
There is no one particular generally accepted definition of a small business. The definition tends
to vary depending on the sector of the business, he purpose of the definition and the level of
development where the enterprise is located (country).
The criteria for describing an enterprise as small might be based on one or a combination of the
following factors:
a) Total number of employees in the enterprise.
• Informal sector less than 10 employees.
• Formal sector – between 10-50 employees.
• Medium size enterprise – 51-150 employees.
b) Total investment or capital resources employed – it goes up to Ksh15 million.
c) Sales turnover.
d) Number of plants or branches operated by one business concern – between 1-5 plants.
In most discussions and writings on the topic of small business, it is concerned that a small
enterprise is one which the administrative and operational management are in the hands of one or
two people who also make the important decisions in that enterprise.
Students in entrepreneurship and small enterprise development should be aware of factors which
usually distinguish the small from the larger enterprises. Common among these factors include:
• Small enterprises is primarily financed from personal or family savings with limited
resource to outside finance during the formative stages.
• The manager has close personal contact with the whole workplace.
• The enterprise operates mainly in a limited geographical area.
Types of Small Business

In Kenya, small scale enterprises include many self-employed artisans and traders in the informal
sector commonly termed as ‘Jua Kali’. The enterprises also cover on the upper limit, the
manufacturing and trading businesses in the formal sector, employing up to 50 people and having
up to Ksh15 million in total investment. The enterprises include many productive activities
consisting of trade, commerce, distribution, transport, construction, agro-business, manufacturing,
maintenance and repair services.
There are various ways of classifying small businesses. However, most small businesses could be
in the following types of business:
a) Manufacturing Firms
Since the initial capital investment of manufacturing firms is high due to use of expensive
machines and equipment, and their operating costs and risks are high, few of such firms are small.
However, many small firms mostly provide parts and components to large companies. Few small
manufacturing firms are coming up utilizing the cheap and local machines and equipment, eg, oil
press machine from aprotech.
b) Construction Firms
In this sector, few small businesses operate autonomously due to high investment costs. However,
many small firms are sub-contractors providing specialized services like electricians, plumbers,
fixing of doors, painting etc.
c) Wholesalers
There are relatively many small enterprises in this sector. Small firms basically acts as middlemen
distributing products of large firms.
d) Retailers
There are many small enterprises in retailing mostly acting as outlets/intermediaries of large firms.
e) Service Business
Service factor is large and small firms perform essential specialized and often technical services
to other businesses, institutions and the general public. Such services are mostly for those
customers that are unable to provide technical services like management, consulting, accounting,
repairs etc.
Characteristics of Small Businesses
There are various distinctive characteristics of small enterprises. Among the most common ones
are:
• Small initial capital investment.
• Mostly privately owned and organized as sole proprietorship.
• Labor intensive – with tendency of utilizing labor more than machinery.
• Proprietor and their family members form the biggest share of the work-force.
• Most of the money come from entrepreneurs savings.
• Weak financial discipline – rules and regulations of financial management not strictly
adhered to.
• Organization and management are poor and negligible in many cases.
• Short gestation period – short time between initial investment and generation of returns.
• Flexibility to adapt rapidly to changing demands and conditions.
• Exploitation of human resources – mostly offer poor pay, poor working conditions, few or
no fringe benefits etc.
• Use of cheap and easy technology.
• Short term planning.
• Poor book keeping practices.
• High rates of corruption, cheating etc – especially in financial presentations.
• High incident of infant mortality rate – few survive the teething problems.
Role of Small Business in Economic Development

Small business has constituted the backbone of some economics and has remained the vital link
between various levels of economic activity in some. The small firm has been associated with
economic development for several reasons:
• Contributes significantly to the countries GDP through production of goods and services,
taxation etc.
• Ability to utilize resources that are under utilized by the large businesses due to their ability
to penetrate small market segments.
• Creation of job opportunities through starting firms and employing assistants.
• Contributes to creativity and innovation by coming up with new ways to counter
competition.
• Training opportunities for entrepreneurs who start small firms and gradually grow into
large firms.
• Solving the problem of capital scarcity by utilizing the availability small resources.
• Distributing of economic power to low income class and minority groups.
• Curbing rural-urban migration as they start firms even in the remote rural areas.
• Providing goods and services to big firms through subcontracting, parts and components
etc.
Problems Facing Small Businesses In Kenya
Problems of small enterprises can be general or specific.
Problems of general nature in small businesses
Government macro-economic policy and resource allocation environment has:

Highly controlled regulatory system
Inadequate infrastructure
Limited markets, ie, low purchasing power and competition
Poor access to appropriate technology
Lack of adequate finances – lack of adequate investment and working capital requirements
due to:
Stringent collateral requirements
Scarcity of backable proposals
Low liquidity ratio of banks
Lack of security
Poor non-financial promotion programmes – these include NGOs that promote businesses.
Lack of adequate information on small scale sector
No adequate assessment of target group
NGO and other promotion programmes have no good coordination thus compete among
themselves.
Specific problems of small enterprises include:
• Small enterprise manager operate with inadequate or minimum quantitative data.

• Mostly pay minimum wages, has few fringe benefits and offers low job security, its not
able to attract good quality personnel.
• Financiers are unwilling to finance small firms and the manager is mostly limited in his
ability to raise initial capital.
• Due to its problem of limited financial resources, the small firm is vulnerable to economic
downturn and recession.
• Lack of ability to realize full potential of its personnel due to lack of training and
development of personnel.
• High operational costs as its not able to enjoy economies of scale associated with large
purchases.
• Its mostly limited to a single or small product or service range thus concentrating risk.
• Mostly managers are not able to understand and interpret government regulations, actions
and concessions to best advantage.
Strengths and Weaknesses of Small Businesses
• Strengths are inherent capabilities of an organization that leads it to have strategic

advantage.
• Weakness – are inherent limitations and constraints of an organization that leads to a
strategic disadvantage to the organization.
Small enterprise possesses distinctive strengths/advantages that include among others:
• Ability to fill limited demands in specialized markets.

• Prosperity for labor intensity and low-medium skilled worker.
• Flexibility to adapt to rapidly changing demands and conditions.
Leadership Roles in Business
Entrepreneurs achieve by being leaders. Leadership can be defined as achieving the objectives of
the business through people. A leader is one who sets goals, knows what she wants to achieve,
and achieves these goals by motivating people and showing people how to be successful
themselves. Leaders do this by:
1. Building workers’ self-esteem.

2. Keeping employees informed of what is happening.
3. Delegating work to others and having faith and trust in their performance.
4. Marinating contact with employees.
5. Analyzing problems when they arise, but not blaming people for those problems.
6. Being an active listener to hear what might be happening in the business and how things
might be improved.
7. Setting specific objectives and continually reviewing them.
8. Taking corrective action when problems arise.
Leadership means working with people hence maintaining contact with people: helping people
to improve their position through training or assistance. Leadership is the position through
training or assistance, leadership is the key to the success of those who establish a new
enterprise.
Good Management Tips in Business

1. You will have products and services that meet your customers’ need.
2. Your business will be located in the right position to satisfy your customers and keep costs
to a minimum.
3. Your marketing and advertising will be effective by telling customers about your products
and services and making sure that you meet the needs of those customers.
4. Your business organization provides an effective and efficient unit. Your staff know that
they have to do who can make decision and who take responsibilities for activities.
5. Overall, you know that management means providing customers with the best and most
efficient service possible in Kenya.
Why Businesses Fail

Evidencefrom around the world shows that enterprises that fail do so as a result (largely) of
poor management. What this means is:
• Neglect by the owners – no management at all, neglect from bad habits, or difficulties
within families or from complacency or laziness.
• Fraud – management of staff taking money or goods from the business without paying for
those goods.
• Disasters – loss of the business through fire or flood or some other disaster and
management failing to protect the business through insurance or some other method.
• Incompetence – owners who lack the personal skills and technical knowledge necessary to
run the business: people who are not capable of managing a small enterprise.
• A market does not exist – poor service, an indifferent attitude by sales people to customers:
prices that are too low or too high: a poor location when compared to competitors.
• Competitive weakness – poor service, an indifferent attitude by sales people to customers:
prices that are too low or too high: a poor location when compared to competitors.
• Credit policy and cash collection policy that spells disaster – providing credit without
checking on the customers: allowing credit to be extended when cash should be collected: not
having sound cash collection policies.
• High expenses – little control over spending on (for example) travel or entertainment,
space, electricity to the use of the telephone.
• Too many assets – too much stock, too many vehicles or too many items of equipment in
a factory when the equipment is not.
• Location of the business – a retail store where customers never see it: a service business
which never advertises and cannot be located by customers: a factory in the wrong place and
hence having high transport costs: an agricultural business far from the market place.
Challenges Facing Youth Entrepreneurs In Kenya
Cash Flow Management

The challenge: Cash flow is essential to small business survival, yet many entrepreneurs struggle
to pay the bills (let alone themselves) while they’re waiting for checks to arrive. Part of the problem
stems from delayed invoicing, which is common in the entrepreneurial world. You perform a job,
send an invoice, then get paid (hopefully) 30 days later. In the meantime, you have to pay
everything from your employees or contractors to your mortgage to your grocery bill. Waiting to
get paid can make it difficult to get by – and when a customer doesn’t pay, you can risk everything.
The solution: Proper budgeting and planning are critical to maintaining cash flow, but even these
won’t always save you from stressing over bills. One way to improve cash flow is to require a
down payment for your products and services. Your down payment should cover all expenses
associated with a given project or sale as well as some profit for you. By requiring a down payment,
you can at least rest assured you won’t be left paying others’ bills; by padding the down payment
with some profit, you can rest assured you can pay your own.
Another strategy for improving cash flow is to require faster invoice payments. I invoice most of
my clients at 15 days, for example, which is half the typical invoice period. This means if a
customer is late on payment I have two weeks to address it and get paid before the next month’s
bills are due. In addition, more and more companies are requiring immediate payment upon project
completion – and in our digital age when customers can pay invoices right from their mobile
phones, it’s not a stretch to request immediate payment.
You can also address cash flow management from the other side of the equation by asking your
own vendors to invoice you at 45, 60, or even 90 days to allow ample times for your payments to
arrive and checks to clear. If you can establish a good relationship with vendors and are a good
customer, they’ll be willing to work with you once you explain your strategy..
3. Time management
The challenge: Time management might be the biggest problem faced by entrepreneurs, who wear
many (and all) hats. If you only had more time, you could accomplish so much more!
The solution: Make time. Like money, it doesn’t grow on trees, of course, so you have to be smart
about how you’re spending it. Here’s how:
Create goal lists: You should have a list of lifetime goals, broken down into annual goals, broken
down into monthly goals, then broken down into weekly goals. Your weekly goals, then will be
broken down into specific tasks by day. In this manner, what is on your task list in any given day
is all you need to do to stay on track with your lifetime goals
If any tasks do not mesh with your goals, eliminate it or delegate them
If any tasks do not absolutely have to be completed by you, delegate them
Consistently ask yourself: “Is what I’m doing right now the absolute best use of my time?”
4. Delegating tasks
The challenge: You know you need to delegate or outsource tasks, but it seems every time you do
something gets messed up and you have to redo it anyway.
The solution: Find good employees (see above) and good outsourced contract help, for starters.
You might have to pay a little more for it, but the savings in time (and the resulting earning
potential) more than make up for it.
Next, be ultra-specific as to what you want done. It will take a little more time at first, but write
down detailed steps listing exactly what you want your help to do. Don’t make assumptions, and
don’t assume your help will be able to think for themselves (they can, but they will complete the
job verbatim because that’s what they’re trained to do). So, don’t say “list stats in a spreadsheet”
when you can say “alphabetically list XYZ in the right spreadsheet column, then list statistic A in
the next column.” It might seem like overkill, but take the time to be specific once and your help
will get it right every time thereafter.
5. Choosing what to sell

The challenge: You know you could make a mint if you just knew what products and services to
sell. You’re just unsure how to pick a niche.
The solution: Admit that you’re weak in identifying prosperous niches, and delegate the task to
someone who is strong in this area. You don’t have to hire a huge, expensive marketing firm;
rather, recruit a freelance researcher who has experience in whatever type of field you’re
considering entering (retail ecommerce, service industry, publishing, etc.). Have them conduct
market research and create a report with suggested niches, backed by potential profit margins and
a complete SWOT analysis: Strengths, Weaknesses, Opportunities, and Threats.
This isn’t to say you should have someone else decide for you; however, if you’re not good at
identifying niches it’s a good idea to have someone who is make suggestions. You can then analyze
the suggestions for yourself to determine if you agree. Taking this step now can save you a lot of
time, money, and hassles later – and it can save your entire business and livelihood.
6. Marketing strategy
The challenge: You don’t know the best way to market your products and services: print, online,
mobile, advertising, etc. You want to maximize your return on investment with efficient, targeted
marketing that gets results.
The solution: Again, if you’re not adept at creating marketing plans and placing ads, it’s a good
idea to outsource your marketing strategy to someone who is. At this point, all you need is a core
marketing plan: what marketing activities will you undertake to motivate purchases? Give your
planner a budget and tell them to craft a plan that efficiently uses that budget to produce profits.
Financing
All entrepreneurs are also faced with the challenge of financing their entrepreneurial ventures.
Even corporate entities are usually faced with financial hurdles within and without. So, unless the
venture capital comes from ones own pocket, getting money might be a challenge that may require
one to prepare funding proposals or applications to be presented for loans and other forms of
financing.
Challenges Facing Group Entrepreneurs

Poor group formation
A group poorly formed is a sinking ship with no savior. Why do most youths form groups? How
do they end up together? Do they pool together because they have the same vision or mission or
is it a coincidence? Most of the youth groups we have been formed for convenience. One or two
youths heard of an opportunity and thus to get few of the friends who can’t oblige the invitation
and thus form a group. Some of the members have been childhood friends, college mates and thus
are used to each other that they can’t be really accountable to others and thus the group is formed
poorly. This will transcend to group activities as the founder will always be given there bigger and
tough role even if they are not up to task and thus leading to poor management of projects initiated.
Although this is not the case to all groups, with a few formed by objectivity and soberness of
vision, more groups are being formed for convenient.
Lack of ownership of project ideas by other members

One of the key drivers to successful and sustained projects is the project idea ownership. The
question that I ask the youths I interact with undertaking a project is “who had this idea?” after
that I get to ask the other members what they did when they had the idea and sometimes the answers
are shocking.
Because the idea came from their friends and didn’t want to offend them, they accepted it and
waited for further instructions. Some groups on the other hand are doing projects not because they
are passionate about the projects but because that is where their finances would stretch to or
because that was the sector that was being financed by a donor or financial institution or the
government.
This lack of ownership of the project makes the youths not to do their best in the projects hence
not getting the desired results as well as abandoning it immediately the financial support is over.
This has led to the death of many projects began by most youth groups.
Non commitment
Are most youths committed to their projects? The answer from most of my interactions is no. most
of the youths are not committed to their course of action and thus with the lack of commitment the
projects cannot be successful. They will be abandoned at some point for lack of commitment. A
committed group will do what it takes to make their project sustained but this is only seen in few
youth groups.
Poor record keeping and wastage

What is the total amount invested in this project? How much so far has been repaid by this project?
How much profit so far have you made from this project? Is the project doing well financially?
Most of the groups would not have substantive answers to these questions. They will always tell
you of how the projects are giving them something but when you evaluate the cost verses the
benefits of the projects you’ll be surprised. Poor records are making the youths to mismanage the
finances as well as to fail to track the progress of the projects and hence project failures.
Supremacy battle
As the groups start making progress each of the youths would want to be at the top. The founder
of the group will always want to remain at the top while the other proactive members also feel that
they need to be at the top. They would also wish to control the resources, to represent the group in
meetings with the financers or other donors and also to be in control. Some would feel they are
being used by others and thus want to make themselves look superior and thus the rise of wrangles
from the group. Because of poor laid down structures and because of poor group dynamics, the
group members will fight themselves leading to the disintegration of the group and hence failing
of the projects
Distractions and thus forsaken course

Lack of concentration and lack of focus is a major disease eating the youth. They will want to try
every new idea that comes up. They would want to try every other thing that is looking lucrative
that is being done by others elsewhere. This distractions and lack of focus makes the youths to try
to seek for greener pastures and thus while on this course projects and businesses that would have
flourished if given the right focus and attention end up failing.
Urge to grow rich instantly

Most of the youths I have interacted with want to grow rich. Some have come to a point of
embracing the end rather than the process. They would not want to wait and be patient and grow
what they are doing but would want to get and follow the easiest way to riches. This has made
most projects to fail as the youths are not willing to wait for as longer period of time to see the
results but would wish to do something that will give them finances quickly without much struggle.
This has made it hard for them to concentrate on what they have began and thus most projects
began by the youths will not celebrate their second birthday if they don’t find instant satisfaction
in them.
Poor project appraisal

What is the profit project of this project? What is the cost and benefit of this project? What is the
impact of this project? What are the financial projections of this project? What are the expected
risks of these projects? If you find answers to these questions from most project teams in youth
groups than you’ll be working with one of the few serious groups. Most groups do not appraise
their projects before undertaking them but will venture into projects blindly. When frustrations
arise, the youths abandon the projects for search of new ones and thus cannot grow stably.
Dependence on support and hence forsake sustainability aspect

Most of the youth’s projects are initiated because of availability of donations or financial assistance
from the government or other financial institutions. The youths in most cases will not think of how
they will sustain the project if the assistance ceases and thus depend entirely on the finances
brought in. sometimes the incomes from the projects are mismanaged and misdirected as the
youths know that more is coming from the donors or financers of the projects. When the financing
period elapses then it is usually the end of the projects as the youths cannot sustain the projects on
their own.
Disintegration of the groups as youths search greener pastures

Youths are always on the move in search of riches and greener pastures. As argued above most of
them lack the patience and persistence to stay at one point longer and would like to move away in
search of better opportunities. This leads to disintegration and break away from the groups and
hence the projects initiated are forsaken and thus project failures.
Conclusion
These may not be all the challenges making youth projects to fail and not all youth projects face
these challenges but if capacity building is done on group dynamics including proper formation
and management of groups, book keeping and record keeping, project management skills,
communication skills as well as reporting skills. This will make more projects sustained and we
will have economic empowerment of the youth hence reduced poverty levels, dependence and
unemployment among the youths.
CHAPTER FIVE
BUSINESS FINANCING
Introduction
Before you approach any funding source:
• Be clear about the basic facts of your project and about the money needs. Put yourself in
the shoes of the relative, supplier or banker and consider the information they need to decide
before reaching a financing decision.
• So the first rule is come prepared when you approach your financier.
• Assuming you have got the above right, get ready for the formal request. Most banks have
developed forms, which they expect you to complete with great diligence. Make sure you fully
understand what is required and paint as realistic a picture of your project as possible.
• Other institutions may require very comprehensive documentation including possibly an
entire business plan with supporting evidence. Time invested to prepare such a document is
normally well spent. The plan will provide a very useful road map when you start operation.
• In sum, during the negotiations, you will wish to project an image of honesty, of purpose
and of desire for success. The financing institutions chosen by you should perceive a
knowledgeable and dedicated entrepreneur assisted by a management team well organized to
meet the challenging tasks ahead.
So you’ve got a killer business idea and want to start a business. How are you going to get the
business start up money you need to take your new business from idea to success? This
rundown of where to look for the start up money you need and the most popular sources of
business start up money will help.
Sources of Business Financing

1) Your own pockets.
This may be daunting at first glance, but it’s the most popular source of business start up money.
Don’t have a start up money nest egg? Many people get the business start up money they need by
mortgaging or remortgaging their homes, or selling property or possessions – even those who do
succeed in getting a start up business loan. Lending institutions and investors usually expect the
person starting a business to make a personal financial commitment.
2) Family and friends.

The second most popular source of business start up money. Family and friends are often willing
to provide a business start up loan or sometimes even an outright gift. After all, they’re likely to
be already “pre-sold” on the value of your business idea to some degree, as your family and friends
believe in you.
3) A line of credit.
While not recommended as a sole source of business start up money, a line of credit is essential
for the start up phase. No matter how careful and detailed you’ve been in preparing your business
plan, there are always unexpected expenses and expenses that you’ve underestimated.
Before you start a business, you should already have prepared the way to access this source of
business start up money by having established a relationship with your local bank manager and by
ensuring that your credit rating is in good shape.
4) A start up business loan from a bank.

I’m using the term “bank” to refer to a business start up loan from a traditional lending institution
(such as banks and Credit Unions). It’s actually easier than ever to get a business loan, as more
people than ever have been successfully starting small businesses and the big banks have more
interest in small businesses than they used to.
That said, you can't just walk in, tell a loans manager how much business start up money you want,
and expect to walk out with it. Applying for any business loan is a process that you need to prepare
for.
5) A start up business loan from a business-related or government sponsored organization.

There are many organizations whose purpose is to promote economic development or provide
assistance to help particular types of people succeed in business. Often (but not always) this
assistance includes financial support, such as start up business loans. For instance, one of the ways
the GOK, , supports young entrepreneurs (aged 18 to 35) is by providing start up business loans
through youth fund.
Many women’s organizations also provide financial assistance to women in business, including
start up business loans. e.g KWFT is one such organization; you’ll find links to women’s
organizations.
There are economic development organizations in place in every province to provide support and
services to entrepreneurs, including financial assistance. CDF. IFC,
You’ll find more examples of organizations that offer business loans, including start up business
loans, KREP, SMEP , KADET, ECLOF
6) Participating in a government-sponsored business start up program.

If you qualify, this is the best way to start a business. Programs such as C-YES ,KMAP not only
provide start up money but invaluable assistance, such as mentoring and help developing your
business plan. These are just two such start up programs; there are others.
7) Finding investors.
Angel investors, venture capitalists, or private lenders all may be excellent sources of business
start up money for your new business. While it’s certainly more difficult in most cases to attract
investors to a start up rather than to an established venture, it’s not impossible if you have the right
business idea at the right time backed by an impressive business plan.
8) Government grant programs.

While this is often touted as a great source of business start up money, it’s not, because most start
ups simply don’t qualify as you'll see in While there are government grants available, finding one
that can provide start up money for your new business will be an enterprise in itself (which is
probably why there are so many companies out there providing grant-finding services).
Those planning to start up “the right business” will have a much easier time finding government
grant programs that may provide business start up money. For example, generating efficient,
renewable energy is a priority of the federal government, so businesses involving Cogeneration
(using one fuel to simultaneously produce heat and electricity) or renewable energy technologies
will find more government grant opportunities than others.
CHAPTER SIX
FACTORS AFFECTING ENTREPRENEURSHIP GROWTH IN KENYA
The various factors that contribute to entrepreneurship are varied and many. However, such factors
are broadly classified into the broad areas as listed below:
1. Social Factors
2. Cultural Factors
3. Facilitating Factors
4. Psychological Factors
5. Economic Factors
6. Competitive Factors
1. Social Factors
Social factors strongly affect the entrepreneurial behaviour which contributes to entrepreneurial
growth. The social factors can be:
a) Family Background: Family background greatly affects the entrepreneurial environment

and maintenance of social systems. Joint family or nuclear families have their own benefits and
disadvantages. The environment of the family influences the entrepreneurship. If the father is a
professional or a businessman, the son is more likely to adopt the same occupation because of
certain inherent advantages by virtue of his father being in the similar line.
b) Social Status: Social status has its own role to play. Every human being aspires for high
social status and once he achieves a reasonable level, his aspirations and desires for it start getting
multiplies. Chester Barnard said that the desire for improvement of status and especially the hard
to maintain their status as is also contributes to their entrepreneurial growth.
c) Religion: Caste and religion of entrepreneur are the contributory factors of entrepreneurial
mainsprings of entrepreneurial activity.
d) Social Mobility: Social mobility involves the degree of social and geographical mobility
and the nature of mobility channels within a system.
e) Social Marginality: Social marginality also positively influences entrepreneurship.
Stauworth and Curran stress that a person belonging to a social group traditionally constrained to
enter economic activity and barred form many other activities by the society is expected to choose
the owner manage role in small industry.
2. Cultural Factors
Max Weber emphasizes that cultural factors have crippling effect on entrepreneurial growth.
Culture consists of:
a) Tangible man-made objects like furniture, building etc.
b) Intangible concepts like laws, morals, knowledge etc.
c) Values and behaviour acceptable within the society.
America is a capitalist country. Russia followed a socialist patter. Democracy has no touch in
China, but Indian culture encourages democracy` and accepts mixed economy.
3. Facilitating Factors
There is lot of reluctance from the elders when an inexperienced young fellow declares his decision
to become an entrepreneur. The elders are resistant to permit due to various reasons.
i) Lack of experience
ii) Difference between present occupation and prospective occupation
iii) Uncertainty about the prospects of entrepreneur
iv) Fear of losing money and esteem
v) Arrangement of finance
vi) Fear of occupational and geographical mobility
vii) Publicity of entrepreneurial failures
viii) Sacrificing the lucrative job, if already in service
ix) Under-estimation of capabilities and talents of the child.
x) Fear of giving freedom
xi) Fear of getting deceived in a new business
xii) Lack of training
4. Psychological Factors
Theory of achievement motivation has been developed by Harvard Psychologist David; C.
McClellan Achievement motivation means a drive to overcome challenges. It is a personality
characteristic which major determinant of entrepreneurship development. McClelland says that
average level of achievement motivation existing in a society ensured a relative high amount of
entrepreneurship in the society. The trait of need for achievement is not born but it can develop
through various training programmes.
5. Economic Factors
i) Financial Assistance from Institutional Sources: Liberal financial assistance from
institution certainly boosts the morale of young entrepreneurs to set up an industry. For seeking
assistance, it is necessary for the entrepreneur to have some financial base and the institutions and
banks also provide facilities in the form of finance, consultancy, purchase of land, availability of
fixed assets like plant and machinery on hire-purchase installments etc. a part form financial
assistance, several promotional measures are also implemented to make the environment
conducive to entrepreneurial growth.
ii) Accommodation in Industrial estate: Industrial estate scheme has been a great success
in the country in achieving healthy growth of entrepreneurship. The industrial estates are meant
to provide wide varieties of facilities are sponsored by the government.
iii) Attitude of the Government: It is only due to the task of development planning
undertaken stress on rapid industrialization, expansion in domestic demand, change in composition
of imports and rigid control on imports proved a blessing and stimulated most of the industries.
The slogan ‘export or perish’ led to export promotion and enjoyed a special status.
The government took three important measures in various industrial resolutions:
a) To maintain a proper distribution of economic power distribution of economic power
between private and public sector.
b) To encourage the tempo of industrialization by spreading entrepreneurship to every
city town or village.
c) To disseminate the entrepreneurial acumen concentrated in a few dominant
communities to a large number of industrially dominant people of varied social strata.
iv) Encouragement from Large Business: Encouragement from large business has also
contributed to entrepreneurial growth. Reservation policy initiated by the government prohibits
the large houses to complete with the small units. Only those large houses who export 75% of
their production can produce the products reserved for small units.
v) Machinery on Hire-Purchase: The entrepreneurs do not have a strong capital base
and they lack resources to buy every expensive machinery single handedly. The
government intervenes to assist them.
vi) Labor Conditions: The quality rather than quantity of labour is another factor which
influences the emergence and growth of entrepreneurship. The availability of low cost
labour positively affects entrepreneurship but the immobility of unskilled labour is
often quite less.
vii) Raw Materials: shortage of raw material can much adversely affect the
entrepreneurial environment and it has been affecting many industries. Shortage of
raw-materials, inferior quality high price resulting in high cost of production are
bringing bad name to the small industry. Without raw-materials, no industry can run
and no entrepreneurship would come up. The more favourable the conditions of raw-
materials are better would be its influence on entrepreneurial emergence.
viii) Market: If the entrepreneur does not possess knowledge and various marketing
techniques, he is unlikely to survive. The size and composition of marketing both
influence entrepreneurship in their own ways. The benefits of an improved and healthy
market conditions in the environment or entrepreneurial growth are self explanatory.
ix)
6. Competitive Structure of Industries Factors

Identification of forces affecting the competitive dynamics of an industry will be very useful in
formulating strategies. According to Michael Porter’s model of structural analysis of industries,
the state of competition in an industry depends upon five basic competitive forces, viz.
1. Rivalry among Existing Competitors: Factors which influence the intensity of rivalry:
a) Number of firms and their relative market share, strengths.
b) State of growth of industry (slow etc).
c) Storage cost
d) Product standardization
e) Exit barriers
f) Diverse competitors.
2. Threat of Entry – Entry barriers:

a) Government policy
b) Product differentiation (brand image, customer loyalty)
c) Monopoly elements
d) Capital requirements
3. Threat of Substitutes: Firms in same industries face competition form those marketing
substitute products.
4. Bargaining Power of Buyers: Buyers are Potential competitors. Important determinants of

buyer Power:
a) The volume of purchase
b) The importance of the product to the buyer
c) Profitability of the buyer
d) Extent of buyer’s information
5. Bargaining Power of suppliers: Determinants

a) Extent of concentration/domination in the supplier industry.
b) Importance of the product to the buyer.
c) Importance of the buyer to the supplier.
d) Extent of substitutability of the product.
CHAPTER SEVEN
CREATING A COMPETITIVE ENTERPRISE
Value Chain Analysis (VCA)
Value chain analysis is a process where a firm identifies its primary and support activities that add
value to its final product and then analyze these activities to reduce costs or increase differentiation.
Value chain represents the internal activities a firm engages in when transforming inputs into
outputs.
Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and support of a
product or service. They consist of the following:
Inbound logistics – These are all the processes related to receiving, storing, and distributing inputs
internally. Your supplier relationships are a key factor in creating value here.
Operations – These are the transformation activities that change inputs into outputs that are sold
to customers. Here, your operational systems create value.
Outbound logistics – These activities deliver your product or service to your customer. These are
things like collection, storage, and distribution systems, and they may be internal or external to
your organization.
Marketing and sales – These are the processes you use to persuade clients to purchase from you
instead of your competitors. The benefits you offer, and how well you communicate them, are
sources of value here.
Service – These are the activities related to maintaining the value of your product or service to
your customers, once it's been purchased.
Support Activities
These activities support the primary functions above. In our diagram, the dotted lines show that
each support, or secondary, activity can play a role in each primary activity. For example,
procurement supports operations with certain activities, but it also supports marketing and sales
with other activities.
Procurement (purchasing) – This is what the organization does to get the resources it needs to
operate. This includes finding vendors and negotiating best prices.
Human resource management – This is how well a company recruits, hires, trains, motivates,
rewards, and retains its workers. People are a significant source of value, so businesses can create
a clear advantage with good HR practices.
Technological development – These activities relate to managing and processing information, as

well as protecting a company's knowledge base. Minimizing information technology costs, staying
current with technological advances, and maintaining technical excellence are sources of value
creation.
Infrastructure – These are a company's support systems, and the functions that allow it to
maintain daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.
Companies use these primary and support activities as "building blocks" to create a valuable
product or service.
Resources, Competencies and Capabilities for Competitive Advantage
Resources
The activities and processes of the organization utilize certain assets. These assets are called
resources. These resources can be created within the organization. They form the internal
resources. Such generated resources are organization-specific. Otherwise they could be obtained
externally from the suppliers available in the resource markets. They form the external resources.
The externally obtained resources are organization-addressable. In addition resources can be
categorised as specific or non-specific. Those resources which can only be used for extremely
specialized intentions and are significant to the organization in adding value to goods and services
are called specific resources.
Non-specific resources are less specific and are less significant in adding value. Also resources
can be broadly classified as tangible and intangible. The physical assets that an organization
possesses are called tangible resources. The physical resources, human resources and final
resources come under this category.
The intellectual resources, technological resources and the organizational reputation together form
the intangible resources. The patents and copyrights of the organization are typical examples of
intellectual resources. The innovation capacity and innovation speed are examples of technological
resources. Reputation is basically good-will that the organization has acquired among the
customers. It is a critical resource of an organization.
Competencies
An organization should posses some characteristics in order to have the ability to compete with
other organizations in the market place. These characteristics form the competencies of the
organization. For any organization to survive in an industry competencies are must. At the same
time competencies cannot be useful to an organization when they stand alone. It is when they
combine together in the right combination that they help the organization to attain competitive
advantage. For instance consider an information technology organization. For this to compete in
the software industry it should posses the competencies to write programs and design tools which
have to be combined together to provide it with the competitive advantage in the industry.
Distinctive Capabilities
An organization’s resources which are critical in imparting it with competitive advantage are called
distinctive capabilities. When the capabilities originate from an attribute which other firms do not
have then they form an organization’s distinctive capabilities. In addition to having a distinctive
characteristic it should also be sustainable and appropriable.
When a distinctive capability is able to continue functioning over a period of time it is said to be
sustainable. When the organization which holds a distinctive capability is able to benefit mainly
from it then it becomes appropriable. An organization can derive the distinctive capabilities mainly
the organizational architecture, organization reputation and innovation. The relationships between
the organization and the stakeholders are critical in developing these three aspects of the
organization.
Resource Based View Model (RBV / VRIO)

Resouce Based View Model Analysis is an analytical technique briliant for the evaluation of
company's resources and thus the competitive advantage. VRIO is an acronym from the initials of
the names of the evaluation dimensions: Value, Rareness, Imitability, Organization
The following model explains RBV and emphasizes the key points of it.
According to RBV proponents, it is much more feasible to exploit external opportunities using
existing resources in a new way rather than trying to acquire new skills for each different
opportunity. In RBV model, resources are given the major role in helping companies to achieve
higher organizational performance. There are two types of resources: tangible and intangible.
Tangible assets are physical things. Land, buildings, machinery, equipment and capital – all these
assets are tangible. Physical resources can easily be bought in the market so they confer little
advantage to the companies in the long run because rivals can soon acquire the identical assets.
Intangible assets are everything else that has no physical presence but can still be owned by the
company. Brand reputation, trademarks, intellectual property are all intangible assets. Unlike
physical resources, brand reputation is built over a long time and is something that other companies
cannot buy from the market. Intangible resources usually stay within a company and are the main
source of sustainable competitive advantage.
The two critical assumptions of RBV are that resources must also be heterogeneous and immobile.
Heterogeneous. The first assumption is that skills, capabilities and other resources that
organizations possess differ from one company to another. If organizations would have the same
amount and mix of resources, they could not employ different strategies to outcompete each other.
What one company would do, the other could simply follow and no competitive advantage could
be achieved. This is the scenario of perfect competition, yet real world markets are far from
perfectly competitive and some companies, which are exposed to the same external and
competitive forces (same external conditions), are able to implement different strategies and
outperform each other.
Therefore, RBV assumes that companies achieve competitive advantage by using their different
bundles of resources.
The competition between Apple Inc. and Samsung Electronics is a good example of how two
companies that operate in the same industry and thus, are exposed to the same external forces, can
achieve different organizational performance due to the difference in resources. Apple competes
with Samsung in tablets and smartphones markets, where Apple sells its products at much higher
prices and, as a result, reaps higher profit margins. Why Samsung does not follow the same
strategy? Simply because Samsung does not have the same brand reputation or is capable to design
user-friendly products like Apple does. (heterogeneous resources)
Immobile. The second assumption of RBV is that resources are not mobile and do not move from
company to company, at least in short-run. Due to this immobility, companies cannot replicate
rivals’ resources and implement the same strategies. Intangible resources, such as brand equity,
processes, knowledge or intellectual property are usually immobile.
Porter's Model of Generic Strategies for Competitive Advantage
A firm's relative position within its industry determines whether a firm's profitability is above or
below the industry average. The fundamental basis of above average profitability in the long run
is sustainable competitive advantage. There are two basic types of competitive advantage a firm
can possess: low cost or differentiation. The two basic types of competitive advantage combined
with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies
for achieving above average performance in an industry: cost leadership, differentiation, and focus.
The focus strategy has two variants, cost focus and differentiation focus.
1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the pursuit
of economies of scale, proprietary technology, preferential access to raw materials and other
factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can
achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.
2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.
3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry.
The focuser selects a segment or group of segments in the industry and tailors its strategy to serving
them to the exclusion of others.
The focus strategy has two variants.
(a) Cost focus - a firm seeks a cost advantage in its target segment, while in
(b) Differentiation focus- a firm seeks differentiation in its target segment. Both variants of
the focus strategy rest on differences between a focuser's target segment and other segments in
the industry. The target segments must either have buyers with unusual needs or else the
production and delivery system that best serves the target segment must differ from that of
other industry segments. Cost focus exploits differences in cost behaviour in some segments,
while differentiation focus exploits the special needs of buyers in certain segments.
COMMUNICATION SKILLS
CHAPTER ONE
INTRODUCTION TO COMMUNICATION SKILLS
INTRODUCTION
communication (from Latin commūnicāre, meaning "to share") is the act of conveying
intended meanings from one entity or group to another through the use of mutually
understood signs and semiotic rules.
Communication studies or communication sciences are an academic discipline that deals with
processes of human communication. There are three types of communication: verbal, involving
listening to a person to understand the meaning of a message; written, in which a message is read;
and nonverbal communication involving observing a person and inferring meaning.[1] The
discipline encompasses a range of topics, from face-to-face conversation to mass media outlets
such as television broadcasting.
Communication Terms and Concepts

Definition: "Communication is the process of sharing meaning through continuous flow of
symbolic messages.
Communicator (Sender/receiver) - the participants in communication. Typically the roles

reverse regularly.
Message - a single uninterrupted utterance. Verbal or nonverbal
Code - a system suitable for creating/carrying messages through a specific medium
o Encode (put into code) and

o Decode (take out of code)
Channels (verbal, nonverbal, etc.) - the specific mechanism (“pipeline”) used to transmit the
message
Medium (face-to-face, television, web, phone, etc.) - form or technology of transmission —

determines kind of code used.
Noise - interference with message — external (physical), internal (mental) or semantic

(misunderstanding/reaction
Environment (part of context) - that which surrounds and provides a basis for the meaning of a
message:
o Physical (surroundings)
o Temporal (point in time)
o Relational (the existing relationship between communicators - friends,
strangers, etc.)
o Cultural (language and behavior community the communicator(s) come
from)
Feedback - checks effects of messages
7. positive feedback - "keep doing what you’re doing"

8. Negative feedback - change what you’re doing.
Levels (contexts) of Communication
9. Intrapersonal
10. Interpersonal
11. Public Communication
12. Mass Communication (non-interactive)
13. Computer Mediated Communication (interactive)
Essential of Effective Communication
An Effective communication is critical to any successful relationship. It is an important tool for

better understanding between friends, neighbors, spouse, stakeholders and colleagues. It therefore
important to remind ourselves about good communication practices, after all, words have at least
two meanings: what you intend to say and what the listener thinks you mean.
1) Clarity of Information:
Commenting on the ‘communication realism’ Terry says that first essential of effective
communication is to ‘inform yourself fully’. It implies that first of all the communicator must be
clear in his mind with the information he wants to communicate. Communication should always
be in common and easily understandable language so that it may not be misunderstood by the
persons receiving it.
(2) Adequacy of Message:

The message to be communicated should be adequate and complete in all respects since incomplete
information turns out to be dangerous from the viewpoint of business. The adequacy of information
being transmitted depends upon the intellectual capabilities of parties concerned.
(3) Consistency of Message:

The message to be communicated should not be mutually conflicting rather it should be in line
with the overall objectives, policies, programmes and procedures of the organisation. Self-
contradictory messages always create chaos and confusion in the organisation which is highly
detrimental to the efficient running of the enterprise. If the message is amended from the previous
one, the fact should be clearly stated so that the chances of confusion can be reduced.
(4) Feedback:
Feedback is an important method of ensuring effective communication. It refers to the
confirmation of the idea communicated whether the message has been understood by the receiver
in the same sense in which the sender makes or whether the recipient is agreed or disagreed to the
proposal of the communicator, makes it essential on the part of the sender to confirm it from the
receiver.
In case of face to face communication, it is easier to get feedback information observing the
emotions and expressions on the face of the receiver. But, for written communication, the
management should devise or evolve suitable means and ways for making communication more
effective.
(5) Understanding the Receiver:

Understanding is the main aim of communication. The communication must create proper
understanding in the mind of the receiver. Killian advised, “communicate with an awareness of
the total physical and human setting in which the information will be received.
(6) Consultation:
It is generally desirable to consult others in planning communication. This will provide additional
insight and objectivity to the message. An important advantage of consultation will be that those
who have been taken into confidence while planning communication will lend active support.
(7) Determine Medium:

After having decided the subject matter it should be determined as to how best this message is to
be communicated. All aspects of oral or written communication must be carefully examined.
(8) Tone and Content:

The communicator must be careful about the language he uses while speaking or writing. His tone,
expression and emotion will have a definite impact on the effectiveness or otherwise of what he is
trying to communicate.
(9) Timing and Timeliness:

Proper attention should be given to the timing and timeliness of the communication. The same
message will be received or responded differently by different individuals and groups at one time
and differently by the same individuals and groups at different times.
(10) Support with Action:

It is highly necessary that the actions of the communicator should support his communication. This
is because action speaks louder than words. The most persuasive communication, it should be
noted, is not what one says but what one does.
(11) Listening:
A very important aspect of effective communication is that executives and supervisors should be
good listeners. It is dangerous to be inattentive or indifferent when others are attempting to
communicate. The ten commandments of American Management Association state: “Listening is
one of the most important, most difficult and most neglected Skills M communications.
It demands that we concentrate not only on the explicit meanings another person is expressing, but
on the implicit meanings, unspoken words, and undertones that may be far more significant. Thus,
we must learn to listen with the inner ear if we are to know the inner man. ”
(12) Environment of Trust and Confidence:

F.E. Fischer has pointed out that ‘communication grows best in a climate of trust and confidence’.
Every effort should, therefore, be made to win confidence by reporting facts honestly. Employees
need to be convinced and feel that the company is truthful and sincere in its contacts.
(13) Keeping the System Always Alive:

The system of communication should be kept open and alive all the year round. It is only by honest
attempts that good communication relations can be developed.
CHAPTER TWO
COMMUNICATION PROCESS
The communication process is the steps we take in order to successfully communicate.
Components of the communication process include a sender, encoding of a message, selecting of
a channel of communication, receipt of the message by the receiver and decoding of the message.
Stages Of Communication Process

Communication is a key component to living a successful life. Possessing effective
communication skills can improve your career, your relationships, and increase your people
skills. There are seven stages to basic communication. By knowing and understanding these
stages you will be able to better communicate in your personal and professional life.
Communication process is the set of some sequential steps involved in transferring message as
well as feedback. The process requires a sender who transmits message through a channel to the
receiver. Then the receiver decodes the message and sends back some type of signal or feedback.
1. Sender – Know the message you want to communicate and make sure that message contain
useful and correct information.
2. Encoding – Encoding is the process where the information you would like to communicate
gets transferred into a form to be sent and decoded by the receiver. The ability to deliver
the message clearly as well as be able to discard any confusing or potentially offensive
themes such as cultural issues, or missing information is imperative in this stage.
3. Channel – Channels are the way you convey your message.These channels include verbal
such as telephone, and face-to-face conversations as well as non-verbal such as e-mail and
text messaging. Each individual channel has its strengths and weaknesses in terms of
communicating. For example, it is better to give instructions non-verbally rather than
expecting the person you are communicating with will remember everything you tell them.
You would also never critique or criticize anyone through a non-verbal channel at the risk
of having a misunderstanding.
4. Decoding – Decoding is on the receiving end of communication. This stage is just as
important as encoding. Communication can go downhill at this stage if the receiver is not
practicing active listening skills or if they do not possess enough information to accurately
decode the message.
5. Receiver – Know your audience. Each individual person on the receiving end of your
message already has their own ideas and thoughts that will absolutely influence the way
they translate your message. By getting to know your audience better you will be able to
have a better understanding of how they will react to what you are trying to communicate.
6. Feedback – As you are communicating your message your audience will provide you with
non-verbal and verbal reactions. You will be able to asses while communicating your
message if it is being conveyed accurately by paying close attention to non-verbal cues
first such as returning eye contact, head nodding etc.
7. Context –Context is the environment in which your message is being delivered. For
example, If you’re making a work presentation chances are you will be speaking more
professionally, than if you were conversing casually with a neighbor or friend.
Barriers to Effective Communication

A communication barrier is anything that prevents you from receiving and understanding the
messages others use to convey their information, ideas and thoughts. These barriers may be
related to the message, internal barriers related to thoughts and feelings, or external barriers.
1. Physical Barriers: this has to do with poor or outdated equipment used during
communications, background noise, poor lighting, temperatures that are too hot or too cold.
2. Attitudes: emotions like anger or sadness can taint objectivity. Also being extremely nervous,
having a personal agenda or “needing to be right no matter what” can make communications less
than effective. This is also known as “Emotional Noise”.
3. Language: this can seem like an easy one, but even people speaking the same language can
have difficulty understanding each other if they are from different generations or from different
regions of the same country. Slang, professional jargon and regional colloquialisms can even hurt
communicators with the best intentions.
4. Physiological Barriers: ill health, poor eyesight or hearing difficulties, pain.
5. Problems with Structure Design: companies or institutions can have organization structures
that are not clear, which can make communications difficult. Also to blame for faulty
communications are bad information systems, and lack of supervision or training of the people
involved.
6. Cultural Noise: people sometimes make stereotypical assumptions about others based on their
cultural background.
7. Lack of Common Experience: it’s a great idea to use examples or stories to explain a point
that is being discussed. However, if the speaker and the audience cannot relate to these examples
because they do not have the same knowledge or have not shared the same experiences then this
tool will be ineffective.
8. Ambiguity and Abstractions Overuse: leaving things half-said, using too many
generalizations, proverbs or sayings, can all lead to communications that are not clear and that can
lend themselves to misinterpretations.
9. Information Overload: it takes time to process a lot of information and too many details can
overwhelm and distract the audience from the important topics. Keep it Simple, Sweetie.
10. Assumptions and Jumping to Conclusions: This can make someone reach a decision about
something before listening to all the facts.
Overcoming Communication Barriers

There are a lot of communication barriers faced these days by all. The message intended by the
sender is not understood by the receiver in the same terms and sense and thus communication
breakdown occurs. It is essential to deal and cope up with these communication barriers so as to
ensure smooth and effective communication.
As, in the previous section we have discussed the major barriers of communication. Let’s talk
about how to overcome these barriers of communication.
1. Eliminating differences in perception: The organization should ensure that it is recruiting

right individuals on the job. It’s the responsibility of the interviewer to ensure that the
interviewee has command over the written and spoken language. There should be proper
Induction program so that the policies of the company are clear to all the employees. There
should be proper trainings conducted for required employees (for eg: Voice and Accent
training).
2. Use of Simple Language: Use of simple and clear words should be emphasized. Use of
ambiguous words and jargons should be avoided.
3. Reduction and elimination of noise levels: Noise is the main communication barrier
which must be overcome on priority basis. It is essential to identify the source of noise and
then eliminate that source.
4. Active Listening: Listen attentively and carefully. There is a difference between
“listening” and “hearing”. Active listening means hearing with proper understanding of the
message that is heard. By asking questions the speaker can ensure whether his/her message
is understood or not by the receiver in the same terms as intended by the speaker.
5. Emotional State: During communication one should make effective use of body language.
He/she should not show their emotions while communication as the receiver might
misinterpret the message being delivered. For example, if the conveyer of the message is
in a bad mood then the receiver might think that the information being delivered is not
good.
6. Simple Organizational Structure: The organizational structure should not be complex.
The number of hierarchical levels should be optimum. There should be a ideal span of
control within the organization. Simpler the organizational structure, more effective will
be the communication.
7. Avoid Information Overload: The managers should know how to prioritize their work.
They should not overload themselves with the work. They should spend quality time with
their subordinates and should listen to their problems and feedbacks actively.
8. Give Constructive Feedback: Avoid giving negative feedback. The contents of the
feedback might be negative, but it should be delivered constructively. Constructive
feedback will lead to effective communication between the superior and subordinate.
9. Proper Media Selection: The managers should properly select the medium of
communication. Simple messages should be conveyed orally, like: face to face interaction
or meetings. Use of written means of communication should be encouraged for delivering
complex messages. For significant messages reminders can be given by using written
means of communication such as : Memos, Notices etc.
10. Flexibility in meeting the targets: For effective communication in an organization the
managers should ensure that the individuals are meeting their targets timely without
skipping the formal channels of communication. There should not be much pressure on
employees to meet their targets.
Seven C’s of Effective Communication

There are 7 C’s of effective communication which are applicable to both written as well as oral
communication. These are as follows:
1. Completeness - The communication must be complete. It should convey all facts required
by the audience. The sender of the message must take into consideration the receiver’s
mind set and convey the message accordingly. A complete communication has following
features:
 Complete communication develops and enhances reputation of an organization.
 Moreover, they are cost saving as no crucial information is missing and no
additional cost is incurred in conveying extra message if the communication is
complete.
 A complete communication always gives additional information wherever required.
It leaves no questions in the mind of receiver.
 Complete communication helps in better decision-making by the
audience/readers/receivers of message as they get all desired and crucial
information.
 It persuades the audience.

2. Conciseness - Conciseness means wordiness, i.e, communicating what you want to convey
in least possible words without forgoing the other C’s of communication. Conciseness is a
necessity for effective communication. Concise communication has following features:
 It is both time-saving as well as cost-saving.
 It underlines and highlights the main message as it avoids using excessive and
needless words.
 Concise communication provides short and essential message in limited words to
the audience.
 Concise message is more appealing and comprehensible to the audience.
 Concise message is non-repetitive in nature.
3. Consideration - Consideration implies “stepping into the shoes of others”. Effective
communication must take the audience into consideration, i.e, the audience’s view points,
background, mind-set, education level, etc. Make an attempt to envisage your audience,
their requirements, emotions as well as problems. Ensure that the self-respect of the
audience is maintained and their emotions are not at harm. Modify your words in message
to suit the audience’s needs while making your message complete. Features of considerate
communication are as follows:
 Emphasize on “you” approach.
 Empathize with the audience and exhibit interest in the audience. This will
stimulate a positive reaction from the audience.
 Show optimism towards your audience. Emphasize on “what is possible” rather
than “what is impossible”. Lay stress on positive words such as jovial, committed,
thanks, warm, healthy, help, etc.
4. Clarity - Clarity implies emphasizing on a specific message or goal at a time, rather than
trying to achieve too much at once. Clarity in communication has following features:
 It makes understanding easier.
 Complete clarity of thoughts and ideas enhances the meaning of message.
 Clear message makes use of exact, appropriate and concrete words.
5. Concreteness - Concrete communication implies being particular and clear rather than
fuzzy and general. Concreteness strengthens the confidence. Concrete message has
following features:
 It is supported with specific facts and figures.
 It makes use of words that are clear and that build the reputation.
 Concrete messages are not misinterpreted.
6. Courtesy - Courtesy in message implies the message should show the sender’s expression
as well as should respect the receiver. The sender of the message should be sincerely polite,
judicious, reflective and enthusiastic. Courteous message has following features:
 Courtesy implies taking into consideration both viewpoints as well as feelings of
the receiver of the message.
 Courteous message is positive and focused at the audience.
 It makes use of terms showing respect for the receiver of message.
 It is not at all biased.
7. Correctness - Correctness in communication implies that there are no grammatical errors
in communication. Correct communication has following features:
 The message is exact, correct and well-timed.
 If the communication is correct, it boosts up the confidence level.
 Correct message has greater impact on the audience/readers.
 It checks for the precision and accurateness of facts and figures used in the message.
 It makes use of appropriate and correct language in the message.
CHAPTER THREE
CLASSIFICATION OF COMMUNICATION
Communication may be classified into several categories on the following basis:
1. On the basis of Organizational structure or relationship:

(a) Formal communication.
(b) Informal Communication
2. On the basis of How or direction:

a) Downward communication.
b) Upward communication.
c) Horizontal or lateral or sideward communication.
d) Diagonal communication.
3. On the basis of methods or media used or expression:

(a) Written communication.
(b) Oral communication.
(c) Gestural or non-verbal communication.
These categories of communication are illustrated in the following chart:
A. On the Basis of Relationship or Organizational Structure:

1. Formal Communication:
Formal communication is that which takes place through the formal channels of the organization
structure deliberately and consciously established by the management. It implies the flow of the
information along the lines of authority formally established in the enterprise.
Members of the enterprise are expected to communicate with one another strictly as per channels
laid down in the structure. For example, when the chief executive issues decisions and instructions
to the subordinates, there is a formal communication which flows downward. In the same manner
formal communication flows upward when the subordinate reports to the superior.
Such communications are generally in writing and may take any of the following forms:
(i) Policy manuals

(ii) Procedural and rule books
(iii) Memoranda papers and orders
(iv) Official meetings
(v) Interviews, etc.
B. On the Basis of Flow or Direction:
1. Downward Communication:
Communication between a superior and subordinate is known as vertical communication. Vertical
communication may be downward vertical communication or upward vertical communication.
Downward communication means communication which flows from a superior to a subordinate.
It follows the line of authority from the top to the bottom of the organization hierarchy. Downward
communication is a must in any organization.
It is needed:
(i) To get things done;
(ii) To prepare for changes;
(iii) To discourage lack of understanding and suspicion; and
(iv) To let the members of the organization develop feeling of pride of being well-informed about
all organizational matters.
The important examples of downward communication are:
(i) Notices
(ii) circulars
(iii) Instructions
(iv) Orders
(v) Letters
(vi) Memos
(vii) bulletins
(viii) Handbooks
(ix) Annual reports
(x) Loudspeaker announcements and
(xi) Group meetings, etc.
2. Upward Communication:
Upward communication means the flow of information from the lower levels of the organization
to the higher levels of authority. It passes from subordinate to superior as that from worker to
foreman, from foreman to manager, from manager to general manager and from general manager
to the chief executive or the board of directors. It includes opinions, ideas, suggestions, complaints,
grievances, appeals, reports, etc.
Upward communication is very important as it serves as the feedback on the effectiveness of

downward communication. Management is able to know how well its policies, plans and
objectives are followed by those working at lower levels of the organization. It keeps the
management informed about the progress of the work and difficulties faced in performance. On
the basis of upward communication, the management revises its plans and policies and makes
further planning.
Upward communication is needed:

(i) To create receptiveness of communication;
(ii) To create a sense of belongingness through active participation;
(iii) To evaluate the effectiveness of communication;
(iv) To increase morale of employees;
(v) To make improvements in managerial decisions :
(iv) To co-ordinate efforts and
(vii) To know ideas of each individual in the organization.
The important examples of upward communication are:
(i) Reports
(ii) Meetings
(iii) Interviews
(iv) Conferences
(v) Letters
(vii) Complaints
(vii) Suggestions
(viii) Surveys
(xi) Union publications and
(x) Grapevine, etc.
3. Horizontal, Lateral or Sideward Communication:

The transmission of information and understanding between people on the same level of
organization hierarchy is called the horizontal communication. This type of communication is also
known as lateral or sideward or crosswise communication. Usually, it pertains to inter-
departmental communication, i.e. the communication between two departmental managers
working at the same level of organization or among subordinates working under one boss.
Horizontal communication speeds up information and promotes mutual understanding.
It enables the managers working at the same level to exchange information and co-ordinate their
activities without referring all matters to the higher level of management. As shown in the diagram
of Flows of Communication, supervisor a will often communicate with supervisor B for co-
ordination and integration of various activities. Such communication is essential in all
organizations.
The horizontal communication is generally of an informal nature. Whenever a departmental head

requires some information from another departmental head, he tends to contact him directly.
However, this type of communication can be oral or written.
4. Diagonal Communication:
The transfer of information between people who are neither in the same department nor on the
same level of organization hierarchy is called diagonal communication. For example, when the
Assistant Marketing Manager communicates with the accounts clerk directly, it is the case of
diagonal communication. This type of communication increases the organizational efficiency by
speeding up information and cutting across departmental barriers.
C. On The Basis Of Media Or Expression:

The term communication media refers to the medium used in the transmission of message and
mutual understanding. Words, pictures and actions are the media used for exchanging information
and understanding between different persons. The most important medium through which
communication takes place is the words. Pictures in the form of charts, models or blue prints and
gestures such as smile, silence, twinkling of eyes etc., are used to make the communication
effective. The communication, purpose, audience, qualities of the communicator and the situation
must be considered in selecting the media of communication.
The various media of communication have been studied as under:
1. Written communication
2. Oral communication
3. Gestural or Non-verbal communication.
1. Written Communication:
Communication through words, may be in writing or oral. Written communication implies
transmission of message in black and white. It includes diagrams, pictures, graphs, etc. Reports,
policies, rules, procedures, orders, instructions, agreements, etc. have to be transmitted in writing
for efficient running of the organization.
Written communication ensures that everyone concerned has the same information. It provides a
permanent record of communication for future reference. Written instructions are essential when
the action called for is vital and complicated. To be effective, written communication should be
clear, concise, correct and complete.
It may take the following forms:

(i) Reports
(ii) Circulars
(iii) Magazines
(iv) Manuals
(v) Memoranda
(vii) Newspapers
(vii) Pictures, diagrams, graphs, etc.
(viii) Agreements
(ix) Rule and Procedure books
(x) Orders
(xi) Instructions
(xii) Notice Boards, etc.
Advantages of Written Communication:

(i) It ensures transmission of information in uniform manner, i.e. everyone concerned has the same
information.
(ii) It provides a permanent record of communication for future reference.
(iii) It is an ideal way of transmitting lengthy messages.
(iv) It ensures little risk of unauthorized alteration in the messages.
(v) It is the only means of exchanging information at distant places even beyond telephonic range,
(iv) It tends to be complete, clear, precise and correct.
(vii) It can be quoted as a legal evidence in case of any disputes.
(viii) It is suited to convey message to a large number of persons at one and the same time.
Disadvantages of Written Communication:

(i) It is expensive.
(ii) It is time consuming.
(iii) It becomes difficult to maintain secrecy about a written communication.
(iv) It is rigid and does not provide any scope for making alterations for inaccuracies that might
have crept in.
(v) It is very formal and lacks personal touch,
(vi) It encourages red-tapism and involves so many formalities.
It may be interpreted in a different manner by different people.
It often becomes lengthy, when messages are conveyed in writing.
2. Oral Communication:
Oral or verbal communication implies the conveying of message through spoken words. It is face
to face communication between individuals and includes communication through telephone,
intercom and public speech, etc. In every organization, a great deal of information is exchanged
orally and it is generally preferred to written communication. Theo Haimann pointed out, “the
human voice can impart the message with meaning and shading which even long pages of written
words simply cannot convey.” The important feature of oral communication is that real meaning
is conveyed by manner or tone of the voice or the facial expressions of the communicator and the
communicate.
It may take the following forms depending upon the need and situation:
(i) Face to face talks.
(ii) Telephonic conversation,
(iii) Interviews.
(iv) Meetings,
(v) Lectures.
(vi) Conferences,
(vii) Symposiums.
(viii) Radio talks, T.V. and cinema shows,
(ix) Joint consultations,
(x) Announcements, etc.
Advantages of Oral Communication:

(i) It is less expensive or economical as compared to written communication.
(ii) It is quicker and saves in time.
(iii) It is more effective than written communication.
(iv) It establishes a personal touch and leads to greater understanding.
(v) Misunderstanding or doubts can be removed then and there.
(vi) Immediate reaction, motivation or response of the receiver can be taken,
(vii) It is more flexible and the messages can be changed to suit the needs and response of the
receiver.
(viii) It provides as the only means of conveying messages in times of emergencies.
Disadvantages of Oral Communication:

Oral communication has the following limitations or drawbacks:
(i) It is less reliable.
(ii) It is influenced by self-interest and attitude of the people.
(iii) Oral communication has the tendency of being distorted.
(iv) It provides no record for future reference.
(vi) It is not suitable for lengthy message.
(vii) It does not provide sufficient time for thinking before conveying the message.
(vii) It has language problems, one may mean to convey something, but due to his way of speaking,
it may convey something else.
(viii) It cannot be used to communicate with people scattered over distant places.
3. Gestural or Non-Verbal Communication:

Communication does not mean merely written or oral messages. It includes everything that may
be used to convey meanings from one person to another, e.g., movement of lips or the wink of an
eye or the wave of hands may convey more meaning than written or oral words. Expression
through body parts is known as gestural or non-verbal communication.
It includes facial expression, movement of lips, wink of an eye, nodding of heads, movement of
hands, a sense of humour or a mere silence, etc. Gestural communication is also known as
‘Gesticulation’ and is frequently used as a supplementary method of communication. It helps of
make communication effective.
Selecting a Suitable Media of Communication Oral vs. Written:

It is very difficult to say which of the two types of media, i.e., written or oral is a better technique
of communication. Both have merits and limitations. But, in general, verbal communication is
more effective media of conveying ideas, feelings, suggestions, information, messages, etc.
However, as a matter of fact, no organization can depend entirely upon one method as both are
complimentary to each other.
Written communication may be preferred to convey lengthy messages to a large number of persons
scattered over distant places and where the information is required to be repeated for purposes of
repetition and record. Oral communication may be the only available method to be used to convey
emergency messages and where personal touch is required. Oral messages may be supported by
gestures, demonstrations, etc. to make communication effective.
The Grapevine
One type of informal communication is called 'the grapevine.' The grapevine is an informational
communication channel that goes in every direction - up, down and sideways. Management does
not control it, and it is very difficult for management to stop it. Instead, messages are spread by
employees sharing information on an informal basis, such as during breaks. It is often a source of
rumors and moves very quickly.
Communication involves the imparting or interchanging thoughts, opinions, or information among

people by speech, writing, or signs. People communicate in different ways. How effective is your
communication style? Are you giving away thoughts you don't mean to?
CHAPTER FOUR
BUSINESS COMMUNICATION
Introduction
It is the sharing of information between people within an enterprise that is performed for the
commercial benefit of the organization. In addition, business communication can also refer to how
a company shares information to promote its product or services to potential consumers.
Business communication covers subjects like advertising, external relations, branding, event
management, marketing, and any other topic related to the organizational structure of that
company. Business communication should not be mistaken for technical communication or
professional communication, even though they are strongly related. The business type of
communication can be considered a common language for any company, no matter its area of
expertise.
This type of interaction has the sole purpose of improving the organizational practices, reducing
the errors and providing a clear guidance, for the team members. Even though it has been here for
a long time, business communication improved a lot in the last decades. That's why, today, we can
identify a series of business communication types, suitable for different circumstances.
Business Communication Flows In Organizations

Here’s another way of thinking about communication in an organizational setting. Let’s assume
that you and the classmate you called on the phone are on roughly equal footing—you’re both
juniors, your grades in the class are about the same, and so forth. Your phone conversation,
therefore, is “lateral”: You belong to the same group (your accounting class), and your group
activities take place on the same level.
Business Communication may also flow laterally in organizational settings (as it does between
you and your classmate), but more often it flows up or down. Take a look at
Downward communication flows from higher organizational levels (supervisors) to lower
organizational levels (subordinates).
Upward communication flows from lower to higher organizational levels.

Lateral (or horizontal) communication flows across the organization, among personnel on the
same level.
Your boss’s request for a sales report is an instance of downward communication, and when you’ve
finished and submitted it, you will have completed a task of upward communication.
Advantages of Communication Flows

Naturally, each of these different directional flows has its functions and advantages. Downward
communication, for example, is appropriate for giving instructions or directions—telling people
what to do. (As a goal of communication, by the way, giving orders isn’t as one-sided as it may
seem. One of the things that employees—the receivers—most want to know is:
Like a sales report, upward communication usually provides managers with information that they
need for making decisions, but it’s also the vehicle for new ideas, suggestions, and complaints.
Horizontal communication supports efforts to coordinate tasks and otherwise help people work
together.
Disadvantages of Communication Flows
And, of course, each type of flow has its disadvantages. As information seeps downward, for
instance, it tends to lose some of its original clarity and often becomes distorted or downright
wrong. (This is especially true when it’s delivered orally.) In addition, unlike Donald Trump, most
people who are responsible for using downward communication don’t like delivering bad news
(such as “You’re fired” or, more commonly, “Your job is being phased out”); as a result, bad
news—including bad news that happens to be important news—is often ignored or disguised. The
same thing may happen when bad news—say, a negative status report—must be sent upward.
Finally, while horizontal flows are valuable for promoting cooperation, they can also be used to
engage in conflict—for instance, between two departments competing for the same organizational
resources. The problem is especially bad when such horizontal communications breach official
upward or downward lines of communication, thus bypassing managers who might be able to
resolve the conflict.
Channels of Business Communication

Summarizes two additional sets of characteristics of organizational communication—internal and
external channels and formal and informal channels. Internal communication is shared by
people at all levels within a company.
External communication occurs between parties inside a company and parties outside the
company, such as suppliers, customers, and investors. Both internal and external forms of
communication include everything from formal e-mail and official reports to face-to-face
conversations and casual phone calls. External communication also takes such forms as customer
and supplier Web sites, news releases, and advertising.
INTERNAL EXTERNAL
Planned communications Planned communications with

following the company’s chain of people outside the
command among people inside organization — letters, instant
the organization — e-mail, messages, reports, speeches, news
memos, conference calls, reports, releases, advertising, Web sites
FORMAL presentations, executive blogs executive blogs
Casual communications among

Casual communications with
employees that do not follow the
outsiders (e.g., suppliers, customers,
company’s chain of
investors) — e-mail, instant
command — e-mail, instant
messages, phone calls, face-to-face
messages, phone calls, face-to-face
conversations, customer-support blogs
INFORMAL conversations, team blogs
The Informal Communication Network

Every company also has an informal communication network (or grapevine), which goes to work
whenever two or more employees get together and start talking about the company and their jobs.
Informal communication can take place just about anywhere (in one person’s cubicle, in the
cafeteria, on the golf course) and by just about any means (phone, e-mail, instant messaging, face-
to-face conversation).
Though it’s sometimes called the grapevine, an informal network is an extremely important
communication channel. Why? For the simple reason that it’s typically widespread and can rarely
be prevented, even if it’s not officially sanctioned by the company—indeed, even when the
company tries to discourage or bypass it. Unofficial information crosses virtually every boundary
drawn by a firm’s organization chart, reaching out and touching everyone in the organization, and
what’s more, it travels a lot faster than official information.
CHAPTER FIVE
ETIQUETTE, PROTOCOL AND DIPLOMACY
What is Etiquette
The term Etiquette is derived from the French language and is defined as the customary code of
polite behavior or the contemporary conventions, forms, manners, rules, or ceremonies governing
social behavior.
This code or set of conventions and manners are recognized as acceptable and required in societal
relations. Such rules or norms are not limited to society’s interactions in general but also includes
relations within a social or professional group. Thus, for example, Etiquette also refers to the code
of conduct or ethics prescribed in certain professions such as the medical or legal profession.
This code of ethics will govern the practice and actions of such professionals in their interactions
with each other. Keep in mind, however, that the purpose of Etiquette is not to simply prescribe
the ‘dos’ and ‘don’ts’ of polite behaviour or good manners, such as how to sit at a table, how to
eat or how to converse with other people.
Instead, the underlying objective of Etiquette is to produce polite, respectful people who
demonstrate a behaviour that is kind, polite, dignified, and respectful. Above all, Etiquette seeks
to ensure that people are treated with and shown respect. An example of this is a conversation
between two people. Etiquette requires that you wait till a person finishes his/her explanation,
narration or expression of a view before expressing your own thoughts or opinion on that matter.
Interrupting a person while he/she is still talking, in a rude and impolite manner, is not an accepted
norm of Etiquette.
Protocol
Protocol is commonly described as a set of international courtesy rules. These well-established
and time-honored rules have made it easier for nations and people to live and work together. Part
of protocol has always been the acknowledgment of the hierarchical standing of all present.
Protocol rules are based on the principles of civility.
There are two meanings of the word protocol. In the legal sense, it is defined as an international
agreement that supplements or amends a treaty. In the diplomatic sense, the term refers to the set
of rules, procedures, conventions and ceremonies that relate to relations between states. In general,
protocol represents the recognized and generally accepted system of international courtesy
A protocol is a rule which describes how an activity should be performed, especially in the field
of diplomacy. In diplomatic services and governmental fields of endeavor protocols are often
unwritten guidelines. Protocols specify the proper and generally accepted behavior in matters of
state and diplomacy, such as showing appropriate respect to a head of state, ranking diplomats in
chronological order of their accreditation at court, and so on.
The Difference Between Protocol And Etiquette

Collectively, the terms Etiquette and Protocol refer to a set of rules, conventions, and norms that
govern the behaviour of people in general and in certain situations. They differ in terms of their
sphere of influence and nature of the rules.
• Etiquette refers to the customary code of social behaviour or rather, a system of accepted rules,
conventions, and norms governing polite behaviour and interactions among society. It also
includes the set of norms and ethics governing the behaviour of professional bodies such as the
medical and/or legal profession.
• Protocol, on the other hand, refers to the code of conduct and behaviour governing diplomacyand
affairs of the state. It constitutes a set of rules, forms, ceremonies, and procedures adhered to and
adopted by diplomatic and government officials in their international relations with states.
• Other meanings of Protocol:
• A Protocol also refers to a legal document, more specifically, an international agreement that
either supplements or amends a treaty or convention.
Instrument by which a state (or, by extension, an organization or individual) attempts to achieve
its aims, in relation to those of others, through dialogue and negotiation
Diplomacy
Diplomacy is defined as the skill for dealing with people effectively in a positive way including
the foreign relations with other countries.
- When you negotiate or broker a deal between two parties who are angry, this is an example
of a time where you have shown diplomacy.
- When a president sits down to talk to the president of another foreign country in order to
try to resolve a tense situation, this is an example of a time when diplomacy is necessary.
Business Etiquette
Etiquette is a set of unwritten rules that apply to social situations, professional workplaces and
relationships. In the business world, good business etiquette means that you act professionally and
exercise proper manners when engaging with others in your profession. Good business etiquette
is a valuable skill-set that will make you stand out from others, enhance your chances at success
and help you land that dream job.
Business etiquette is about building relationships with other people. Etiquette is not about rules &
regulations but is about providing basic social comfort and creating an environment where others
feel comfortable and secure, this is possible through better communication.
Expected behaviors and expectations for individual actions within society, group, or class.
Within a place of business, it involves treating coworkers and employer with respect and
courtesy in a way that creates a pleasant work environment for everyone
Types of Business Etiquette

 Workplace etiquette
 Table manners and meal etiquette
 Professionalism
 Communication etiquette
Workplace Etiquette
These rules deal with your behavior at the office. Culture and expectations differ from company
to company, so what’s rude at one workplace may be normal at another.
For instance, HubSpot is dog-friendly, so my coworkers frequently bring their pups in with them.
At a traditional office, showing up with Rover would probably annoy your colleagues -- and may
even get you in hot water with upper management.
Figure out what’s acceptable and what’s not by reading your company handbook, paying attention
to how the executives behave (and following suit), and sticking by the standard rules (such
as “Don’t heat up excessively smelly foods in the break room.
Table Manners and Meal Etiquette

There’s far more to dinner and meal etiquette than knowing which fork to use. Luckily, once
you’ve memorized these rules, you’ll be well-equipped for any eating situation.
I can’t even begin to cover them here -- you should read a book on meal etiquette or watch some
videos for a full briefer -- but every professional should know the following:
- Put your napkin in your lap when you sit down
- Order items in a similar price range to your dining companions
- Don’t start eating until everyone has received their food
- Pass condiments and dishes from left to right rather than reaching across the table
- Chew with your mouth closed
- Don’t snap your fingers at your server
- After the meal is over, partially fold your napkin and put it to the left of your plate
Professionalism
Being professional means contributing to a pleasant, productive, and inclusive work environment.
Professionalism includes an entire range of behaviors; however, here are the most standard:
- Keeping your word: When you make a commitment -- whether it’s big or small -- keep it.
If you know that will be impossible, give the other person as much notice as possible.
- Being punctual: Show up on time (or early).
- Remaining calm: Even in heated situations, do your best to stay cool.
- Acting flexible: Sometimes you’ll have to stay late, show up early, change plans, move
meetings, and more to make things work. Unless this is happening all the time,
accommodate these changes without raising a stink.
- Using diplomacy: There will be people you don’t like -- prospects, coworkers, or both. Be
kind and amiable anyway.
- Accepting constructive criticism: Throughout your career, others will offer feedback. If
you’re closed off to it, you’ll not only harm your professional rapport, you’ll also lose
valuable opportunities to improve.
Communication Etiquette
A large majority of our relationships hinge on good communication. Not sure what that entails?
Let’s break communication etiquette down into four categories:
Phone etiquette
- Don’t speak too loudly or too softly. If you’re worried about your volume, ask, “How am
I coming across? Do you need me to talk more or less quietly?”
- Never interact with your phone while you’re with someone else. Keep it stashed in your
pocket or bag at all times.
- If you’re on a conference call and you’re not speaking, mute yourself so the others aren’t
distracted by the outside noise.
Email etiquette
- Aim to answer internal emails within one day and external emails within three days.
- Avoid overusing exclamation marks and smiley faces.
- Default to “Reply” over “Reply All.”
- Check with each party before you make an introduction.
In-person etiquette
- Steer clear of complimenting someone’s appearance, since this can make people feel
uncomfortable.
- Maintain eye contact 60% to 70% of the time.
- Match their speaking volume.
- Show interest in what they’re saying.
Virtual meetings etiquette
- Look at the camera -- not your own face or theirs -- so you seem like you’re making eye
contact.
- Shut the door and make sure you’re not interrupted by your pets, children, roommates,
significant other, etc.
- Before your meeting, check the area in camera range for inappropriate or overly personal
items.
Basics of Business Etiquette

The basis of business etiquette is about building strong relationships in your field by fostering
better communication. This can only happen when those you work with feel secure and
comfortable. Although basic business etiquette may vary from country to country, some principles
stand the test of time and geography.
Arrive on Time
In the business world, it is best to observe the old rule, “Five minutes early is late.” Allow yourself
enough time to arrive promptly, take off your coat, and settle in a bit. Arriving at a meeting exactly
at the appointed time can make you feel rushed, and you will look it. Time is a commodity; by
being punctual, you show you respect others.
Dress Appropriately
While appropriate dress certainly varies from field to field and climate to climate, some things
remain the same. Clean, pressed clothing without any loose threads or tags and relatively polished,
closed-toe shoes are a must.
Look at the people around you for ideas on what sort of clothing is standard. The adage, “Dress
for the job you want, not the job you have,” is a good rule to follow. When in doubt, ask human
resources personnel when you get the job or discreetly ask someone you work with.
Speak Kindly
Taking care to greet your co-workers and remembering to say “please” and “thank you” make a
tremendous difference in the way they perceive you. Your good manners show that you
acknowledge those around you and are considerate of their presence. Avoid discussing political or
religious matters. Keep the conversation focused on noncontroversial topics, so your co-workers
find you easy to talk to. That sort of diplomacy is the basic idea of business etiquette.
Avoid Gossip or Eavesdropping

Gossip and eavesdropping are childish behaviors that have no place in the workplace. If you hear
a rumor about someone in the workplace, do not pass it on. People don’t always know or remember
who starts a rumor, but they always remember who spreads it. If you walk into an area, and it
seems your co-workers don't know you are there, make sure to greet them politely to remove any
chance that you accidentally eavesdrop on their conversation.
Show Interest
Showing interest goes beyond business etiquette into general politeness, but it bears repeating:
When speaking with someone, show you are truly engaged. Do not play on your phone or
computer, and if you have to answer a communication say, “Excuse me one moment; I'm so sorry.”
Maintain friendly eye contact. Listen. People will remember how you make them feel, and nobody
wants to feel as if they are ignored.
Watch Your Body Language

In the Western world, a handshake is still the typical greeting. Say hello with a firm but quick
handshake. This handshake is the extent of how much you should ever touch a co-worker – when
it doubt, just don’t touch. Hugs or other types of affection that you share with friends and family
are out of place in the workplace.
Introduce Yourself and Others

Sometimes you can tell people do not remember your name or position. Introduce or reintroduce
yourself quickly if that seems to be the case. If you are with a co-worker who is new, take the time
to introduce him to others. It helps to have a friendly person make you feel comfortable in the
office.
Don’t Interrupt
When you have a great idea or suddenly remember something important, it can be tempting to
blurt it out. Do not do this. Interrupting the person who is speaking sends the message that what
she is saying isn't as important as what you have to say. Demonstrating you are an attentive listener
is the backbone of diplomacy.
Mind Your Mouth

Using vulgar language is a surefire way to become unpopular in your workplace. Vulgar language
includes swear words and judgmental language. Business etiquette requires being constantly
mindful that you are in a diverse environment with people you do not know on a personal level.
Speak as though someone from human resources is always listening.
Consume Correctly
If you attend an after-hours work event, do not drink too much alcohol. When at work, take care
not to bring particularly malodorous foods that everyone in the office can't help but smell. Don't
make noises during or after you eat; no one wants to hear that.
At the heart of these 10 basics of business etiquette is diplomacy. Taking care to treat everyone as
the valuable people they are says a lot about who you are as a person. That is the kind of care
people notice and want to be around. Embrace the basics of business etiquette to become a lasting
employee or to advance through the corporate ranks.
The Importance of Business Etiquette

Builds Strong Relationships
Professional behavior helps build strong relationships among management, staff and clients
because proper etiquette entails honest and fair dealings with everyone. People appreciate honesty
in their business dealings.
If a manager is honest with a client about a mistake he made instead of trying to cover it up, the
client is likely to feel respected and will trust the mananger and the business in the future.
According to EE Compendium, people like others who have good manners and are more likely to
buy from those they like than those they do not. Loyalty to a business is generated through the
solid relations developed by consistent professionalism and integrity shown by all company
employees. Business owners should demand good etiquette from their employees and should
model this themselves.
Promotes Positive Atmosphere

A good working environment is fostered by good business etiquette. When management and
workers treat one another with the respect and sensitivity dictated by good business manners, it
creates a positive working atmosphere.
For instance, when the staff takes the time to express gratitude to fellow workers for their work
efforts, it makes for a more congenial workplace. When employees feel comfortable, they are
likely to be more productive, work better as teammates and maintain upbeat attitudes that help sell
their products or services. Good etiquette should be stressed throughout the entire company as,
according to CBM Training, a single person on staff displaying a lack of etiquette can ruin the
working environment for everyone.
Reflects Confidence
Fine business etiquette reflects confidence because the individual is seen as someone who is
together and knows what to say and how to say it. A worker dealing with an upset customer, for
example, can take the customer to a private office or space, listen attentively to the concerns and
speak calmly and respectfully to the client so the client relaxes and responds well to the confident
worker who used business etiquette to successfully handle the situation. A confident approach
helps the company's marketability.
Customers feel more secure dealing with a manager or other staff member who displays
exceptional business manners. Confidence also boosts the morale of workers who feel they can
accomplish more and react positively to change.
Prevents Misunderstandings
Taking business etiquette seriously in your company will help prevent misunderstandings because
proper etiquette requires everyone to interact professionally with one another and to communicate
clearly and honestly.
For example, managers who always speak on a professional level with employees need not fear
making inappropriate remarks as they guard against casual types of interactions. Those in
management who allow non-business-like joking or teasing can find themselves in hot water
should employees feel they are being harassed.
THE LADDER OF INFERENCE
Description
Have you ever been accused of "putting 2 and 2 together and making 5", meaning that the other person
thinks you have jumped to the wrong conclusion?
In today's fast-moving world, we are always under pressure to act now, rather than spend time reasoning
things through and thinking about the true facts. Not only can this lead us to a wrong conclusion, but it
can also cause conflict with other people, who may have drawn quite different conclusions on the same
matter.
Especially in a fast business environment, you need to make sure your actions and decisions are founded
on reality. Similarly, when you accept or challenge other people's conclusions, you need be confident that
their reasoning, and yours, is firmly based on the true facts. The "Ladder of Inference" helps you achieve
this.
Sometimes known as the "Process of Abstraction", this tool helps you understand the thinking steps that
can lead you to jump to wrong conclusions, and so helps you get back to hard reality and facts.
The Ladder of Inference describes the thinking process that we go through, usually without realizing it, to
get from a fact to a decision or action. The thinking stages can be seen as rungs on a ladder and are shown
in the image.
Starting at the bottom of the ladder, we have reality and facts. From there, we:
Experience these selectively based on our beliefs and prior experience.
 Interpret what they mean.

 Apply our existing assumptions, sometimes without considering them.
 Draw conclusions based on the interpreted facts and our assumptions.
 Develop beliefs based on these conclusions.
 Take actions that seem "right" because they are based on what we believe.
This can create a vicious circle. Our beliefs have a big effect on how we select from reality, and can lead
us to ignore the true facts altogether. Soon we are literally jumping to conclusions – by missing facts and
skipping steps in the reasoning process.
By using the Ladder of Inference, you can learn to get back to the facts and use your beliefs and
experiences to positive effect, rather than allowing them to narrow your field of judgment. Following this
step-by-step reasoning can lead you to better results, based on reality, so avoiding unnecessary mistakes
and conflict.
How to use the theory
The Ladder of Inference helps you draw better conclusions, or challenge other people's conclusions based
on true facts and reality. It can be used to help you analyze hard data, such as a set of sales figures, or to
test assertions, such as "the project will go live in April". You can also use it to help validate or challenge
other people's conclusions.
The step-by-step reasoning process helps you remain objective and, when working or challenging others,
reach a shared conclusion without conflict.
Use the following steps to challenge thinking using the Ladder of Inference:
1. Stop! It's time to consider your reasoning.
2. Identify where on the ladder you are. Are you:
• Selecting your data or reality?
• Interpreting what it means?
• Making or testing assumptions?
• Forming or testing conclusions?
• Deciding what to do and why?
3. From your current "rung", analyze your reasoning by working back down the ladder. This
will help you trace the facts and reality that you are actually working with.
• At each stage, ask yourself WHAT you are thinking and WHY. As you analyze
each step, you may need to adjust your reasoning. For example you may need
to change some assumption or extend the field of data you have selected.
• The following questions help you work backwards (coming down the ladder,
starting at the top):
1. Why have I chosen this course of action? Are there other actions
I should have considered?
2. What belief lead to that action? Was it well-founded?
3. Why did I draw that conclusion? is the conclusion sound?
4. What am I assuming, and why? Are my assumptions valid?
5. What data have I chosen to use and why? Have I selected data rigorously?
6. What are the real facts that I should be using? Are there other
facts I should consider?
4. With a new sense of reasoning (and perhaps a wider field of data and more
considered assumptions), you can now work forwards again – step-by-step –
up the rungs of the ladder
Tips
Use the Ladder of Inference at any of stage of your thinking process. If you're asking any of the
following questions, the model may prove a useful aid:
• Is this the "right" conclusion?
• Why am I making these assumptions?
• Why do I think this is the "right" thing to do?
• Is this really based on all the facts?
• Why does he believe that?
When you are working through your reasoning, look out for rungs that you tend to jump. Do you
tend to make assumptions too easily? Do you tend to select only part of the data? Note you
tendencies so that you can learn to do that stage of reasoning with extra care in the future.
Try explaining your reasoning to a colleague or friend. This will help you check that your argument
is sound.
If you are challenging someone else's conclusions, it is especially important to be able to explain
your reasoning so that you can explain it to that person in a way that helps you reach a shared
conclusion and avoid conflict.
MARKETING MANAGEMENT
CHAPTER ONE
INTRODUCTION TO MARKETING MANAGEMENT
Meaning of marketing
The word marketing has been defined in different ways by several authors and scholars.
The following are some of the definitions which have been given;
American Marketing Association – A.M.A. (1964)
Marketing is the performance of business activities that direct the flow of goods
and services from producers to consumers or users.
Kotler Philip (1997)
Marketing is a social and a managerial process by which individuals and groups obtain what
they need and want through creating, offering and exchanging products of value with others.
Other meanings
Marketing is the bridge between production and consumption.
Marketing forms the vital link between people’s needs and means of satisfying them.
Marketing is an activity that satisfies human needs through exchange processes.
Marketing, as the definitions suggests, is a dynamic process – a total integrated process rather
than a fragmented assortment of institutions or functions. Marketing is not any one activity,
nor is it exactly the sum of several, rather, is it the result of the interaction of many activities.
Customers must be satisfied in order for a company to make repeat business. This implies
that the success of a firm is not profitability perse but profitability through customer
satisfaction.
Marketing is not limited to business. Whenever you are trying to:

Persuade somebody to do something.
The Core Concepts Of Marketing
From the foregoing definitions, it is evident that the definition of marketing rests on the
following core concepts.
i) Needs, wants and demands.
ii) Products
iii) Utility, values and satisfaction.
iv) Exchange, transactions and relationships.
v) Markets.
vi) Marketing and marketers.
Needs, Wants and demands.

The study of marketing begins with the understanding of human needs and wants.
Needs
A human need is a state felt deprivation of some basic satisfaction. People acquire food,
shelter, clothing, safety, belonging, e.t.c. for survival.
These needs are not created by the society for marketers. They exist in their very texture of human
biology and condition.
Wants
Are desires for specific satisfiers of these deeper needs. While people’s needs are fewer, their wants
are many.
Demands
Are wants for specific products that are backed up by an ability and willingness to buy them. Wants
become demands when backed up by the purchasing power. Marketers influence demands.
They try to influence demand by making the product attractive, affordable and easily
available.
Product
People satisfy their needs and wants with products.
A product is anything that can be offered to someone to satisfy a need of want. Products may
take different forms, e.g.
Physical products
Persons – as service providers Places
vacation land
Activities – Physical exercise.

Organizations – E.g. Lonely hearts club
Ideas – E.g. family planning or safe driving
When we buy a physical product or any of the above, we are buying a service. Therefore, a
product is necessarily a service.
Utility, Value and Satisfaction
Utility
Utility answers the question – “How do consumers choose among alternative products
(Product choice set) in order to satisfy his needs and wants?”
Utility is the overall estimate of a product’s capacity a consumer’s needs or wants. This is
the basis on which consumers choose particular products from product choice sets.
Value
Value is equated with price. A product is said to be of better value if it is more for the price.
Marketers should provide value to customers.
Satisfaction
Occurs when a product conforms to a consumer’s needs.
Exchange, Transactions and Relationships
Exchange
Marketing emerges when people decide to satisfy their needs and wants through exchange.
Exchange is one of the four ways that people can acquire products they need. Other ways include:
Meaning
Exchange is the act of obtaining a desired product from someone by offering something in
return.
For exchange to take place, five conditions must be satisfactory. There

has to be at last two parties to the exchange
Each party has something that might be of value to the other party. Each party is
capable of communication and delivery
Each party is free to accept or reject the offer.
Each party believes it is appropriate or desirable to deal with the other party.
1. If these conditions exist, there is a potential for exchange.
2. Whether exchange actually takes place, depends upon whether the two parties can
agree on the terms of exchange that will leave them both better off than before the
exchange.
3. Exchange must be seen as a continuous process rather than an event.
4. Two parties are seen to be engaging in exchange if they are negotiating and
moving towards an agreement
Transaction.
If an agreement is reached, we say that a transaction has taken place.
A transaction consists of a trade of values between two parties.
It involves several dimensions:-
At least two things of value
Agreed upon conditions A
time of agreement
A place of agreement
Usually a legal system arises to support or enforce compliance on the part of the
transactors.
Markets.
The concept of exchange leads to the concept of markets.
A market consists of all the potential customers sharing a particular need or want who might
be willing and be able to engage in exchange to satisfy that need or want.
The size of the market therefore depends on the number of persons who exhibit the need;
have resources that interest others and are willing to offer these resources in exchange for
what they want.
Sellers constitute the industry and
Buyers constitute the market.
Marketing and Marketers.

Marketing consists of human activities taking place in relation to markets.
Marketing means working with marketers to actualize potential exchanges for the purpose
of satisfying human needs.
A marketer is someone seeking a resource from someone else and is willing to offer something
of value for exchange. The marketer can therefore be the buyer or the seller.
CHAPTER TWO
MARKETING MANAGEMENT
Marketing management takes place when at least one party to a potential for exchange
gives thought to objectives and means of achieving desired responses from other parties.
A.M.A. (1985) defines marketing management as:
“The process of planning and executing the conception, planning, promotion and
distribution of ideas, goods and services to create exchanges that satisfy individual
and organizational objectives”
The definition recognizes that marketing management in a process involving analysis,
planning, implementation and control. It covers ideas, goods and services. It rests on
the notion of exchange,
The goal is to produce satisfaction for the parties involved.
Task Of Marketing Managers

Marketing managers cope with the tasks of carrying out Marketing research Planning,
Implementation and Control Target market, and Market position Product development Pricing
Promotion Channels of distribution.
Level, Timing and Composition of demand in a way that will help the organization achieve its
objectives. Marketing management is essentially demand management.
Types Of Demand States And Marketing Task

Negative Demand
This arises when a major part of the market dislikes the product and may pay a price to avoid
it.
Task - Analyze why demand is negative and whether the product can be modified or more
positive promotion done to change a market’s attitude.
No Demand
Target customers may be uninterested or indifferent to the product. E.g. College students may
not be interested in a foreign language.
Task - Find ways to connect the benefits of the products with the person’s natural needs and
interests.
Latent Demand
Many consumers may share a strong need that cannot be satisfied by any existing
product.
Task - Conduct a survey to identify the unmet needs
Falling Demand
Every organization, sooner or later faces failing demand for one or more of its products.
E.g. Decline in church membership
Decline in private college enrolment
Task Analyze causes of falling demand

Determine whether demand can be re-stimulated by finding new target markets Changing products
features. Reversing the declining demand through creative remarketing of the product.
Irregular Demand
Many organizations face demand that varies on a seasonal, daily or even hourly basis,
causing problems of idle capacity or over-worked capacity.
Task - This calls for synchro-marketing. I.e. find ways to alter the same pattern of
demand through promotion, flexible pricing and other incentives.
Full Demand
Organizations face full demand when they are pleased with their volume of business.
Task - Maintain the current level of demand in the face of changing customer preferences and
increasing competition; improve or maintain quality, continuously measure customer
satisfaction to make sure it’s doing a good job.
Overfull demand
Some organizations face a demand level that is higher than they can or want to handle.
Task - Demarketing – Finding ways to reduce the demand temporarily or permanently e.g.
raising prices or reducing promotion.
Unwholesome demand
Unwholesome products will attract organized efforts to discourage their consumption.
Unselling campaigns have been conducted against cigarettes, alcohol, hard drugs, hand guns,
x-rated movies and large families.
Task - Get people who like something to give it up.
You can use fear communication, price hikes and reduced availability.
Marketing Management Concepts
Marketers need guidance regarding their conduct in the market place. This is because conflicts
are bound to arise between the needs of the society. Customers and the company. These
guidance are known as the marketing principles, rules, concepts or philosophies.
There are five competing concepts that may govern the operations of companies, namely;
1. The production concept
2. The product concept
3. The selling concept
4. The marketing concept and
5. The societal marketing concept.
THE PRODUCTION CONCEPT
This concept holds that “consumers will favor those products that are widely available and low
in cost.” Management focuses on high production efficiency and wider distribution coverage.
This concept makes sense under the following circumstances;
1. When the product is a basic necessity
2. The customers are low income earners
3. When the production costs are high and have to be brought down through
high production efficiency
4. When the market is highly price sensitive.
5. When demand for the product exceeds the supply and some other means have to
be used to allocate the products to the customers.
Examples of companies guided by this concept include,
1. City Council primary schools
2. Unilever- for its basic foodstuff
3. City Council health services.

This concept ensures product availability to the consumers. However, product quality
is compromised.
THE PRODUCT CONCEPT
The product concept holds that “consumers favor those products that offer the most
Quality, performance and features. Marketers assume that consumers will buy
those products of high quality and shun those products of inferior quality.”
Management focuses on producing high quality products and improves on them over time.
This concept may apply under the following conditions;

1. When the market is not price sensitive
2. In the case of conspicuous goods
3. Where the customers are well-off financially.
The concept has been criticized on the following grounds:
1. The idea of a good product is defined from the company’s end but not the
consumer’s. The concept thus leads to marketing myopia [short-sightedness].
There is undue concentration on the product rather than the needs of the
consumer.
2. A company may end up producing goods that may not have demand.
3. The concept ignores the needs of the society
Examples of firms practicing this concept are;
1. Those selling jewelleries,
2. Private schools and
3. Private hospitals
THE SELLING CONCEPT

This concept holds that consumers, if left alone, will ordinarily not buy a lot of a company’s
products. The organization must therefore undertake aggressive selling and promotion effort.
That is, a company must focus on hard selling. Under hard selling, consumers are not willing
to buy such products easily.
Examples of products sold under this concept are;
1. Life insurance policies
2. Political campaigns
3. Fund raisings
4. New products
5. Encyclopedias
6. Funeral plots
7. Coffins.
The concept may work under the following circumstances;
1. Where the company is operating under excess capacity and wishes to fully
utilize its resources with no regard to the product’s demand
2. Where the product is new in the market
3. Where the firm has adequate machinery for effective promotion
4. where the products are obsolete or are slow moving
The selling concept has some limitations. Namely:
1. Consumers may be forced to buy products that they do not have real need for
2. It is an expensive concept as it requires a lot of resources, both human and financial.
THE MARKETING CONCEPT
The marketing concept holds that “the key to achieving organizational goals lies in
determining the needs and wants of the target market and delivering the desired satisfaction
more effectively and efficiently than competitors This concept has been expressed in many
colorful ways;
Find needs and meet them

The customer is always right
The customer is the king
At Your service
Your problem is our business
Have it Your way
You are the Boss, e.t.c.
The concept rests on five main pillars;
1.Market Focus
The company must define the boundaries of its market. It should know those customers that
are members of their market. This can be done through a process known as segmentation.
2.Customer Focus
The company should determine the needs and wants of the customers from the customers’
point of view but not the company’s. Customers’ needs must be identified and satisfied as this
result into customer loyalty which is a source of Co goodwill.
3.Integrated Or Coordinated Marketing
When all company Departments work together to achieve the consumers’ interest, the result
is integrated marketing.
The Marketing function
The various marketing functions – advertising, marketing research, sales, branding, e.t.c. must
work together. They must be well coordinated from the customers’ point of view.
Company-wide orientation
Marketing must be embraced by other departments. They must think customer. Marketing is
not a department but much of a Co-wide orientation. Teamwork must be fostered among all
departments. This requires the practice of internal as well as external marketing. Whereas the
latter is directed at people outside the firm, the former is the task of hiring, training and
motivating employees to serve customers well. Internal marketing must external marketing.
Managers must consider customers as the true profit centers hence adopt a modern
organizational chart.
4.Profitability
The ultimate purpose of the marketing concept is to help organizations achieve their
objectives. In the case of private firms, the major one is profit. However, they should aim for
profits through customer satisfaction.
5.Competition
The concept recognizes the existence of competition. However a Co should offer superior
customer value. It should serve customers better than competitors.
Circumstances under which the marketing concept may be practiced by companies
Most companies do not embrace the marketing concept until driven to it by

circumstances Various events forcing companies to adopt the marketing concept
includes:-
Sales decline: - when sales fall, companies panic and look for ways of increasing sales. Slow
growth in sales forces some companies to search for new markets. They realize they need
marketing skills to identify new opportunities.
Changing buying patterns – Most companies operate in markets characterized by rapidly

customer ways such companies need more marketing know-how if they are to track buyers’
changing values.
Increasing competition - Complacent companies may suddenly be attacked by powerful

competitors, e.g. Kenya Breweries
Reasons To Embrace The Marketing Concept
Marketers’ arguments
The company assets have little value without the existence of customers. The
key company task therefore is to attract and retain customers.
Customers are attracted through competitive superior offerings and retained through
satisfaction.
Marketing’s task is to develop a superior offering and deliver customer satisfaction.
SOCIETAL MARKETING CONCEPT

Some people have questioned whether the marketing concept is an appropriate philosophy in
the age of:
Environmental deterioration Resource shortages

Exposure
Population growth
World hunger and poverty
Neglected social services
The societal marketing concept holds that
“Organization’s task is to determine the needs wants and interests of the target markets and
to deliver the desired satisfactions, more effectively and efficiently than competitors in a way
that preserves or enhances the consumers’ and the society’s well being.” The societal
marketing concept calls upon marketers to build Social and Ethical considerations into their
marketing practices.
They must balance the conflict criteria of Company profits Consumer needs and Public
CHAPTER THREE
MARKETING ENVIRONMENT
Meaning Of the Marketing Environment
A company’s marketing environment consists of actors that affect its ability to develop and
maintain successful transactions and relationships with its target customers.

They are factors and forces that affect a company’s ability to operate effectively in providing
products and services to its customers.
Marketing Environment is the combination of external and internal factors and forces which
affect the company’s ability to establish a relationship and serve its customers.
The marketing environment of a business consists of an internal and an external environment.
The internal environment is company specific and includes owners, workers, machines, materials
etc. The external environment is further divided into two components: micro & macro. The micro
or the task environment is also specific to the business but external. It consists of factors engaged
in producing, distributing, and promoting the offering. The macro or the broad environment
includes larger societal forces which affect society as a whole. The broad environment is made
up of six components: demographic, economic, physical, technological, political-legal, and social-
cultural environment.
Components of the Marketing Environment

The marketing environment can be divided into two components namely:
1. The micro-environment
2. The macro-environment
The Micro-Environment
This can be subdivided into two;
a) The Internal Micro- Environment
b) The External Micro- Environment
The Internal Micro- Environment
This consists of those forces within the company, i.e. a firm’s capabilities or bundle of assets
and skills possessed by the company. They include
• Marketing programmes
• Financial resources
• Research and development
• Purchasing
• Manufacturing, e.t.c.
These reveal a firm’s strengths and weaknesses.
The External Micro- Environment

These consist of the actors and forces in a company’s immediate environment that affects
its ability to serve its markets. Such forces include the company’s
• Suppliers
• Marketing intermediaries
• Customers
• Competition and
• The publics
These comprise the core marketing system of the company in its efforts to meet its primary
goal of profitability and customer satisfaction.
• These forces represent the uncontrollable marketing variables that the company must
monitor and respond to
• The Macro and the external Micro-Environment both pose threats and spin
opportunities from the environment
The socio-cultural forces/ environment
External Micro-Environmental
1. THE SUPPLIERS
These are business firms and individuals who provide resources needed by the company to
produce goods and services.
Companies must
• Develop specifications
• Search for suppliers
• Qualify them and
• Choose those who offer the best mix of
- quality
- delivery reliability
- credits
- warranties and
- low costs
Development in the suppliers’ environment can have substantial impact on the company’s
marketing operations.
Marketing managers need to watch
i) the price trends of their key inputs
ii) supply availability i.e. continuity
Marketing managers should avoid over relying on one source of suppliers.
2. MARKETING INTERMEDIARIES
These are firms that aid the company in promoting, selling and distributing its goods and
services to the final buyers. They include:
- Middlemen
- Physical distribution firms
- Marketing service agencies
- Financial intermediaries.
a) Middlemen
They are business firms that help the company to provide customers or *** sales with
them for example
i) Merchant middlemen - wholesalers and retailers,
ii) Agent middlemen - brokers, sales representatives
b) Physical distribution firms
These firms assist the company in stocking and moving goods from their original
locations to their destinations. For example
- Warehousing firms
- Transportation firms
Every company looks for the most effective models of transportation balancing such
considerations as
- cost
- delivery
- speed and
- safety
c) Marketing service agencies

Examples here include:-
- Marketing research firms
- Advertising agencies
- Media firms
- Marketing consulting firms
They assist the company in targeting and promoting its products to the right market.
d) Financial intermediaries.
These include
- Banks
- Credit companies
- Insurance companies etc
These intermediaries provide financial assistance and or insure risk associated with
buying and selling of products to companies or marketing organizations
3. CUSTOMERS
These are the people that the company sells their goods to, also known as the target markets.
Five types of customer markets exist, namely: -
- Consumer markets – individuals and households that buy goods and services for
personal consumption
- Industrial markets – organizations that buy goods and services needed for
producing other products and services for the purpose of making profits and/ or
achieving other objectives
- Reseller markets – organizations that buy goods and services for the purpose of
reselling them at a profit.
- Government and non profit markets – they buy goods and services in order to
produce public services or to transfer these goods and services to others who need
them.
- International markets – buyers found abroad including foreign customers, producers,
resellers and governments.
Examples include:
- Banks
- Personal customer markets
- Trust department markets
- Business customers
- Profit customers – high earner members e.g. estate agents and stock brokers
- Importers and exporters.
NB
Each customer group exhibits specific characteristics that warrant careful study by the seller.
4. COMPETITORS
A company rarely stands alone in its efforts to serve a given customer market. It is
surrounded and affected by a host of competitors. These competitors have to be identified,
monitored and outmaneuvered to capture and maintain customer loyalty.
5. PUBLICS
A public is a group that has actual or potential interest in or impact on a company’s ability to
achieve its objectives.
A public can facilitate or impede a company’s ability to achieve its goals.
The wise company takes concrete steps to manage successful relations with its key publics.
Every company faces several important publics
- Financial publics - Financial institutions affect the company’s ability to obtain

funds. Examples of financial institutions include banks, investment houses,
stock brokerage firms and insurance companies.
- Media publics – companies must activate the good will of media organizations,
specifically newspapers, magazines, radio and television stations in order to set
more and better media coverage in the form of favorable news features and editorial
comments.
- Government publics – companies need to take government developments into

account in formulating marketing plans.
- Citizen action publics / lobby groups / pressure groups – a company’s marketing

practices may be questioned by consumer organizations, environmental groups,
minority groups etc
- Local publics – every company faces local publics for example neighborhood
residents and community organizations. Companies must deal with community
issues, attend meetings answer questions and make contributions to worthwhile
courses.
- General publics – a company needs to be concerned with the general public’s

attitude towards its products and practices. The public’s image of the company
affects its patronage.
- Internal publics – a company’s internal publics include blue coller workers, white
coller workers, managers, etc
Companies should spend time monitoring all its publics, understanding their needs and
opinions and dealing with them constructively.
The Macro-Environment
Demographic Factors
Population Size
1. Geographical distribution
2. Population density
3. Mobility trends
4. Age distribution
5. Birth rates
6. Death rates
7. Life expectancy
8. Household/ family size, makeup
9. Income/ wealth distribution
10. Socio –economic groups: occupation, ethnic groups
Political Factors
The political arena has a huge influence upon the regulation of businesses, and the
spending power of consumers and other businesses. You must consider issues such as:
1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
a. What is the government's policy on the economy?
4. Does the government have a view on culture and religion?
5. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?
Legal Factors
1. Legislations
2. The legal system
3. Fiscal and monetary policies
4. Employment legislation
5. Consumer protection laws
6. Pressure groups
7. Foreign trade regulations
8. Environment protection regulation
Economic Factors
Marketers need to consider the state of a trading economy in the short and long-terms. This
is especially true when planning for international marketing. You need to look at:
1. Interest rates
2. Business cycles
3. Money supply
4. Investment levels
5. Balance of payment
6. The level of inflation Employment level per capita
7. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on
Socio-cultural Factors
The social and cultural influences on business vary from country to country. It is very
important that such factors are considered. Factors include:
1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the populations have a strong/weak opinion on green issues?
8. Demographics
9. Attitudes
10. Social class
11. Changes in consumer values and lifestyles
12. How much time do consumers have for leisure?

13. What are the roles of men and women within society?
14. How long are the population living? Are the older generations wealthy?
15. Do the populations have a strong/weak opinion on green issues?
Technological Factors
Technology is vital for competitive advantage, and is a major driver of globalization.

Consider the following points:
1. Does technology allow for products and services to be made more

cheaply and to a better standard of quality?
2. Do the technologies offer consumers and businesses more innovative

products and services such as Internet banking, new generation mobile
telephones, etc?
3. How is distribution changed by new technologies e.g. books via the

Internet, flight tickets, auctions, etc?
4. Does technology offer companies a new way to communicate with

consumers e.g. banners, Customer Relationship Management (CRM), etc?
Natural environment
1. Product resources
• Raw materials
• Energy resources
• Mineral resources
• Water resources
2. Climatic conditions
• Seasons
• Weather
3. Physical resources
• Topography
• Attitude
• Waterfalls
• Altitude
4. Pollutions
• Air
• Water
5. Natural calamities
• Floods
• Earthquakes
• Disease outbreaks
• Storms
• Landslides
• Volcanic activity
Political / Legal
6. Politic
al / Legal Economic Social Technological
Environmental Economic growth (overall; Income distribution (change Government
by in spending
distribution of disposable
regulation and industry sector) income; on research
protection
Monetary policy (interest Demographics (age structure
Taxation (corporate; rates) of the Government and
population; gender; family
consumer) size and industry focus on
composition; changing nature
of technological effort
occupations)
Government spending
International trade (overall Labor / social mobility New discoveries and
regulation level; specific spending development
priorities)
Consumer Policy towards

protection unemployment Lifestyle changes (e.g. Home Speed of technology
(minimum wage,
unemployment working, single households) transfer
benefits, grants)
Taxation (impact on Rates of

Employment law consumer Attitudes to work and leisure technological
disposable income,
incentives to obsolescence
invest in capital equipment,
corporation tax rates)
Energy use and

Government Exchange rates (effects on Education costs
organization / demand by overseas
attitude customers;
effect on cost of imported
components)
Competition Inflation (effect on costs

regulation and Fashions and fads Changes in material
selling prices) sciences
Impact of changes
Stage of the business cycle Health & welfare in
(effect on short-term Information
business technology
performance)
Economic "mood"
consumer Living conditions (housing, Internet!
confidence amenities, pollution)
The Importance of Marketing Environment
Every business, no matter how big or small, operates within the marketing environment. Its present
and future existence, profits, image, and positioning depend on its internal and external
environment. The business environment is one of the most dynamic aspects of the business. In
order to operate and stay in the market for long, one has to understand and analyze the marketing
environment and its components properly.
Essential for planning- An understanding of the external and internal environment is essential for
planning for the future. A marketer needs to be fully aware of the current scenario, dynamism, and
future predictions of the marketing environment if he wants his plans to succeed.
Understanding Customers - A thorough knowledge of the marketing environment helps

marketers acknowledge and predict what the customer actually wants. In-depth analysis of the
marketing environment reduces (and even removes) the noise between the marketer and customers
and helps the marketer to understand the consumer behaviour better.
Tapping Trends - Breaking into new markets and capitalizing on new trends requires a lot of
insight about the marketing environment. The marketer needs to research about every aspect of the
environment to create a foolproof plan.
Threats and Opportunities - A sound knowledge of the market environment often gives a first
mover advantage to the marketer as he makes sure that his business is safe from the future threats
and taps the future opportunities.
Understanding the Competitors - Every niche has different players fighting for the same spot.
A better understanding of the marketing environment allows the marketer to understand more
about the competitions and about what advantages do the competitors have over his business and
vice versa.
CHAPTER FOUR
MARKETING MIX
Introduction
The marketing mix is a significant tool for creating the right marketing strategy and its
implementation through effective tactics. The assessment of the roles of your product, promotion,
price, and place plays a vital part in your overall marketing approach.
The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand
or product in the market. The 4Ps make up a typical marketing mix - Price, Product, Promotion
and Place. However, nowadays, the marketing mix increasingly includes several other Ps like
Packaging, Positioning, People and even Politics as vital mix elements.
Elements Of The Marketing Mix
The key elements of any successful marketing plan include the concepts of product, price, place
and promotion, also known as the four Ps of marketing. The marketing mix of the four Ps functions
as a guide to help the marketing manager successfully develop a strategy for promoting products
and services to customers
1.Price:
Refers to the value that is put for a product. It depends on costs of production, segment targeted,
ability of the market to pay, supply - demand and a host of other direct and indirect factors. There
can be several types of pricing strategies, each tied in with an overall business plan. Pricing can
also be used a demarcation, to differentiate and enhance the image of a product.
It is alo a very important component of a marketing plan as it determines your firm’s profit and
survival. Adjusting the price of the product has a big impact on the entire marketing strategy as
well as greatly affecting the sales and demand of the product.
When setting the product price, marketers should consider the perceived value that the product
offers. There are three major pricing strategies, and these are:
 Market penetration pricing
 Market skimming pricing
 Neutral pricing
Here are some of the important questions that you should ask yourself when you are setting the
product price:
 How much did it cost you to produce the product?
 What is the customers’ perceived product value?
 Do you think that the slight price decrease could significantly increase your market share?
 Can the current price of the product keep up with the price of the product’s competitors?
1. Product:
Refers to the item actually being sold. The product must deliver a minimum level of performance;
otherwise even the best work on the other elements of the marketing mix won't do any good.
A product is an item that is built or produced to satisfy the needs of a certain group of people. The
product can be intangible or tangible as it can be in the form of services or goods.
You must ensure to have the right type of product that is in demand for your market. So during the
product development phase, the marketer must do an extensive research on the life cycle of the
product that they are creating.
Marketers must also create the right product mix. It may be wise to expand your current product
mix by diversifying and increasing the depth of your product line.
All in all, marketers must ask themselves the question “what can I do to offer a better product to
this group of people than my competitors”.
In developing the right product, you have to answer the following questions:
 What does the client want from the service or product?
 How will the customer use it?
 Where will the client use it?
 What features must the product have to meet the client’s needs?
 Are there any necessary features that you missed out?
 Are you creating features that are not needed by the client?
 What’s the name of the product?
 Does it have a catchy name?
 What are the sizes or colors available?
 How is the product different from the products of your competitors?
 What does the product look like?
3. Place:
Refers to the point of sale. In every industry, catching the eye of the consumer and making it easy
for her to buy it is the main aim of a good distribution or 'place' strategy. Retailers pay a premium
for the right location. In fact, the mantra of a successful retail business is 'location, location,
location'.
Placement or distribution is a very important part of the product mix definition. You have to
position and distribute the product in a place that is accessible to potential buyers.
This comes with a deep understanding of your target market. Understand them inside out and you
will discover the most efficient positioning and distribution channels that directly speak with your
market.
There are many distribution strategies, including:
 Intensive distribution
 Exclusive distribution
 Selective distribution
 Franchising
Here are some of the questions that you should answer in developing your distribution strategy:
 Where do your clients look for your service or product?
 What kind of stores do potential clients go to? Do they shop in a mall, in a regular brick
and mortar store, in the supermarket, or online?
 How do you access the different distribution channels?
 How is your distribution strategy different from your competitors?
 Do you need a strong sales force?
 Do you need to attend trade fairs?
 Do you need to sell in an online store?
4. Promotion
This refers to all the activities undertaken to make the product or service known to the user and
trade. This can include advertising, word of mouth, press reports, incentives, commissions and
awards to the trade. It can also include consumer schemes, direct marketing, contests and prizes.
Promotion is a very important component of marketing as it can boost brand recognition and sales.
Promotion is comprised of various elements like:
 Sales Organization
 Public Relations
 Advertising
 Sales Promotion
Advertising typically covers communication methods that are paid for like television
advertisements, radio commercials, print media, and internet advertisements. In contemporary
times, there seems to be a shift in focus offline to the online world.
Public relations, on the other hand, are communications that are typically not paid for. This
includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.
Word of mouth is also a type of product promotion. Word of mouth is an informal communication
about the benefits of the product by satisfied customers and ordinary individuals. The sales staff
plays a very important role in public relations and word of mouth.
It is important to not take this literally. Word of mouth can also circulate on the internet. Harnessed
effectively and it has the potential to be one of the most valuable assets you have in boosting your
profits online. An extremely good example of this is online social media and managing a firm’s
online social media presence.
In creating an effective product promotion strategy, you need to answer the following questions:
 How can you send marketing messages to your potential buyers?

 When is the best time to promote your product?
 Will you reach your potential audience and buyers through television ads?
 Is it best to use the social media in promoting the product?
 What is the promotion strategy of your competitors?
Your combination of promotional strategies and how you go about promotion will depend on your
budget, the message you want to communicate, and the target market you have defined already in
previous steps.
Importance Of Marketing Mix
1) It helps in a clean mix creation
Your marketing mix should have all the P’s compatible with each other. The price should be
compatible with the placement of the product. The product should be compatible with
the promotions. In general, all the P’s are intrinsically linked to each other.
As a result, when you are making a marketing mix, it becomes a chain of strong bonds. And these
bonds then guide you forward in making the chain longer. Whenever you are considering adding
a new feature or changing existing things, you have to look at the overall picture, which helps in
creating a clean marketing mix for the product.
2) Marketing mix helps in New product development

While designing an existing product, there are any numbers of ideas which can come up for a
related product that can be designed by the company. The pricing, place and promotions might be
different for such a product. Nonetheless, it can be classified as a new product and hence while
designing the marketing mix, the company can come up with good ideas for NPD as well.
3) Marketing mix helps increase the product portfolio
Whenever you want to increase the product depth or product line and length, you have to make
minor changes to the product. In essence, you are making minor changes in the marketing mix
itself. You are making changes to the product features, to its pricing and possible to its
promotions. As a result, by altering the marketing mix and certain features within it, you can end
up with an enlarged product portfolio.
4) It is a guide to improve a business

Physical evidence was an important P in the service marketing mix. If a restaurant or an interior
design business realizes its important, then naturally they can act on it and improve the physical
evidence of their business thereby bringing in more business.
The importance of marketing mix is evident in more than a single P. People and process are
important to the organization too and optimizing both can improve the overall working of the
organization. Hence, marketing mix is an excellent guide if someone wants to improve their
business and is doing gap analysis.
5) It helps in differentiation
When you analyze the marketing mix of Competitors, there are many different ways that you
can differentiate yourself from the competitor. The competitor might have poor promotions and
by analyzing them, you can create better promotions of your own product.
The competitor might have poor placement of products or he might have the wrong process or the
wrong people in place. All this can be improved upon giving you a better marketing mix and
therefore a competitive advantage in the market.
6) Finally, it helps you in being dynamic

A company which is well prepared is also prepared when disaster strikes. During recession or
during a poor business environment, a company should be ready to respond. At such times, the
company needs to be dynamic in nature. Such a company needs to understand its product,
processes, people, promotions and all other P’s better. If it understands them, it will respond with
a better agility.
Thus, there are many ways that marketing mix may be important to an organization. The best part
is, analyzing and understanding the marketing mix is not a lengthy procedure and the ROI on the
time spent is much higher.
Factors Affecting Marketing Mix

- Consumers behavior. - It is determined by consumers motivation in purchasing, buying
habits, living habits, buying power. - Technical and socio-economic development of the
society also brings changes in consumers behavior.
- Competitors behavior - Competition is another factor affecting the demand and supply
for the product.
- Size and strength of the competitors.
- Number of competitors.
- Product choices offered to the consumers.
- Government exercises control and regulates the production and pricing of products,
advertising and sales promotion. - The management should consider the consider the
government laws and policies while formulating the marketing mix
CHAPTER FIVE
MARKET SEGMENTATION AND TARGETING
Market segmentation and target marketing are two steps of the marketing process. Although the
two go hand-in-hand, there are distinct differences between them, as market segmentation must
take place before a target market is determined.
According to Kotler and Armstrong’s Principles of Marketing, market segmentation is used to

research the entire market as a whole and then place consumers into separate groups based on
common characteristics. The company then decides which group is best and concentrates on
selling to them, which is also called target marketing
Marketing segmentation is “The act of dividing a market into distinct groups of buyers who might
require separate products and/or marketing mixes. Or it is the sub-division of a market into smaller
homogenous sub-markets which the organization might successfully satisfy.”
Target Marketing involves breaking a market into segments and then concentrating your marketing
efforts on one or a few key segments consisting of the customers whose needs and desires most
closely match your product or service offerings. It can be the key to attracting new business,
increasing your sales, and making your business a success.
Importance of market segmentation and targeting
Understand Customers
To sell to your customers, you first must understand why they would want to buy your product.
Market segmentation allows for the development of profiles of the many different kinds of
customer groups who buy your products. You can use this information to create better marketing
programs. It also can be used to develop products for your target audience.
Maximize Product Potential

Segmenting your market helps you understand how your product is being used by various customer
groups. During the course of your market segmentation, you may come across an alternate use for
your product that had not been previously discussed. You may discover a new market for your
product.
Improve Distribution Network

Market segmentation assists companies in developing more efficient distribution networks. By
studying the buying behaviors of various target customer groups, you can determine the way that
customers prefer to buy your product. If customers prefer to buy online, you will want to focus on
your online presence and reduce the resources you put into retail stores. Market segmentation also
helps you identify geographic areas where your products are popular.
Gain New Clients
A comprehensive market segmentation analysis includes reasons why consumers are not buying
your products. By understanding why the various market segments do not buy your products, you
can alter your marketing or change your product development to try to gain new customers. It is
important to have a balance when trying to gain new clients as you do not want to alienate and lose
your existing customer base.
Up-selling across the customer journey

The above example of web-based services with different pricing plans illustrates that market
segments enable businesses to target their customers according to their lifecycle phase.
As users get used to the service and grow their business, they can easily change to the next higher
plan or to supplementary services. The service bundle evolves across the customer journey. Thus,
segment-specific product bundles increase chances for up-selling and cross selling.
Absorption of purchasing power by price differentiation

It is often difficult to increase prices for the whole market. Nevertheless, it is possible to
develop premium segments in which customers accept a higher price level. Such segments could
be distinguished from the mass market by features like additional services, exclusive points of sale,
product variations and the like. A typical segment-based price variation is by region. The generally
higher price level in big cities is evidence for this.
When differentiating prices by segments, organizations have to take care that there is no chance
for cannibalization between high-priced products with high margins and budget offers in different
segments. This risk is the higher, the less distinguished the segments are.
Attract additional customer groups

Targeted marketing plans for particular segments allow to individually approach customer groups
that otherwise would look out for specialized niche players. By segmenting markets, organizations
can create their own ‘niche products’ and thus attract additional customer groups.
Sustainable customer relationships in all phases of customer life cycle

Customers change their preferences and patterns of behavior over time. Organizations that serve
different segments along a customer’s life cycle can guide their customers from stage to stage by
always offering them a special solution for their particular needs.
For example, many car manufacturers offer a product range that caters for the needs of all phases
of a customer life cycle: first car for early twens, fun-car for young professionals, family car for
young families, etc. Skin care cosmetics brands often offer special series for babies, teens, normal
skin, and elder skin.
Targeted communication
It is necessary to communicate in a segment-specific way even if product features and brand
identity are identical in all market segments. Such a targeted communications allows highlighting
those criteria that are most relevant for each particular segment (e.g. price vs. reliability vs.
prestige).
Stimulating Innovation
An undifferentiated marketing strategy that targets at all customers in the total market necessarily
reduces customers’ preferences to the smallest common basis. Segmentations provide information
about smaller units in the total market that share particular needs.
Only the identification of these needs enables a planned development of new or improved products
that better meet the wishes of these customer groups. If a product meets and exceeds a customer’s
expectations by adding superior value, the customers normally is willing to pay a higher price for
that product. Thus, profit margins and profitability of the innovating organizations increase.
Higher Market Shares

The above points have already highlighted that market segmentation is an ideas basis for pursuing
additional growth opportunities. This translates in higher market shares in many cases.
In contrast to an undifferentiated marketing strategy, segmentation supports the development of

niche strategies. Thus marketing activities can be targeted at highly attractive market segments in
the beginning. Market leadership in selected segments improves the competitive position of the
whole organization in its relationship with suppliers, channel partners and customers. It
strengthens the brand and ensures profitability. On that basis, organizations have better chances to
increase their market shares in the overall market.
Types of Market Segmentation
Geographic Segmentation
Geographic segmentation divides the market on the basis of geography. This type of market
segmentation is important for the marketers as people belonging to different regions may have
different requirements. For example, water might be scarce in some regions which inflates the
demand for bottled water but, at the same time, it might be in abundance in other regions where
the demand for the same is very less.
People belonging to different regions may have different reasons to use the same product as well.
Geographic segmentation helps marketer draft personalized marketing campaigns for everyone.
Demographic Segmentation
Demographic segmentation divides the market on the basis of demographic variables like age,
gender, marital status, family size, income, religion, race, occupation, nationality, etc. This is one
of the most common segmentation practice among the marketers. Demographic segmentation is
seen almost in every industry like automobiles, beauty products, mobile phones, apparels, etc and
is set on a premise that the customers’ buying behaviour is hugely influenced by their
demographics.
Behavioral Segmentation
The market is also segmented based on audience’s behaviour, usage, preference, choices and
decision making. The segments are usually divided based on their knowledge of the product and
usage of the product. It is believed that the knowledge of the product and its use affects the buying
decision of an individual. The audience can be segmented into –
- Those who know about the product,
- Those who don’t know about the product,
- Ex-users,
- Potential users,
- Current Users,
- First time users, etc.
People can be labelled as brand loyal, brand-neutral, or competitor loyal. They can also be labelled
according to their usage. For example, a sports person may prefer an energy drink as elementary
(heavy user) and a not so sporty person may buy it just because he likes the taste (light/medium
user).
Psychographic Segmentation
Psychographic Segmentation divides the audience on the basis of their personality, lifestyle and
attitude. This segmentation process works on a premise that consumer buying behaviour can be
influenced by his personality and lifestyle. Personality is the combination of characteristics that
form an individual’s distinctive character and includes habits, traits, attitude, temperament, etc.
Lifestyle is how a person lives his life.
Personality and lifestyle influence the buying decision and habits of a person to a great extent. A
person having a lavish lifestyle may consider having an air conditioner in every room as a need,
whereas a person living in the same city but having a conservative lifestyle may consider it as a
luxury.
The Process / Steps of Market Segmentation

1) Determine the need of the segment
What are the needs of the customers and how can you group customers based on their needs? You
have to think of this in terms of consumption by customers or what would each of your customer
like to have.
For example – In a region, there are many normal restaurants but there is no Italian restaurant or
there is no fast food chain. So, you came to know the NEED of consumers in that specific region.
2) Identifying the segment

Once you know the need of the customers, you need to identify that “who” will be the customers
to choose your product over other offerings. Quite simply, you have to decide which type of
segmentation you are going to use in this case. Is it going
tobe geographic, demographic, psychographic or what? The 1st step gives you a mass of crowd,
and in the 2nd step, you have to differentiate the people from within that crowd.
3) Analyze the most attractive segment

Now, we approach the targeting phase in the steps of market segmentation. Out of the various
segments you have identified via demography, geography or psychography, you have to choose
which is the most attractive segment for you. This is a tough question to answer because one of
them will be left out.
If you are using psychographic segmentation, then you need to target the psychology of consumers
which takes time. So you will not be able to expand faster. But if your product is basic, then you
can use demographic segmentation as the base, and expand much faster in surrounding regions.
So this step involves deciding on ALL the different types of segmentation that you can use.
4) Find out if the segment giving profitable

So, now you have different types of segmentation being analysed for their attractiveness. Which
segment do you think will give you the maximum crowd has been decided in the 3rd step. But
which of those segments is most profitable is a decision to be taken in the 4th step. This is also one
more targeting step in the process of segmentation.
5) Positioning for the segment

Once you have identified the most profitable segments via the steps of market segmentation, then
you need to position your product in the mind of the consumers. I would not dive deep
into positioning here as you can read this quick guide to positioning. The basic concept is that the
firm needs to place a value on its products.
If the firm wants a customer to buy their product, what is the value being provided to the customer,
and in his mindset, where does the customer place the brand after purchasing the product? What
was the value of the product to the customer and how valuable does he think the brand is – that is
the work of positioning. And to complete the process of segmentation, you need to position your
product in the mind of your segments.
6) Expanding the segment

All segments need to be scalable. So, if you have found a segment, that segment should be such
that the business is able to expand with the type of segmentation chosen. If the segment is very
niche, then the business will run out of its course in due time. Hence the expansion of the segment
is the second last step of market segmentation.
7) Incorporating the segmentation into your marketing strategy

Once you have found a segment which is profitable and expandable, you need to incorporate that
segment in your marketing strategy. How do you think McDonalds or KFC became such big
chains of fast food? They had a very clear process of segmentation because of which it became
easier to find regions to target.
With the steps of market segmentation, your segments become clear and then you can adapt other
variables of marketing strategy as per the segment being targeted. You can modify the products,
keep the optimum price, enhance the distribution and the place and finally promote clearly and
crisply to your target audience. Business becomes simpler due to the process of market
segmentation.
Benefits of Market segmentation and targeting

It may enable a company to select a potentially most profitable segment. It enables
a company to concentrate resources on the chosen segments.
The analysis gives a company the opportunity to review developments and anticipate changes
in its chosen segment from competitive activity, legal/political changes, e.t.c.
Sales opportunities are more likely to be effectively and fully exploited by staff when target
audience is properly defined.
Better services tailored to the needs of particular market segments are offered. Prices are
tailored to customer situations and circumstances.
It may lead to improved level of services both in terms of sophistication and general standards.
Assists in identifying gaps. Market segmentation involves marketing research. During this
process, the marketer can also engage in ‘Gap Analysis”. Gap Analysis is:
A process which aims to seek out differences between what the market needs and wants and
what is actually being supplied – the gap.
Limitations Of Market Segmentation and Targeting
Segmentation also has its limitations as it needs to be implemented in the proper manner. As
segmentation is one of the most important process in the marketing plan or for your business, you
need to know the limitations of segmentation and what pitfalls lie ahead if you go wrong with
your target market segment.
1) Segments are too small – If the chosen segment is too small then you will not have the proper
turnover which in turn will affect the total margins and the viability of the business.
2) Consumers are misinterpreted – The right product to the wrong customers. What if
your market research says that your customers want a new soap and you come out with a new
facial cream. The concept is same, cleanliness. But the concept is completely different.
3) Costing is not taken into consideration – Targeting a segment is ok but you also need to know
how much you will have to spend to target a particular segment. If it is a Sec A segment and you
do not have the budget to be present in the places the the Sec A customer visits, then
your segmentation strategy is a failure.
4) There are too many brands – Along with segmentation, you also need to check out the
competition offered in the same segment from other products. Getting into a segment already
saturated will mean higher costs and lesser profit margins.
5) Consumer are confused – If the consumer himself doesn’t know whether he will be interested
in a particular product or not, than that’s a sign that you need to get out of that segment / product.
6) Product is completely new – If a product is completely new than there is no market research
to base your segmentation on. You need to market it to the masses and as acceptance increases,
only then will you be able to focus on one particular segment.
CHAPTER SIX
CONSUMER BEHAVIOR
Introduction
Consumer Behaviour
Consumer Behaviour or the Buyer Behaviour is referred to the behaviour that is displayed by the
individual while they are buying, consuming or disposing any particular product or services. These
behaviours can be affected by multiple factors. Moreover, it also involves search for a product,
evaluation of product where the consumer evaluate different features, purchase and consumption
of product. Later the post purchase behaviour of product is studied which shows the consumer
satisfaction or dissatisfaction where it involves disposal of product (Solomon, 2009).
Importance Of Studying Consumer Behavior
Perceptions
Studying consumer behavior helps marketers understand consumer perceptions about a particular
product or range of products. Uncovering and correcting erroneous perceptions about a particular
product may give marketers an additional competitive advantage over competitors.
Attitudes
Consumer attitudes very often determine consumer beliefs about certain products. Discovering
consumer attitudes allows marketers to fine tune their campaigns to resonate with a particular
consumer niche and deepen marketing reach.
Cultures
Changing population demographics around the world affect the way marketing campaigns are
designed. Understanding cultural nuances and subtleties may allow marketers to help further
define their particular target market.
Lifestyles
Consumer lifestyles also determine what products appeal to certain consumer markets.
Understanding consumer lifestyles is also a key component of consumer behavior that lets
marketers make the appropriate appeals in promoting lifestyle products and further consumption
of lifestyle products.
Experience
Like consumer attitudes, experience also colors consumer responses to certain products. By
studying consumer behavior, marketing professionals can tap into consumer experiences with
similar products to promote consumption and gain competitive advantage over competitors.
Dynamic Nature of Market:

Consumer behaviour focuses on dynamic nature of the market. It helps the manager to be dynamic,
alert, and active in satisfying consumers better and sooner than competitors. Consumer behaviour
is indispensable to watch movements of the markets.
Effective Use of Productive Resources:

The study of consumer behaviour assists the manager to make the organisational efforts consumer-
oriented. It ensures an exact use of resources for achieving maximum efficiency. Each unit of
resources can contribute maximum to objectives.
It is to be mentioned that the study of consumer behaviour is not only important for the current
sales, but also helps in capturing the future market. Consumer behaviour assumes: Take care of
consumer needs, the consumers, in return, will take care of your needs. Most of problems can be
reasonably solved by the study of consumer behaviour. Modern marketing practice is almost
impossible without the study of consumer behaviour.
Competition:
Consumer behaviour study assists in facing competition, too. Based on consumers’ expectations,
more competitive advantages can be offered. It is useful in improving competitive strengths of the
company.
Developing New Products:

New product is developed in respect of needs and wants of the target market. In order to develop
the best-fit product, a marketer must know adequately about the market. Thus, the study of
consumer behaviour is the base for developing a new product successfully.
Factors Influencing Consumer Buying Behavior
Consumer buying behavior is the sum total of a consumer's attitudes, preferences, intentions,
and decisions regarding the consumer's behavior in the marketplace when purchasing a product or
service. The study of consumer behavior draws upon social science disciplines of anthropology,
psychology, sociology, and economics.
The consumer behaviour or buyer behaviour is influenced by several factors or forces. They are:
1. Internal or Psychological factors
2. Social factors
3. Cultural factors
4. Economic factors
5. Personal factors
1. CULTURAL FACTORS
Consumer behavior is deeply influenced by cultural factors, such as buyer’s culture, subculture
and social class.
• Culture
Essentially, culture is the share of each company and is the major cause of the person who wants
and behavior. The influence of culture on the purchasing behavior varies from country to country,
therefore sellers have to be very careful in the analysis of the culture of different groups, regions
or even countries.
• Subculture
Each culture has different subcultures, such as religions, nationalities, geographical regions, racial,
etc. marketing groups may use these groups, segmenting the market in several small portions. For
example, marketers can design products according to the needs of a specific geographical group.
• Social Class
Every society has some kind of social class is important for marketing because the buying behavior
of people in a particular social class is similar. Thus marketing activities could be adapted to
different social classes. Here we should note that social class is not only determined by income,
but there are several other factors such as wealth, education, occupation etc.
2. SOCIAL FACTORS
Social factors also influence the purchasing behavior of consumers. Social factors are: the
reference groups, family, the role and status.
• Reference groups
Reference groups have the potential for the formation of an attitude or behavior of the individual.
The impact of reference groups vary across products and brands. For example, if the product is
visible as clothing, shoes, car etc., the influence of reference groups will be high. Reference groups
also include opinion leader (a person who influences others by his special skill, knowledge or
other characteristics).
• Family
buyer behavior is strongly influenced by a family member. So vendors are trying to find the roles
and influence of the husband, wife and children. If the decision to purchase a particular product is
influenced by the wife of then sellers will try to target women in their ad. Here we should note that
the purchase of roles change with changing lifestyles of consumers.
• Roles and Status

Each person has different roles and status in society in terms of groups, clubs, family, etc.
organization to which it belongs. For example, a woman working in an organization as manager
of finance. Now she is playing two roles, one of the chief financial officer and the mother.
Therefore, purchasing decisions will be influenced by their role and status.
3. PERSONAL FACTORS
Personal factors may also affect consumer behavior. Some of the important factors that influence
personal buying behavior are: lifestyle, economic status, occupation, age, personality and self
esteem.
• Age
Age and life cycle have a potential impact on the purchasing behavior of consumers. It is obvious
that consumers change the purchase of goods and services over time. Family life cycle consists of
different stages as young singles, married couples, unmarried couples etc that help marketers to
develop suitable products for each stage.
• Occupation
The occupation of a person has a significant impact on their buying behavior. For example, a
marketing manager of an organization is trying to buy business suits, while a low level worker in
the same organization buy-resistant clothing work.
• Economic situation
economic situation of the consumer has a great influence on their buying behavior. If income and
savings a customer is high, then going to buy more expensive products. Moreover, a person with
low income and savings buy cheap products.
• Lifestyle
Lifestyle clients is another factor affecting import purchasing behavior of consumers. Lifestyle
refers to the way a person lives in a society and express things in their environment. It is determined
by the client’s interests, opinions, etc and activities shapes their whole pattern of acting and
interacting in the world.
• Personality
Personality changes from person to person, time to time and place to place. Therefore, it can greatly
influence the buying behavior of customers. In fact, personality is not what one has, but is the
totality of the conduct of a man in different circumstances. Has different characteristics, such as
dominance, aggression, confidence etc that may be useful to determine the behavior of consumers
to the product or service.
4. PSYCHOLOGICAL FACTORS
There are four major psychological factors that affect the purchasing behavior of consumers. These
are: perception, motivation, learning, beliefs and attitudes.
• Motivation
The level of motivation also affects the purchasing behavior of customers. Each person has
different needs, such as physiological needs, biological needs, social needs, etc. The nature of the
requirements is that some are more urgent, while others are less pressing. Therefore, a need
becomes a motive when it is most urgent to lead the individual to seek satisfaction.
• Perception
Select, organize and interpret information in a way to produce a meaningful experience of the
world is called perception. There are three different perceptual processes which are selective
attention, selective distortion and selective retention. In the case of selective attention, sellers try
to attract the attention of the customer. Whereas in case of selective distortion, customers try to
interpret the information in a way that supports what customers already believe. Similarly, in the
case of selective retention, marketers try to retain information that supports their beliefs.
• Beliefs and Attitudes

Client has specific beliefs and attitudes towards different products. Because such beliefs and
attitudes shape the brand image and affect consumer buying behavior so traders are interested in
them. Marketers can change beliefs and attitudes of customers with special campaigns in this
regard.
5. ECONOMIC FACTORS:
Consumer behaviour is influenced largely by economic factors. Economic factors that influence
consumer behaviour are
a) Personal Income,
b) Family income,
c) Income expectations,
d) Savings,
e) Liquid assets of the Consumer,
f) Consumer credit,
g) Other economic factors.
a) Personal Income:
The personal income of a person is determinant of his buying behaviour. The gross personal
income of a person consists of disposable income and discretionary income. The disposable
personal income refers to the actual income (i.e. money balance) remaining at the disposal of a
person after deducting taxes and compulsorily deductible items from the gross income. An increase
in the disposable income leads to an increase in the expenditure on various items. A fall in the
disposable income, on the other hand, leads to a fall in the expenditure on various items.
The discretionary personal income refers to the balance remaining after meeting basic necessaries
of life. This income is available for the purchase of shopping goods, durable goods and luxuries.
An increase in the discretionary income leads to an increase in the expenditure on shopping goods,
luxuries etc. which improves the standard of living of a person.
b) Family income:
Family income refers to the aggregate income of all the members of a family.
Family income influences the buying behaviour of the family. The surplus family income,
remaining after the expenditure on the basic needs of the family, is made available for buying
shopping goods, durables and luxuries.
c) Income Expectations:
Income expectations are one of the important determinants of the buying behaviour of an
individual. If he expects any increase in his income, he is tempted to spend more on shopping
goods, durable goods and luxuries. On the other hand, if he expects any fall in his future income,
he will curtail his expenditure on comforts and luxuries and restrict his expenditure to bare
necessities.
d) Savings:
Savings also influence the buying behaviour of an individual. A change in the amount of savings
leads to a change in the expenditure of an individual. If a person decides to save more out of his
present income, he will spend less on comforts and luxuries.
e) Liquid assets:
Liquid assets refer to those assets, which can be converted into cash quickly without any loss.
Liquid assets include cash in hand, bank balance, marketable securities etc If an individual has
more liquid assets, he goes in for buying comforts and luxuries. On the other hand, if he has less
liquid assets, he cannot spend more on buying comforts and luxuries.
f) Consumer credit:
Consumer credit refers to the credit facility available to the consumers desirous of purchasing
durable comforts and luxuries. It is made available by the sellers, either directly or indirect у
through banks and other financial institutions. Hire purchase, installment purchase, direct bank
loans etc are the ways by which credit is made available to the consumers.
Consumer credit influences consumer behaviour. If more consumer credit is available on liberal
terms, expenditure on comforts and luxuries increases, as it induces consumers to purchase these
goods, and raise their living standard.
g) Other economic factor:

Other economic factors like business cycles, inflation, etc. also influence the consumer behaviour.
Factors Influencing Organizational Buying Behavior
Organizational buying is much more complex than consumer buying, and thus deserves to be
studied separately. The entwined interpersonal relationships and the multiple communication
processes between the organizational members, involved in the buying decision process, are some
of the major contributors to this complexity. The list of affecting factors isn’t limited to these;
there are many more important determinants. Let’s take a look at what factors influence
organizational buyers and their buying behavior. But before that we’d just like to divert your
attention to why organizational buying is so different.
Unique Features of Organizational Buying

1. Organizational buying is mostly a multi-person activity, and that’s true for more than 90%
of the organizational buying. Decisions for some of the bigger purchases may have
participants from a range of departments and from different management levels. Think
about the purchase of new software – it may require a collective decision made by end
users and people from the IT, finance and administration departments.
2. When organizations make purchases there is always a meticulous formal process that
precedes the actual purchasing.
3. Organizational buying decisions are never made at the spur of a moment. The buying
decision making is stretched and this drag can even be a year long, when it comes to critical
purchases.
1. External Environmental Factors

As a major constraint under which a business operates, the external environment impacts nearly
every aspect of a business, including its buying decisions. Here’s a list of the external elements
that affect organizational buying.
Economic Conditions: The fluctuations in the money markets and the interest rates have a major
impact on the buying strategies. The interest rates and organizational buying have an inverse
relation; in most cases, an increase in the interest rates may bring about a drop in the buying.
Regulatory Changes: Any changes in the corporate laws, rules and regulations will also influence
how, when and what the organizations buy. There are also regulatory changes that may affect only
a particular industry and accordingly the related organizations will change their buying patterns to
stay in-line with the new regulations.
Political Environment: A change of the government or policy has a direct impact on the economic
scenario, and this ultimately translates into a shift in the organizational buying patterns as well.
Social Environment: Societies and cultures are ever evolving, and every business has to change
its practices and procedures to meet up with the societal changes. For instance with the rise in the
number of animal lovers, pure leather suppliers have seen a slump in their business. The clothing
and footwear manufacturers have shifted to artificial leather suppliers. This points out how the
social environment can affect the buying patterns of organizations.
Competition: Today’s business is all about beating competition and staying ahead. So when an
organization's competitors move on to a newer product or service, or if they get to enjoy a
competitive edge because of their suppliers, it's very likely for the organization to change its trends
too and thus its buying pattern will change accordingly.
The external environment is the first of the four major factors that influence organizational
behavior as shown in this diagram which you can click on to enlarge.
2. Internal Organizational Factors

More than the external factors, it’s the internal organizational factors that influence organizational
buying. These internal factors are the:
Organization's Goals and Objectives: The goals and objectives of an organization are major
determinants as to how and what the organization will purchase. An organization that wants to
capture a bigger chunk of the market by selling cheaper stuff is more likely to look for suppliers
who can supply larger quantities at a low price. However, a company whose goal is to deliver
quality products may have a very contrasting buying pattern, and they will focus more on the
quality issues than on the price advantage.
Organizational Structure: Hierarchical and management structures vary from one organization
to another. While some organizations have a well established purchase department, others may
assign this job to the HR or Administration department. There are also organizations where the
purchase decisions must be taken collectively by all concerned departments.
Policies and Procedures: How the purchase order is routed, depends on the organization's
policies. How does the buying procedure begin, who will participate and who has the ultimate
authority to decide on the purchase are all dependent on the policies and procedures of the
organization. Some organizations prefer to invite public bids, while others may contact only the
few suppliers on their list. There are also budgetary policies that have a say in the purchase
decisions, for instance while some organizations may have a flexible policy to make purchases as
and when the need arises, others may have to wait till the allocation of the annual or biannual
budget.
Technological Levels: Whenever making new purchases, organizations take into consideration
their current technology. Some purchases are meant to replace the current technology with a newer
version, so their buying decision will be influenced by what level of technology they currently
own. Also, organizations try to ensure that all new purchases being made are technologically
compatible with their existing technology. So, one way or the other – an organization's existing
technology has a major influence on its future purchases.
Manpower Skills: Whether the organization has the skilled manpower to make proper and
optimum use of the new purchases being made, especially equipment and machinery, is another
issue that influences organizational buying.
3. Interpersonal and Individual Factors

Since organizational buying decisions are never a one person affair, interpersonal relationships
among the decision makers plays a vital role in this type of buying.
Participation and Authority: In organizational buying situations, there are always re-defined
rules as to who can participate in the purchase decision and who is the ultimate deciding authority.
Interpersonal Conflict: Interpersonal conflicts and conflicts of interest amongst the decision
makers often results in delays and changes. Thus, the kind of thinking and the kind of relationship
the decision makers share have a major role to play in corporate buying.
Education and Awareness: The educational background of the decision makers and their level
of awareness have a major bearing on what type of purchases they will make.
Risk Taking Ability: If the buying committee constitutes high risk takers, they will not be averse
to the idea of choosing the latest technology or new suppliers. While on the other hand, decision
makers with a low risk taking tolerance are more likely to stick to proven and tested technology or
to well known and well established suppliers.
Individual Factors: Individual factors such as age, cultural background and social status, of the
members on the buying team, also influence the buying decisions.
4.Situational Factors
In this final section we’ll take a look at some of the situational factors that can influence
organizational buyers.
Time Factor: Sometimes, organizations don’t have all the time to follow the detailed buying
procedure. If the organization needs a replacement for equipment that broke down suddenly, it
may decide to place its order with some existing supplier or a supplier that is at close proximity.
Current Financial Situation: If the organization is crunched for cash, it may decide to place its
order with one of its existing supplier who offers extended credit. Also, if the organization cannot
spare out enough money for a certain purchase, it may opt for a readily available cheaper version
that fits into its budget.
Availability: Some buying decisions can wait while others cannot, thus if the supplier cannot
make available the exact product by the desired date, the organizational buyers may shift to a new
supplier or to a more readily available alternative.
Special Offers: Special offers being given by a supplier may also be one of the situational factors
affecting the buying decision.
As a supplier, now that you know what factors influence organizational buyers, you can work up
your business to business sales strategies to manipulate organizational buying activities and thus
procure more orders for your supply business.
Consumer Buying Decision-Making Process
The consumer decision-making process consists of five steps, which are need recognition,
information search, evaluations of alternatives, purchase and post-purchase behavior. These steps
can be a guide for marketers to understand and communicate effectively to consumers. One note
is that consumers do not always move in the exact order through the process; it can depend on the
type of product, the buying stage of the consumer and even financial status.
NEED
↓
INFORMATION GATHERING/SEARCH
↓
EVALUATION OF ALTERNATIVES
↓
PURCHASE OF PRODUCT/SERVICE
↓
POST PURCHASE EVALUATION
1. Problem recognition/Need
The first step of the consumer decision-making process is recognizing the need for a service or
product. Recognition is driven by both internal and external stimuli.
An internal stimulus occurs within you—it could include basic impulses like hunger or a change
in lifestyle. An external stimulus originates from an outside source, like a billboard or review from
a friend. Need recognition, whether it occurs through internal or external means, prompts the same
response: a want.
Once a consumer recognizes a want, they need to gather information to understand how they can
fulfill that want.
Example: Winter is coming. This particular customer has several light jackets, but she’ll need a
heavy-duty winter coat if she’s going to survive the snow and lower temperatures.
2. Information search
Your consumer has recognized a want. Now comes the task of gathering information. Consumers
again rely on internal and external factors, as well as past interactions with a product or brand,
both positive and negative, to make their decision. In the information stage, the consumer may
browse through options at a physical location or consult online resources, such as Google or
customer reviews.
Your job as a brand is to give the potential customer access to the information they want, with the
hopes that they decide to purchase your product or service. When creating content, put yourself in
the shoes of your customer. What might they be interested in knowing about your product? Is there
something that sets your product apart from competitors? Explore ways to present information to
your potential customers that will help them arrive at a decision faster and easier.
Example: The customer searches “women’s winter coats” on Google to see what options are out
there. When she sees someone with a cute coat, she asks them where they bought it and what they
think of that brand.
3. Alternatives evaluation
At this point in the consumer decision-making process, the prospective buyer has developed
criteria for what they want in a product. Now they weigh their prospective choices against
comparable alternatives.
Alternatives may present themselves in the form of lower prices, additional product benefits,
product availability, or something as personal as color or style options. Your marketing material
should be geared towards convincing consumers that your product is superior to other alternatives.
Example: The customer compares a few brands that she likes. She knows that she wants a
brightly colored coat that will complement the rest of her wardrobe, and though she would rather
spend less money, she also wants to find a coat made from sustainable materials.
4. Purchase decision
This is the moment the consumer has been waiting for: the actual purchase. Once they have
gathered all the facts, including feedback from previous customers, the consumer should arrive at
a logical conclusion on the product or service to purchase.
Throughout this process, external and internal factors impact the end decision. Even ever-changing
factors like emotions or the weather can affect when and how a purchase is made. If you’ve done
your job correctly, the consumer will recognize that your product is the best option and decide to
purchase.
Example: The customer finds a pink winter coat that’s on sale for 20% off. After confirming that
the brand uses sustainable materials and asking friends for their feedback, she orders the coat
online.
5. Post-purchase evaluation
This part of the consumer decision-making process involves reflection from both the consumer
and the seller. As a seller, you should try to gauge the following:
 Did the purchase meet the need the consumer identified?
 Is the buyer happy with their purchase?
Remember, it’s your job to ensure your customer continues to have a positive experience with your
product. Post-purchase engagement could include follow-up emails, discount coupons, and
newsletters to entice the customer to make an additional purchase. You want to gain life-long
customers, and in an age where anyone can leave an online review, it’s more important than ever
to keep customers happy.
Buying Roles
(Who makes the buying decisions?)
Marketers should identify the buying roles for their products. They should however note
that these roles keep changing hence care should be taken when making their buying
decisions. They have distinguished five roles that people might play in a buying decision.
HH. Initiator – A person who first suggests the idea of buying a particular product or service.
II. Influencer – A person whose views or advice influences the buying decision.
JJ. Decider – A person who ultimately determines any part of or the entire buying
decision :-whether to buy, what to buy, how to buy it or where to buy it.
KK. Buyer – The person who makes the final purchase.
LL. User – A person who consumes or uses the product.
A marketer needs to identify these roles because they have implications for the design of
product, determining the promotion messages and allocating the promotion budget.
Product Life Cycle
A new product progresses through a sequence of stages from introduction to growth, maturity, and
decline. This sequence is known as the product life cycle and is associated with changes in the
marketing situation, thus impacting the marketing strategy and the marketing mix
The product life cycle has 5 very clearly defined stages, each with its own characteristics that mean
different things for business that are trying to manage the life cycle of their particular products.
.
1. Product Development Stage

When the company finds and develops a new product idea, product development starts. During
product development, sales are zero, and the company’s investment costs increase.
Introduction Stage
This stage of the cycle could be the most expensive for a company launching a new product. The
size of the market for the product is small, which means sales are low, although they will be
increasing. On the other hand, the cost of things like research and development, consumer testing,
and the marketing needed to launch the product can be very high, especially if it’s a competitive
sector.
Marketing strategies used in introduction stages include:
 Rapid skimming - launching the product at high price and high promotional level
 Slow skimming - launching the product at high price and low promotional level
 Rapid penetration - launching the product at low price with significant promotion
 Slow penetration - launching the product at a low price and minimal promotion
2. Growth Stage
The growth stage is typically characterized by a strong growth in sales and profits, and because
the company can start to benefit from economies of scale in production, the profit margins, as well
as the overall amount of profit, will increase. This makes it possible for businesses to invest more
money in the promotional activity to maximize the potential of this growth stage.
Marketing strategies used in the growth stage mainly aim to increase profits. Some of the common
strategies to try are:
 Improving product quality
 Adding new product features or support services to grow your market share
 Enter new markets segments
 Keep pricing as high as is reasonable to keep demand and profits high
 Increase distribution channels to cope with growing demand
 Shifting marketing messages from product awareness to product preference
 Skimming product prices if your profits are too low.
Growth stage is when you should see rapidly rising sales, profits and your market share. Your
strategies should seek to maximise these opportunities
3. Maturity Stage
During the maturity stage, the product is established and the aim for the manufacturer is now to
maintain the market share they have built up. This is probably the most competitive time for most
products and businesses need to invest wisely in any marketing they undertake. They also need to
consider any product modifications or improvements to the production process which might give
them a competitive advantage.
When your sales peak, your product will enter the maturity stage. This often means that your
market will be saturated and you may find that you need to change your marketing tactics to
prolong the life cycle of your product. Common strategies that can help during this stage fall under
one of two categories:
 Market modification - this includes entering new market segments, redefining target
markets, winning over competitor’s customers, converting non-users
 Product modification - for example, adjusting or improving your product’s features,
quality, pricing and differentiating it from other products in the marking
4. Decline Stage
Eventually, the market for a product will start to shrink, and this is what’s known as the decline
stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who
will buy the product have already purchased it), or because the consumers are switching to a
different type of product. While this decline may be inevitable, it may still be possible for
companies to make some profit by switching to less-expensive production methods and cheaper
markets.
During the end stages of your product, you will see declining sales and profits. This can be fuelled
by changes in consumer preferences, technological advances and alternatives on the market. At
this stage, you will have to decide what strategies to take. If you want to save money, you can:
 Reduce your promotional expenditure on the products
 Reduce the number of distribution outlets that sell them Implement price cuts to get the
customers to buy the product Fin another use for the product Maintain the product and wait
for competitors to withdraw from the market first Harvest the product or service before
discontinuing it
Another option is for your business to discontinue the product from your offering. You may
choose to:
 Sell the brand to another business
 Significantly reduce the price to get rid of all the inventory
CHAPTER SEVEN
PRICING DECISIONS
Introduction
What is price?
Price is a measure of the value exchanged by the buyer for the value offered by the seller.
Price is also referred to as the amount of money, which is sacrificed to obtain something.
Pricing goes by many names, e.g. rent, tuition, fee, fare, rate, interest, toll, premium,
commission, salary, retainer, etc.
Traditionally, price has operated as the major determinant of buyer choice. Non-price factors
have however, increased in importance in buyer behavior. However, price still remains one of
the most elements determining market share and profitability
Price is the only element in the marketing mix that that produces revenue, other elements
produce cost. Price is also one of the most flexible elements of the marketing mix, in that it can
be changed quickly. At the same time, pricing and price competition are the number one
problems facing many marketing executives. It is for this reason that price is said to be the
most unstable, uncertain of the marketing mix. It is also used as a competitive tool.
Setting The Price

A firm must set a price for the first time when the firm develops or acquires a new product,
when it introduces its regular product into a new distribution channel or geographical area,
and when it enters its bid on new contract work.
A firm must decide where to position its product on quality and price. A company can
position its product in the middle of the market, up three levels. The seven levels are as
follows:
• Ultimate
• Luxury
• Special needs
• Middle
• Ease/convenience
• Me too, but cheaper
• Price alone
There can be competition between price-quality segments
Factors To Consider When Setting The Price

Kotler describes a 6 – step procedure for price setting:
1. Select the price objective
2. Determine demand
3. Estimate cost
4. Analyze competitor’s costs, prices and offers
5. Select a pricing method
6. Select the final price
Methods for setting the price:
Markup pricing
This is the most elementary pricing method and it involved adding a standard markup to the
product’s cost.
Markups vary considerably among different goods. Markups are generally higher on seasonal
items (to cover the risk of not selling), specially items, slower-moving items, items with high
storage and handling costs, and demand inelastic items. In addition, companies sometimes use
higher markups when hidden or variable costs are involved. This pricing method is critical for
ignoring current demand, perceived value and competition.
Target-return pricing
The firm determines the price that would yield its target rate of return on investment
Here the company determines the price that would yield its target rate of return on investment
The formula that is usually applied is as follows:
Target return price = Unit costs + (desired capital*invested capital/ unit sales)
The company must be able to work out the costs and estimated sales in order to be able to
realize the required rate of return on the investment. The company should consider determine
the break even point i.e. point at which costs = revenue. The target sales must be above break-
even points sales.
This method ignores price elasticity and competition prices. The company needs to consider
different prices and estimate the possible impact on sales volume and profits. The company
should also research for ways to lower its fixed and/or variable costs, because lower costs will
decrease its required break-even volume.
Perceived-value pricing
This method is being used increasingly by companies. These companies see the buyer’s
perception of value, not the seller’s cost, as the key to pricing. They use non-price variables in
the marketing mix to build up perceived value in the buyer’s minds. Price is yet to capture the
perceived value.
Perceived-value pricing fits well with product-positioning thinking. A company develops a

product concept for a particular target market. With a planned quality and price. Then
management estimates the volume it hopes to sell at this price. The estimate indicates the
needed plant capacity, investment and unit costs. Management then figures out whether the
product will yield a satisfactory profit at the planned price and cost. If answer is yes, the
company goes ahead with product development. Otherwise, the company drops the idea.
Value pricing
Value pricing says that the price should represent a high-value offer to customers. Companies
charge a fairly low price for high quality offering.
Going-rate pricing
In going-rate pricing, the firm pays less attention to its own costs or demand and bases its
price largely on competitors’ prices. The firm might charge the same, more, or less than its
major competitor[s].
Where costs are difficult to measure or response is uncertain, firms feel that the going price
represents a good solution. The going price is thought to reflect the industry’s collective
wisdom as to the price that would yield a fair return and not jeopardize industrial harmony.
Sealed-bid pricing
Competitive-oriental pricing is common where firms submit sealed bids for jobs. The firm
bases its price on expectations of how competitors will price rather than on a rigid relation to
the firm’s costs or demand. The firm requires submitting a lower price than competitors. At
the same time, the firm cannot set is price below cost without worsening its position.
Adapting The Price

Companies usually do not set a single price but rather a pricing structure that reflects variations
in geographic demand and costs, market-segment requirements, purchase timing, order levels,
delivery frequency guarantees service contracts and other factors. A company may adapt the
price of its product as a result of variations in these factors. Some price adaptation strategies
include geographical pricing, price discounts and allowances, promotional pricing,
discriminatory pricing and product-mix pricing.
a) Geographical pricing
This involves the company in deciding how to price its products to different
customers in different locations and countries.
b) Price discounts and allowances
These are modifications in the basic price to reward customers for such acts as early
payments. Such price modifications may be by way of cash discounts, quantity
discounts, functional discounts, seasonal discounts, allowances and promotional
pricing.
c) Discriminatory pricing (Price discrimination)
This occurs when a company sells a product or service at two or more prices that do not reflect
a proportional difference in costs. Discriminatory pricing takes several forms.
i. Customer-Segment pricing: Different customer groups are charged different

prices for the same product or service
ii. Product-Form pricing: Different versions of the product are priced

differently but not proportionately to their respective costs.
iii. Image Pricing: some companies price the same product at two different levels
base on image difference.
iv. Location pricing: the same product is priced differently at different locations
even though the cost of offering at each location is the same.
v. Time pricing: prices are varied by season, day or hour.

d) Product-mix pricing
Price-setting logic must be modified when the product is part of a product mix. In this case,
the firm searches for a set of prices that maximize the profits on the total product mix.
Pricing is difficult because the various products have demand and cost inter-relationships
and are too different of competition. There are six (6) situations involving product-mix
pricing, two part pricing, by product pricing and product-bundling pricing.
Factors Affecting Pricing

Internal Factors:
1. Cost:
While fixing the prices of a product, the firm should consider the cost involved in producing the
product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the firm
must be able to recover both the variable and fixed costs.
2. The predetermined objectives:

While fixing the prices of the product, the marketer should consider the objectives of the firm. For
instance, if the objective of a firm is to increase return on investment, then it may charge a higher
price, and if the objective is to capture a large market share, then it may charge a lower price.
3. Image of the firm:

The price of the product may also be determined on the basis of the image of the firm in the market.
For instance, HUL and Procter & Gamble can demand a higher price for their brands, as they enjoy
goodwill in the market.
4. Product life cycle:

The stage at which the product is in its product life cycle also affects its price. For instance, during
the introductory stage the firm may charge lower price to attract the customers, and during the
growth stage, a firm may increase the price.
5. Credit period offered:

The pricing of the product is also affected by the credit period offered by the company. Longer the
credit period, higher may be the price, and shorter the credit period, lower may be the price of the
product.
6. Promotional activity:
The promotional activity undertaken by the firm also determines the price. If the firm incurs heavy
advertising and sales promotion costs, then the pricing of the product shall be kept high in order
to recover the cost.
External Factors:
1. Competition:
While fixing the price of the product, the firm needs to study the degree of competition in the
market. If there is high competition, the prices may be kept low to effectively face the competition,
and if competition is low, the prices may be kept high.
2. Consumers:
The marketer should consider various consumer factors while fixing the prices. The consumer
factors that must be considered includes the price sensitivity of the buyer, purchasing power, and
so on.
3. Government control:
Government rules and regulation must be considered while fixing the prices. In certain products,
government may announce administered prices, and therefore the marketer has to consider such
regulation while fixing the prices.
CHAPTER EIGHT
SALES PROMOTION
In marketing, promotion refers to any type of marketing communication used to inform or
persuade target audiences of the relative merits of a product, service, brand or issue. ... It is one of
the basic elements of the market mix, which includes the four P's: price, product, promotion, and
place.
Promotions refer to the entire set of activities, which communicate the product, brand or service
to the user. The idea is to make people aware, attract and induce to buy the product, in preference
over others.
There are several types of promotions. Above the line promotions include advertising, press
releases, consumer promotions (schemes, discounts, contests), while below the line include trade
discounts, freebies, incentive trips, awards and so on. Sales promotion is a part of the overall
promotion effort.
There are also:
1. Personal selling: one of the most effective ways of customer relationship. Such selling works
best when a good working relationship has been built up over a period of time.
This can also be expensive and time consuming, but is best for high value or premium products.
2. Sales promotions: this includes freebies, contests, discounts, free services, passes, tickets and
so on, as distinct from advertising, publicity and public relations.
3. Public relations: PR is the deliberate, planned and sustained effort to establish and maintain
mutual understanding between the company and the public.
Importance of Promotion
Increases brand parity and price sensitivity of consumer:
With more brand choices available to the consumer and with the fact that product differences are
becoming less and less apparent, consumers are becoming more and more reliant to the price and
price incentives.
Decreased brand loyalty:
Another reason which goes hand in hand in increasing sales promotions budget is decreased brand
loyalty. Consumers are getting used to the fact that almost always at least one brand category is on
sale or on a sales promotional offer.
Rewards for meeting targets:

Another reason is coming from the roots of corporate culture and the reward and promotion
strategy within corporations. In the conditions of severe competition, there is increasing pressure
on brand managers to show fast results in terms of increased sales and nothing is as effective in
short run as sales promotions to achieve this goal.
Consumer Promotion
Many popular sales promotions are targeted primarily or solely to household consumers. Those
focused on price include both discount coupons and the significant but time-limited price breaks
known as deals, like buy-one-get-one-free offers. Contests and sweepstakes are another approach
intended to create interest and excitement tied to a brand. Loyalty programs, heavily used by
airlines and hotels, reward patrons with some premium or gift that becomes more valuable as their
purchases increase in frequency or volume.
Trade Promotion
Trade sales promotion is aimed at a market that buys for resale, not for personal consumption.
Primarily, this group includes retail and wholesale buyers who control distribution to household
consumers. Certain types of consumer promotion can influence the trade, but marketers also use
devices specifically designed for this audience. Some common trade promotions include discounts
or rebates offered in return for large orders, rewards of cash or merchandise to high-performing
salespeople, and exhibits at trade shows.
Sales Promotion
Sales promotion is a category of the promotional mix, alongside advertising, personal selling and
public relations. The primary importance of a sales promotion is to offer an inducement to buyers,
increasing sales. In some cases, the other components of the promotional mix support a sales
promotion strategy. For example, an advertising campaign might be used to publicize a sales
promotion strategy.
Consumer Sales Promotion

Manufacturers that sell directly to consumers can use sales promotion strategies to increase sales.
Consumer incentives, such as attractive financing terms, might convince consumers to make a
large purchase. Coupons, bulk discounts and frequent-buyer reward programs also give consumers
more motivation to buy a product. For example, a manufacturer might offer steep price discounts
at its on-site shop, convincing consumers to travel to its location to obtain deals they can’t get at
their local retailers.
Elements of Promotion
Elements of promotional mix are also called as tools, means, or components. Basically, there are
five elements involved in promotional mix
1. Advertising:
Advertising is defined as any paid form of non-personal presentation and promotion of ideas,
goods, and services by an identified sponsor. It is a way of mass communication. It is the most
popular and widely practiced tool of market promotion. Major part of promotional budget is
consumed for advertising alone. Various advertising media – television, radio, newspapers,
magazines, outdoor means and so forth – are used for advertising the product.
Characteristics of advertising
i. Adverting is non-personal or mass communication. Personal contact is not possible.
ii. It is a paid form of communication.
iii. It is a one-way communication.
iv. Identifiable entity/sponsor-company or person gives advertising.
v. It is costly option to promote the sales.
vi. It can be reproduced frequently as per need.
vii. Per contact cost is the lowest.
viii. Various audio-visual, print, and outdoor media can be used for advertising purpose.
ix. It is a widely used and highly popular tool of market promotion.
2. Sales Promotion:
Sales promotion covers those marketing activities other than advertising, publicity, and personal
selling that stimulate consumer purchasing and dealer effectiveness. Sales promotion mainly
involves short-term and non-routine incentives, offered to dealers as well consumers. The popular
methods used for sales promotion are demonstration, trade show, exhibition, exchange offer,
seasonal discount, free service, gifts, contests, etc.
Characteristics of sales promotion

i. The primary purpose of sales promotion is to induce customers for immediate buying or dealer
effectiveness or both.
ii. Excessive use of sale promotion may affect sales and reputation of a company adversely.
iii. It is taken as supplementary to advertising and personal selling efforts.
iv. It involves all the promotional efforts other than advertising, personal selling, and publicity.
v. It consists of short-term incentives, schemes, or plans offered to buyers, salesmen, and/ or
dealers.
vi. It involves non-routine selling efforts.
3. Personal Selling:
Personal selling includes face-to-face personal communication and presentation with prospects
(potential and actual customers) for the purpose of selling the products. It involves personal
conversation and presentation of products with customers. It is considered as a highly effective
and costly tool of market promotion.
Characteristics of personal have been listed below:

i. Personal selling is an oral, face-to-face, and personal presentation with consumers.
ii. Basic purpose is to promote products or increase sales.
iii. It involves two-way communication.
iv. Immediate feedback can be measured.
v. It is an ability of salesmen to persuade or influence buyers.
4. Publicity:
Publicity is also a way of mass communication. It is not a paid form of mass communication that
involves getting favourable response of buyers by placing commercially significant news in mass
media. William J. Stanton defines: “Publicity is any promotional communication regarding an
organisation and/or its products where the message is not paid for by the organisation benefiting
from it.”
It is the traditional form of public relations. Publicity is not paid for by the organisation. Publicity
comes from reporters, columnists, and journalists. It can be considered as a part of public relations.
Publicity involves giving public speeches, giving interviews, conducting seminars, charitable
donations, inauguration by film actor, cricketer, politician or popular personalities, stage show,
etc., that attract mass media to publish the news about them.
Characteristic of publicity include:

i. Publicity involves obtaining favourable presentation about company or company’s offers upon
radio, television, or stage that is not paid for by the sponsor.
ii. It is a non-paid form of market promotion. However, several indirect costs are involved in
publicity.
iii. It may include promotion of new product, pollution control efforts, special achievements of
employees, publicizing new policies, etc., for increasing sales. It is primarily concerns with
publishing or highlighting company’s activities and products. It is targeted to build company’s
image.
iv. Mostly, publicity can be carried via newspapers, magazines, radio or television.
5. Public Relations:
The public relations is comprehensive term that includes maintaining constructive relations not
only with customers, suppliers, and middlemen, but also with a large set of interested publics. Note
that public relations include publicity, i.e., publicity is the part of public relations.
William Stanton defines:
“Public relations activities typically are designed to build or maintain a favourable image for an
organisation and a favourable relationship with the organization’s various publics. These publics
may be customers, stockholders, employees, unions, environmentalists, the government, and
people in local community, or some other groups in society.” Thus, public relations include
organization’s broad and overall communication efforts intended to influence various groups’
attitudes toward the organisation. Some experts have stated that the public relations are an
extension of publicity.
Main characteristic of publicity

i. Public relations is a paid form of market promotion. Company has to incur expenses.
ii. Public relations activities are designed to build and maintain a favourable image for an
organisation and a favourable relationship with the organization’s various publics.
iii. It is an integral part of managerial function. Many companies operate a special department for
the purpose, known as the public relations department.
iv. It involves a number of interactions, such as contacting, inviting, informing, clarifying,
responding, interpreting, dealing, transacting, and so forth.
GROUP DYNAMICS
CHAPTER ONE
INTRODUCTION TO GROUP DYNAMICS
Understanding Groups
Introduction
Groups are very important in the development of communities and individual households. By
nature, no individual is born complete, and every person must work with others to attain
development. Groups or Associations help to bring people with common interests and goals
together to work for transformative change in their households and communities. This Module
introduces participants to the concept of groups and looks at reasons why people join groups, and
why certain groups succeed and others fail.
What is a Group?
A group is two or more people with common interest coming together for a purpose. A group can
also be defined as a number of individuals from the same place who have been motivated to come
together to follow up a common interest. Their interest may be related to economic (e.g. Savings
and credit), or social development.
A Group can also be defined as two or more individuals who are connected to one another by social
relationships (Forsyth, 2006).
People are motivated to join groups when they can see some likely direct or indirect benefit to
themselves, or their families, through their membership. Some of the different considerations
which motivate people to join groups are;
Financial Considerations Social Considerations Political Considerations
Group membership allows Group members can; People join groups for;
for;
 Acquire/Share New  Leadership Purposes
 Better utilization of Ideas or experiences  Security Reasons
resources  Mix With Others  Personal Satisfaction
 Better Mobilization Of  Promote Public 
Resources Relations
 Better Production Or  Enjoy a sense of
Marketing belonging
 Greater Benefits  Enjoy a ne sense of
Stimulation
Activities Of Groups
What activities do groups undertake?
A group should focus on some type of activity within a reasonable time. Group members
themselves should decide on which activities to undertake. Activities should encourage
participation of members and serve to strengthen the group.
Selecting group activities involves identifying;
 Available Resources
 Possible markets
 The need for any technical support
 Potential problems.
In activities:
 All group members must be involved. They are central to decision making and
implementation
 The dependence of the activity on any outside assistance must be minimal
 The must be ably sustained within the context of locally available resources
 The activity should relate to the next activity planned by the group.
Group activities might include for example;

 Vegetable gardening - The group can work together to make a vegetable garden. Produce
can be sold and the profits can be put into the account or used to buy more inputs.
 Handicrafts -The group can work together to make handicrafts and explore markets.
 Music, Dance and Drama - The Group can perform for money.
 Training - acquisition of knowledge and skills. Training sessions can be organized for
group members through inviting people with expert knowledge to give sessions on topics
of interest.
 Agriculture - Farmers often form agricultural groups for marketing, transport and labor
purposes. Farmers may come together to grow the same crop using joint labor, buy the
necessary chemicals, find markets for the produce and hire transport. However, it should
be remembered that group cooperation does not necessarily mean group production.
Members can produce independently but come together after production for marketing and
transport, etc.
 Savings and Loan/Credit - Group members save and raise funds together which can later
lent to group members.
Key Questions To Think About When Forming A Group
Some key questions to think about in forming a group are:

1. Why is the group being started?
2. What problems does the group want to solve?
3. What common interest will group members have?
4. How many people will be in the group?
5. What benefits will; members get from belonging to the group?
Characteristics Of A Group
Regardless of the size or the purpose, every group has similar characteristics:
(a) 2 or more persons (if it is one person, it is not a group)

(b) Formal social structure (the rules of the game are defined)
(c) Common fate (they will swim together)
(d) Common goals (the destiny is the same and emotionally connected)
(e) Face-to-face interaction (they will talk with each other)
(f) Interdependence (each one is complimentary to the other)
(g) Self-definition as group members (what one is who belongs to the group)
(h) Recognition by others (yes, you belong to the group).
CHAPTER TWO
TYPES OF GROUPS
One way to classify the groups is by way of formality – formal and informal. While formal groups
are established by an organization to achieve its goals, informal groups merge spontaneously.
Formal groups may take the form of command groups, task groups, and functional groups.
Formal Groups: These are groups that are organized and legally recognized and registered. These
Groups have leadership structures, written down By-Laws or constitutions and follow specific
guidelines in all their work. A majority of the Groups that succeed are Formal Groups.
Informal Groups: These are groups that do not have any established structures. They do not have
a leadership structure and have no written down rules and as such are not legally recognized.
Formal Groups
1. Command Groups:
Command groups are specified by the organizational chart and often consist of a supervisor and
the subordinates that report to that supervisor. An example of a command group is a market
research firm CEO and the research associates under him.
2. Task Groups:
Task groups consist of people who work together to achieve a common task. Members are brought
together to accomplish a narrow range of goals within a specified time period. Task groups are
also commonly referred to as task forces. The organization appoints members and assigns the goals
and tasks to be accomplished.
Examples of assigned tasks are the development of a new product, the improvement of a
production process, or designing the syllabus under semester system.
Other common task groups are ad hoc committees, project groups, and standing committees. Ad
hoc committees are temporary groups created to resolve a specific complaint or develop a process
are normally disbanded after the group completes the assigned task.
3. Functional Groups:
A functional group is created by the organization to accomplish specific goals within an
unspecified time frame. Functional groups remain in existence after achievement of current goals
and objectives. Examples of functional groups would be a marketing department, a customer
service department, or an accounting department.
Informal groups
In contrast to formal groups, informal groups are formed naturally and in response to the common
interests and shared values of individuals. They are created for purposes other than the
accomplishment of organizational goals and do not have a specified time frame. Informal groups
are not appointed by the organization and members can invite others to join from time to time.
Informal groups can have a strong influence in organizations that can either be positive or negative.
For example, employees who form an informal group can either discuss how to improve a
production process or how to create shortcuts that jeopardize quality. Informal groups can take the
form of interest groups, friendship groups, or reference groups.
i. Interest Group:
Interest groups usually continue over time and may last longer than general informal groups.
Members of interest groups may not be part of the same organizational department but they are
bound together by some other common interest.
The goals and objectives of group interests are specific to each group and may not be related to
organizational goals and objectives. An example of an interest group would be students who come
together to form a study group for a specific class.
ii. Friendship Groups:

Friendship groups are formed by members who enjoy similar social activities, political beliefs,
religious values, or other common bonds. Members enjoy each other’s company and often meet
after work to participate in these activities. For example, a group of employees who form a
friendship group may have a yoga group, a Rajasthani association in Delhi, or a kitty party lunch
once a month.
iii. Reference Groups:

A reference group is a type of group that people use to evaluate themselves. The main objectives
of reference groups are to seek social validation and social comparison. Social validation allows
individuals to justify their attitudes and values while social comparison helps individuals evaluate
their own actions by comparing themselves to others. Reference groups have a strong influence on
members’ behavior. Such groups are formed voluntarily. Family, friends, and religious affiliations
are strong reference groups for most individuals.
CHAPTER THREE
GROUP DEVELOPMENT
Stages of Group Development
Group development has four major phases or stages.
Forming stage
This is the stage when the group first comes together. Everybody is very polite and dull, conflict
is seldom voiced directly, mainly personal and defiantly destructive. Since the group is new, the
Individual will be guided by their own opinions and generally reserved. At this stage, members are
also very excited about their new ideas and there is a lot of personal sacrifice to see the group
succeed.
Storming stage
This is the second stage when functions form, personalities close, no one concedes a single point
without first battling for the recognition of their point. Most importantly, very little communication
takes place since no one is listening and some are still unwilling to talk openly.
Norming stage
At this stage, the sub groups begin to recognize the moments of working together and the fighting
subsides since a new spirit of cooperation is evident, every member begins to feel secure in
expressing their own view points. There are open discussions with all the Group members. The
most significant improvement is that people start to listen to each other. Work methods become
established and recognized by the groups as a whole.
Members begin to take greater responsibility for their own group and relationship while the
authority figure becomes relaxed. Once this stage is complete, a clear picture will emerge about
hierarchy of leadership. The norming stage is over with the solidification of the group structure
and a sense of group identity and camaraderie.
Performing stage
This is the culmination when the group has settled on systems which allow free and frank
exchange of views and high degree of support by the group for each and its own decisions.
The group may redefine its goals Development in the light of information from the outside
environment and show an autonomous will to pursue those goals. The long-term viability of the
group is established and nurtured.
Adjourning
In the case of temporary groups, like project team, task force, or any other such group, which have
a limited task at hand, also have a fifth stage, This is known as adjourning.
The group decides to disband. Some members may feel happy over the performance, and some
may be unhappy over the stoppage of meeting with group members. Adjourning may also be
referred to as mourning, i.e. mourning the adjournment of the group.
Factors Affecting Group Behavior

The success or failure of a group depends upon so many factors. Group member resources,
Group structure (group size, group roles, group norms, and group cohesiveness), Group
processes (the communication, group decision making processes, power dynamics, conflicting
interactions, etc.) and Group tasks (complexity and interdependence).
1. Group Member Resources:
The members’ knowledge, abilities, skills; and personality characteristics (sociability, self-
reliance, and independence) are the resources the group members bring in with them. The success
depends upon these resources as useful to the task.
2. Group Structure:
Group Size:
Group size can vary from 2 people to a very large number of people. Small groups of two to ten
are thought to be more effective because each member has ample opportunity to take part and
engage actively in the group. Large groups may waste time by deciding on processes and trying to
decide who should participate next.
Evidence supports the notion that as the size of the group increases, satisfaction increases up to a
certain point. Increasing the size of a group beyond 10-12 members’ results in decreased
satisfaction. It is increasingly difficult for members of large groups to identify with one another
and experience cohesion.
Group Roles:
In formal groups, roles are always predetermined and assigned to members. Each role shall have
specific responsibilities and duties. There are, however, emergent roles that develop naturally to
meet the needs of the groups.
These emergent roles will often substitute the assigned roles as individuals begin to express
themselves and become more assertive. Group roles can then be classified into work roles,
maintenance roles, and blocking roles.
Blocking roles are activities that disrupt the group. Blockers will stubbornly resist the group’s
ideas, disagree with group members for personal reasons, and will have hidden agendas. They may
take the form of dominating discussions, verbally attacking other group members, and distracting
the group with trivial information or unnecessary humour.
Often times the blocking behaviour may not be intended as negative. Sometimes a member may
share a joke in order to break the tension, or may question a decision in order to force group
members to rethink the issue. The blocking roles are aggressor, blocker, dominator, comedian, and
avoidance behaviour.
Role conflicts arise when there is ambiguity (confusion about delegation and no specific job
descriptions) between the sent role and the received role which leads to frustration and
dissatisfaction, ultimately leading to turnover; inconsistency between the perceived role and role
behaviour (conflict between work roles and family roles); and conflicting demands from different
sources while performing the task.
Group Norms:
Norms define the acceptable standard or boundaries of acceptable and unacceptable behaviour,
shared by group members. They are typically created in order to facilitate group survival, make
behaviour more predictable, avoid embarrassing situations, and express the values of the group.
Each group will create its own norms that might determine from the work performance to dress to
making comments in a meeting. Groups exert pressure on members to force them to conform to
the group’s standards and at times not to perform at higher levels. The norms often reflect the level
of commitment, motivation, and performance of the group.
The majority of the group must agree that the norms are appropriate in order for the behaviour to
be accepted. There must also be a shared understanding that the group supports the norms. It should
be noted, however, that members might violate group norms from time to time.
If the majority of members do not adhere to the norms, then they will eventually change and will
no longer serve as a standard for evaluating behaviour. Group members who do not conform to
the norms will be punished by being excluded, ignored, or asked to leave the group.
Group Cohesiveness:
Cohesiveness refers to the bonding of group members or unity, feelings of attraction for each other
and desire to remain part of the group. Many factors influence the amount of group cohesiveness
– agreement on group goals, frequency of interaction, personal attractiveness, inter-group
competition, favourable evaluation, etc.
The more difficult it is to obtain group membership the more cohesive the group will be. Groups
also tend to become cohesive when they are in intense competition with other groups or face a
serious external threat to survival. Smaller groups and those who spend considerable time together
also tend to be more cohesive.
Cohesiveness in work groups has many positive effects, including worker satisfaction, low
turnover and absenteeism, and higher productivity. However, highly cohesive groups may be
detrimental to organizational performance if their goals are misaligned with organizational goals.
Highly cohesive groups may also be more vulnerable to groupthink. Groupthink occurs when
members of a group exert pressure on each other to come to a consensus in decision making.
Groupthink results in careless judgments, unrealistic appraisals of alternative courses of action,
and a lack of reality testing.
Evidence suggests that groups typically outperform individuals when the tasks involved require a
variety of skills, experience, and decision making. Groups are often more flexible and can quickly
assemble, achieve goals, and disband or move on to another set of objectives.
Many organizations have found that groups have many motivational aspects as well. Group
members are more likely to participate in decision-making and problem-solving activities leading
to empowerment and increased productivity. Groups complete most of the work in an organization;
thus, the effectiveness of the organization is limited by the effectiveness of its groups.
3. Group Processes:
Decision-making by a group is superior, because group generates more information and
knowledge, generates diverse alternatives, increases acceptance of a solution, and increases
legitimacy. But it is also true, that decision making is like ‘munde munde matirbhinna’.
Decisions take longer time, minority is dominated, pressure is applied to conform to group
decisions, and none is responsible for the decisions. Group processes also include communication,
conflict management, and leadership that we shall discuss in details in the chapters to follow
hereafter.
CHAPTER FOUR
GROUP FAILURE & SUCCESS
What makes a Group to fail?
Case Study
Activity 1
NOTE; Make a Copy for the Case Study and Share with the Trainees for Discussion
The Kiwi Youth Group started a Pineapple project. In the planning stages of their project, they
assigned duties to every member of the group to carry out during implementation.
The project started well; members were motivated and keen to achieve results. However, during
the actual process of pineapple growing, some members failed to carry out assigned tasks. Some
of the tasks which were not performed included weeding, mulching and de-suckering.
During the harvests, however, all the group members turned up again. Unfortunately, due to poor
management of the pineapples, yields were not very high. A large part of the crop of the crop had
been destroyed by weeds and heavy suckers.
Marketing then also proved a problem. All the group members wanted to sell the crop and be
involved in handing the money. However, many of those people who were involved in the actual
sales of the pineapples failed to present the income to the group’s pooled funds. As a result, by the
end of the project, the group was no better off than at the beginning.
Questions for discussion:

1. When do you think things started to go wrong for the group?
2. Why do you think the group was no better off by the end of the project?
3. If you were a member of this group, how would you try to avoid the repeat of a similar
problem? Many groups fail and there are many reasons that explain this failure.
General Factors Which Can Cause A Group To Fail
Poor planning and inability to manage activities: Groups starting activities before there is sufficient
group cohesion and determination.
Not enough immediate benefits and inadequate benefit distribution. Some people taking more than
their fair share of the benefits.
Non constructive and limited participation. Lack of full involvement in group activities by some
members
Limited confidence. Members not having sufficient confidence to manage activities themselves
and vesting management of group activities to outsiders
More specific factors that can cause a group to fail include;

- Membership being non voluntary and non-homogenous (members not sharing common
interests)
- The group being too large
- Activities being imposed on the group
- Group leaders being appointed by outsiders. Leaders not being rotated regularly. Members
fearing the rotational leadership system since, initially, they lack confidence in their own
abilities.
Book keeping being controlled by one person. The accounts not being regularly open to members.
Actual cash on hand not being presented at the meeting for control
Lack of regular meetings, and poor and irregular attendance

· No group savings fund, no credit programme, irregular loan repayments.
· Lack of clear objectives
· Illiteracy of some members, leading to exploitation by those who are literate.
· Depending on outside support for funding and marketing
· Many people dropping out after a short time
· Groups mirroring (representing) existing power status within the community.
Group success
What makes a group successful?
When groups fail, this is often because people don’t know what factors are necessary for a group
to be successful.
Factors That Can Contribute Towards Group Success
Composition - Group members must come from similar backgrounds, speak the same language,
and be accessible to one another. However, members must also appreciate as individuals, they
have different characteristics.
Consider the animals below. They are representative of the characters every group will have. Just
consider the characteristics of the animal and you will understand the nature of members you will
have in any type of group. For example, the cat is an animal that is always looking for pity. It will
meow under the table when you are eating, wag its tail on your legs and often with begging eyes.
Even in group settings, there are members who always look for pity all the time.
Common interest - Group members must share a common interest.
Motivation- Group members must have the motivation to work together for their common good.
Voluntary membership - Group members must be able to resign at any time and groups must
have the right to accept or reject new members.
Size - The group must be small enough to facilitate participation of all members in discussions and
decision making. A size of 10-25 members is ideal and appropriate. Some practitioners encourage
odd numbers in groups e.g. 11, 13, 15 in order to prevent the possibility of a tie in voting.
Meetings - The group must meet regularly. The frequency of the group meetings and the meeting
venue must be decided by the group.
Participation - All members must participate fully in all aspects of the group. Everyone must be
clear, united and committed to the group purpose.
Equality - All members must have equal rights.
Effectiveness - This is important in terms of achieving set targets and goals.
Accountability - All financial records must be kept open to the scrutiny of members and be kept
up to date.
Independence - The group must maintain both operational and financial independence.
Flexibility - During hard times, e.g. droughts, epidemics, etc, groups must be flexible in terms of
repayment of loans. Minority ideas must also be respected.
Self-reliance -A group must strive to build its own group fund.

Objectives and by-laws - The group must have clear objectives, rules and regulations (by-laws).
The By-laws must establish guidelines for membership, leadership and decision making, meetings,
solving conflicts, etc.
Efficiency - All business must be done in accordance with the opportunities available and within
the constitution of the group. Efficiency should also be in terms of resource allocation. The group
is managed through following the group constitution which is designed by the group members.
The constitution is very important since it binds members and indicates how the group will operate.
CHAPTER FIVE
GROUP MANAGEMENT AND LEADERSHIP SKILLS
Defining Management And Its Functions
What is management?
Management is about organizing resources, most importantly people, to achieve set objectives.
Management is needed in all organizations- from the smallest to the biggest- if they are to function
effectively.
Management Functions
What are the different functions of management?
Management functions include
 Organizing and planning
 Coordinating
 Supervising and controlling
 Directing and leading
Organizing and Planning.
Organizing is a key function of management. It is about:
 Grouping and structuring different activities
 Devising and allocating roles and responsibilities for people
 Designing rules and systems of working.
Planning is about deciding on the action necessary to achieve something desired at a later date. It
is about thinking before action is taken. Good plans are those that are SMART i.e.
Simple/Systematic/Short, Manageable, Achievable/Attainable, Realistic, and Time-bound. Good
plans are also those that are documented or written down.
By planning in advance, resources (e.g. time and money) are not wasted.
The advantages of planning include;
 Better use of resources
 Better coordination of activities
 Better control of activities
Coordinating
Coordinating is about structuring different activities and the roles of different people so that they
function together to achieve objectives. Effective coordination ensures that people don’t carry out
activities in isolation and also avoids overlap.
Supervising and controlling

Supervision is about keeping a watch over work that is going on. Control is closely related to
supervision. Control is making sure that the task or job done is of good quality and that all
resources have been properly used as planned.
The process of supervision and control involves regularly checking;
1. People doing the work.

 How regularly they work
 How committed they are
 Working conditions
 Team spirit
 What feelings they have about the work Materials
 How adequate the materials are
 How they are stored
 What the procedures for receiving and giving out the materials are
 How well the materials are used in relation to the work plan and budget
2. Finance
 What the source of the money is
 How available the required money is
 How the money is kept.
 What the receiving and payment procedures are
 How well the records of accounts are kept
 How regularly the accounts are updated
 How effectively the money is being used in relation to the budget.
3. Time
 How effectively and strictly working time is used
 Whether time is being used or followed as per the work plan
 What the constraints against the time schedule are
4. Activities
 How good the quality of the work done is
 How much work is accomplished according to the work plan
Activity 2
NOTE; Make a Copy for the Case Study and Share with the Trainees for Discussion
Case Study
Community members in Lacampenino Village, with the assistance of a Non-Governmental
Organization,
Decided to construct a two room Health Unit.
The Community was to provide;
10 trips of plaster sand
7 trips of lake sand
5 trips of stones and bricks
The NGO was to provide cement, nails, Iron sheets, DPC Sheeting, Timber and iron and pay the
local Masons. Before the construction begun, a series of planning meetings were conducted. The
community had to mobilize locally available resources. Three committees were set up. These were
the;
Mobilization committee
Operational committee
Implementation committee
The roles of each committee were defined and the LC 1 Chairperson was to coordinate all the
committees and their activities.
The Mobilization committee was to ensure that all the local resources required were at the site on
time. The Operational committee was to ensure that all the materials-both local and external and
laborers were readily available. The implementation committee was to ensure that all agreed
activities were actually put into practice. Its task was to supervise the work and ensure the safe
custody of all the materials. The work went ahead on schedule. There was good coordination of
all the activities.
1. What do you think made the project a success?
2. If you were involved, which committee would you have wanted to join and
3. What would have been your role?
4. Did you learn anything from this case study?
A good supervisor should be:

 Knowledgeable and confident
 Ready/Open to learn(ing)
 Observant
 Ready to encourage others
Directing/Leading
Directing is a major function of management. Directing is about being a good leader and so
requires the skills of leadership.
Group leadership
Introduction to Leadership Skills
What is leadership?
Leadership is the process of motivating and guiding people towards setting and achieving goals.
If you are a leader, it means you must direct and guide others.
Qualities of a good leader

To be a good leader, you need leadership abilities. This means you must be able to influence the
thinking, feeling or actions of others in order to bring about desired changes or action. A good
leader must be able to:
 Perform duties well
 Take initiative
 Make sound judgment
 Be flexible
 Delegate tasks
Leadership Styles
There are different styles of leadership. These include;
1. The Participative style
2. The Directive Style
3. The Laissez Faire style.
Participative Leadership:
 Allows group participation
 Encourages two-way communication (open communication)
 Has shared authority
 Encourages motivation: people become more committed to activities.
 Makes good use of the skills and knowledge of people
 Allows for flexibility.
Directive Style
The Directive style of leadership, by contrast, does not encourage any of the characteristics of
participative leadership. It is the opposite of participative leadership.
Laissez Faire
The Laissez Faire leader does not provide any direction for others. This leader is content to let
things happen as they will.
Generally, the participative style of leadership is more effective in community activities. However,
it requires a lot of patience and compromise because it takes time to get others involved.
Leadership Skills
What are the skills involved in good leadership?
A leader must assume various roles. These roles relate to the activities at hand or to maintaining
the spirit of others. To fulfill such roles successfully, a good leader requires different skills. These
include ability to:
 Communicate
 Delegate
 Manage time effectively
 Make decisions
 Handle conflicts
1.Communication
Communication is the process of sharing/exchanging information, ideas, and feelings from one
person to another.
Communication can also mean passing a message from one person or groups of persons to
another with the hope of receiving a feedback. Complete is not complete unless a feedback is
given.
Types of Communication
There are two types of communication. These are:

Verbal Communication: Verbal communication refers to the face to face transfer if information in
conversations, etc. Verbal communication can also be used at a distance through radio, telephone,
Internet Chats, or on Cassettes.
Non Verbal Communication: Nonverbal communication refers to messages conveyed through

body actions, such as posture (how we stand or sit), and gestures (using the hands, arms and other
parts of the body, e.g. facial expressions, to convey messages). Nonverbal communication can take
place face to face or through pictures and films. In communication, looking out for those nonverbal
cues is very helpful because we then will be able to comprehend what the individual is not
expressing verbally.
For example, you are pressing someone to make an appointment by telephone but someone is
saying okay with a lot of hesitations and unease. When you invite people for a meeting and they
turn late, it could be a sign of disinterest. You could be facilitating a training session, and some
participants are yawning or even dozing off. This shows that they are tired and need an ice breaker
or at least a break. Ignoring nonverbal communication is ignoring a big part of the communication
process.
How to communicate effectively

To communicate effectively, there are various skills you can employ. These include;
 Listening: You should always listen carefully and without preconceptions
 Speaking (audibility): Speak clearly. You should plan in advance what you want to speak.
Don’t use jargon (terminology) that the other person cannot understand. Use simple
language and hit your point without meandering.
 Eye contact: When communicating face to face with someone, maintain eye contact.
 Observation: You should always be observant: listen with your eyes as well as with your
ears.
Barriers to communication and how to overcome them

 Language Use simple or local language
 Culture. Please be aware of culturally sensitive gestures when communicating.
 Cultures can use the same gestures but with completely different meanings.
 Sensitize the community.
 Dressing. Extra-long slits that threaten to expose private body parts, shabby dressing, too
smart in a village setting. Dress simple but descent.
 Environment. Noisy environment is disturbing and so are hot, very cold or less aerated
venues. Choose a good venue for meetings.
 Seating. Let everybody be at the same level. Good sitting arrangement in a circle. The
classroom type of sitting (where the teacher stands in front and all the students sit facing
one direction) should not be encouraged in community work.
 Timing. Agree with group members the right time for trainings and meetings and don’t
assume that they have nothing else to do.
Reasons for Communication Break-down
There are various reasons for break downs in communication.

Factors contributing to communication break downs include:
 Unclear message
 Distortion of information
 Unnecessary information
 Disinterest from the listener and or speaker
 Long messages
 Intermediaries in the communication process
 Interruptions
You can improve the communication of your messages by:
 Consulting others when planning the message
 Keeping the message simple and clear- don’t overload people with information.
 Keeping the message appropriate for the context. E.g. it will be inappropriate for you to
communicate messages on Family planning to Old Women who are in the evening of their
lives.
 Delivering the message in a manner that keeps the participants interested and expectant.
 Getting feedback from the listeners to ensure that the message was received correctly.
You can make your messages convincing by:
 Using humor to make messages easier to understand (But be careful not to distract or annoy
people in this way)
 Using logical arguments. Give people good reasons for why they should accept something
 Involving the audience; asking them to contribute and showing appreciation for their
participation.
2.Delegation
Delegation is about giving someone else the authority to make a decision or accomplish a task on
your behalf. For delegation to be effective;
 You should only delegate the task to someone with the skills to undertake the task.
 There must be mutual trust between you and the person to whom you delegate.
 The task must be clearly defined and any tools required for the job must be available.
 You must give adequate support and supervision to the person to whom you are delegating
and when the task is well done; you must give full credit for this to the person to whom
you delegated.
Advantages of delegation include;

 You have more time to do the tasks only you can do.
 More people have the opportunity to share responsibility, to learn more and to become
more involved.
 Fuller use of skills and abilities is made.
Disadvantages of delegation include;
 It takes time to brief someone to do a task
 You may overload the person to whom you delegate and he may not carry out the task as
he would.
 Some people may over cross delegation boundaries and impose themselves as the new
leaders.
Remember, Delegation is not about passing on unpleasant responsibilities to others!! You cannot
delegate accountability.
Activity 3
Case Study
Jimmy Ogwang has been the LC 1 Chairperson of Liam since 2006. Although he is very well
liked, his problem is that he is continually postponing problems because he has other
commitments to attend to. He often fails to fulfill some commitments because he is very busy.
For instance, last year, he had three meetings to attend and two parties to officiate at and it ended
up that none took place. He cannot be removed from office because his people like him.

1. Why do you think Jimmy fails to fulfill all his commitments?
2. What advice would you give to Jimmy?
3.Time Management
Time is a unique resource- everyone has the same amount of time. This means people who succeed
make better use of their time than others. This is often done by allocating time according to a
clearly understood set of priorities, which is regularly reviewed. To be effective, you have to plan
your work and time, put your plan into action and then measure the performance.
If you start each day working with a definite plan, you will do a better job than someone who has
nothing particular in mind and sits around waiting for something to happen. Always ask yourself,
“Am I making the best use of my time right now? If the answer is YES, then continue with what
you are doing. If the answer is no, then think about what you should be doing.
Time management is about having the skill to use your time effectively. There are four elements
of good time management. These are;
1. Planning: This involves determining what you are going to do; how you are going to do it;
and when you are going to do it.
2. Organizing: This involves determining and obtaining the necessary resources and putting
them in proper order to work towards the achievement of your goals.
3. Developing. Developing involves improving resources to increase their productivity, e.g.
servicing of machines and equipment, and training.
4. Controlling: Controlling means keeping yourself organized and on top of things: avoiding
surprises. A useful device for keeping things under control is to use a pocket diary or even
phone Calendar- you can keep your entire work schedule in this.
4.Decision making
Decision making is about making a firm selection from among many alternative choices/options
of a particular course of action for solving a problem. It is therefore, a process through which a
course of action is selected as a solution to a specific problem.
The primary steps in an ideal decision making process are recognizing and defining the situation,
developing alternatives, evaluating alternatives, selecting the best alternative, implementing it and
evaluating its effectiveness. Creativity however is the back bone to decision making.
Strategies that can be used in decision making include;

 Identifying relevant information
 Distinguishing between facts and opinions
 Listing advantages and disadvantages
 Predicting the consequences of a solution or course of action
Who makes decisions?
Decisions are made by;
 Individuals
 Groups
 Managers
 Leaders
How do you make a good decision?
The process of decision making involves;
 Experience
 Knowledge
 Common sense
 Wise judgment
To make good decisions, you need:
· Information: You need to know about your actual situation. This may involve having to
collect the information. For example, communities may have to know the actual number of
children of school age who are not attending school before they realize the need for more
schools.
· Time: Don’t yield to the temptation of making quick decisions especially on issues that
may require well thought out strategies. Similarly, do not take eternity (very long time) to make
a decision. Make a decision at the appropriate time.
· Consult wisely: There is a common adage, “Let people advice you, but never allow them to
decide for you.” Consulting other people will enable us to weigh our options well before
jumping into the racket of decision making.
Activity 4
Case Study
The people of Liam organized themselves to start on two projects at their school. These projects
were the flooring of the roofed classroom and the rebuilding of a teacher’s house which had
recently nearly collapsed totally during very strong winds.
Before beginning either project, they met to decide how they should get about their tasks. They
decided they could not work on the two projects at the same time and so had to establish which
project was more important. There were supporters for both projects but, through discussions, the
group agreed to begin on the teacher’s house first. They had decided that this was the most urgent
and that it should be completed within one month.
Since this was a community initiative, it required the community to contribute funds, direct and
supervise the work on the project and pay the workers. According to plan, by the end of the month,
the house was Completed
1. What different things do you think the people of ABC may have considered before deciding
to start with the project of the teacher’s house?
2. Why do you think the project was able to be completed successfully and within the required
time?
5.Conflict handling
Conflict is the name given to serious disagreements between individuals and groups.
What do you think are the causes of conflicts within a group?
Causes of conflict in Groups

Some causes of conflict include some members;
 Trying to dominate the group by the way they behave or even speak
 Forming small cliques within the group and working for their own interests not those
of the group
 Not agreeing on the procedures of doing things; having different values or beliefs about
how things should be done
 Having negative feelings about the leader; attempting to discredit the leader and seek
power
 Struggling for something that may not be part of the group’s tasks e.g. two men in a
group fighting over one woman.
 directing unfair blame on others
 Making unconstructive criticism
 Laughing at other members’ efforts and contributions.
Effects of conflicts on Groups

Conflict can affect the group in many ways. Conflict can;
 Divert members to other issues and prevent them from getting on with the task at hand
 Disorganize the community and divide it into opposing sub groups, or cliques.
 Result in a situation where members are more interested in their side winning than in doing
what is best for the group.
Guidelines for conflict handling

 Define and describe the conflict, i.e. establish its nature and decide how it manifests itself.
 Deal with issues rather than personalities
 Deal with one issue at a time
 Don’t allow issues to grow: deal with them while they are still small.
 Use persuasion rather than threats.
 Emphasize the common goal and objectives shared by the community or group: let people
realize they have something in common, despite the conflict.
 Don’t allow hidden agendas or secret intentions, old feelings to surface
 Involve all parties in the conflict in a community meeting.
 Work for a situation where everyone feels they have won something, rather than where
some win and others lose.
There are many skills necessary to handle conflicts.

These include;
 Avoiding conflict by changing the subject that might be confrontational
 Compromise i.e. giving in part and expecting others to do the same so you meet in the
middle.
 Accommodating, i.e. trying to push aside the issues which bring about differences in order
to be able to live and work together in harmony.
 Joint problem solving, i.e. working together with all sides in the conflict to reach a solution
on issues which cause the conflict.
CHAPTER SIX
GROUP MANAGEMENT COMMITTEES
Introduction
What is a Committee?
A committee is a group of people selected from a larger group (which may be the whole
community) to oversee the organization or running of some particular activities to ensure
maximum results.
Who are the key members of a committee and what are their roles?
Within the committee, the key members are the;
 Chairperson
 Secretary
 Treasurer
The Specific Roles Of The Key Committee Members
Chairperson:
7. To call the meetings to order, announce the agenda and lead discussions
8. To ensure that the meetings follow proper procedure and that the constitution/ By-laws is
followed and respected
9. Communicates final decisions on behalf of the committee
10. Directs and coordinates the activities
11. To facilitate discussions and to ensure that everyone’s views are listened to
12. To resolve conflicts
13. To represent the Association to outsiders and non-members, including government officials.
Secretary:
1. Ensures that information reaches people
2. Organizes meetings in close liaison with the Chairperson
3. Takes minutes of meetings
4. Keeps records
Treasurer:
 Keeps proper records of accounts
 Collects contributions from the members where necessary
 Updates the committee on the use of the funds
The committee will also include Committee members (who can be requested to help any of the
above office bearers when need arises), depending on the activity. The final composition of the
committee will depend on its functions. As a golden rule however, Committees must have odd
numbers e.g. 3, 5, 7 and 9 to facilitate voting processes and avoid a tie in elections or decision of
important issues. Committees must also not go beyond 9 members. If the group is too big for the
nine members, it should be divided and another committee put in place to manage the new group.
Factors to be considered or rather the qualities of committee members depend on the position in
question e.g. a Treasurer must be trustworthy with skills in numeracy.
Factors to be considered when selecting committee members include:

 Accessibility of the members to the larger group
 Acceptability of the members by the larger group
Personal Characteristics To Consider Include The Member Showing:

 Willingness to participate
 Commitment
 Flexibility
 Leadership skills
Qualities and Responsibilities of the Committee Members
POSITION QUALITIES ROLES & RESPONSIBILITIES

Chairperson  Respected  To call the meetings to order,
 Has good ideas announce the agenda and lead
 Trustworthy discussions
 Fair with everyone at all times and treats  To ensure that the meetings follow
everyone equally proper procedure and that the
 Confident and calm constitution/ By-laws is followed and
 Listens to others and takes their respected
opinions into account  Communicates final decisions on
 Organised behalf of the committee
 Punctual  Directs and coordinates the activities
 At ease speaking in front of others  To facilitate discussions and to ensure
 Capable of summarising the views of that everyone’s views are listened to
many people  To resolve conflicts
 To represent the Association to
outsiders and non-members, including
government officials.
Secretary  Trustworthy  Ensures that information reaches
 Reliable people
 Intelligent  Organizes meetings in close liaison
 From a respected home, reputed for with the Chairperson
honesty  Takes minutes of meetings Keeps
 Punctual records
Treasurer  Numerate and able to keep simple  Keeps proper records of accounts
financial records  Collects contributions from the
 Trustworthy and with a strong character members where necessary
 From a family with a good reputation  Updates the committee on the use of
 Lives in a secure house where money the funds
can be safe
 Reliable and responsible
 Punctual
Every committee should be made up of both men and women. Committees should also be
representative of the larger group.
If the committee is representative, then the decisions the committee makes are more likely to be
accepted by and agreeable to the larger group. The committee is also more likely to gain the support
of the people in its undertakings, e.g. mobilization of resources.
What The Committees Does

The general roles of a committee include;
 Managing and ensuring the continuity of activities
 Managing and mobilizing resources, like money, people, materials, equipment, land and
time so that the objectives are achieved. Managing money requires keeping accounts.
 Ensuring the required tasks are achieved to agreed standards.
 Ensuring effective communication and clear understanding between people.
 Coordinating between the larger group and any donor agencies or the government
 Encouraging the participation and commitment of the people involved.
How To Plan A Committee Meeting

A meeting is a coming together of people to discuss or decide on specific matters. Participants list
and discuss factors which can contribute to the success or failure of a meeting
There are six basic principles to follow in order to conduct an effective meeting. These are;
 Purpose There should be a clearly defined reason for calling the meeting.
 Objectives. The objectives set for the meeting should relate to the activities to be
carried out in the meeting.
 Agenda. There should be a list of all the issues which are to be covered during the
meeting. This agenda should be communicated to all the members before the meeting
so that they come ready to deliberate on the issues. Members should also be allowed to
make a contribution towards the items in the agenda.
 Timing. Every agenda items should have a specific time allocated for its discussion.
The set timetable should be followed during the meeting. The duration of the meeting
should be communicated to the members at the beginning of the meeting.
 Action. By the end of the meeting, the committee members should have drawn up a
plan of action from what has been decided.
 Record keeping. Every key issue which is discussed should be recorded. Records of
the discussions and decisions made at meetings are called minutes. These help in
facilitating the follow up of action decided upon during the meeting.
Procedures For A Meeting

Although every meeting conducted may be slightly different, general procedures to follow are;
 Opening the meeting
 Reading the minutes of the previous meeting
 Discussing any matters arising from previous minutes
 Discussing agenda items
 Drawing up a course of action
 Closing the meeting
How to draw up an agenda

All parties concerned should be consulted. The agenda should not originate from only one source,
e.g. the Chairperson. The Chairperson should send out notice of the intended meeting and a request
for agenda items through the secretary two weeks before the meeting date. Alternatively, the
Chairperson can propose the items on the agenda and request for the input of all the members.
A sample of an Agenda for a meeting:
United Group 2nd Executive Committee Meeting to be held on 2nd September, 2017 at ABC
Primary School from 10:00am
Agenda:
 Opening Prayer
 Welcome remarks and introductions
 Reading of previous minutes and reactions
 Discussion of key issues
 Action Plan
 AOB
 Closure
In most Christian communities, meetings start with an opening prayer. This may not be applicable
to other religions so just cross check this before you put it in the agenda.
Welcome remarks are important to call members’ attention to the meeting. If the members already
know each other, there will be no need for introductions.
AOB (Any Other Business). This gives room for members to bring in those very vital issues that
were not covered in the agenda and yet important for progress. AOB should be relevant to what
the meeting was addressing and contribute towards the progress of the group e.g. a member might
point out the availability of a funding opportunity so that the group can act and submit a proposal.
AOB can also be an avenue for members to provide information on personal challenges that could
be affecting them and seeking for the counsel and support of peers.
The roles of Committees in meeting

Chairperson:
 Calls the meeting
 Ensures full participation of all the members
 Directs the flow of the meeting
 Takes votes if necessary
Secretary
 Reads the previous minutes before discussions of the meeting start
 Records the minutes of the meeting
 Is the custodian of committee records
Treasurer
 Keeps all the funds collected during a meeting
 Pays for any costs incurred during the meeting
 Keeps all accountabilities for money spent
CHAPTER SEVEN
COMPONENTS OF EFFECTIVE GROUPS
Group Constitution or Bye-Laws
An example of what might be contained in a group constitution is given below. At the end of
session, the Facilitator should challenge the Group to develop a Constitution that he/she can review
so that by the end of the Group Dynamics Training, the Group has a Constitution.
Group Constitution Sample
1. Name of Group
2. Aims of the Group
For example;
To improve the Income and Food Security at Household and
Community level To generate income
3. Objectives of the Group
For example;
 To introduce new and appropriate technologies in households
 To initiate income generating activities
3. Group Membership
 Lower age limit
 Gender
 Residence
 Other common circumstances
 Size of the group
 Membership fee
 When does one cease being a member?
 What happens when someone wants to end their membership?
 What happens if a member dies?
4. Activities of the Group
5. Election of Office Bearers/Leaders
 What are the positions to be filled?
 How will the leaders be elected? Secret Ballot or show of hands?
 How long is the term of office for the leaders?
 What are the roles and responsibilities of the leaders?
 Under what circumstances can someone lose his leadership position?
6. Group Organization
 The group (or sub groups if the main group is very large) should meet every...at... Members
are required to attend regularly. Failure to attend on three consecutive meetings without
apology or permission/written reason will result in the member being warned.
 When a member is dismissed or ceases membership, he/she forfeits any shares,
contributions or subscriptions paid to the group. This may not be applicable to some groups
like VSLA.
 There should be an Annual General Meeting (AGM). A special general meeting can be held
in the case of emergency.
7. Distribution of Assets
 When profits are made on group projects, these will be distributed amongst active
members.
 Members can borrow from Group funds. Loans will be repayable within a given period and
with reasonable profit. The Executive will be responsible for the issuing of loans but all
members will approve.
 A bank account for the group will be opened. The account will, e.g. require three
signatories, i.e. the chairperson, Secretary and Treasurer. These people will be responsible
for withdrawing money from the bank.
8. Dissolution of Group
After debts have been paid, assets may be sold and or distributed to members.
Group Constitution Template

1. Name of Group
2. Aims of the Group For example;
To improve the Income and Food Security at Household and Community level
To generate income
3. Objectives of the
Group For example;
To introduce new and appropriate technologies in
households To initiate income generating activities
4. Group
Membership
Lower age limit
Gender Residence
Other common
circumstances Size of the
group Membership fee
When does one cease being a member?
What happens when someone wants to end their
membership? What happens if a member dies?
5. Activities of the Group
6. Election of Office Bearers/Leaders
What are the positions to be filled?
How will the leaders be elected? Secret Ballot or show of
hands? How long is the term of office for the leaders?
What are the roles and responsibilities of the leaders?
Under what circumstances can someone lose his leadership position?
7. Group Organization
The group (or sub groups if the main group is very large) should meet every...at... Members are required
to attend regularly. Failure to attend on three consecutive meetings without apology or
permission/written reason will result in the member being warned.
When a member is dismissed or ceases membership, he/she forfeits any shares, contributions or
subscriptions paid to the group. This may not be applicable to some groups like VSLA.
There should be an Annual General Meeting (AGM). A special general meeting can be held in the
case of emergency.
8. Distribution of Assets
When profits are made on group projects, these will be distributed amongst active members.
Members can borrow from Group funds. Loans will be repayable within a given period and with
reasonable profit. The Executive will be responsible for the issuing of loans but all members will
approve. A bank account for the group will be opened. The account will, e.g. require three signatories,
i.e. the chairperson, Secretary and Treasurer. These people will be responsible for withdrawing money
from the bank.
9. Dissolution of Group
After debts have been paid, assets may be sold and or distributed to members.
Drawn By:
2jiajiri Group
P.O.BOX 0000-Muthiga - KENYA
A Practical Exercise
Election of Group Committee Members and Development of Group Constitution
Delivery
 The Facilitator will ask the Group if they feel that they need to re-elect their Committee
Members in line with the Qualities and Skills needed. If the Group says yes, then the
Facilitator will lead the participants through the election process by asking them which
process they want to follow in electing their Executive Committee.
 The Facilitator will provide a copy of the Constitution Template and Sample for the Group
for the Groups to use in developing or reviewing their Group Constitution.
NOTE;. By This Point, The Trainees should have formed Temporary Groups for Entrepreneurship,
Innovation & Creativity, Communication Skills and Group Dynamics For Practice Purposes.
LIFE SKILLS
CHAPTER ONE
INTRODUCTION TO LIFE SKILLS
Definition Of Skills
Skill is the knowledge and ability that enables you to do something well.
A skill is a type of work or activity which requires special training and knowledge
A skill is the ability to carry out a task with determined results often within a given amount of
time, energy, or both. Skills can often be divided into domain-general and domain-specific skills.
For example, in the domain of work, some general skills would include time management,
teamwork and leadership, self-motivation and others, whereas domain-specific skills would be
used only for a certain job. Skill usually requires certain environmental stimuli and situations to
assess the level of skill being shown and used.
Types Of Skills
- Literary Skills
- Language Skills
- Functional Skills
- Livelihood Skills
- Vocational Skills
- Technical Skills
- Employability Skills
- Cultural Skills
- Sports Skills
- Recreational Skills
- LIFE SKILLS
What are Life Skills?
Life skills education is one of the most effective approaches to equip the youth with knowledge,
skills attitudes and values that empower them. This empowerment enables the youth to face
realities of life and therefore take responsibility of their actions for this reason there is need to
promote life skills education.
Life Skills are abilities for adaptive and positive behavior that enable individuals to deal effectively
with the demands and challenges of everyday life (WHO) Adaptive means that a person should
have the flexibility to adjust according to the situation. For positive behavior, a person needs to
have positive thinking and look at opportunities even in difficult situations, in order to cope with
the situation.
UNICEF defines Life Skills as “a behavior change or behavior development approach designed to
address a balance of three areas: knowledge, attitude and skills”. Life Skills, are essentially those
abilities that help to promote physical, mental and emotional well being and competence to face
the realities of life.
Life skills are abilities for adaptive and positive behaviour that enable humans to deal effectively
with the demands and challenges of life This concept is also termed
as psychosocial competency. The subject varies greatly depending on social norms and
community expectations but skills that functions for well-being and aid individuals to develop into
active and productive members of their communities are considered as life skills
Objectives Of Life Skills Education

Life skills Education should enable learners to:-
- Develop an awareness and understanding of everyday demands and challenges
- Understand and deal with their health problems, fears and anxieties about growing up
sexuality and relationships.
- Enhance their self-esteem and assertiveness in their relationships with peers and adults.
- Develop an appreciation of females and males as equal partners in society.
- Make optimum use of available resources in order to improve the quality of life.
- Develop attitude values and skills that promote positive responsible and healthy life styles.
- Develop an understanding support and a sense of care and responsibility for disadvantaged
groups in the community.
- Recognize themselves, as responsible members of the society, when a contribution to their
development and well-being.
- Demonstrate an understanding of the skills.
Sources Of Life Skills

People learn life skills from different sources. The following are the major ones.
1. Family: Parents, guardians and other relatives are primary source from whom we learn
different life skills.
2. Neighbors: We learn the different ways that people live from our neighbors. Good
neighbors help us to behave well.
3. Friends: Friends helps us to acquire various life skills. Exchanging good ideas with friends
help to mold us in to well-behaved individuals.
4. Schools: The good education we get at school enables us to develop skills for life.
5. Society: the way people live in the society allows an individual to learn what is expected
of him/her and how he/she should behave in different circumstances.
6. Religion: Good religion teachings help to get skills which enable us to live harmoniously
in society Note: The above mentioned sources of life skills are sources of positive and
progressive life skills.
The Ten Core Life Skills (WHO)

1. Self-Awareness
2. Empathy
3. Critical Thinking
4. Creative Thinking
5. Decision Making
6. Problem Solving
7. Effective Communication
8. Interpersonal Relationship
9. Coping With Stress
10. Coping With Emotion
Self-Awareness- includes recognition of ‘self’, our character, our strengths and weaknesses,
desires and dislikes. Developing self-awareness can help us to recognize when we are stressed or
feel under pressure. It is often a prerequisite to effective communication and interpersonal
relations, as well as for developing empathy with others.
Empathy - To have a successful relationship with our loved ones and society at large, we need to
understand and care about other peoples’ needs, desires and feelings. Empathy is the ability to
imagine what life is like for another person. Without empathy, our communication with others will
amount to one-way traffic.
When we understand ourselves as well as others, we are better prepared to communicate our needs
and desires. We will be more equipped to say what we want people to know, present our thoughts
and ideas and tackle delicate issues without offending other people. At the same time, we will be
able to elicit support from others, and win their understanding. Empathy can help us to accept
others, who may be very different from ourselves. This can improve social interactions, especially,
in situations of ethnic or cultural diversity.
Critical Thinking is an ability to analyze information and experiences in an objective manner.

Critical thinking can contribute to health by helping us to recognize and assess the factors that
influence attitudes and behaviour, such as values, peer pressure and the media.
Creative Thinking is a novel way of seeing or doing things that is characteristic of four
components – fluency (generating new ideas), flexibility (shifting perspective easily), originality
(conceiving of something new), and elaboration (building on other ideas).
Decision Making helps us to deal constructively with decisions about our lives. This can have
consequences for health. It can teach people how to actively make decisions about their actions in
relation to healthy assessment of different options and, what effects these different decisions are
likely to have.
Problem Solving helps us to deal constructively with problems in our lives. Significant problems
that are left unresolved can cause mental stress and give rise to accompanying physical strain.
Interpersonal Relationship Skills help us to relate in positive ways with the people we interact
with. This may mean being able to make and keep friendly relationships, which can be of great
importance to our mental and social well-being. It may mean keeping, good relations with family
members, which are an important source of social support. It may also mean being able to end
relationships constructively.
Effective Communication means that we are able to express ourselves, both verbally and non-
verbally, in ways that are appropriate to our cultures and situations. This means being able to
express opinions and desires, and also needs and fears. And it may mean being able to ask for
advice and help in a time of need.
Coping With Stress Means recognizing the sources of stress in our lives, recognizing how this
affects us, and acting in ways that help us control our levels of stress, by changing our environment
or lifestyle and learning how to relax.
Coping With Emotions means involving recognizing emotions within us and others, being aware
of how emotions influence behaviour and being able to respond to emotions appropriately. Intense
emotions like anger or sadness can have negative effects on our health if we do not respond
appropriately
Importance Of Life Skills

Life skills are very important because they help develop abilities which are necessary for making
life better. Some of the things that these skills enable us to do include:
 Make proper decisions in life on different matters, like friendships, whichsubjects to
studyin school and what career to pursue.
 Develop good behavior. Through social skills, a person is able to avoid bad friends and
anti-social behavior such as smoking, drug abuse, abusing alcohol and getting into
premature sexual relationships.
 Increase love and understanding for other people because of good social skills.
 Respond effectively to different situations. Through life skills, a person is able to handle
unfortunate occurrences such as divorce, death of friends or relatives, examination pressure
or any form of harassment or intimidation.
 Maintain peace and order. Negotiation skills enable people to solve their problems
peacefully. This helps prevent conflict.
 Understand the environment and ways to fit in it because you have skills to solve any
problem around you. It also helps to maintain the culture of your community.
CHAPTER TWO
TYPES OF LIFE SKILLS
There are three major types of life skills. These are: individual life skills, social skills and
effective decision- making skills.
Individual Life Skills

The ability of a person to know and understand personal feelings, emotions, strengths, weaknesses
as well as the position in life and society. It is also the ability of an individual to have a clear vision
of self-identity of where he/she come from and culture which has shaped him/her.
(a). Self-awareness
Awareness is the ability of knowing things. Thus self- awareness is the ability of an individual to
know himself or herself, his or her feelings, emotions, strengths and weaknesses. This skill enables
a person to ask important questions about himself or herself.
Ask yourself the following questions and try to answer them.
 Who am I and what is my role in the society?
 What do I like, what are my dislikes and why?
 What makes me happy, what makes me unhappy and why?
(b). Copying with stress

Stress is a mental, emotional or physical tension or pressure. It can be caused by the events such
as examinations, divorce, death of a family member or a friend or problems in the family. A
person needs to develop skills that help him or her to cope with stress
 Would you be happy with the results? Why?
 Would your parents be happy with the results? Why?
 Would you be able to explain the results to other people? Why?
 How would you cope with this situation?
(c). Copying with emotions

Emotions are strong feelings such as love, the desire to be accepted, fear, anger shyness and
disgust. The ability to handle emotions enables a person to control his/her strong feelings and
actions. Evaluate yourself. Let’s say you are too shy to ask or answer questions in class:
 How would you feel about this situation? Why?
 How would your fellow students react to this behaviour during the lesson?
 How would you overcome your shyness?
(d). Assertiveness
Assertiveness is the ability of a person to know what he/she wants and why, and be able to take
necessary steps to achieve it. An assertive person is able to express his or her opinions or desires
strongly and with confidence. However in achieving what he/she wants the person has to consider
rights of others.
The motion is, `Teachers should build laboratories for practical training in the school. ` You are
proposing this motion. How can you convince the other students to support your side?
Social Skills
This is the ability to understand and live in peace and harmony with others. These are skills for the
development of positive interpersonal relationships with friends, family members, peers, people
in authority and adults. Social life skills can be developed through the following:
(a). Building Positive Relationships With Others

This is the ability of a person to meet and relate with others in various places such as schools,
playing field and social gathering. Relationships can be between children and parents or students
and teachers. They can also be between relatives, neighbours or peers. Being able to form healthy
relationships enables one to know how to behave properly in each relationship.
(B). Peer Resistance

Peer pressure iswhen one's peers/friends influence another person to do something. Our friends
can influence us to do good or bad things. For example, positive peer pressure can lead to you to
work harder in school and improve your grades. Negative peer pressure can cause you to engage
in wrong activities, such as drugabusing andescaping from school. Such bad behavior will get you
into trouble with your teachers and parents. No one wants to have a friend who can lead one into
problems. Peer resistance helps an individual to take control of him/herself by resisting negative
influences from others. Evaluate yourself:
 Have you ever been influenced by your friends to do something?Elaborate
 Was it good or bad?
 What did you do when you were influenced to do bad things?
(c). Empathy
This is the ability to understand other people`s feelings and to feel concerned about their
problems. When you empathize, you imagine yourself in the other people`s situation. This skill
enables us to share our friend’s problems. Evaluate yourself:
 How do you feel when your best friend is faced with problems?
 Imagine your friend has failed the civic test. Say how you would feel and what can you
do to help him/her?
(d). Negotiation
This is the ability to agree on issues without undermining or going against one’s principles. It is
an important skill when disagreements occur. Negotiation skills build good understanding.
Evaluate yourself. Imagine your friend wants you to discuss mathematics with him/her while you
wanted to discuss civics. How would you negotiate with him/her so that both of you can agree?
(E) Effective Communication

This is the ability of a person to communicate with people according to their mood, age and
background. It includes speaking, reading, listening and writing skills. This skill is very important
in maintaining good relationship with other people. Speaking correctly means saying what you
want in a way that can be easily and clearly understood. Evaluate yourself;
 Do you talk to your parents the same way you talk to your younger brother or sister?
Why?
 How do you talk to your best friend when he/she is happy? How do you talk to him/her
when he or she is sad?
Effective Decision-Making Skills

These skills enable a person to make good decisions. The following are the aspects of effective
decision-making skills: Critical thinking, creative thinking, problem-solving and decision-
making.
(A) Critical Thinking

This is the ability of a person to develop a deep understanding of something. It helps a person to
understand the environment in which he/she lives and problems which might prevent him or her
from making proper decisions. Before making a decision, a critical thinker considers the
advantages and disadvantages of various ways of doing something. Critical thinker helps a person
to come up with ideas to solve problems. Evaluate yourself What problems does your school face?
Can you find out their cause? Have you ever thought of how to solve them?
(B) Creative Thinking

This is the ability to think and come up with new ideas and ways of doing things. In life, creative
thinking helps an individual to come up with solutions that other people had not thought of.
Evaluate yourself
 Have you found problems at your school or home which other people did not know of?
 Were you able to suggest solutions that other people had not thought of?
(C) Decision-Making
This is the ability to make the best choice out of many available options. The choice is made after
considering its results. In life, it is important to think about consequences before making a decision.
Evaluate yourself; Imagine your pen cannot write and you do not have money to buy a new one.
How do you solve this problem?
The Ways Of Using Social Skills

Social skills help a person to know and live with others peacefully. They give a person knowledge
and ability to live a better life with other people in the society. Social skills consist of the ability
to form good relationship with other people, make good friends, show empathy, exhibit peer
resistance, negotiate effectively and have effective communication. We can use social skills in the
following ways:
Forming Relationship With Other People - This skill enables one to know how to behave in
each relationship. It helps a person to behave properly according to the prevailing situation.
Making Good Friends – A person can use this skill to make good friends. Good friends are
those who:
(i). Respect and assist us, our parents, relatives and elders
(ii). Go to school and school rules.
(iii). Assist each other when in problems
(iv). Correct each other when one misbehave
Showing Empathy – this is the ability to feel what others are going through, especially when
they are experiencing problems. This social skill enables one to understand other people’s
problems and show feelings. It enables a person to take part in finding out ways to solve other
people’s problems.
Exhibiting Peer Resistance – A person who have proper social skills is able to resist bad
influences from his/her peers or friends. Such a person does not do things that are unacceptable
to society, for example fighting, prostitution, theft and truancy.
Displaying Effective Communication – Proper communication can be used to establish good

relationships with others people. It is through effective speaking, writing and listening that a
person can establish relationships with others.
Problem – Solving – This is the social skill that enables a person to make a proper decisions in
difficult times
CHAPTER THREE
CATEGORIES OF LIFE SKILLS
Life Skills are classified into three broad categories namely:-
- Skills of knowing and living with oneself.
- Skills of knowing and living with others.
- Skills of making effective decision.
SKILLS OF KNOWING AND LIVING WITH ONESELF

This category entails skills that are closely linked to each other which aim at enhancing self
understanding, growth, coping with challenges of life and developing potential. They include:
- Self awareness
- Self esteem
- Coping with emotions
- Coping with stress.
1. SELF AWARENESS
Self awareness is the ability of an individual to understand oneself, one’s emotions, abilities,
strengths and weaknesses. This self awareness happens when an individual interacts with others
and listens to comments made about them.
As people get older they become increasingly conscious of who they are leading to development
of self awareness. The feedback received and the value judgment attached to it leads one to self-
image which can be positive or negative.
Self image is a fundamental pillar of human personalities as one evaluates oneself, forms one’s
self-esteem according to mental pictures or images of one’s self. If one happens to see oneself as
good, clever, successful, likeable etc, one develops a positive self-esteem. On the other hand, if
one will have largely received negative feedback, sees one’s self as unlikeable and stupid, she/he
will develop a low self-esteem.
It should be noted that the environment play a big role in building of children’s self-
esteem. Parents and teachers play a significant role in building self-esteem in children.
Parents and teachers can help children or learners to develop high self-esteem by providing them
with positive feedback.
Some of the things that could be postured to build a positive self-image include:-
- Recognizing one’s weaknesses and seeking ways to improve.

- Realizing that one is a special and unique creative.
- Avoiding harsh self-criticism, being gentle to oneself.
- Using failure as learning or starting point, as a challenge or opportunity for growth.
- Complimenting oneself and others for successes achieved.
- Celebrating or focusing on strengths and trying to build on them.
- Being happy and confident with oneself.
- Not blaming one self for the mistakes of others.
- Maturity In emotions. Emotional maturity is manifested through control of emotions.
Control of emotions is important to us because it enable us:

- Live at peace with ourselves and others.
- Not to cause harm to ourselves or other people. For example lack of control of one’s joy /
happiness could be a nuisance to other people through uncontrolled laugher or shouting. On the
other hand, uncontrolled sorrow can lead one to depression.
We can control our emotions by observing the following:
- Seeking guidance and counseling. For example when we are faced with disturbing issues,
it is advisable to seek for professional guidance and counseling. Another alternative for facing
such a situation is seeking help from people who have gone through a similar experience.
- Exercising patience, for example we should not take action while we are still angered. We
should do after cooling down.
- Forgiving those who wrong us instead of becoming angry with them.
- Praying to God to give us guidance to cope with the emotions.
2. SELF ESTEEM
- It is the way we feel about ourselves self-esteem is the awareness of a person’s attitudes and
values. It is the way we rate ourselves, the respect we accord ourselves and the confidence we have in
ourselves.
- Self esteem as a skill influences our actions, the attitudes we hold of ourselves and ultimately what
we achieve in life. When teachers build self-esteem of their learners, they contribute in making them self
directed. When learners have self-esteem, they understand who they are and what they want in life. These
leads to the learners becoming focuses, determined and able to set realistic goals.
3. COPING WITH EMOTIONS

- Emotions are strong feelings that we go through. They include anger, fear, sorrow, joy and
love. Depending on different situations and circumstances, our emotions change from time to time for
example, when we receive good news, we become happy while when we receive bad news, we become sad
and sorrowful.
- Good emotions such as joy, love and excitement are desirable. Bad emotions such as anger, jealousy and
fear are undesirable.
- Emotions need to be controlled so that people can live at peace and harmony. Control of emotions will
lead to an environment free of quarrels, fights and violence. Maturity in mind and body goes hand in
hand with Skills of knowing and living with oneself.
4. COPING WITH STRESS
Stress involved pressure, tension or wrong resulting from problems in one’s life. Stress is an
individual’s response to overwhelming internal and external demands.
When people are stressed they are unable to response appropriately to challenging issues and
situations. Examples of causes of stress among young people include:-
- Academic pressure, rejection by peers (biological, physical and emotional), poor

communication in the family and death of loved ones among others.
A healthy level of stress is necessary for us to achieve some of our goals stress can help us improve
performance or complete tasks in good time. However, too much stress can be harmful to our
health, relationships and performance.
To ensure that we live happy and healthy lives we need to identify:-
- What causes our stress so that we can avoid it.
- Signs of stress in our bodies so that as soon as we get them we do all we can to get rid of
the stress that is causing the feelings.
In order to live stress free lives, we need to understand and appreciate ourselves. We need to know
our strengths and limitations. This helps us to kill what we can do and we cannot do. We also
need to be positive in life and to keep busy.
Managing Stress
- Know what causes your stress. Avoid what cause you stress
- Know the signs of stress in your body when you get these signs act to avoid stress learn to enjoy
life.
- Learn to be grateful for what you have.
- Have a positive view of life
- Be organized. Plan your work in advance. Plan your time. Have a list to shoe priorities, what will
be done when and plan your future.
- Be assertive. Know your rights and defend them and respect the rights of others.
- Create a friendly and peaceful environment because this reduces stress.
- Balance your work and leisure. Balance what you do for your family and community.
- Learn to relax and exercise
- Have moments of silence
- Express your emotions appropriately
- When faced with problems learn to be clam, learn to take time to serve problems.
- Keep yourself busy
- Learn to pray and trust God to help you to deal with problems you face.
Coping With Challenges

Challenges can be cooked at as demanding tasks, or situations, problems or difficulties. They can
also be described as something that is hard to understand, accomplished or deal with.
Challenges are experienced by all people regarding of their status in life. When people face
challenges, they experience certainty in achieving desired results or objectives. Sometimes
challenges may overwhelm people and they may result into desperation and self pity.
What are some of the challenges that people experience?
Different people experience different challenges such as:
- Having a poor self concept or self image: people who have this difficulty suffer from a
low self-esteem and lack of confidence in themselves and in what they do. They are likely to be
failures in life or may become aggressive and hostile in the way they relate with other people.
- Financial challenges: The economically disadvantaged in society find it’s difficult to meet
their basic needs of food, shelter and clothing. They cannot support themselves or their children
and end up being desperate and hopeless.
- The rich also experience challenges that are posed by their wealth. They may have too
much wealth that may make them arrogant and even forget God. They may also get addicted to
wealth such that they can do anything to acquire more wealth such as exploiting others, engaging
in illegal trade and even grabbing other people’s property.
Their arrogance may make them unpopular and as a result may be avoided by other people hence
leading to loneliness. They may live in fear and insecurity of losing their wealth to thieves.
- Indiscipline children: Parents may experience challenges as they bring up their children
especially adolescents who become rebellious and resort to irresponsible behavior such parents
worry about their children and may blame themselves for the mistakes or failure of their children.
- How to handle interpersonal relationships” some people lack interpersonal skills for critical
and judgmental.
- Poor academic achievement: at school level some learners have challenges in

understanding some subjects or certain concepts, such students perform poorly and may get
discouraged unless supported by their teachers and fellow students. In some cases such learners
drop out of schools.
- Health issues: These may cause challenges to individuals and members of their
families. For example, some sickness may be terminal and may drain family resources and cause
a lot of suffering. Sickness interferes with the well-being of a person.
- Other challenges that people face include separation, divorce, bereavement and loss of
property.
When faced with challenges, people should not give up but look for solutions.
Approaches Of Coping With Challenges
- Accepting that the challenges exists once we accept a challenge, we can then proceed to
look for possible ways of dealing with it; we should never run away from challenges as this will
only make matters worse.
- Develop a positive attitude in dealing with challenges. All challenges have something
positive to teach us. A positive attitude encourages us to realize that problems are temporary and
that they should not stop us from moving on.
- Seek guidance and counseling and talk to people who have experienced similar
challenges. This will alleviate the fears one may have and provide support on how to deal with
such challenges.
- Avoid irrational decisions, when faced with a challenging situation. It is advisable to take
time to analyze the problem and evaluate all options before making a decision.
- Avoid alcohol and drugs as an escape route to dealing with challenges. These may provide
temporary relief but will not solve the problem.
- Carry out research on the nature of the challenges so as to understand and find out the
solutions.
- Pray to God for guidance on how to deal with the challenge. Read relevant scriptures from
the Bible on similar challenges. The Bible offers inspiring guidance on how to cope with
challenges of life such as finance, family and suffering.
Summary
In this lesson, we have looked at the necessary skills of knowing and living with one self. We have looked
at ways of coping with ones’ emotions, coping with stress and the challenges that we are likely to encounter
in the relation with self.
CHAPTER FOUR
SKILLS OF KNOWING AND LIVING WITH OTHERS

Introduction
As we understand ourselves and assert ourselves, we ought to take care not to hurt other people
feelings by stepping on their rights, loosing dignity for them and interfering with their
privacy. This lesson shall take us through the assertive skills, friendship skills and non-violent
approach to resolving conflicts.
Human beings are social beings who need to relate with one another in various stages of life and
in different settings. To be able to relate well, people need to acquire the skills of living with other
people.
The acquisitions of these skills make people to live in peace and harmony. Some of the life skills
of living with others include assertiveness empathy, negations / tolerance, effective
communication and conflict resolutions.
These are skills that help us to establish and maintain good relationship in society. They are also
referred to as interpersonal relationship skills. Some of the skills considered under this group
include:
- Empathy
- Effective communication
- Assertiveness
- Friendship formation and maintenance
- Negotiation skills
- Non violent conflict resolution.
1. EMPATHY
Empathy is the ability to feel with other and to identify with their feelings and emotions as they
face the challenges and problems of life.
The following are examples where empathy is required:-
- Death of a loved one may it be parents, children, husband / wives ore close relatives.
- When one fails a major examination
- When one loses a job
- When a relationship beaks up
- When one is either separated from his/her spouse.
- When one loses property or money through calamities like theft, fire or collapse of financial
institutions.
How do we show empathy?
- Being loving, caring, kind and understanding
- Being available for the person to listen to his story of hurt, sadness, sorrow and anger.
- Consoling the person who is hurting.
- Encouraging the person affected to express his hurt, pain emotions and feelings without
fear. Being able to listen to the person actively without judging them.
- Being confidential, not letting others know what you have been told in confidence by the
person who has told you about his hurt.
- Asserting when possible in order to reduce the pain and hurt. If for example, one has lost
her job and has no money you can assist the person with money to use while she looks for another
job or connect the person with other employers.
2. EFFECTIVE COMMUNICATION
Communication is the transmission of information, ideas, attitudes or emotions from one person
to another. The information must be understood by the receiver who should then send a feedback
to the sender. The message send should be in such a way that there is a common understanding
about it.
In any form of communication, there should be the sender, the message the channel for conveying
the message.
Elements in communication
- A sender in communication
- The message
- A receiver of the message
- The medium / channel of transmitting the message.
- Feedback
Communication is an important skill of knowing and living with others. In effective
communication the sender has to be clear, audible and have attributes that easily make his/her
message acceptable. The sender should also not act or adorn him/herself in ways that can distract
receiver from getting the message.
The sender should also use a suitable channel to convey the message for example appropriate voice
projection, tone variation, radios and electronic media.
The message should be clear so that is understood by the receiver. The feedback received by the
sender will determine whether communication has been effective.
Goals Of Communication
When we engage in communication, we normally target:-
- To convey information
- To ensure understanding
- To get action
- To persuade
- To modify behavior
- To express feelings and emotions
- To change attitude.
Ways Of Communication
There are various ways that could be used to communication with others namely:
- Speaking
- Writing
- Listening
- Gestures
- Facial expression
- Body language
- Change in voice
Communication Barriers
Communication barriers are the problems that occur during transmission of information from the
time the message is sent by the sender to the receiver.
Communication barriers result in the message not being understood by the receiver. Some of the
very common communication barriers are:-
(a). Language barriers. Language becomes a problem where there are differences in language,
culture, age and educational background.
(b). Physical barriers. Physical barrier come about when communication is disrupted for
example by power failure distance, noise etc.
(c). Cultural and attitude differences for example, failure to get attention to messages from
people of another accouter.
(d). Organizational structure barriers such as long chain of commands or lack of awareness of
the accepted chain of communication.
(e). Technology related problems. Those who do not have the necessary skills to operate
computers, videos, films or cameras, may have problems accessing information or
communicating with others who use this type of technology.
(f). Failure to plan. If you do not plan what you intend to tell people you may create a
communication barrier
(g). Distorted information. At times the information we send up being distorted by those who
receive it. This may be intentional or unintentional.
(h). Having wrong attitude. If you have a wrong attitude towards people you may not care to
understand what they say.
(I). Asking wrong questions. When people ask wrong questions they put off those who send
the message and also other listeners. This may hinder communication because those
sending the message may get fed up and stop sending any more information.
(j). Poor listening and pre-mature evaluation. When people do not listen attentively to those
talking, they may not understand most of what is said. In addition there are people who do
not listen attentively to others. They start interrupting conversations.
(k). Age difference. These, differences may result in communication barriers because people
do not understand one another due to their age differences.
Dealing With Communication Barriers Can Be Dealt With.

Communication barriers can be dealt with in various ways. Depending on the type of
communication barrier, various methods can be implored for example:-
1. Language barrier
- The sender should make the message clean so that it is understood and accepted by the
receiver.
- Learn the background of the receiver
- The language used should be simple and within the understand of the receiver.
- The receiver should be attentive ask right questions, at right time.
2. Physical barrier
- The parties involved should avoid communicating in a distracting environment for
example a noisy place.
- Telephone connections, power failure electronic equipment, postal services should be
well serviced and maintained to ensure better communication.
3. Cultural and attitude barrier

- Employing adequately literate and culturally sensitive people who can appreciate and
respect cultural differences.
- Train people to recognize and appreciate differences in others.
4. Organization structure barrier

- A shorter chain of command should be established by eliminating some levels of
authority and delegating them to lower levels.
- The organization should adopt more democratic styles which encourage cooperation and
communication.
- Develop clear channels of communication
5. Technology related problems

- Training people on use of electronic media.
- Ensure the electronic media equipment and tools are properly serviced and maintained.
How You Can Improve Communication
- Make adequate and timely plans
- Know the receiver
- Make the message specific, clear and complete
- Get the receiver attention
- Use the right approach
- Keep verbal and non-verbal communication congruent
- Watch the timing: Do not be too long as this bores the listener
- Ask for feedback
- Listen actively and effectively
- Speaking effectively by studying and knowing the audience.
- Avoid being nervous
- Have audience contact
- Use effective methods of giving and receiving feedback.
3. NEGOTIATION SKILLS
Negotiation is the ability to discuss issues especially problems in a clam and open manner with the
hope of arriving at an amicable solutions which is favourable to both parties. Negotiation involves
two or more people or groups.
The Aim Of Negotiation

Negotiation aims at:-
- Bringing to the open issues that are problematic.
- Starting problematic issues openly without being judgment, angry and defensive.
- Making those concerned listen actively in order to evaluate facts.
- Reaching an amicable solution using information presented.
- Reaching a solution that satisfies both parties.
The Most Important Negotiation Skills

Negotiation skills help in resolving conflicts. Some of the negotiations skills include:-
- Being an active listen. One should listen actively to both parties without interrupting and
being judgement.
- Being impartial. One should not take sides. One should listen to both parties.
- Using only the facts resented to negotiate the case.
- Being calm and controlled. This helps those negotiating not to judge the ease under the
pressure of emotions
- Communicating effectively one’s views, opinions and feelings.
- Using polite language to communicate
The Process Of Negotiating

In order for one to succeed in negotiations, she/he should observe the following:-
- Understand the situation or the conflict property.
- Separate the painful from the issue
- Emphasize interests not position
- Develop precise goals at the onset of the negotiation with parties to establish options that
will satisfy both parties.
- Be honest and do not play tricks or blackmail.
Requirements For Being Able To Negotiate Effectively.
To negotiate effectively one requires:-
(i). To know yourself
(ii). Do your homework
(iii). To build trust
(iv). To know what a win is
(v). Separate the people from the problem
(vi). Ensure the sitting position encourages negotiation
(vii). Ensure you distinguish between interests and position.
(viii). To know one’s own power
(ix). To appreciate that silence is golden
(x). Pursue fairness
(xi). Only one person can get angry at a time
(xii). To consider the best alternative to a negotiated alternative but also consider the other
person’s best alterative to ensure balance of power.
(xiii). Enjoy the process.
Summary
This lesson has delved into the skills of knowing and living with others. The lesson has looked at the skill
of empathy effective communication and it has looked at how to achieve each one of the three skills. The
next lesson is a continuation of skills on knowing and living with others. It shall look at assertiveness,
friendship making and resolving conflicts in a non-violent manner.
4. ASSERTIVENESS
Assertiveness is the way of expressing ones’ feelings or desires in an open and honest way. It is
also the ability to know what you want, why you want it and taking the necessary stops to achieve
what you want.
Assertiveness can also be defined as the ability to ask in one’s best interest, to stand up for
legitimate rights and to express ones views with courtesy, directly and openly. Assertiveness helps
a person make choices without anger, aggression and without hurting others.
Assertiveness involves knowing what an individual wants and why. It also involves
communicating ones views, feelings, needs and preferences in a manner that is not threatening or
harmful towards another person.
Assertiveness Can Be Enhanced By
- Safeguarding one’s rights and those of others
- Having self esteem
- Being confident
- Standing up for your rights
- Expressing both positive and negative views, thoughts, feelings and beliefs openly without
fear, anger and using polite language
- Respecting your rights and those of others
- Respecting your physical and psychological space.
- Guarding your views, beliefs, values and principles and respecting those of others.
- Being true to yourself.
- Being specific and brief on issues.
Characteristics Of Assertive People.
- They know what they want in life set clear goals and work toward achieving them.
- They refuse to be manipulated or exploited.
- They work hard in assignments or in their job so as to achieve their goals.
- They have high levels of self-esteem and confidence
- They are honest with themselves and are able to express their feelings, thoughts and needs
in an open way.
- They are not discouraged by failure or when they make mistakes, instead they are ready to
learn, from such experiences
- They do not bow down to peer pressure
- They accept criticism and use it for personal improvement
- They feel good about themselves are confident and have a positive self-image
- They respect other people’s opinions and ideas.
How To Improve Assertive Behavior

(a). Avoid emotional presentation
(b). Deal with one issue at a time
(c). Be clear direct and to the point
(d). Convey your feelings
(e). Watch out for deviations from the issue
(f). Accept other peoples point of view
(g). Openly admit errors
(h). Go for workable solutions when resolving conflicts.
(i). If possible use ‘Win-Win’ strategy to resolve conflicts.
(j). Provide opportunities for people to learn and practice assertive behavior.
5. FRIENDSHIP FORMATION AND MAINTENANCE

A friend is a person you are in good relationship with and with whom you share personal matters.
Friendship pre-supposes certain togetherness, a meeting of minds and feelings and desires. It
follows from this that most of one’s friends will share one’s basic principles though some may
have a radically different outlook.
If there is respect, flexibility and a real desire on the part of both to help each other to find the trust
than a deep friendship can develop. If that is not the case the relationship will meet lots of
obstacles and mutual affection can easily disappear and turn into desire to dominate the other party.
Friendship will be commented through the effort of both to develop at least in human virtues. A
good friend makes demands on his friend, is understanding with him, is an example to him, gives
him what he needs and finds time to spend with him.
Factors That Contributes To Friendship Formation

- Self confidence
- Values
- Common interests
- Beliefs
- Love
- Availability
- Similar value system
- Respect of other people’s rights.
Factors That Enhance Friendship Maintenance

- Honest
- Cooperation
- Mutual understanding
- Respect for oneself and others
- Empathy
- Love
- Availability
6. NON-VIOLENT CONFLICT RESOLUTION

Conflicts are serious disagreements on issues that one considers to be very important in
life. Conflicts to be very important in life. Conflicts are part of life therefore it is important to
learn how to resolve conflicts amicably.
Conflicts can be intrapersonal (within an individual) interpersonal (between individuals)

intergroup (within a group) or intergroup (between groups).
Sources Of Conflicts
- Perceptual differences. This happens when people have views that differ greatly
- Priority or value differences. This is when people have values and principles that differ.
- Different expectative. This is when people have different expectations on the same issue.
- Role conflicts. This is when people have roles that conflict with one another
- Role pressure. This is when one is overburdened with work.
- Divergent goals. When people have very different goals either in life or in an organization,
they are bound to have constant conflicts.
- When one’s self-esteem is undermined. When people make you feel worthless and
incapable you are bound to have conflict with them as you try to protect your self-esteem.
- When your status is threatened. There will be conflicts when are feels that her status in her
life or her job is being undermined or threatened.
- Personally differences. When you have people who have very different personalities there
may be conflicts because their likes and dislikes differ significantly.
- Cultural differences. When people are from different cultures there might be conflicts
because they have different experiences, beliefs and practices.
The Best Way Of Dealing With Conflicts

Resolving conflicts involves ensuring that harmony and peace are restored.
This can be done through:
- Studying the conflict situation thoroughly in order to establish what caused its.
- Assessing the conflict in order to find out its effects on those involved
- Helping the person or parties involved to be clam
- Making those involved feel that whatever will be decided will be four and just.
- Listening actively to the individual or both parties without being judgemental.
- Providing adequate time to deal with the conflict.
- Ensuring that conflicts are dealt with in good time.
- Allowing those, involved to express the negative and positive views and emotions openly
without fear, intimidation and interruption
- Involving all the parties in the conflict to reach a decision that is best for all.
- Weighing the advantages and disadvantages of the solution agreed upon in order to ensure
the solution reached is the best one possible.
- Helping the conflicting parties to reach an amicable solution which will restore peace,
harmony and good relationships.
- Ensuring that when conflicts are resolved those involved do not hold grudges and do not
bring up the issue again.
Summary
In summary, we may say that among the skills that one should have is knowing and living with
others is assertiveness, friendship formation and maintenance and non-violent conflict
resolution. In the process of asserting oneself, an individual must respect other people’s rights,
feelings, dignity and privacy.
It is through observation of other people rights, feelings dignity and privacy that friendship can be
enhanced. We have also observed that should conflicts arise, they can be resolved in a non-violent
manner. The next lesson looks at skills of making effective decisions.
CHAPTER FIVE
SKILLS OF MAKING EFFECTIVE DECISIONS
Introduction
Decision – Making is a process of making up our minds on issues so as to arrive at conclusions and
resolutions to make effective decisions one needs to use the following skills.
- Critical thinking
- Creative thinking
- Decision making
1. CREATIVE THINKING
Creative thinking is an important skill in making effective decisions. It involves coming up with
new ways of handling a variety of situations and challenges. Creative thinking calls for a person
to make use of his/her imagination and originality of thought creative thinking is necessary in
helping the young people respond adaptively to unexpected and unfamiliar situations. It helps
them realize that there are many ways of doing things.
Importance Of Creative Thinking

Creative thinking is of importance to an individual because:-
- It transforms an individual from a state of dependence to that of doing things on his or her
own.
- It helps an individual to generate ideas and come up with alternatives to be able to solve
problems effectively.
- It enables an individual to discover his or her talents.
2. CRITICAL THINKING
This is the ability to analyze and evaluate ideas or issues objectively. It involves weighing options
and making rational choices that are well thought out in order to arrive at a rational decision. It
entails developing an inquisition mind instead of accepting everything at face value critical
thinking skills can be applied in everything a person undertakes.
Critical Thinking Is Important Because Of The Following Factors:-
- Makes an individual less vulnerable as he/she will always demand evidence for claims
made by others.
- Equips an individual with reasoning skills and this makes him/her to question illogical and
irresponsible actions.
- Introduces an individual into ways of thinking that can help them to discover and possibly
to enhance their personality.
- Helps an individual to shape his/her personal beliefs and outlook in life and be able to avoid
negative influences.
- A critical thinker thinks for himself/herself as an individual and accepts only what has been
proven or demonstrated to the satisfaction of reason such as individual becomes mentally
disciplined and he/she is able to think clearly and accurately.
- Young people need this skill to be able to question those who want to influence them to self
destructive activities.
3. PROBLEM SOLVING
A problem is doubtful or difficult matter question or task that requires a solution. It can also be
looked at as something hard to understand, accomplish or deal with.
When people are faced with problems they experience obstacles that present them from achieving
their objectives problems are experienced by all people and are part of life.
Problem solving is the process through which people find answers, actions or courses that
effectively remove or deal with a difficult solution.
Problem solving is the ability to come up with workable solution to different problems
situations. It involves appreciating the nature of the problem by analyzing the causes and looking
for possible solutions. This enables the individual to take the best alternative in whatever difficulty
situations one is confronted with.
Types Of Problems
During the course of life, people experience many problems. Some of these many include the
following:-
- The way a person perceives himself or herself
- Financial problems
- Parents may experience problems as they bring up their children
- Problems brought about by natural calamities such as floods, earthquakes, drought, death
etc.
- Some problems arise from the way people relate with one another
- Art school, teachers deal with a lot of problems among the learners.
Problems Solving Skills

In getting solutions to problems people need to adapt some of the following approaches.
- Accepting the problem
- Approach every person with a positive mental attitude
- Seek guidance and counseling
- Cultivate the wisdom to identify those problems that are real issues and those that you need
to ignore
- Avoid rash or irrational decisions
- Avoid alcohol and drugs.
Summary
We, can only able to make effective decisions through creative thinking. At the same time we
need critical thinking to enable us make effective decisions in our lives. This lesson has taken us
through ways of making effective decisions through critical thinking. We have learned that it is
through critical thinking that we can solve the most likely problems to encounter as we live with
other people.
CHAPTER SIX
THE CORE LIVING VALUES
Introduction
Values are the principles and beliefs that influence the behavior and way of life of a group of
people or community. The things, ideas, beliefs and principles that are worth to a person shape
his or her values. A person’s values help to define who he/she is and help determine the choices
he/she makes.
Living values provide principles and tools for development of the whole person recognizing that
the individual is comprised of the physical intellectual emotional and spiritual dimension.
1. LOVE
Love is a feeling of endearment towards somebody or something, love is an emotional attribute
that leads to affection, liking and interest in somebody or something for a person to love one
another there must be cordial understanding between the two parties involved.
Where there is love there is a world love looks on all with a vision of equality, love is all giving without
any thought of a return. A heart that has love is able to accommodate. The whole universe and still has
space for more. Selfless love is truly unlimited; it forgets and forgives the weakness and sees only beauty
and specialties in everyone.
When true love prevails, no one can oppress or exploit gap between them is big. The gap can be narrowed
through sharing whatever each has.
The love of God which is true is explained by Pau 1 Corithians 13:4-8. Christians learn that love
as a principle should guide them to care and share with others and not just accumulate wealth for
themselves.
In Romans 12:10-13 christians are commended to be devoted to one another in brothely

love. Christians are expected to stand up for each other in times of trials and suffering.
2. HONESTY
Honesty is the ability to tell the truth and to carry out one’s commitment without deceit. The term
honesty is related to reliability and faithfulness. When people are honest they are also dependable
and can be trusted to carry out tasks with faithfulness. An honest person does not lie, cheat other
people or steal from them.
People who are honest have integrity; Honesty and integrity are basic qualities in human
relationship.
3. TOLERANCE
To tolerate means to put up with or bear with another person’s perceived weaknesses even when
they are not acceptable to you. In work places, there are people we do not get along with because
of their various weaknesses. In such circumstances we need top show tolerance so as to accept
them and establish a harmonious working relationship and a conducive working environment.
Tolerance helps us to overlook our differences and focus on our strengths for the betterment of an
organization. Tolerance is an important virtue as it helps us to appreciate one another and to build
healthy human relationships that are mutually beneficial.
4. SIMPLICITY
Simplicity is identifying and being comfortable with those elaborate circumstance which shape
our lives without worrying or making matters complicated.
It requires facing any complexity with a plain and simple mind. Simplicity starts with the self
and overflows to everything else around us. A life lived in simplicity is a satisfying life which
inspires everyone yet possessed by one.
A simple person ensures that his normal ways of acting – his speech, the way he dresses, and the
way he behaves – is consistent with what his real motives are; he allows other people to know
him accurately: he is what he seems.
The virtue of simplicity is a sign of a person’s genuineness; and something is genuine when it is
humanly sound. In other words, simplicity calls for a person to have a clear mind and upright
will.
Simplicity is the opposite of duplicity, which amounts to thinking one thing and doing another,
making one’s external action contradict one’s real attitude. Obviously, therefore, this virtue is
closely connected to humility and sincerity. Simplicity implies that the person has reflected on
what he wants to express. Many small children have a kind of grace which lets them act so
naturally that they cause others to be open and simple.
Simplicity is a matter of allowing oneself to be known a achieving continuity between what goes
on inside you and how you usually behave, in speech dress, and general behavior. This virtue is
intimately connected with the of truthfulness, which inclines a person always to tell the truth, and
with the virtue of loyalty, which inclines one’s will to keep to what one has committed oneself to
do to keep one’s promises.
Obstacles To Simplicity
Here we will bear in mind the way the virtue of simplicity expresses itself in speech, dress and
general behavior.
 As regards dress; wanting to seem better off poorer, younger, older or simply different.
 As regards speech: wanting to appear more intelligent by using complicated
words. Pretending that one does not have qualities which one obviously does have.
 As regards behavior; trying to project a false image of one. Pretending one was a lot of
work to do when that is not do.
Summary
This lesson has taken us through love, honesty simplicity, as tolerance and simplicity as core values
of living. It has emphasized the importance of upholding core living values in any given
community. It has come out clearly that a persons value helps him/her to define himself / herself
and helps an individual make decisions. The next lesson continues to look at other core living
values; peace happiness, co-operation and humility.
5. PEACE
Peace is the original quality of the self. In its purest form, peace is inner silence. It consists of
positive thoughts, pure feelings and good wishes.
To have peace you need patience. When you are peaceful, you create an atmosphere of peace;
peace in the world can only be realized when there is peace in the minds of man.
6. HAPPINESS
There is happiness when each moment is used in a worthwhile way. Happiness is such
nourishment that it can transform a person, from weak to powerful; it makes difficult things easy,
heavy things light. To remain happy and share happiness with others is the greatest act of
charity. No matter what happiness, your happiness should not be lost.
7. CO-OPERATION
Co-operation is seen as mutual aid and working together for a common purpose. It is also
expressed in solidarity and interdependence. This is a value that promotes social harmony.
The individual human person cannot be self sufficient. To fulfill his/her basic needs he/she
requires the help of others.
Co-operations is based on faith, love trust and understanding. It is not a bargaining game in which
one person’s success is achieved at the expense of another’s. Real co-operation takes place when
there are good wishes and pure feelings for each other.
8. HUMINITY
Humanity refers to being humble in the mind, lack of pride or having meekness.
Humility is the acknowledgement of one’s qualities, abilities and inadequacies. It is also accepting
oneself with his/her strengths and weakness. A humble person is not proud or boastful of his/her
achievements and uses his/her qualities to serve others. Humble people are sensitive to the
feelings of others and do not hurt them deliberately.
Humility should not be confused with shyness or fear of other people humility is dedication to the
extent that no acknowledgement is sought for the self. There is great strength in humility.
9. RESPONSIBILITY
Responsibility means a caring attitude that one feels they ought to adopt with respect to the well-
being of others such responsibilities include helping others in distress, showing concern for the
welfare and needs of others and not harming them. Children are socialized to feel responsible
towards others.
A responsible person accepts the consequences of his actions, be they intentional or unintentional,
so that others either benefit as much as possible or at least do not suffer. He is also concerned that
others over whom he has influence showed act similarly.
To acquire the virtue of responsibility means learning, not only to accept liability for decisions
made by others but also to take decisions oneself. Responsibility involves not only accepting
decisions made by others but also taking decisions oneself on matters on which one is competent,
in order to improve and help others to improve. A sense of responsibility requires an initial
decision (we make no formal decision of any kind before doing or saying so many things.
On a human level, we all have a responsibility to others. Certainly we must respect others but this
respect involves stimulating them and making demands of them within the bounds of the friendship
which exists between us. Our children should feel responsible and take responsibility for their
own lives, but also pay due attention to others on the human level.
10. FREEDOM
Freedom starts in the mind. Understanding the self is the key to freedom. The more one
understand the self, the easier it is to be liberated from waste.
Freedom means to be uninfluenced, unaffected and to be at peace with the self. True freedom is
to experience the true essence of one’s being and that is peace.
11. UNITY
Unity means the state or quality of being whole. It is a moral value for it fosters harmony and
togetherness. This virtue is related to other virtues like co-operation, harmony, mutual
responsibility and sharing.
Unity is harmony within and amongst individuals. It is built from a shared vision for the common
good. Unity is appreciating the values of each individual and their unique contributions. When
there is willingness within the self to accommodate others, unity blossoms.
Benefits Of Living Values

Examples of benefits of living values are:-
- A life filed with values is a life of self-respect and dignity
- Values bring independence and freedom.
- They expand the capacity to be self-sufficient
- They liberate one from external influences.
- They open the heart and transform human nature so that life is filed with compassion and
humility.
- Acquisition of living values enables one to thrive in a value based atmosphere and positive,
safe environment of mutual respect and care.
- Play a big role in shaping a person’s character.
- There is good understanding between people, strong friendship, co-operation and harmony.
- The development of principles that guide individual behavior.
- Cohesiveness and harmony in the society
- Improvement of self-esteem and confidence.
Summary
This lesson has looked at qualities of a responsible person, having freedom and unity. The lesson
has also looked at the benefits of having core living values. Which among others is living a life
of self respect and dignity.
CREATIVITY AND INNOVATION
CHAPTER ONE
INTRODUCTION TO CREATIVITY
Meaning Of Creativity
Creativity
Creativity is the act of turning new and imaginative ideas into reality. Creativity is characterised
by the ability to perceive the world in new ways, to find hidden patterns, to make connections
between seemingly unrelated phenomena, and to generate solutions. Creativity involves two
processes: thinking, then producing.
Creativity is the process of bringing something new into being. Creativity requires passion and
commitment. It brings to our awareness what was previously hidden and points to new life. The
experience is one of heightened consciousness: ecstasy.
Creative Thinking
Definition of the term creative thinking
Creative thinking means looking at something in a new way. It is the very definition of “thinking
outside the box.” Often, creativity in this sense involves what is called lateral thinking, or the
ability to perceive patterns that are not obvious.
A way of looking at problems or situations from a fresh perspective that suggests unorthodox
solutions (which may look unsettling at first). Creative thinking can be stimulated both by an
unstructured process such as brainstorming, and by a structured process such as lateral thinking.
Situations that require creative thinking

The situations that require creative thinking include:
 Problem solving
 Debating
 Communication
 Games
 Leisure
 When faced with violence
 When threatened with rape
 When confronted with harmful cultural practices
 Coping with peer pressure
 Choosing friends
 Overcoming personal weaknesses
 When confronted with unfamiliar situations

Creative Thinking process
Stages Of Creativity Thinking
Creativity does not just happen. It is a cognitive process that produces new ideas or transforms old
ideas into updated concepts, according to Brussels Free University psychology professor Liane
Gabora. Scientists such as Jacques Hadamard and Henri Poincaré studied the creative process and
contributed to the Creative Process Model, which explains how an individual can form seemingly
random thoughts into an ideal combination or solution.
Preparation
During the preparation step of the creative process model, an individual becomes curious after
encountering a problem. Examples of problems can include an artistic challenge or an assignment
to write a paper. During this stage, she may perform research, creates goals, organize thoughts and
brainstorm as different ideas formulate. For example, a marketing professional may prepare for a
marketing campaign by conducting market research and formulating different advertisement ideas.
Incubation
While the individual begins to process her ideas, she begins to synthesize them using her
imagination and begins to construct a creation. Gabora states that during this step, the individual
does not actively try a find a solution, but continues to mull over the idea in the back of her head.
Illumination
As ideas begin to mature, the individual has an epiphany regarding how to piece her thoughts
together in a manner that makes sense. The moment of illumination can happen unexpectedly. For
example, an individual with the task of putting together an office party may have an idea for a
theme while driving home from work.
Verification:
Though the solution is found in illumination stage, it is necessary to verify whether that solution
is correct or not. Hence in this last stage evaluation of the solution is done. If the solution is not
satisfactory the thinker will go back to creative process from the beginning.
Implementation
The implementation of an idea or solution in the creative process model is when an individual
begins the process of transforming her thoughts into a final product. For example, during this step,
a painter may begin outlining shapes on a canvas with charcoal before applying oil paints to the
medium. According to Gabora, an individual may begin this step more than once in order to reach
the desired outcome. For example, a graphic designer may open a new digital canvas if he did not
have the scale calculated correctly on a previous work, and he will continue to implement his ideas
and make adjustments until he reaches a pleasing final product.
Creative Thinking Techniques
Mind Mapping
Let’s begin with a timeless classic. Mind mapping (aka brainstorming or spider diagrams) is the
little black dress of idea generation; it never goes out of fashion. It almost feels wrong to walk into
an agency and not see some form of mind map on a whiteboard somewhere.
The key to mind mapping is to take note of every idea that comes up. Don’t neglect anything, no
matter how far-fetched it may seem. Save the critical selection process for later. Generate as many
ideas as possible; the more you jot down, the bigger chance of finding that golden ticket idea.
The Checklist
Young children are amazingly creative. Their curiosity, imagination and thirst for knowledge seem
boundless. They ask questions about everything, because practically everything is new to them. If
you’ve ever played the ‘Why?’ game with a kid, you’ll know exactly what I’m talking about*. It’s
infuriating, yet surprisingly enlightening.
Focus on Change
Jumpstart product or service brainstorming through the context of possible change to existing
offerings. Brainstorm options for magnifying, eliminating, reversing, or combining to help you
formulate novel solutions.
Reframe the Problem

Examine your issue from all sides: people, product, potential, and planning. The more you know
about the problem, the more comprehensive the solutions become.
Make Creative Thinking a Game

we recently looked at research’s use of gamification to improve information obtained with
studies, and the same techniques can work to improve creative input in the insight generation
process. Bring cards with thoughtful, provocative, or creative questions to get the creative juices of
participants flowing.
Brainstorming
Brainstorming is the most familiar and popular idea-generating technique for groups. Useful in all
stages of a larger problem-solving process, brainstorming is entirely divergent.
Creative Problem Solving

Since the arrival of the now classical Osborn-Parnes structure, any number of academic and
business entities have re-sorted and renamed the stages and phases of what we now call the
Creative Problem Solving Process (CPS).
Daydreaming
It is a method of following self-thought one after another, make one drifts in stream of ideas which,
eventually take a conic shape: what seemingly started as random thoughts will end as a tip of the
cone: the ultimate idea.
Morphological Analysis
Morphological Analysis provides a system and format for examining the parameters of complex
problem situations for novel combinations that can be developed into creative solutions.
Productive Thinking
Productive Thinking is a problem-solving and opportunity-finding framework designed to
incorporate creativity techniques such as brainstorming and lateral thinking as needed.
SWOT Analysis
SWOT Analysis is well known as a business tool for planning but you can find that very useful
generally in thinking.
CHAPTER TWO
IMPORTANCE OF CREATIVITY IN BUSINESS
Creativity helps you stay one step ahead.

Creativity is vital to the success of your business… In fact, experts even go as far as to say it is
one of the most important factors to the success of your business. Every business wants to keep up
with the latest trends, and furthermore, they want to always stay one step ahead of their competitors
so they can beat them to the chase for “the next big thing.” Therefore, creative thinking and
dreaming up new and unique ways of transforming your product and marketing it are the key to
staying one step ahead of the competitors.
A study was done by Forrester Consulting and Adobe actually found that 82 percent of companies
agree that there is a strong connection between successful business results and creative thinking.
Furthermore, those companies also believe that actively fostering creative thinking allows you to
outperform your rival in the areas of market share, competitive leadership, and revenue growth.
Creative thinking promotes problem-solving.

In addition to new ideas, businesses and business owners also need to be able to effectively
problem solve. Whether it is a financial issue, customer service issue, or a business model issue,
there will always be unforeseen issues that arise – which require a solution. By using your creative
thinking skills, you are improving the ideas you can come up with…
Creative thinking can help you decipher the easiest and most valuable solution needed to solve
your problem. In turn, this can have a more positive impact on your business as the problem is
handled smoothly and efficiently.
Creative thinking increases productivity.

Aside from a solid idea, one of the most important aspects of a business is increased productivity.
It is needed to ensure that demands are met and that customers are happy. Stimulating creativity
leads employees to new and unknown territories, and as a result, it leads to increased productivity
of the entire organization.
By encouraging each employee to think outside of the box and providing them with the time and
resources to do so, you will gain cost-effective business solutions and innovative ideas through
them.
Creativity makes people feel appreciated.

By allowing your employees the time and resources to be creative, you are giving them a voice in
the workplace. You are enabling them to contribute to a company that they work for day in and
day out.
Furthermore, by giving them positive feedback and possibly even an incentive based on the idea,
you are showing that you are listening and you value their opinion. Plus, just as an added bonus,
you end up with a new and fresh perspective on things. By incorporating creativity into the
workplace and allowing everyone to get involved, you can really boost the overall morale of your
workplace.
How to Foster Creativity within An Organization/Business

There are several smaller steps leaders can take to make a big change on their organization. Here
are five ways you can foster creativity within your own team:
1. Reward Creativity
Not every idea will be a success, but big breakthroughs won’t occur if the company plays it safe.
Executives need to be comfortable with failure, and give employees the freedom and flexibility to
experiment with and explore new opportunities.
Global conglomerate Tata gives out a “Dare to Try” award to employees with the “most novel,
daring, and seriously attempted ideas that did not achieve the desired results,” while Google’s
innovation lab, X, member who worked on a project the company ultimately decided to kill as soon
as evidence suggested it wouldn’t scale.
Companies that reward creativity show they value it, inspiring individuals within the organization
to pursue untested theories and concepts.
2. Hire the Right People

The “right” people in this context aren’t solely creative. Organizations should instead focus on
diversity, bringing in a variety of viewpoints, cultural backgrounds, and skill sets. Tom Kelley,
partner at global design firm IDEO, established “The Ten Faces of Innovation,” describing how
each type of person—such as “The Hurdler,” who tackles problem-solving head-on, or “The
Caregiver,” who works to understand and form relationships with each individual customer—adds
to the overall creativeness of a project.
“Not everyone is going to be creative, but most people can learn the tools and techniques for being
innovative,” Marion says. “It helps to look at things from a different vantage point.”
It is also worth considering building an innovation team within your organization, whose role is to
tap into creative energies to develop new products, services, or processes within an organization.
3. Try the “Yes, And…” Approach
One method for spurring creative brainstorming is trying a technique used in improvisational
theater: “Yes, and…” The approach encourages colleagues to build off their peers’ thoughts by
first agreeing and then adding something to the discussion. Taking “no” off the table ensures all
ideas are heard.
Employees could test this approach by simply putting a paperclip in the middle of the table and
thinking up as many use cases for it as possible. The activity might sound silly, but it could help
inspire creativity.
4. Try Flexible Work Hours

Not everyone is suited for the traditional nine-to-five schedule. Offering flexible arrangements,
such as the ability to work from home, is known to make employees healthier, happier, and more
productive. As long as employees are clear about expectations, complete their work on time, and
coordinate appropriately with their team, it’s an easy strategy to test and enables everyone to work
when they’re feeling most creative, as opposed to a set time during the day.
5. Give Employees Time to Recharge

With creativity can also come burnout. Employees need time to step back and hit the refresh button.
“Companies do need to take burnout into consideration,” Marion says, “and maybe take some time
between projects or offer sabbaticals to recharge their employees.”
The only thing companies can’t do is ignore creativity altogether, or hope the problem will solve
itself. Creativity needs to be prioritized—and for good reason, reminds Marion.
“Creativity lends itself to unique solutions to problems,” he says, “and to unique features on
products, or unique business models and sources of revenue.”
Who can argue with those benefits?
Barriers To Creativity And How To Overcome Them
Barriers Blocks and Limiting Beliefs Switch To Positive Attitude
The tendency to focus on the negative aspects

Negative Attitude Seek the inherent opportunities in the situation.
of problems and expend energy on worry.
Failure is a necessary condition of and a
Fear of Failure Fear of looking foolish or being laughed at.
stepping stone to success.
Long-term corporate success linked to
Not having time to think creatively. The over- the ability to innovate. Managing day-to-day
stressed person finds it difficult to think operations is important, but it is new game
Executive Stress
objectively at all. Unwanted stress reduces the changing breakthroughs that will launch
quality of all mental processes. company into new markets, enable rapid
growth, and create high return on investment.
A tendency to conform to accepted patterns of
Some rules are necessary, but others encourage
belief or thought – the rules and limitations of
Following Rules mental laziness. "Every act of creation is first
the status quo – hampers creative
of all an act of destruction." – Pablo Picasso
breakthrough.
Many both conscious and Identify and examine the assumptions you are
Making Assumptions unconscious assumptionsrestrict creative making to ensure they are not excluding new
thinking. ideas. Challenge assumptions.
Investing all your intellectual capital into
"Innovation is not the product of logical
Over-reliance on logical or analytical thinking – the step-by-
thought, although the result is tied to logical
Logic step approach – excludes
structure." – Albert Einstein
imagination, intuition, feeling or humor.
Other Factors That Limit Creative Behavior Include:
Restrictive routines - Routines or set ways of performing tasks have their uses and sometimes
make life flow a bit more easily. However, set routines can also limit the range of responses and
solutions we have in attempting to solving problems.
They can also restrict how we view an event or even how we approach a problem. Strict insistence
to rules, routines, and regulations can lead some people to have what can be called a “bureaucratic
mind.” I would define a bureaucratic mind as one so committed to the adherence of rules that it
fails to see beyond those immediate regulations in unusual or emergency circumstances.
Beliefs - Having a strong belief in something cannot only limit our response options, but cause us
to limit the way in which we perceive and process information from the outside world. We may
“filter out” information which contradicts our beliefs, and end up in our own “reality tunnel.” In
this short-sighted state we remain blissfully unaware of much that occurs in front of our very eyes.
We can remain committed to a belief without becoming blind to what is around us. Strong beliefs
are meant to be tested, and sometimes revised according to new information. This is not to
imply that we must have no beliefs, merely that we need to be very aware of our beliefs and the
possibility of their consequent limitations.
Fear - Fears come in many forms. Psychologically the fear of self-expression or of the judgment
of others can severely limit our creativity. Physical fear can also limit our responses, imaginings,
risk-taking behaviors, and production as we are more concerned with mitigating the cause of that
fear and in seeking equilibrium and safety.
Self-criticism - Negative thinking and constant self-criticism and self-doubt are also very limiting
factors to creativity. We can talk ourselves out of taking creative risks, or of trying new things, or
of seeking new forms of expressions.
Ego - The ego is identified as one’s perception of self or the “I.” This conceptual framework helps
us assume and project our unique, highly individualized identities. In creative production an overly
active sense of self can prohibit exploration, or personal or creative growth. This may cause an
individual to become stuck in one’s past glories, or in producing tired permutations of the same
thing over and over.
Functional fixity - This is a term in the world of creativity that refers to the cognitive inability to
look passed the designated function of an object or idea. It is a strong cognitive bias that prevents
people from seeing something beyond the initial or designated function of an item, term, or
concept. For instance a paperclip can be only used to clip papers; or a pencil is only for writing;
or a barrette can only be used to hold hair. The term first emerged as functional fixedness and came
from Gestalt Psychology, a psychological movement emphasizing wholeness.
CHAPTER THREE
MYTHS ABOUT CREATIVITY
Common Myths About Creativity

Mention the word creativity, and people begin to squirm in their chairs. The very thought can
prompt anxiety, fear, and doubt – even in the most accomplished professionals. Let’s explore some
common myths, and uncover the truth behind this “fuzzy” topic:
MYTH 1: Creativity is only needed at the top

TRUTH : In today’s business environment, creativity applies to everyone. The organizations that
win in these challenging times have creativity as a core priority at all levels of the organizational
chart. We must embrace the concept of Everyday Creativity: fresh ideas and creative problem
solving in every business setting. Every meeting. Every customer interaction.
MYTH 2: People are creative (or not) based on what they do

TRUTH: Your role has nothing to do with your creativity. There are professional musicians in
major symphonies that are great technicians but don’t use an ounce of creativity. There are also
statisticians that are brilliantly creative. Don’t let labels dictate or limit your creativity.
MYTH 3: Creativity can’t be developed

TRUTH: As human beings, we all have tremendous creative capacity; we just need to develop it.
Your level of creativity isn't fixed at birth. Instead, think of creativity as an expandable muscle.
You don’t become a champion bodybuilder without hitting the gym. Similarly, to build creative
capacity requires some practice and focus. There is an overwhelming amount of scientific research
confirming that you can grow your creativity at any age.
MYTH 4: Creativity isn’t my job

TRUTH: Today, creativity is everyone’s job. For your organization to enjoy success, creativity
must be harnessed at all levels. It is no longer just something those “art people” do. There isn’t a
job function that can’t benefit from creative problem solving, fresh ideas for the future, or simply
finding a better way.
MYTH 5: My technical skills and experience are enough

TRUTH: Maybe in the past, but definitely not in the future. Unorthodox approaches, original
thought and imagination have become the currency for success in the new world of business…and
life. The difference between getting a promotion, making the sale, raising capital, or reaching your
full potential lies in your ability to embrace and nurture your creative potential.
In our fist-fighting business climate, we're faced with unprecedented challenges. The stakes are
higher than ever, but so is the opportunity. Dispelling the myths, and then harnessing your own
creativity can be the difference-maker for you and your company.
Consequences of Uncreativity
There is a lot of talk about the importance of creativity to business these days, but little
consideration about the consequences of not being creative. You should be aware of those
consequences. Here are seven of them.
1. Without creativity, there is no innovation.
This one is a bit of a no-brainer, but it needs saying. Innovation comes from creative vision.
Without that creative vision, there is nothing to innovate. It's rather like trying to make an omelet
without eggs. It just will not work.
That means that in order to keep up with your innovative competition, you can buy ideas, steal
ideas or fade into irrelevance. The latter option is not a good strategy. Stealing ideas may seem a
cost effective option, but it seems that when it comes to dishonesty, creative people are better than
that than non-creative people; and if your company is not creative, you are going to find it hard to
hire and retain creative employees. This leaves you one option: buying creative ideas, either
through licensing or buying up innovative start-ups. This is the strategy most companies use.
So, uncreative companies have to buy innovative companies or license ideas in order to innovate.
Creative companies can innovate in house or steal ideas cost effectively.
2. Without creativity, there is no differentiation.

No matter what you may want to buy these days, you will almost certainly find yourself facing a
choice of barely distinguishable products in barely distinguishable packaging. Few products truly
stand out as different in any positive way. As a result, your choice is based on past experience, a
special price or having been bombarded by boring advertisements for a particular product.
The uncreative company is unable to come up with original new ideas that ensure their product
stands out or is even recognised. As a result, they have to bombard customers with those boring
advertisements in hopes that their brand name will stick in customers' brains long enough for them
to go shopping.
The creative company can come up with unconventional, original ideas to make their product stand
out as superior, in one or more ways, to the competition's.
So, uncreative companies' products are readily forgettable and demand endless advertising.
Creative companies' products stand out for their unique value.
3. Without creativity, you do not see all of the options.

One way that creative people differ from others is that they can visualise more possibilities in a
given situation. Less creative people tend only to see the more conventional options in a situation.
In a tough negotiation, for example, an uncreative person will limit their thinking to money. If the
buyer cannot meet the uncreative seller's price, the seller must either sell at a loss or forego the
sale.
A creative person will see more options. She will look beyond the money and find other things to
include in a deal. Perhaps she can include additional, value-added services in the sale in order to
make it more attractive (and worth more money) to the buyer. Perhaps she can come up with a
payment plan that enables the buyer to spread payment into a new year and a new budget. Perhaps
she can simplify the deal to make it less costly for both sides. As a result, she is more likely to
reach a win-win agreement with the buyer.
So, the uncreative seller loses the sale or sells too cheaply. The creative seller wins the sale on
terms that leave both sides happy.
4. Without creativity, complex problems are hard to solve.

Complex problems involve a number of variables and, as a result, obvious, simple solutions are
often not the best solutions. In fact, they may be very bad solutions. Complex problems are not
solvable by following a five minute Youtube video you found when Googling the problem.
Creative people can visualise complex problems as well as imagine the application of various
solutions.
So, the uncreative manager misses an opportunity to grow her company. The creative manager
exploits a non-obvious opportunity to serve more clients and grow her company.
5. Without creativity, you fail to see and exploit opportunities

There is a story about a shoe company that sends two sales people to a developing country in the
tropics. The first calls the office and complains, "What a waste of time! There's no market for
shoes here. Everyone goes barefoot! I'm catching the next flight home."
The second salesperson calls the office and excitedly says, "Send all the shoes you possibly can.
No one here wears shoes. The opportunities are enormous!"
Without creativity, a person sees only what is in front of her. With creativity, she sees not only
what is in front of her, but ideas of what could be in front of her.
So, the uncreative salesperson loses out on sales opportunities she does not see. The creative
salesperson wins sales opportunities that others do not see.
6. Without creativity, your response to crisis is limited

Crises, by their nature, are unexpected and can severely damage a business and even an entire
market. Crises can include natural disasters, human disasters, legislation that affects a company's
products, economic downturns and disruptive innovation.
When a crisis hits, managers need to be able to think fast, see multiple options and make a decision.
This requires creativity and a willingness to act on that creativity in an uncertain situation.
A creative manager is better able to visualise the potential threats, devise original solutions and
imagine the application of those solutions to see how they might work. This enables her to find the
best solution − or in a worst case scenario, the least damaging solution The non-creative manager
can only apply familiar solutions that fail to address the unique nature of the complex problem.
So, the uncreative manager is ill equipped to solve complex problems while the creative manager
can devise and apply unique solutions.
7. Without creativity, you cannot make creative ideas even better

Even an uncreative person occasionally has creative ideas and an uncreative company may
accidentally hire a creative person (who typically leaves as soon as she can find a more appreciative
employer). However, a creative idea alone is not enough to innovate. New ideas are untried and a
bit unpredictable. Unexpected problems may crop up in their implementation. Things might not
go as planned. Committees may kill the idea for its perceived riskiness.
A creative team understands that innovation does not require a single creative idea, but a creative
vision built of numerous integrated creative ideas. They realise that they will need to be continually
creative to see an idea through to implementation and to solve the various problems that arise along
the way.
So, the uncreative team tends to dilute the creativity of potential innovations -- thus reducing value.
The creative team is continually creative, adding value to the original creative idea as the members
develop it.
Conclusion:
Uncreativity = missed opportunities, loss of income and market vulnerability
There you have it. creativity is not really an option if you expect your company to grow over the
long term, survive crises and be a market leader. It is essential. Without creativity, you can expect
to miss opportunities that your competitors exploit, suffer in crises and be a market follower rather
than a market leader.
Over the short term, that might work. Over the long term, it is a path to corporate mediocrity.
Fortunately, of course, most organisations fall somewhere between those two extremes of
uncreativity and high creativity. But unless your company is near the high level of creativity, it is
clear that you are missing opportunities and leaving your business vulnerable to crises.
CHAPTER FOUR
INNOVATION
Introduction To Innovation
Innovation generally refers to changing processes or creating more effective processes, products
and ideas
For businesses, this could mean implementing new ideas, creating dynamic products or improving
your existing services. Innovation can be a catalyst for the growth and success of your business,
and help you to adapt and grow in the marketplace.
Innovation involves producing new products and services, new business models, and new or
improved methods for producing goods or services. Innovation is more than invention. It feeds
commercial success, normally boosting efficiency and/or profits.
Innovation Related Terms
Invention
Invention means discovery or devising of a new product, process or system. It is an identifiable
discrete contribution to technical knowledge and to technical change although it is not the only
way in which technology changes e.g small improvements and adaptations changes technology. It
is usually a stage of technological development at which an idea has advanced sufficiently for the
inventor to draw up plans, construct a working model or in some way establish technical feasibility.
At this stage, technology is patentable and technological research is the most important source of
inventions. Entrepreneurs should be exposed to research opportunities to develop inventive minds.
Patent
This is a governmental legal register/gratuity for a specific period, monopoly (exclusive) property
rights for the exploitation of an invention. Patents only protect knowledge to the extent that it is
embodied in a tangible item which is patentable. Patents are frequently appropriated and exploited
by large businesses or Trans National Corporations and Multi National Corporations.Local
entrepreneurs rarely enjoy their technological inventions due to lack of awareness. For instance
Kyondo and Kikoi in Kenya
Industrialization
Process leading to the capitalist mode of production based on the division and specialization of
labour, development of productive forces, improvements in technology, skills and
productivity.Generally starts in high industrial activities and represent fundamental change in the
structure of an economy particularly in the redeployment of resources away from agriculture.
Know-how
Practical, unpatented, technical knowledge, professional experience and accumulated skills for the
production and distribution of commodities and services.
Productivity
Is a measure of the rate at which output flows from the use of a given amount of in-put. It’s
measured by expressing output as a ratio to a selected input e.g. labor productivity, capital
productivity. Entrepreneurs should utilize technology to improve business productivity.
Technical change
An advance, a change in technique, change in methods of production or adoption of a different
technique. It is the production of a given output with a different amount or proportion of inputs
such as labor, capital etc. Technical change may involve any of the following:-
Shift in or along production function
Introduction of a new product or process
Technical change occurs by way of innovation and diffusion and does not necessarily mean/
involve new technology.
Technical progress
These are effects of change in technology i.e shifts in the production functionas a role of
technological change in the growth process. Technical progress is an aggregate factor comprising
anything that increases the output per unit of factor inputs that contribute to the growth of total
productivity in a business eg effects of training of the labour.Technological progress in that matter
is the process of transmission of technology (technical knowledge), its absorption, diffusion and
reproduction by a different productive apparatus form the one that has produced it.It is worthy
noting that transfer of technology seldom occurs in LDCs as compared to common process of
commercialization of technology.
The Importance Of Innovation In Business
Solving problems:
Most ideas are actually derived from attempts to solve existing problems. As such, when you
encourage innovation, you are opening doors for solutions to problems both within and outside
your company. If your business provides services, you might realize that your customer do not
have an avenue to share their opinions, complaints, and compliments. The only avenue available
could be the physical office. So, to solve the problem, you could decide to operate a virtual office
where customers’ needs can be attended to within a short time. The customers will be happy and
as a result, your sales will go higher.
Adapting to change:
This is especially evident in the technological world where there are rapid changes defining the
business. Change is inevitable and innovation is the method to not only keep your business afloat,
but also ensure that it remains relevant and profitable. With the rise in mobile phones, traditional
telephone had to find ways to remain relevant. Same case with your business, when you develop
an innovation culture, you remain relevant at all times.
Maximizing on globalization:
With markets all over the world becoming more interlinked, greater opportunities are emerging in
these new markets and with that, new needs and challenges. For instance, China and India are
estimated to be the leading markets, and Africa is predicted to be the next “hot spot”. Therefore,
if your company hopes to tap into this market share, innovation is a must to enable you to capitalize
on the opportunities opening up.
Facing up the competition:

The corporate world is always very competitive, and with many new companies coming up, the
top position in the industry is no longer a reserve of a few. To retain or establish your company’s
cutting edge, you can compete strategically by having a dynamic business that is able to make
strategic and innovative moves and thus cut above the rest.
Grow in Leaps and Bounds

Sixty-six percent of respondents in The Deloitte Innovation Survey 2015 stated innovation is
important for growth. Businesses that innovate are able to scale up and add more employees. That
allows them to take on more customers and grab a bigger share of the market.
Innovation makes it easier to grow, regardless of the size of the business. You might have a small
startup, but if you innovate, you can grow your business. The same is true for a fortune 500
company. It might be a huge corporation, but it can take even more of the market share if it
manages to innovate. It's easy for innovative companies to grow.
Stand Out from Competitors

Your company fits inside of a specific niche or industry, and it's far from alone. Let's say, for
example, you manufacture light bulbs. Tons of companies also manufacture light bulbs, and you
need to stand out in some way. You can do that through innovation.
The right innovation will allow you to offer something unique to your customers. For instance,
what if you managed to create a light bulb that automatically turned off when people left the room?
That's a crazy example, but that's how some of the best innovations work. Top innovators take
popular products and make them even better. That makes brands stand out in the market and makes
it easy for companies to increase revenue.
Attract the Best Talent
Talented, innovative people want to work for innovative companies. You aren't going to attract
someone who is going to create the next big thing unless your company has a history of creating.
Innovators want to be challenged and encouraged to create on a regular basis, so you need a culture
of innovation to recruit that talent. Make a name for your company by being innovative and then
watch the resumes pile in. Innovators from all over will want to work with you, and then something
magical will happen.
Your company will become even more innovative. You will experience more growth, stand out
from competition even more, and meet your customers' needs in ways you never imagined. That's
when your company will reach an entirely new level.
It's normal to want to maintain the status quo. You assume that since it's worked for you in the
past, it will work for you in the future. In reality, the status quo only works for so long. If you're
going to keep your doors open, you have to innovate. You need to take the risks that come with
innovation so you can enjoy all of the rewards.
CHAPTER FIVE
INNOVATION PROCESS
Barriers To Innovation
1. Fear
The single biggest reason why most organisations and individuals do not achieve their full
potential is fear of failure. There are no guarantees that any new idea will work. We must accept
failing is an important part of learning, development and progress.
2. Lack of leadership
Innovation must be led from the top. Often, trustees, chief executives and directors do not support
or are not in agreement as to the strategic importance of innovation as a business driver and what it
would look like for their organisation. Consequently, they continue to do what they have
always done.
3. Short term thinking

Most charities calculate on a one year return on investment. Any new innovation is expected to
have immediate impact. Under the pressure to deliver return quickly we conduct inadequate
research and rush processes, leading to failure, the
idea being ditched and innovation being perceived as not working.
4. Lack of resource/capacity
Linked to thinking in the short term, charities are apprehensive about investing
in something that does not have guaranteed return on investment and often take a scattergun
approach to innovation or under-resource it. This has a knock on
effect of it not delivering the impact that it should or could.
5. Lack of collaboration
Internal budgeting and structures don’t always facilitate collaboration between teams. Individual
income targets mean people fight over budgets and are reluctant to ‘share’ donors, even if the
return for the organisation could be potentially higher if teams worked together.
6. No time
There is an understandable focus on the fundraising here and now. However, if we don’t start to
make time to take a more long-term view and develop and test new ways to generate income,
charities will struggle to survive.
7. Lack of focus
If an organisation is not clear on where to focus, it can easily spend time on activity that won’t
make a difference. It’s easy to become distracted by new products and new technology, but if it
isn’t helping you achieve your mission then you should not be investing time and resource in it.
Overcoming Barriers To Innovation

1) Redefine efficiency. Business systems are designed for efficiency, with time being a business’
most precious commodity. Enlightened leaders and entrepreneurs invest in education,
relationships, experimentation, personal growth and health, but these efforts are difficult to
quantify, especially as they often don’t pay off in a timely way. But this mentality comes into play
when approaching creativity as well.
2) Measure ROI differently. Revenues, profits, and market share is often the only measures used
in organizations. These are easier to quantify than intangibles such as reputation, knowledge,
attractiveness to talent, leadership and other assets that make major contributions to the true value
of an enterprise. Most innovations that matter are difficult to explain in terms of return on
investment.
Even those innovations that have the potential to disrupt or create new markets may suffer by
comparison when put up against more incremental, or safe, projects as they grind through a
standard budgeting process. But by expanding the view of measures and including decision makers
in the process of creating those measures, it’s possible to avoid the ROI trap.
3) Hold standardization loosely. In a search for efficiency, standardization has become the norm.
Many efforts to implement standardization in organizations failed, or failed to produce the results
that could have been experienced had whole systems been integrated.
For example, as many organizations attempted to implement the Toyota Production System, those
naturally geared toward thinking in terms of processes would utilize only the few Principles out of
the 14 that focused on standardization and process. Without the supporting culture created by the
overlooked principles, results were minimal.
4) Start with people, not technology. Tech and engineering-driven firms commonly begin the
innovation journey by looking for a technological breakthrough. Even small startups and
companies typically seen as the bastion of hope for the creative, often focus first on developing a
new product, technology, or a new idea devised within their own bubble of like- minded
individuals. (This often involves a whiteboard.)
As they enthusiastically pursue their idea, they later wonder why there’s no market for it. Their
innovation efforts had many of the right elements, but still fell flat.
5) Ban comparison. (Comparison is an innovation-killer.) Despite branding experts warning

against the precarious position a brand builds by pursuing a ‘me-too’ mentality, many companies
are still searching for ‘the next iPhone’ or the ‘next Steve Jobs.’
Innovation, though, is built based on an organizations unique set of strengths and abilities. It is
rooted in the authenticity of leadership, and the organization. Attempting to be like Steve Jobs or
like Google is destined to produce me-too-like products, services and solutions that can hardly be
categorized as innovative.
CHAPTER SEVEN
RISKS OF THE INNOVATION PROCESS AND HOW TO OVERCOME THEM
The innovation process is lauded for its many benefits that have defined the corporate and social
cultural scene since the era of industrialization. However, it does not lack its set of challenges and
risk as discussed below.
Technological failure of the innovation – The biggest risk any company takes in the innovation
process is whether or not the new product or idea will work once it is launched in the real world
or whether it remains to be a white elephant. To manage this risk, the company may carry out trials
on a small scale to test its effectiveness. Once this is done and observations made on, the necessary
adjustments may be made accordingly to avert any huge losses once the product is mass produced.
Financial strain – Often, the innovation process is faced with the challenge of draining out the
company resources as returns are usually long-term as opposed to immediate. This may lead to
abortion of the product or idea once it is perceived to be non-profitable. However, you should look
at the projected returns and consider whether or not the innovation aligns with its long-term goals.
Market failure – For innovations which involve the introduction of new products or technology
to the market, it is imperative that the product meets the needs, tastes and preferences of the
consumers. Failure to do this would mean that demand would be low and therefore the innovation
not viable commercially. To avoid this, you should undertake extensive and in-depth market
research before committing limited resources to its development and production.
Redundancy – With trends in the market constantly changing and many innovations emerging, it
is possible that a profitable innovation today may be redundant in the near future. To counter this,
there must be constant research on how to improve the existing systems and a keen observance of
global trends and the factors influencing them in order to stay a step ahead.
Lack of capacity for implementation – This is especially a challenge for start-ups where they
lack the structural and financial capacity to roll out the innovation. You then risk remaining a pipe
dream. So, you may choose to look for partners who will assist in your area of lack and thus
overcome the challenge. It is important that the partner also shares in the vision of the innovation
to avoid conflicting interests in future.
Organizational risks – This refers to the risks that are faced in the structure and running of the
business once the innovation is introduced. For instance, the company may revert to focusing all
resources and time towards innovation at the expense of its daily activities. Proper planning and
allocation of resources has to be ensured by the leadership to ensure this does not happen.
Unprecedented risks – These are risks that would not have been foreseen and may be influenced
by factors outside the company’s control. They may involve changes in policies or political
instability whose ripple effect spills over hindering the effectiveness of the innovation. It is
important for the business to keep a contingency plan to buffer it against such unseen events
How Innovative Companies Benefit From Innovations

Experience
Innovative companies have the advantage of experience in innovating a product. Since they
understand the process so well, they do not have to always go through many trial and errors. The
fact that they have repeated the process several times sets them apart from other companies who
do not have an innovative culture.
Creativity
Innovative companies attract innovative employees. Since the company maintains an innovative
culture, the employees understand that they are responsible for innovations and implementation of
new products. Moreover, every stage of the innovation process is characterized by a large number
of experienced personnel who ensure that the process goes on smoothly.
The experienced professionals ensure the conceptualization, design and implementation of the idea
is completed. Besides, they make sure the product is desirable to customers.
Leadership
As a matter of fact, innovative companies are industry leaders. They are always ahead of the others
in the market. Even if the others try to catch up, they can’t. This is because they only copy what
the industry leaders do.
By the time they implement the idea fully, the innovative company already has a new
product. Therefore, innovative companies set the pace for the industry.
Name recognition
Companies with an innovation culture are known in their industry. Therefore, they do not have a
huge budget on marketing and branding. As a fact, customers look forward to new products from
the company.
Different Understanding On Innovation And Their Consequences On The

Innovation Process
If the innovation process is viewed as a process where only specialists participate, then there will
be very little involvement from all the employees. Some employees will keep off since they do not
feel like they are specialists.
Small companies view innovation as a process for the big companies only.
This is because they conceptualize the innovation process as a complicated process which they
lack the capacity to handle. Innovation can involve small and big changes so the small businesses
miss out on market and technical opportunities which they could have enjoyed had they involved
themselves in innovation. If you have a small business that produces books, you can add a section
for dates at the top of every page. It will not cost you much but it will draw people to your books.
Innovations that are entirely targeted miss out on opportunities for new customers.
For example, supermarkets could give awards to people with the highest loyalty points to the end
of the year. The incentive might not attract more customers if it is only focused on customers who
acquired loyalty cards a month before the service was introduced. Customers who acquire the cards
later will not feel valued. As a result, they might not feel compelled to acquire the cards.
Another misunderstanding is looking at the innovation process as a linear process.

A linear process relies on either technology or market trends as sources of innovation. As a result,
a lot of money is spent on research and development and other sources of innovations are ignored.
The customer, suppliers, public, and employees are ignored as sources of innovation. The
innovation is therefore not a representation of the needs of the customers.
Companies look at innovations as breakthroughs and fail to think about incremental

innovation.
A good example is what happened concerning electric light using the Edison design. The design
of the bulb did not change for 16 years after it was created. When a product and process
improvement took place, the price of the bulb was reduced by about 80%.
Often times, the innovation process is looked at as an independent process separate from the
other processes in the organization.
This is not right as all processes in an organization work together to support each other. Besides,
the other processes in the organization. This is not right as all process in an organization work
together to support each other. Besides, some organizations look at the process of innovation
differently from the product being produced. This is a misunderstanding as the process and product
relate to each other.
Innovation involves some players and set rules. The two make up the rules of the game; they can
therefore influence the conditions and space of the innovation.
If anything happens that is capable of dislocating the framework and the rules of the game, it leads
to a discontionus innovation. It is a shift in the basic conditions (technology, market, regulatory
social etc.) when some innovation conditions are discontinued.
NEGOTIATION SKILLS
CHAPTER ONE
INTRODUCTION
It is generally accepted that a key competence in a procurement executive is an ability to negotiate.
It is also noted that the most important activities performed by urchers involves negotiating
agreements or contracts with supplies. While purchasing is certainly not the only group that
negotiates, negotiation is a vital part of the purchasing process. Negotiation is an ideal way to
implement the purchasing strategies and plans that a business unit develops. It is also often an
ideal way to convey a purchaser’s requirements to a supplier.
Negotiation has been describes as perhaps the finest opportunity for the buyer to improve his/her
company’s profits and obtain recognition.
Definition
1. The process whereby two or more parties decide what each will give and take in an
exchange between them
The definition highlights that negotiation is interpersonal in nature, the interdependence in
parties, and allocation of resources.
2. An occasion where one or more representatives of two or more parties interact in an
explicit attempt to reach a jointly acceptable position on one or more divisive issues
about which they would like to agree.
These definitions shows that negotiations is
 formal – restricts the occasion to those involved
 representative of parties – eg purchaser and supplier
 explicit – it’s a genuine and deliberate attempts
 Divisive issues – about which they would like to agree.
3. Any form of verbal communication in which the participants seek to exploit their
relative competitive advantages and needs to achieve explicit or implicit objectives
within the overall purpose of seeking to resolve problems which are barriers to
agreement.
It is a trading and a deliberations move leading to purchase or sale agreement of goods and services.
It is usually not a negotiation of price though price is a prime point in the agenda. Negotiation is
interpersonal in nature, represents the interdependence of the parties and its allocation of resources.
Negotiation is formal and restricted to two or more parties in a particular agreement. Negotiation
is a discussion on all aspects of a contract i.e quality, quantity, price, time of delivery etc.
 It interpersonal in nature
 There is interdependence of the parties
 There is allocation of resources
 It is formal – restricted to occasions when two or more parties need to reach agreement.
 Involves representatives of the parties
 It is explicit – the process genuinely and deliberately attempts to reach an agreement
 It involves divisive issues about which the parties would like to agree
 It involves communication – exchange of information
Conditions That Pertain Before Negotiation
There are some specific conditions that pertain before negotiations are used in an attempt to
resolve differences between buyers and sellers. This includes and not restricted to:
 When a quotation contains cost elements that are uncompetitive when compared with
others.
 A tender or quotations is unclear on major features.
 There is reason to believe that the seller has a high probability of not fulfilling a critical
feature of the contract.
 Where tenderers are believed not to be pricing competitively.
 The purchase has a unique element.
 The supply market is monopolistic hence diminishing the normal forces of competition.
 There is a contractual dispute that required s detailed understanding of all the circumstances
leading to the dispute.
Negotiations may involve dealing with a single issue or many. They may be conducted on a one
to one basis or between teams of negotiators representing different interests, and may be conducted
over the telephone in a matter of minutes or take months to complete.
Negotiations are not necessarily confined to the buyer-seller relationship; many buying
negotiations take place on an intra-organizational basis, involving the reconciliation of the views
of supplies staff and colleagues. The negotiation process involves the management of time,
information, and power between individuals and organizations who are interdependent. Each party
has a need for the other yet recognizes that compromises or concessions are often required to
satisfy that need.
An important part of negotiation is realizing that the process involves relationships between
people, not just organizations. A central part of negotiations involves each party trying to persuade
the other party to do something that is in their best interests. The process involves skills that
individuals, with other proper training and experience, can learn and improve upon. Good
negotiators are not born, they develop their skills through practice and experience.
Objectives Of Negotiations
The first step of the planning process involves developing the objectives sought from the
negotiations. An objective is an aspiration or vision to work towards in the future. An obvious
objective is to reach an agreement that covers the purchase of a good or service. A buyer or
seller would not commit scarce resources if the goal were to see a negotiation fail. Before actual
negotiations begin, the parties usually believe they can reach an agreement. Saleemi (2010)
observes that for each negotiation, there may be different objectives depending upon the nature
of negotiation. One should however be very clear as to:
Why the negotiations is being planned
 what is planned to be achieved
 what forms the basis of negotiation.
Fundamentally, objectives of a negotiation will obviously be:
1. To safeguard the interest of the organization.
2. Protect the distant future in creating integral relationships.
3. To avoid ambiguity in all concepts.
4. To focus on objectives that must be achieved, objectives intended and objectives we would
like to achieve.
Characteristics Of Negotiation
There are certain characteristics of the negotiation process. These are:
There are a minimum of two parties present in any negotiation.
(ii) Both the parties have pre-determined goals which they wish to achieve.
(iii) There is a clash of pre-determined goals, that is, some of the pre-determined goals are not
shared by both the parties.
(iv) There is an expectation of outcome by both the parties in any negotiation.
(v) Both the parties believe the outcome of the negotiation to be satisfactory.
(vi) Both parties are willing to compromise, that is, modify their position.
(vii) The incompatibility of goals may make the modification of positions difficult.
(viii) The parties understand the purpose of negotiation.
Understanding of the negotiating process. Highly effective negotiators recognize that

negotiating is a process, not just something that is done when discussing the terms and conditions
of a solution. Negotiating is much more than haggling about price. It requires an understanding of
the dynamics that affect the process and influence the behavior of people. Great negotiators invest
time learning different tactics and strategies and how each technique contributes to the overall
outcome.
Focus on win-win. Win-win means that both parties feel good about the outcome of the
negotiating process. Some books that state win-win solutions are not possible in business
negotiating; the authors write that someone usually gives away more than they should and the
outcome becomes a win-lose situation. Great negotiators don't believe that. They help their
customer try and solve problems and look for opportunities to give as much value as possible.
They also know how and when to limit their concessions, give-aways, and discounts so they can
work out an agreement that is equitable for both parties.
Patience. Too many people search for the quick fix try to close the sale as fast as possible so they
can move on the next prospect. Great sales negotiators recognize that patience is a virtue and that
rushing the process often leads to an undesirable outcome. They don't hurry to reach an agreement.
Instead, they take time to gather the necessary information. They think carefully about possible
solutions. They take their time during the entire process. This is critical because major mistakes
are made when we try to reach an agreement too quickly. We rush through the process, not giving
the other person's offer ample attention, and often end up with an outcome that is win-lose. Simply
because we were in a hurry
Creativity. Most great negotiators are also very creative. They use their problem-solving skills to
determine the best solution and look for unique ways to achieve their goal. A friend of mine was
once embroiled in a bitter lawsuit with a company and after months of negotiation, he came up
with a solution that ended the suit. He stretched out beyond the normal answers and developed an
alternative that was accepted by the other party. In other words, he got creative.
Willingness to experiment. Negotiating is a very dynamic process because no two people are
alike. What works extremely well in one situation can backfire in another. That's why great
negotiators practise using a variety of concepts and techniques. They experiment with different
strategies, solutions, and tactics. And a small failure does not prevent them from experimenting
with new ideas in the future.
Confidence. Great negotiators are confident when they enter a negotiation. They aren't arrogant
or rude or cocky-they are simply confident. They have developed a high belief in their ability to
reach an win-win agreement. They are confident that they can handle anything that comes their
way in a negotiation and this confidence is developed through experience. Great negotiators
evaluate themselves regularly. They learn from their mistakes and victories. They focus on
improving their skill. They develop an internal confidence that is unshakable.
Keen listening skills. People will tell you virtually everything you need to know if you ask the
right questions AND listen carefully to their answers. I personally believe that this one attribute is
the most important skill in selling and negotiating. I remember my wife talking to a prospect on
the telephone and at one point during the conversation she sensed that he had more to say. She
waited patiently and listened carefully and the other person eventually gave her valuable
information that helped her close the sale. Unfortunately, too many sales people simply wait for
their turn to talk, or even worse, interrupt their prospect. This lack of listening means they often
miss hearing key information that will assist them in the negotiations.
Negotiating is not a skill that is easily acquired. It takes time, effort and energy. If you want to
improve your negotiating ability you must be ready to work at it. Invest the time learning the
dynamics and science of negotiating. And be prepared to push yourself out of your comfort zone.
The Importance Of Negotiation In Business

One of the biggest obstacles in the way of someone becoming successful at negotiating is the
mental barrier created about the importance of the actual discussion. Essentially, negotiation is a
conversation between two people, or groups of people, looking for a solution that suits both parties.
Once you can calm the nerves and realise this, you are on to a winner.
Becoming a good negotiator could mean the difference between a successful career in business
and a failed one. So why do you need negotiation in business?
Initial Start at a Company

Before you’ve even started a job at a company you are negotiating with them to gain a place, and
then to secure a salary to your liking. It is important to strike a good balancing act from both sides,
leaving the company in a good place financially, whilst keeping the new staff member motivated.
Building Supplier and Customer Relationships

Every deal with a supplier, or a customer, is a negotiation in itself. If an employee can learn how
to negotiate the best prices with vendors or customers, without being rude and damaging
relationships, your company can build longstanding ties that are beneficial to everyone.
Conflict Resolution
As a career moves into management, there are many other problems to consider. This includes
disputes within internal departments. The best case scenario in this situation, is for a good manager
to negotiate a truce between two parties that leaves both happy to continue working in a productive
manner for the company.
Creates Win-Win Situations

Contrary to what some believe, negotiation skills are not about beating the opposition out of the
other party. In fact, the best negotiators are ones who are able to create win-win situations, in which
everyone walks out thinking that the deal is a good one. While the ability to aggressively get what
one wants might seem like a victory in the moment, the reality is that the lack of goodwill generated
by this can cause problems down the road.
There is no question that finding a deal which makes everyone happy is difficult, but this is exactly
why it is so highly valued.
Good Negotiating can Improve your Bottom Line
Ultimately, the goal of a negotiation is to get the best deal possible for you and your organization.
In doing so, you are by definition improving your bottom line. For example, if you are able to
reduce your overhead by 10% due to an effective negotiation, that money goes straight to your
profit margin
CHAPTER TWO
PREPARING FOR NEGOTIATION
Why Negotiate?
Negotiations are applicable where there is disagreement or potential disagreement between
suppliers and buyers. A good buyer will be sensitive to potential areas of conflict and will seek to
resolve these before they arise by ensuring that the terms and conditions applicable to the purchase
provide for such contingencies.
In an ideal world, from a buyers point of view, all of the materials and services required by a
business would be freely available at cheap rates. From a suppliers point of view,
the ideal world would be one in which he could charge as much as he liked for his goods and
services. Somewhere between these two extremes, businesses must find common grounds.
Often, the means of doing so lies in negotiation.
What Matters Should Be Negotiated?
Not all matters should be conducted by means of negotiations. If the value of an item is small,
and an item is found fairly in the stores, this does not need negotiation. Situations are different if
the value of items is large and the terms of sale include clauses, of if the buyer suspects that the
quoted price is unreasonably high.
For there to be successful negotiation, there are goals and objectives of the exercise. The buyer
must decide whether negotiation is the correct approach at all. If e decides so, then he has to
understand how to undertake it. There are then the MIL objectives.
 Objectives that we Must achieve – these are show stoppers, if we can’t achieve then all
will fail.
 Objectives that we Intend to achieve (Important for us to achieve) but if not possible, it’s
not disastrous.
 Objectives we would Like to achieve - if we do achieve, we feel successful.
Experts on negotiation agree that planning is perhaps the most important part of the negotiations
process. Unfortunately, many negotiators fail to prepare properly before entering a formal
negotiation. A plan is a method or scheme devised for making or doing something to achieve a
desired end.
Approaches To Negotiations
Approaches to negotiation may be classified as adversarial or collaborative.
1. Distributive/Adversarial Negotiation – also termed as distributive or win-lose
negotiation. This is an approach in which the focus is on positions staked out by the
participants and the assumption is that every time one part wins, the other loses, so, as
a result, the other party is regarding as an adversary. Many purchasers believe that the
primary objective of negotiation is to win at the expense of a counterpart. We call this
win-lose. Win-lose negotiation means that two or more parties are competing over a
fixed value with the winner taking the larger share. It is also a zero sum game – if one
party gains, it is at the expense of the other party.
2. Integrative/Collaborative/Partnership Negotiation – also called partnership or win-

win negotiation – is an approach in which the assumption is that, by means of creative
problem-solving, one or both parties can gain without the other having to lose. The
participators may be more willing to share concerns, ideas and expectations than would
otherwise be the case. Win-win seeks to expand the value or resources available to
participate through cooperative negotiation. The parties still negotiate to determine
how to divide a bigger and expanded a value pie.
Characteristics Of Adversarial And Partnership Negotiation

Distributive/Adversarial Integrative/ Partnership negotiation
Emphasis is on competing goals to be The emphasis is on ascertaining goals held

attained at the adversary’s expense in common with the other party
Strategy is based on secrecy, retention of Strategy is based on openness and sharing
information and low trust. information
The desired outcomes of the negotiation are The desired outcome of negotiation is
often misrepresented so that the adversary made known so that there are no hidden
does not know what the opponent requires agendas and issues clearly understood.
Strategies are unpredictable Strategies are predictable, and because they
are flexible, they are aimed at reaching an
agreement acceptable to the other party.
Parties uses threats and ultimata to keep the Parties refrain from threats since they are
other on the defence seen as counterproductive., to the rational
solution of the issue
The approach is basically hostile and The approach is basically friendly and non-
aggressive i.e its us against them aggressive i.e we are in this together
The key attitude is that we win and you The key attitude is how can the respective
loose goals of each party be achieved for both to
win
NB/ adversarial strategies may, on occasions, be appropriate when:
 No ongoing relationship or the potential for one exists or is desired i.e the deal is one off.
 A quick simple solution to a disagreement is required.
Partnership or integrative necessary when:

 They are more stable and lead to long-term relationships and creative solutions to mutual
problems
 It may be the only way out of obtaining agreements when both parties to a negotiation have a
high aspirations and resist making concessions on these issues.
The Content Of Negotiations

In any negotiation, two goals should receive consideration i.e Substance goals and relationship
goals.
Substance goals – are concerned with the content issues of the negotiations relating to the
requirements and situations. Most negotiations will take place in respect of high value usage items
that may constitute to 15-20% of the inventory investment.
Content may include:
Amendment to the quoted or existing price
Type of pricing agreement
Quantity, cash and trade discounts
Terms of payment, time of delivery
Relationship goals
These are concerned with outcomes relating to how well those involved in the negotiation are able
to work together once the process is concluded. Some areas of relationship goals include
 Partnership sourcing
 Preferred supplier status
 Supplier involvement in design and development.
 Sharing technology
CHAPTER THREE
FACTORS IN NEGOTIATIONS
The Negotiator
The person- these are the representatives from both the supplier and purchaser. Their behaviors
in negotiations will be influenced partly by their personalities and partly by the role as
representative. Personality is the relatively enduring and stable patterns of behavior, thinking and
feeling which characterize an individual. Personality variables such as authoritarianism, anxiety,
self esteem and paranoia affect the degree of cooperation or competitiveness present in a
negotiating situation. Largely, some of the characteristics will be –
 Their external appearance –
 Their behavior
 Intuition
 Strategic thinking
The negotiator as representative - needs to know the extent of their authority to commit the
organizations that they are representing as such authority prescribes their options and responsibility
for the outcome of the negotiations. Authority could be that of an emissary commissioned to
present, without variation, a position determined by superiors, to that of a free agent.
The Negotiating Situation
This relates to the strengths and weaknesses of the participants in the negotiation. There are a
number of factors that will impact upon the buyers ability to negotiate, including:
 Knowledge of the supply market and available competition
 Technical and other data of the product or service being purchased.
 Intelligence on suppliers finances, organization, production capability.
 Professional knowledge of buying and interface subjects.
 Perceived status of buying power.
 Use of appropriate negotiation skills, including comprehensive planning
 Ability to handle time constraints imposed by others
 Knowledge of past negotiations with seller.
 Confidence in own ability to negotiate and to create an effective team.
The buyer will be in a strong position
 where demand is not urgent and can be postponed,
 supplier are anxious to obtain the business,
 there are many potential suppliers,
 the buyers is a monopolistic position,
 demand can be met by alternatives,
 The buyer has a reputation for fair dealing and prompt payments.
The supplier negotiating position: the supplier will be in a strong position when;
 Demand is urgent
 The supplier is in a monopolistic position
 Buyer wish to deal with the supplier because of his reputation
 The supplier owns the necessary tools or specialized machinery
Time
Necessity never made a good buyer and therefore requirement must be given in good time to
allow for purchasing function to have adequate time to negotiate and procure. Negotiations may
have a past and certainly have a future and a present. Past experience governs expectations and
perceptions. Previous encounters usually produce precedents, custom and practice, which
become identified with a particular relationship and influence the behavior of the negotiating
parties.
Time is a vital consideration when planning negotiations. Procurement specialists must
ensure there is an appropriate context to:
 Convince all those engaged in a procurement process that sufficient time must be
provided to facilitate complex and prolonged negotiations.
 Prevent the other party engaging in procrastination and delaying tactics.
 Ensure that when negotiating overseas/internationally, buyer allows sufficient time to
make return travel arrangements only when the objectives have been achieved.
 Ensure that the planned agenda is time by topic, allowing sufficient time for active
debate and review of positions.
 Allow for respective decision making at executive level.
 Prepared for the interventions of specialist advisers in a negotiations process,
particularly lawyers, who are not noted for timely and speedy responses.
Styles And Ploys Of Negotiations

Negotiation tactics are the short-term plans and actions employed to execute a strategy, cause
a conscious change in a counterpart’s position, and influence others to achieve negotiating
objectives. Negotiators develop tactics to persuade ethically a counterpart to endorse a certain
position. Furthermore, a negotiator must understand what type of tactics a counterpart is using.
An awareness of a counterpart’s tactics may diminish the effectiveness of those tactics. Some
include:
 Low ball– usually involving one party often the seller, offering an unusually low price
to receive a buyers business. Suppliers know that once a buyer makes a commitment
to a seller, is often difficult for that buyer to witch to another supplier.
 Honesty/Openness: parties with a close working relationship have a level f trust that
allows open sharing of information. The objective of this tactic is to make each party
aware of the relevant information needed to create an acceptable agreement.
 Questions – open-ended questions serve dual purposes as a negotiating tactic.
Insightful questions can result in revealing new information and could also provide a
relief as the other party takes time to consider an answer.
 Caucus – involves taking time out to process new information, take a needed break
when negotiation is going on poorly, and when a negotiator feels he/she is making too
many concessions.
 Trial Ballon, where a negotiator wants to test the well meaning of the other party.
“supposing I persuade my manager to endorse this option, would you still go along?
 Price increase – sellers sometimes argue that if a buyer does agree to a certain price,
the price will soon increase. A well informed negotiator can tell the diference between
a real price change and a tactic used by the seller merely to get a purchase contract.
 High ball – tactic involves taking an initial high or low position on an issue. A buyer
may offer an extremely low purchase price or the seller may put forth an extremely
high selling price. The logic is that once a party actually makes a concession from the
extreme position, the new position may appear quite acceptable to the other party.
 Best and final offer – this may signal the end of a negotiation. The person making the
best and final offer must be prepared to end the discussion if the other party does not
accept the offer.
 Silence – this is where one party does not immediately respond when a counterparts
make an offer in the hope that an awkward silence will encourage further offers or
concessions.
 Planned concessions – the use of planned concessions signals that is now the other
party’s turn to reciprocate and make a concession on an important issue.
 Venue – some negotiators insist on a location that is most favourable to them. One
party may have to travel a great distance, face the sun, or sit in an uncomfortable chairs
inorder to create stress.
According to Robert Cialdin, there are hundreds of ploys but can be grouped into six principles.
1. Reciprocation – Every society on earth adheres to the principles of reciprocation, which
means we feel an obligation to give something back to someone after have received
something.
2. Consistency – be consistent in our beliefs and actions. Once a small commitment is in
place, it becomes easier to request larger commitments later.
3. Social proof – whereby we look to the behaviour of others to determine what is desirable,
appropriate, and correct.
4. Liking – This principles states that we work well and are more agreeable with people we
like. Effective negotiators take time to get to know their counterparts, knowing that
concessions are more likely when a favourable level of familiarity exists.
5. Authority – states that we are more likely to accept the positions, arguments, and directions
from authority figures. In negotiation, a senior sales executive may be able to influence an
inexperience buyer.
6. Scarcity – sellers learn early in their career the influence that scarcity can have on a buyer.
Who wants to close a plant because supply will be short? The same argument applies to
price increase. If the product will be scarce at this price, purchasers need to act before the
price increases.
NB/ A tactic used during one negotiation may not be successful or applicable to another
negotiations. When conducting a negotiation, an effective negotiator must be willing to modify
tactics that are not effective. Tactics are most effective when the other party is unprepared,
stressed, under sever time deadlines, inexperienced, fatigued or disinterested.
CHAPTER FOUR
THE NEGOTIATION LIFE CYCLE
Traditionally, negotiation is viewed as the actual interactions among participants to derive mutual
commitment. Negotiation starts when participants begin communicating their goals, and ends
(successfully) when all agree to a specified contract. In expanding our analysis to the negotiation
life cycle, we can consider the broad range of tools and techniques that are applied to negotiations.
The negotiation life cycle address steps directly leading to, or following from, the actual
negotiation process; this includes the subprocesses of: initial problem recognition, participant
solicitation and communication, goal analysis, solution generation, solution selection, solution
implementation, and solution maintenance.
Characteristics Of A Good Negotiator
What The Experts Say
 preparation and planning skill

 knowledge of the subject matter being negotiated
 ability to think clearly and rapidly under pressure and uncertainty
 ability to express thoughts verbally
 listening skill
 judgment and general intelligence
 integrity
 ability to persuade others
 patience
 decisiveness
 considers lots of options
 aware of the process and style of the other person
 is flexible
Thinks and talks about possible areas of agreement

1. Ability To Analyze:
He should have clear thinking and possess sound judgement to enable him to plan and consider
various alternatives objectively. He must discern the statements of others — those favouring his
position, those opposing and those suggesting alternative solutions and should be able to use these
statements to his advantage
2. Sense Of Humour:
He must be tactful and possess a sense of humour. Obviously, one cannot win every point. He
must, therefore, possess the ability to make a concession at the right moment and still display good
humour even when losing a point.
3. Knowledge:
A good negotiator must have a good working knowledge of all primary functions of business like,
economics, business law, engineering, finance, cost accounting etc. He should have studied in
detail the methodology of contract and techniques of negotiation.
Prior to embarking on any negotiation, he must study and acquire detailed knowledge of the
product he is buying, the manufacturing techniques, raw materials used, likely substitutes,
breakdown of the cost and factors affecting price etc.
4. Persistence And Persuasiveness:

He must be tenacious and should be able to persist in his efforts to solve the problem to mutual
satisfaction without causing offence. For this, he should acquire the art of persuasiveness and the
knock of getting along in an agreement. He should be an optimist and need not give up midway in
disgust. He should be able to withstand adverse comments.
5. Skill:
He must be skillful in identifying issues in a negotiation and their relative importance, in planning
strategy and tactics, in communicating, arguing and persuading. He must possess fluency of
expression and a technique of his own to lead conferences.
6. Calm, Quiet And Impersonal:

In all situations he should remain calm & quiet but impersonal. These are difficult qualities to
practice particularly in the heat of discussion during negotiation. He should be a good listener,
allowing others to talk. Simultaneously, he himself should be a good talker.
7. Right Attitude:
He should have studied psychology and must understand human relations and interaction of
groups.
Negotiation Life-Cycle
PRENEGOTIATION STAGE
It is said that cases are won in chambers. Legal victories are often the outcome of the proceedings
research and planning of strategy on the part of lawyers. Matters to be considered at the
prenegotiation stage include:
 Who is to negotiate – which has two approaches.
1. Individual approach – where both should normally have sufficient status to settle
unconditionally without reference to higher authority e.g in cases of rebuy.
2. Team approach – this is for important negotiation and especially where complex
technical, legal, financial etc issues are involved. When using the team approach, it is
important to
 Allocate Roles – typical players i.e spokespersons, who presents the cases and acts as the
captain of the team in deciding how to respond to the situations. There is the secretariat –
one who takes note of the negotiations. There is the expert e.g an engineer or other
technical staff, legal advisors, who provide back up to the spokes person. It is not a must
that every member must speak.
 Avoid Disagreement – there shouldn’t be any outward disagreement between team
members while negotiating.
 The Venue: The buyer should expect the vendor to come to him unless there are good
reasons
 Intelligence Gathering – ascertaining the strengths and weakness of respective
negotiating positions, assembling relevant data relating to costs, production, sales and so
on, preparing data that is to be presented at the negotiation in the form of graphs, charts,
tables and so on so that it can be quickly assimilated
 Negotiation Objectives – buyers should be clear what they expect the negotiation to
achieve. Both parties must decide if negotiations are the correct approach at all. If so
determined, they must determine the objectives they Must achieve, Intend to achieve and
those they would Like to achieve hence MIL. The M objectives are show stoppers i.e if
we can’t achieve these, the negotiations will fail. The L represent the feel that if we can
achieve these, we can feel that we have been very successful indeed. The I occupies the
middle position. While a failure to achieve one or more of these will not necessarily be
disastrous, we will certainly be trying hard to achieve them.
 Strategy And Tactics – this is the overall plan that aims to achieve, as nearly as possible
your objectives.
 Show respect and understand the other person's values and beliefs.
Recognize and define the problem.
Look for different possible solutions.
Be reliable.
Communicate properly.
THE NEGOTIATION STAGE

This is the stage of actual discussion. At this stage, explanatory information is collected. At this
point, a number of steps are observed.
1. Introduction, agreements of an agenda, and rules of procedures.
2. Ascertaining the negotiating range i.e the issues which the negotiator will attempt to
resolve.
3. Agreements of common goals- which must be met if the negotiations is to reach a
successful outcome. This will require some movement on both sides from the original
negotiating range.
4. Identification of and removal of barriers that prevent attainment of agreed common goals.
There will be problem solving, considering solutions put forward by each, review what has
been agreed so far, allow a recess for each side to reconsider its position and make
proposals or concessions, refer the issue back to higher authority, change the negotiators.
5. Agreement and closure –
NB/
 In framing an agenda, the more difficult issues should appear later, thus enabling some
agreements on less controversial matters to be reached early in the negotiation.
 Questions are healthy for gathering more information and also to control the pattern and
progress of the negotiation.
 Concessions are a means of securing movement when negotiations are deadlocked. One
should avoid a pattern of concessions and especially where there has been inadequate
preparation.
POST -NEGOTIATION
 It involves drafting a statement detailing as clearly as possible the agreements reached and
circulating it to all parties for comment and signature.
 Selling the agreements to the constituents of both parties
 Implementing the agreements, e.g planning contracts, setting up joint implementation
teams etc.
 Establishing procedures for monitoring the implementation of the agreements and dealing
with any problems that may arise.
CHAPTER FIVE
NEGOTIATION PROCESS
The five steps of the negotiation process are;
1. Preparation and Planning.
2. Definition of Ground Rules.
3. Clarification and Justification.
4. Bargaining and Problem Solving.
5. Closure and Implementation.
1. Preparation and Planning

Before the start of negations, one must be aware of the conflict, the history leading to the
negotiation the people involved and their perception of the conflict expectations from the
negotiations etc.
2. Definition of Ground Rules
Once the planning and strategy are developed, one has to begin defining the ground rules and
procedures with the other party over the negotiation itself that will do the negotiation. Where will
it take place?
What time constraints, if any will apply? To what issues will negotiations be limited? Will there
be a specific procedure to follow in an impasse is reached? During this phase, the parties will also
exchange their initial proposals or demands.
3. Clarification and Justification

When initial positions have been exchanged both the parties will explain amplify, clarify, bolster
and justify their original demands. This need not be confrontational.
Rather it is an opportunity for educating and informing each other on the issues why they are
important and how each arrived at their initial demands.
This is the point where one party might want to provide the other party with any documentation
that helps support its position.
4. Bargaining and Problem Solving

The essence of the negotiation process is the actual give and take in trying to hash out an
agreement, a proper bargain. It is here where concessions will undoubtedly need to be made by
both parties.
5. Closure and Implementation

The final step in the negotiation process is formalization the agreement that has been worked out
and developing and procedures that are necessary for implementation and monitoring.
For major negotiations – this will require hammering out the specifics in a formal contract.
Negotiation Process has five stages. In all steps of a negotiation process, the involved parties
bargain at a systematic way to decide how to allocate scarce resources and maintain each other’s
interest
Sourcing And Management Of Suppliers

What is sourcing?
It is the process of identifying, selecting and developing suppliers. It is a key purchasing activity,
which can be at tactical, operational and strategic levels.
Tactical and operational sourcing is concerned with lower level decisions relating to high profit,
low risk non critical items. It is also concerned with short term adaptive decisions as to how and
from where specific requirements shall be met.
 Sourcing can be divided into two i.e sourcing abroad (International) and Sourcing locally.
Just before a supplier is commissioned, a supplier appraisal and rating is necessary.
Supplier appraisal is situational. What to appraise is related to the requirement of the
particular purchaser
Why evaluate supplier performance

 Evaluation provides answers to questions like
Who are the highest quality suppliers
How can relationships with the best suppliers be enhanced
How can feedback be shared
 Evaluation assists in deciding with which suppliers a specific order should be placed
 Evaluation can assist in how to distribute an item amongst several suppliers to better
manage risk.
When determining whether an supplier is effective, an evaluation should be done; An elaborate
evaluation includes the 7Cs.
1. Competency of the supplier to undertake the tasks required.
2. Capacity of the supplier to meet the purchasers total needs
3. Commitment of the supplier to the customer in terms of quality and service.
4. Control systems in relation to inventory – costs, budgets
5. Cash resources and financial stability – ensuring that the selected supplier is financially
sound and is able to continue in business in the future.
6. Cost is commensurate with quality and service
7. Consistency – the ability of the supplier to deliver consistently and, where possible,
improve levels of quality and service.
Other non common Cs. Include
Clean suppliers and products should satisfy legislative and other environmental requirements.
Communications – can the supplier communicate and receive information electronically.
PURCHASING AND SUPPLY MANAGEMENT
CHAPTER ONE
INTRODUCTION TO PURCHASING
Purchasing is the organized acquisition of goods and services on behalf of the buying entity.
Purchasing activities are needed to ensure that needed items are obtained in a timely manner and
at a reasonable cost. A purchasing department is especially necessary in a manufacturing business,
where large amounts of raw materials and components must be obtained on a recurring basis.
The term “Purchasing” refers to the process of ordering and receiving goods and services. It is a
subset of the wider procurement process. Generally, purchasing refers to the process involved in
ordering goods such as request, approval, creation of a purchase order record (a Purchase Order or
P.O.) and the receipting of goods.
Objectives of Purchasing
1. To pay reasonably low prices for the best values obtainable, negotiating and executing all
company commitments.
2. To keep inventories as low as is consistent with maintaining production.
3. To develop satisfactory sources of supply and maintain good relations with them.
4. To secure good vendor performance including prompt deliveries and acceptable quality.
5. To locate new materials or products as required.
6. To develop good procedures, together with adequate controls and purchasing policy.
7. To implement such programmes as value analysis, cost analysis, and make-or-buy to reduce
cost of purchases.
8. To secure high caliber personnel and allow each to develop to his maximum ability.
9. To maintain as economical a department as is possible, commensurate with good performance.
10. To keep top management informed of material development which could affect company profit
or performance.
11. To achieve a high degree of co-operation and co-ordination with other departments in the
organisation.
Importance Of Purchasing
1. Purchasing function provides materials to the factory without which wheels of machines cannot move.
2. A one percent saving in materials cost is equivalent to a 10 percent increase in turnover. Efficient buying
can achieve this.
3. Purchasing manager is the custodian of his firm’s is purse as he spends more than 50 per cent of his
company’s earnings on purchases.
4. Increasing proportion of one’s requirements are now bought instead of being made as was the practice
in the earlier days. Buying, therefore, assumes significance.
5. Purchasing can contribute to import substitution and save foreign exchange.
6. Purchasing is the main factor in timely execution of industrial projects.
7. Materials management organisations that exist now have evolved out or purchasing departments.
Reducing Costs
Getting the lowest price for a particular product or service may not be necessary. But purchasers
strive to save money for their businesses by getting the best prices and terms overall. Capitalizing
on incentives and discounts that suppliers offer is important. So too are negotiating favorable
contract terms that improve cash flow by prolonging payment and reducing long-term costs by
cutting waste and avoiding defective products.
Diversifying Supply
Spending too much with one supplier is risky. If that supplier should have trouble fulfilling their
obligations or raise their prices significantly, the company that depends on them may have to delay
delivery of goods to their customers or raise their prices, which could cost them business. So,
ensuring the security of supply by expanding the supplier base is a key objective for purchasing
management.
Fulfilling Business Requirements

Doing business with the right suppliers can matter as much as pricing and supplying. For example,
companies may want to ensure that they support small businesses by allocating a certain
percentage of their purchasing budgets accordingly. They also may want to avoid suppliers with
bad reputations or business practices. Purchasing management can support the achievement of
such objectives.
Sparking Innovation
Purchasing professionals can support their company’s growth by obtaining innovative solutions to
business problems and opportunities. They do so by working closely with vendors, sharing their
company’s needs and exploring how suppliers can help. Together, they can develop better
technologies and products for customers, and refine processes that allow them to deliver goods
and services more efficiently.
Managing Internal Relationships
Given the broad range of goods and services that they buy and the impact that their decisions have
on their company as a whole. purchasing professionals can work with just about anyone in their
companies. They may deal with representatives from marketing, finance and logistics departments
to name just a few. Purchasing connects departments and aligns their efforts in pursuit of the
company’s general goals.
Spending Wisely
Purchasing often accounts for more than half of a company’s spending. Investing purchasing
dollars correctly can help a company expand market share and increase its sales by allowing it to
bring quality products to market first. Purchasing management also can improve profitability by
efficiently developing those products and services through collaboration with suppliers who are
similarly invested in the company’s success.
Principles Of Purchasing
1. Principle of Right Quality:
Right quality implies that quality should be available, measurable and understandable as far as
practicable. In order to determine the Quality of a product, sampling schemes, will be useful.
The quality particulars are normally obtained from the indents, and experience indicates that a
substantial portion of the indents prepared by the user departments are invariably incomplete.
Such incomplete indents often cause unnecessary delays in procurement as the indenter has to be
referred to, and if not referred, results in heavy rejection. Drawings are also attached to the indents,
particularly for spare parts.
Since the objective of purchasing is to ensure continuity of supply to the user departments, the
time at which the material is provided to the user department assumes great importance.
2. Right Quantity:
Materials purchased should be of right quantity. The right quantity is the quantity that may be
purchased at a time with the minimum total cost and which obviates shortage of materials.
Ensuring and maintaining a regular flow of materials for carrying the production activity is the
vital aim of any purchase organisation. Excess purchases should be avoided, it results in
overstocking and capital is unnecessarily blocked and inventory carrying cost goes up.
Economic Order Quantity (EOQ) helps in determining the right quantity of materials to be ordered.
It is calculated by applying the following formula
3. Right Time:
The time at which the purchases are to be made is of vital importance. In case of items used
regularly, right time means the time when the stock reaches the minimum level. The reorder level
of material is fixed for each item under the principle of right time.
Action for the purchase of new supplies should be immediately initiated, when the material reaches
the reorder level. Reorder level for each type of material is calculated by applying the following
formula.
Reorder level = Maximum Consumption x Maximum Reorder Period. The materials control
department sends the purchase requisition to be purchase department for the purchase of materials.
In case materials are required for special jobs, the Purchase Department ensures that the materials
are delivered in time.
Another important factor to be considered is the delivery of materials from stores to production
departments. Any under delay in supplying the materials on different jobs delays the production.
4. Right Source:
Selecting the right source for the purchase of materials is an important consideration in the
purchase procedure. The right source for the procurement of materials is that supplier who can
supply the material of right quality as ordered, in right quantity as ordered, at a right time at which
the materials were required to be supplied, at an agreed price with the supplier, who is in a position
to honour the commitment without much follow- up, who has necessary financial resources and
adequate man-power to handle the order and who is well established with higher reputation and
proven business integrity.
The source of material should be located within a reasonable distance from the buyer’s
organisation. This will minimise the delivery delays, higher transportation charges and improve
the personal contact between the buyer and the supplier and enable better after-sales service etc.
5. Right Price:
Determination of right price is a difficult task. It is the main object of any organisation to procure
the material items at the right price. It is that price which brings the best ultimate value of the
money invested in purchasing the materials.
Deciding the right price of a product depends on variety of factors, viz.; quality, delivery time and
ultimate life of the material, demand and supply curve, extent of competition, government
restrictions, after sales services, discount offered, and terms of purchase etc. It may be pointed out
here that the determination of proper price depends not only on market knowledge but also a clear
understanding of the pricing process.
The buyer should keep in touch himself with the above mentioned factors in the process of
determination of price. He must consider that whether a proposed item to be purchased represents
the best value for money or not.
This is known as “value analysis”. The prevailing market prices also provide basis for the price
determination. There should be negotiation between the purchase department and the suppliers for
the determination of proper price.
6. Right Place:
Besides obtaining the materials of the right quality and quantity from the right source at the right
price, it should be ensured that the materials are available at the right place. Transportation and
material handling costs are greatly affected by the selection of the right place from where the
materials are to be acquired.
For minimising these costs, selection of right place for the acquisition of material is of utmost
importance. If local as well as outside supplier fulfills these conditions, the former should be
preferred. The above mentioned principles of purchasing can be summed up as the six R’s of
purchasing. These are also known as the “essentials” to be followed by the purchasing executive.
CHAPTER TWO
FUNCTIONS OF A PURCHASING
Procuring Materials
One role of the purchasing department is to procure all necessary materials needed for production
or daily operation of the company or government organization. For a manufacturing company, this
might include raw materials such as iron, steel, aluminum or plastics, but it also might include
tools, machinery, delivery trucks or even the office supplies needed for the secretaries and sales
team.
In a retail environment, the purchasing department makes sure there is always sufficient product
on the shelves or in the warehouses to keep the customers happy and keep the store well-stocked.
With a small business, it is especially important to keep inventory ordering at a reasonable level;
investing large amounts of capital in excess stock could result in storage problems and in a shortage
of capital for other expenditures such as advertising or research and development. Purchasing also
oversees all of the vendors that supply a company with the items it needs to operate properly.
Evaluating Price
A purchasing department also is charged with continuously evaluating whether it is receiving these
materials at the best possible price in order to maximize profitability. This can be challenging for
a small business that may purchase in lesser quantities than a larger vendor and which thus may
not receive the same type of bulk discounts. A purchasing department in a small business needs to
shop around to find the best vendors at the most reasonable prices for the company's particular size
orders. Purchasing department staff may communicate with alternate vendors, negotiate better
pricing for bulk orders or investigate the possibility of procuring cheaper materials from alternative
sources as part of their daily activities.
Paperwork and Accounting
Purchasing departments handle all of the paperwork involved with purchasing and delivery of
supplies and materials. Purchasing ensures timely delivery of materials from vendors, generates
and tracks purchase orders and works alongside the receiving department and the accounts payable
department to ensure that promised deliveries were received in full and are being paid for on time.
In a small business, this means working closely with the accounting department to ensure that there
is sufficient capital to buy the items purchased and that cash is flowing smoothly and all payments
are made on time.
Policy Compliance
The purchasing department also must ensure that it is complying with all company policies. For
example, in a small business, individual staff members may communicate with the purchasing
department about purchasing needs for things such as office supplies or computers. Before making
a purchase, the purchasing department must ensure that it heeds the proper protocols for purchase
and budget approval and must ensure that any items are purchased in accordance with the overall
purchasing policy of the organization
Supply Sourcing
One of the main roles of the purchasing department is to source supplies and parts, and then
purchase them. In large companies, this may also include deciding whether to make the item in-
house. Purchasing departments often work alongside product development teams to source
materials and determine cost of the finished product. Purchasing departments may use trade
publications to source suppliers, or go straight to the manufacturer. Finding the correct item at the
correct price can be difficult, and purchasing departments may also work to assist suppliers in
manufacturing the item needed. This can involve providing considerable assistance to the supplier.
Bidding
For items needed in bulk, or specialist items, purchasing departments often use competitive
bidding to chose a supplier. The department will then be responsible for all aspects of the bidding
process. For example, when the purchasing department of the Port of Houston chooses a supplier,
it publishes a public notice, writes detailed instructions on the bidding process, accepts companies
onto the approved list of bidders, handles bid security money, opens and reads the bids publicly
and makes a recommendation on which bid to accept.
Cost Control
Purchasing departments, especially in government agencies, may also be responsible for
maintaining strict cost control. For example, in a 2010 article on hotel purchasing specialist site
Food Buyers Network, John Schalow suggests that to get the best price, purchasing departments
need to ensure suppliers themselves get a lower cost from distributors and manufacturers. This can
be done by increasing delivery size, paying on time, ordering online and making sure suppliers use
the best practice.
Methods of purchasing
1. Purchasing by Requirement:
This method refers to those goods which are purchased only when needed and in required quantity.
The goods which are not regularly required are purchased in this way. On the other hand it refers
to the purchase of emergency goods. These goods are not kept in store. Purchasing department
must be in knowledge of the suppliers of such goods so that these are purchased without loss of
time.
2. Market Purchasing:
Market purchasing refers to buying goods for taking advantages of favourable market situations.
Purchases are not made to meet immediate needs but are acquired as per the future requirements.
This method will be useful if future needs are estimated accurately and purchases are made
whenever favourable market situations arise. The market situation is constantly studied for
forecasting price trends.
The advantages of this method are: lower purchase prices, more margin on finished products due
to lower material cost and saving in purchase expenses. This method suffers from some limitations:
losses in case of wrong judgment, fear of obsolescence, higher storing expenses due to more
purchases.
3. Speculative Purchasing:
Speculative purchasing refers to purchases at lower prices with a view to sell them at higher prices
in future. The attention in this method is to earn profits out of price rises later on. The purchases
are not made as per the production needs of the plant rather these are far in excess of such
requirements. A cloth mill may purchase cotton in the market when prices are low with the
attention of earning profits out of its sales when prices go up.
Speculative purchasing should not be confused with market purchasing. The former is done to earn
profits out of future price rises where as the latter is concerned with purchasing for own needs
when favourable market situations exist. Though speculative purchasing may result in profits but
there are chances of prices going down in future, fear of obsolescence and incurring higher storage
costs.
4. Purchasing for Specific Future Period:

This method is used for the purchase of those goods which are regularly required. These goods are
needed in small quantity and chances of price fluctuations are negligible. The needs for specific
period are assessed and purchases made accordingly. The requirements for such purchases may be
assessed on the basis of past experience, period for which supplies are needed, carrying cost of
inventory etc.
5. Contract Purchasing:
In the words of Spriegel it is “the purchasing under contract, usually formal, of needed materials,
delivery of which is frequently spread over a period of time.” Under this method a specific quantity
of materials is contracted to be purchased and delivery is taken in future. Even though the goods
are procured in future but the price and other terms and conditions are fixed at the time of contract.
This method may be useful when price rises in future may be expected and material requirements
for future may be accurately estimated.
6. Scheduled Purchasing:
Under this method the suppliers are supplied a probable time schedule for material requirements
so that they are in a position to arrange these in time. An accurate production schedule is prepared
for estimating future material needs. The suppliers are informed of probable needs and orders are
sent accordingly. The schedule provided by the purchaser to the vendor is not a contract. This is
only a gentleman’s agreement for terms and conditions of purchases. The main objectives of this
method are: minimum inventory, prompt service. low prices, quality goods etc.
7. Group Purchasing of Small Items:

Sometimes a number of small items are required to be purchased. The prices of these items are so
small that costs of placing orders may be more than prices. In such situations the buyer places
order with a vendor for all these items. The purchase price is agreed to be by adding some
percentage of profit in the dealer’s cost. This method will be used only when dealer’s records are
open to inspection for determining his cost. This type of purchasing reduces the cost of the buyer
by eliminating much clerical work.
8. Co-operative Purchasing:
Small industrial units may join to pool their requirements and then place bulk orders with dealers.
This will help them in availing rebates on large quantity purchases, cash discounts and savings in
transportation costs. After receiving the materials these are divided among the member units. Co-
operative purchasing helps small units in availing the benefits of bulk purchasing.
Purchasing Process
1 Request To Purchase / Requisition
This phase deals with identifying the need – what to buy – how much of it – and when it is needed
for – there are two main forms of requisition – a manual one i.e. that created on a form (such as a
requisition form) or other document and that created automatically via an ERP type system. The
requisition will likely go through an approvals process whereby authorization is given to purchase
the item (or not!)
2 Supplier Selection
Buyers may already know which supplier to to buy the item from that is being requested. If not a
tender (or request for quote) process may be initiated to identify a supplier, price and lead time.
3 Purchase Order
A purchase order is dispatched to the supplier (either a paper copy or electronically) to inform the
supplier of the intent to purchase. The purchase order will identify the item(s) being procured, the
quantity required and the price being paid. It will also identify delivery address and any terms and
conditions that relate to the order.
4 Fulfillment
The supplier will then dispatch the goods to the buying organization. Lead time might be required
to allow the supplier to manufacture the item or receive deliver from Mitsubishi own suppliers.
5 Goods Receipt
Once the goods arrive at the buying organisation they will typically go through some form of goods
receipting process where the goods are checked to ensure that they match what was ordered and
that they are of the correct quality.
6 Supplier Invoice/Payment
At time of despatch the supplier will typically issue an invoice – which either accompanies the
goods or is sent separately. This will be received by the finance department – processed and paid
(assuming the goods are received and are correct).
Business Organization's Purchasing Process
1. A Problem Is Identified
The purchasing process does not begin until someone identifies a problem within the organization,
which can be solved by purchasing a good or service. Anyone within the organization can initiate
this -- from a customer service rep out of printer paper -- to the CEO who decides that it's time to
expand to a larger facility. In some instances, a sales person may help someone in the organization
to identify a need that no one had previously recognized.
2. General Need Description

After a problem is identified, the organization determines which product or service is required.
When an office is out of printer paper, the office manager may decide that more paper is needed.
However, a software engineer in the same company might suggest that the organization become
paperless by providing all employees in the office with tablet computers.
3. Product Specification
Once the general need is agreed upon by those who have purchasing authority in that organization,
they will then narrow down the options by specifying what the product or service must offer. If
they have decided on tablets, they would then specify the size they want, how much memory the
tablets offer, and so on. If they decide on paper, then they would determine the quantity and quality
of paper required.
4. Supplier Search
The third step of the buying process involves looking for potential suppliers. If the company
doesn't already have an established relationship with a vendor that offers the product, then often
the company must look online, attend trade shows or contact suppliers by telephone. Purchasers
determine if the suppliers are reputable, financially stable and if they'll be around for future
requirements.
5. Request for Proposals

For large purchases, organizations usually write out a formal RFP, a Request for Proposal, and
then send it to their preferred suppliers. Alternatively, they may make the process public so that
anyone can send in a proposal. For smaller purchases, this could be as simple as looking at the
price on a website.
6. Supplier Selection
In this part of the process, supplier proposals and prices are evaluated to determine who is offering
the best price and the best quality. Often, price alone is enough to win an organization's business,
as many businesses will weigh the price against financing options, supplier reputation and whether
or not a supplier can provide the organization with future goods and services.
7. Order Specification
Once the winning supplier has been selected, the organization places the order. This may involve
establishing credit with the supplier, agreeing on terms, as well as reviewing shipment times and
any other deliverables that may come with the sale, such as installation or product training.
8. Performance Review
After the product has been delivered or the service has been performed, the organization will
review the purchase to see if it meets acceptable standards. For larger purchases, this could be a
formal review involving key decision makers in the organization and the supplier's sales staff. For
smaller purchases, it is often informal. For example, if the company ordered a box of paper that
arrived late or was damaged, the company may decide not to buy from that supplier again, without
ever informing the supplier of a problem.
CHAPTER THREE
SOURCING DECISIONS
Sourcing Decisions in Supply Chain. Purchasing: Also called the procurement, is the process by
which companies acquire raw materials, components, product, services or other resources from
suppliers to execute their operations.
Make-Or-Buy Decisions
A make-or-buy decision is the act of choosing between manufacturing a product in-house or
purchasing it from an external supplier. In a make-or-buy decision, the most important factors to
consider are part of quantitative analysis, such as the associated costs of production and whether
the business has the capacity to produce at required levels.
Reasons Favoring Making A Part In-House:

 Cost considerations (less expensive to make the part)
 Desire to integrate plant operations
 Productive use of excess plant capacity to help absorb fixed overhead (using existing idle
capacity)
 Need to exert direct control over production and/or quality
 Better quality control
 Design secrecy is required to protect proprietary technology
 Unreliable suppliers
 No competent suppliers
 Desire to maintain a stable workforce (in periods of declining sales)
 Quantity too small to interest a supplier
 Control of lead time, transportation, and warehousing costs
 Greater assurance of continual supply
 Provision of a second source
 Political, social or environmental reasons (union pressure)
 Emotion (e.g., pride)
Criteria for Make or Buy Decision:

Companies prefer own manufacturing and buying only raw material or semi-finished parts.
Such decision is made in the following cases:
1. Finished product can be made cheaply by the firm than that by the outside suppliers.
2. Finished product only is manufactured by limited number of outside firms, which are unable to
meet the demand.
3. The part has an importance for the firm, and requires extremely close quality control.
4. The part can readily be manufactured with the firm’s existing facilities and the part is similar to
other items in which the company has manufacturing experience.
5. Requires high investment on facilities, which are not available at supplier’s plant.
6. Has a demand that is both stable and relatively large.
Factors Considered for Making

1. Are patents or copy rights involved?
2. If so, what are the royalties?
3. Have the best prices been obtained?
4. Are the quantities optimized?
5. Is the previously contracted firm already making something similar which could be added to the
new item, thus reducing production cost?
6. Techniques of production may be special.
7. Is raw material readily available?
8. If free material to be provided?
9. Will any tax be involved?
Factors Considered for Buying:
1. What quantities are involved?
2. Will drawings need modification?
3. Whether jigs, tools, gauges are loaned?
4. Will demand be temporary or permanent?
5. Will demand fluctuate?
6. Are special manufacturing techniques involved?
7. Is there any question of secrecy?
8. Is there a likely market elsewhere?
9. Are frequent design changes likely?
10. Arrangement for inspection, sampling etc.
11. Retention of own production personnel.
12. What notice of termination is required?
CHAPTER FOUR
SUPPLY CHAIN MANAGEMENT
Introduction
Supply chain refers to the network of relationships upstream and downstream in the
organization which involves the flow of materials, services, information and finance right from
the SS to the CC
Supply Chain Management refers to the integration, coordination and unifying all theprocess
within the supply chain network. With fulfilment of the basic fundamental functions of plan,
source, make deliver and return.
The concept of supply Chain Management involves a number of processes and in particular
they are about 8 plus; They are:-
1. Customer Relationship Management (CRM) –Which is basicallyunderstanding
the needs of customers, arriving with solutions to satisfy these needs and managing
the relationship in long run.
2. Customer Service Management (CSM) –Which is basically following
upcustomers demand after delivery through satisfaction survey.
3. Demand Management (DM) –Basically forecasting quantity and time when
aspecific product will be needed.
4. Order Fulfilment (OF) –Basically ensuring that customers demands are met asand
when required using the principle of OTIF.
5. Manufacturing Order Management (MOM) –This involves management
ofconversion processes to ensure products are produced within reasonable cycles,
at most minimal cost possible while delivering in terms of quality to the customers.
6. Product Development Management (PDM) –This encompasses themanagement
of new product, design and development taking into consideration the various
stages of research, tests through to commercialization.
7. Supplier Relationship Management (SRM) –It involves the element
ofprocurement. Identifying, supplying sources, managing quality from suppliers,
negotiations, managing contractual terms, building long term relationship,
partnering, entering into alliances that are strategic in business and streamlining
flow of information and cash within those relationships.
8. Return Management (RM) –This is basically reverse of logistics that
addressesissues arising from customer complains throughout the supply chain
network both upstream as well as downstream.
The Need for SCM


 The need to improve operations.

 Increasing levels of outsourcing.

 Increasing transportation costs.

 Competitive pressures.

 Increasing importance of e-commerce.

The need to manage inventories
Reasons for the slow growth of integrated SCM include the following:

 Lack of guidelines for creating alliances with supply chain partners.

 Failure to develop measures for monitoring alliances.

Inability to broaden the supply chain vision beyond procurement or product
 distribution to encompass larger business processes. 

 Inability to integrate the company internal procedures.

 Lack of trust inside and outside a company.

 Organizational resistance to the concept.

 Lack of buyin-by top managers.

Lack of integrated information systems and electronic commerce linking firms
Elements of SCM
Supply chain management involves coordinating activities across the supply chain central to
these corresponding activities at each level of the supply chain.
Elements Typical Issues

Customers Determining what products and/or
services customers want
 Forecasting Predicting the quantity and timing
of customer demand.
 Inventory Meeting demand requirements
while managing the costs of holding
inventory
 Purchasing Evaluating potential suppliers,
supporting the needs of operations
on purchased goods and services
 Suppliers Monitoring supplier quality, on-time delivery, and
flexibility maintaining supplier relations
Location Determining the location of facilities
Logistics Deciding how to best move information and
materials
Capacity Planning Matching supply and demand
Processing Controlling quality, scheduling work
Supply Chain Management Enablers
For a successful SCM operations there are key fundamental enablers that make supply chain
successful and various research findings classifies all these enablers into 5 key elements with
each particular enabler having some specific attributes.
1. Systems
Systems is one of the most fundamental supply chain enabler and in this particular sense refers
to the softwares that are used for provision of information and data within the entire supply
chain network and the softwares purse provide:
(a) Connectivity –which is simply the ability to exchange information with allthe
relevant partners collaborating with all the relevant partners collaborating with
the organization.
(b) Integration –which is simply the process of combining and integrating
orco-ordinating with the partners in a seamless manner.
(c) Visibility –This is the ability to access all the data and information at anypoint
of the network.
(d) Responsiveness –This is the ability to react quickly to the demands ofsuppliers
or customers both internally as well as externally to achieve all the product
rights.
2. Organizational Infrastructure
The general infrastructure of the organization plays a significant role in the management of
supply chain since it determines how the functional units are organized as well as how change
management aspects will be handled in a co-ordinated manner. The key attributes of this
enabler are;
(a) A functional organizational strategy that is coherent or in line with the business
objectives.
(b) A formal business process that stipulates how the functional processes will be
handled.
(c) Having a functional business matrix (indicators) on how the organization
performance will be measured and monitored.
3. Technology
Technology as an enabler includes the structure on how the organization is organized and
linked with all the stakeholders both intra (departmental) as well as inter (with other
companies) company and determines the supply chain cycle times between the organization
functions, the organization and allies all through the entire supply chain network. Technology
as an enabler has the following attributes:-
(a) It co-ordinates the business function
(b) It makes data available as at and when required.
(c) It provides visibility in the entire supply chain network.
4. Strategic Alliances
This factor covers how the company integrate with the other companies both upward as well
as downward. Streams of the supply chain network aims at building long term relationships
with common goal of providing availabilities and better service levels to all the stakeholders.
Strategic alliances have the key attributes of:-
(a) Delivering
(b) Integration
(c) Partnerships
(d) Collaborating networks
(e) Consistent systems of IT
5. Human Resource Management

HR plays a significant role in the management of SCM as the entire scope involves designing
jobs, hiring the right talents, motivating and retaining the right talent, defining the key targets
and objectives for the individuals and following up to ensure that target set are met accordingly.
The principle aim of HRM in SCM is to motivate all the processes with the entire chain to
achieve very high service levels (SLs) that will delight the suppliers and the customers in this
network.
CHAPTER FIVE
SUPPLY CHAIN VULNERABILITY AND RISKS
The primary objective of SCM is to reduce risks and uncertainties into the supply chain
network so as to create constant availability of products and services within the entire network
from a constant flow and implementation of PSMDR aspects that will continuously improve
the service level to the customer and ultimately to the end users.
Supply chains are vulnerable to both internal as well as external environment and the internal
risk aspect are motivated with internal interactions of functional units that operate within this
chain while the external risks are those attributable to the PESTEL aspects on the contextual
environment under which the organization operates.
There are 5 categories of supply chain risks which include:-

1. Globalization
The effects of globalization affecting transportation, lead times, political challenges etc pose a
great threat to operation SCM.
2. Chaos Risks
The risk of fluctuation in order from customers through to suppliers as they move from
downstream to upstream causes alot of challenges in PSMDR resulting into chaos within the
chain (commonly referred to as the Bull Whip Effect).
3. Lack of Ownership
Lack of co-ordination between the Ss and the Cc with no clear objective and performance
measurements bring about lack of ownership in SCM processes as there are no clear cut
responsibilities spelt out within this chain.
4. Just in Time relationship risks

Organizations dependent on JIT operations risk quite abit in the sense that JIT approaches only
work in instances where all the stakeholders work seamlessly and their PSMDR operations are
not affected by externalities
5. Sourcing
Supplier base reduction resulting into single sourcing can be source of SCM risk as the
organization will be dependent on a single supplier who in case of breakdown will highly affect
the organizations operations and sometimes lead to high levels of losses from periodic
operational shut downs.
Managing Supply Chain Vulnerability And Risks

There are a number of ways in which the above risks can be reduced/managed and these
includes;
1. Multiple sourcing
Diversification of sourcing strategies in order to spread the risks of reliance on single sources.
2. Management and development of supply sources
With clear agreements on process deliverables
3. Supplier selection
Ensuring that the right suppliers and supply sources are selected in order to avoid the risks of
wastages.
4. Stock pilling
This strategy is used to build inventories within the SC network so as to take care of
globalization risk effects due to transportation bottlenecks high seas threats (piracy), wars, post
congestion etc.
5. Process redundancy
This aims at maintaining high levels of capacity in all SC operations so as to take care of any
uncertainities of sudden increases in demand.
6. Insurance
It is the assurance that in case of any accident or occurrences of a risk the company is going to
be brought to its previous position by insurance company.
7. Collaborative Initiatives
This aims at finding the right partners, collaborating with them to share resources and any risk
that might come within the operational framework.
8. Localised sourcing
This aims at sourcing internally (in country) to avoid risks of long lead times, transportation
(costs), handling and inspection costs etc.
9. Contractual obligations
Getting into formal service level agreements that clearly stipulates the role and obligations of
all the concerned parties
10. Rationalization of product range
Fewer, bigger, better – the less the product range, the less the complexity of PSMDR the better
the service levels.
Supply Chain Optimization (SCO)

Value Chain Analysis
CHAPTER SIX
LOGISTICS MANAGEMENT
Logistics originated from the military during the Napoleonic Wars and it was used as a
technique of moving and quatoring the army as strategy to win against the opponent. It is
basically the process of managing the movement and storage of materials from the source or
point of origin to the point of consumption with the associated information flows.
It is that part of the supply chain that plans, implements and controls the effective and efficient
flow of materials, their storage from the Ss to the Cc in a cost optimised manner.
It basically consists of two phases i.e.

(i) The input phase –which is basically defined as the material management
phasewhich is concerned with all aspects of material management from
procurement, manufacturing, warehousing and its related systems that provides
efficiency and effectiveness within the material flow network.
(ii) The output phase –which is basically physical distribution management that
isbasically concerned with the flow of goods from the time an order is received
all the way through to when the customer consumes the product. The PDM is
concerned primarily with the transportation aspect.
Within the logistics management chain, a continuum of processes from procurement –

transport – storage – manufacturing – warehousing and deliveries to point of sale.
Horizontally increases the cost while vertically it increases the value as shown in the diagram
below:-
Reverse Logistics
Is the process of planning, implementing and controlling the flow of materials, work-in-
progress, finished goods and other consumables together with related information from the
point of consumption to the origin for the purpose of recapturing the value and or proper
disposal
Reasons for Reverse Logistics)

6. Quality problem (defects from production)
7. Non- payment
8. No – order
9. Wrong order
10. Expired products
11. Lack of adherence to terms and conditions of trade
12. Damage on transit (stock in transit insurance [si
Supplier Relationship Management

SRM is simply defined as an interaction between two or more parties either buying or
supplying goods, services or works. This relationship must be two way and it should be in the
position to benefit either of the parties by improving its performance and enhancing its
satisfaction profitably. Management and building of this relationship is a three phased process
that includes;


Initiation


Agreement and

Delivery
1. During the Initiation Phase all the parties concerned identify their needs as well as
their aspirations taking into consideration the strategic fitness of all parties.
2. During the agreement phase the parties determine and define their WOW’S, how
their needs will be met, how the specification will be set, who will be responsible
for defining and determining performance indicators as well as how they will be
measured. This phase is the core of supplier relationship management
3. During the delivery phase the parties perform their obligations as defined within
the agreements which must be acceptable to both of them. In most cases it is the
longest phase that is characterized by;
- Continuous improvement
- Supplier performance measurement
- Supplier rating as well as quality.
Components of Effective SRM

SRM necessitates a consistency of approach and a defined set of behaviours that foster trust
over time. Effective SRM requires not only institutionalizing new ways of collaborating with
key suppliers, but also actively dismantling existing policies and practices that can impede
collaboration and limit the potential value that can be derived from key supplier relationships.
At the same time, SRM should entail reciprocal changes in processes and policies at suppliers.
Organizational structure
While there is no one correct model for deploying SRM at an organizational level, there are
a set of structural elements that are relevant in most contexts.
A formal Relationship Manager or Supplier Account Manager role. Such individuals often sit
within the business unit that interacts most frequently with that supplier, or may be filled by a
category manager in the procurement function. This role can be a full time, dedicated positions,
although relationship management responsibilities may be part of broader roles depending on the
complexity and importance of the supplier relationship.
SRM managers understand their suppliers’ business and strategic goals, and are able to see
issues from the supplier’s point of view while balancing their own organization’s
requirements and priorities.
Governance
The SRM office and supply chain function are typically responsible for defining the SRM
governance model, which includes a clear and jointly agreed governance framework in place
for some top-tier strategic suppliers.
Effective governance should comprise not only designation of senior executive sponsors at
both customer and supplier and dedicated relationship managers, but also a face-off model
connecting personnel in engineering, procurement, operations, quality and logistics with their
supplier counterparts; a regular cadence of operational and strategic planning and review
meetings; and well-defined escalation procedures to ensure speedy resolution of problems or
conflicts at the appropriate organizational level.
Supplier engagement model
Effective supplier relationship management requires an enterprise-wide analysis of what

activities to engage in which each supplier. The common practice of implementing a “one size
fits all” approach to managing suppliers can stretch resources and limit the potential value that
can be derived from strategic supplier relationships.
Supplier segmentation, in contrast, is about determining what kind of interactions to have with
various suppliers, and how best to manage those interactions, not merely as a disconnected set
of siloized transactions, but in a coordinated manner across the enterprise. Suppliers can be
segmented, not just by spend, but by the total potential value (measured across multiple
dimensions) that can be realized through interactions with them. Further, suppliers can be
segmented by the degree of risk to which the realization of that value is subject.
Joint activities
Joint activities with suppliers might include:
c) Supplier summits, which bring together all strategic suppliers together to share the
company’s strategy, provide feedback on its strategic supplier relationship
management program, and solicit feedback and suggestions from key suppliers.
d) Executive-to-executive meetings
e) Strategic business planning meetings, where relationship leaders and technical
experts meet to discuss joint opportunities, potential roadblocks to collaboration,
activities and resources required, and share strategies and relevant market trends.
Joint business planning meetings are often accompanied by a clear process to
capture supplier ideas and innovations, direct them to relevant stakeholders, and
ensure that they are evaluated for commercial suitability, and developed and
implemented if they are deemed commercially viable.
f) Operational business reviews, where individuals responsible for day-to-day
management of the relationship review progress on joint initiatives, operational
performance, and risk
Value measurement
SRM delivers a competitive advantage by harnessing talent and ideas from key supply partners
and translates this into product and service offerings for end customers. One tool for monitoring
performance and identifying areas for improvement is the joint, two-way performance scorecard.
A balanced scorecard includes a mixture of quantitative and qualitative measures, including how
key participants perceive the quality of the relationship. These KPIs are shared between customer
and supplier and reviewed jointly, reflecting the fact that the relationship is two-way and
collaborative, and that strong performance on both sides is required for it to be successful.
Advanced organizations conduct 360 degree scorecards, where strategic suppliers are also
surveyed for feedback on their performance, the results of which are built into the scorecard.
Systematic collaboration
In practice, SRM expands the scope of interaction with key suppliers beyond traditional buy-
sell transactions to encompass other joint activities which are predicated on a shift in
perspective and a change in how relationships are managed, which may or may not entail
significant investment. Such activities include:
• Joint research and development
• More disciplined and systematic, and often expanded, information sharing
• Joint demand forecasting and process re-engineering (has unlocked savings of 10-
30 percent for leading organizations).
Technology & systems
There are a myriad of technology solutions which are purported to enable SRM. These
systems can be used to gather and track supplier performance data across sites, business units,
and/or regions. The benefit is a more comprehensive and objective picture of supplier
performance, which can be used to make better sourcing decisions, as well as identify and
address systemic supplier performance problems. It is important to note that SRM software,
while valuable, cannot be implemented in the absence of the other business structure and
process changes that are recommended as part of implementing SRM as a strategy.
Other Considerations: Challenges
• Creating the business case

• Executive sponsorship
• Calculating ROI
• Developing an SRM sales pitch
CHAPTER SEVEN
INVENTORY CONTROL
We have defined inventory management indicators, the costs associated with inventories, and
the various inventory classifications together with the reasons why organizations keep
inventories. We cannot control what we do not measure and we cannot manage what we do not
control.
Inventory control in itself defines the various techniques both quantitative that are necessary
to establish two critical elements which are:
5. Order quality (how much to order).
6. Order level (when to order)
However, it is necessary in principle to know what order

Inventory control is defined as a planned approach of determining what to order, when to order
and how much to order and stock. (SAS) so that the costs associated with holding the inventory
and ordering the inventory is optimal without interrupting production and sales which in
essence bring equilibrium between supply and demand.
Costs Involved In Inventory Management

(i) Purchasing cost
This cost takes into consideration all the elements and sub-elements that bring in inventories
through acquisition from various supply sources such costs include but not limited to;
- taxes
- custom duties
- IDF Costs – import declaration form
- Inspection costs
- Transportation
- Insurance cost
- Shipping
- Material handling costs e.t.c.
d) Storage Cost
These are costs associated with holding inventory on keeping stock after they have been
received from the supply sources.
Basically, stock keeping costs are highly dependent on the policy of the firm, the nature of the
inventory and the overall objective (strategy that the firm is pursuing under insourcing or
outsourcing strategies (make or buy decisions). These cost elements include but not limited to:
e) Maintenance: stock taking, Policies i.e. FIFO ,OFP W.A.
f) Warehousing cost; rent, leases, depreciation cost
g) Electricity cost i.e. energy costs
h) Security
i) Insurance
4. Pilferage
5. Obsolescence
- Disposal cost
These are cost that are associated with disposing off inventories considered to be of no-use to
the organization. These inventories are normally disposed off taking into consideration all the
SHEQ aspect that will ensure sustainability of the organizations operations in the short,
medium to long term waste costs include but not limited to; Qualitative and quantitative
evaluation of SHE impacts that the firm’s waste management environmental pollutions waste
disposal and any reworks cost compliance e.t.c must be take into consideration like the first 2.
Its element include but not limited;
5. Labour
6. Transport
7. Inspection
8. Storage
9. material handling
6. Stock – out costs

Costs associated with stock non-availability as at and w2hen required are referred to as stock
out costs. This cost is unnecessary evil as it impacts on the business in a number of ways.
Stock outs are unavoidable in the company due to the nature of demand that is stochastic in
nature. However, it is necessary that it is minimized on reduced as far as possible so that the
organize does not suffer in the long term as this costs portray a very negative image due to
stock unavailability that will eventually bring about non-replenishment of customer demands
which eventually leak to loss of competitiveness as the customer demands are not fully met.
11. Loss of production out cost lead to;
12. Loss of productivity i.e. the organization throughput and in tandem/inline with it leads
to loss of sales and profitability.
Supplier Selection
Supplier selection is the process by which firms identify, evaluate, and contract with suppliers.
The supplier selection process deploys a tremendous amount of a firm's financial resources. In
return, firms expect significant benefits from contracting with suppliers offering high value.
Supplier Evaluation
Supplier evaluation is the process to access new or existing supplier base on their delivery, price,
production, and quality of management, technical and services. A standard supplier evaluation
framework shall be used in all cases for the existing and potential suppliers Used in all cases for
the existing and potential suppliers.
The supplier evaluation framework can help to set up a benchmark and corrective action plan for
the existing supplier. Company can decide to reward supplier based on their excellence
performance and penalizing or de-listing them if the performance is not in standard. Supplier
Evaluation and Management had been practiced in manufacturing industry and Construction
Projects.
Quality, Cost, and Delivery (QCD)

The most important criteria in construction industry is material quality, delivery dependability,
and cost. The most important factor of supplier selection should be the quality level of the
procurement items. Product quality should consistently meet specified requirements since it can
directly affect the quality of the finished goods. Not only product quality reliability, supplier
characteristics like delivery lead time shall be consider carefully.
Unit price should not be the only criteria in supplier evaluation. Total cost of ownership is an
important factor. Total cost of ownership includes the unit price of the material, payment terms,
cash discount, ordering and carrying cost, logistics and maintenance costs, and other more
qualitative costs that may not be easy to assess.
Supplier must value add their product by providing good services when needed. For example,
when product information or warranty service is needed, suppliers must respond on a timely basis.
Selecting services and products from suppliers with excellent delivery ability can reduce or get rid
of waste related with purchasing raw materials such as inventory, storage cost, and cost related
with multiple times of material transferring.
Many company adopt to “Just-in-Time” (JIT) Inventory process to reduce the cost of ‘’waste”.
Supplier need to make the delivery on-time based on company request. Supplier that perform
excellent delivery ability can provide additional value to the company by reduce the risks of
material running out, saving on unnecessary transportation costs, reduce the need to storage and
cost inventory related cost.
Long-Term Relationship
Some company will develop long term relationship with potential supplier. This is applicable to
the supplier which falls under the category of high volume of spending and play critically to the
company’s business. With this approach, both party need to share their mutual goals, establish
metrics to guide the relationship and develop a series of ongoing discussion on how issues and
conflicts can be resolved in a mutually beneficial manner over the times. These relationships may
also involve joint cost-savings projects and new product-development efforts.
Financial Stability
Financial status of the supplier should be carefully evaluated as its directly affects its ability to
serve the customer. Analysis of Credit Reports plays an important roles in financial evaluation.
Credit Report contain information about supplier financial status. Credit report contain information
on the experience, management, and facilities of the potential supplier.
A related supplementary procedure is independent analysis of the supplier’ financial statement.

The purchasing officer can obtain information regarding the supplier’s financial stability, pricing
policies, and general operating efficiency by applying the tools of ratio analysis to the supplier’s
balance sheet and income statements.
Total Quality Performance and Philosophy

Supplier quality capabilities can be evaluated by using the supplier certification programs.
Certification is about the setting of criteria regarding of quality levels as demonstrated through the
use of statistical process control and such elements as process capability studies of a supplier’s
equipment, record-keeping abilities, and others. If a supplier meets some but not all of the criteria,
it may reach a “preferred” status and will remain on the construction organization’s bidders list.
If a supplier meets all the criteria and has demonstrated that it can sustain these levels, then it may
be granted “strategic” status and be placed on the construction organization’s bidders list. By the
use of the strategy above, company can reduce their supply base by only awarding to those
suppliers who can become certified or awarding the supplier who become certified first. Those
supplier with low abilities will not be able to become certifies, hence the supply base will be
reduced.
Long-Term Relationship
The exponential growth of internet use has made the dream of E-commerce be more realistic. The
expanding market for E-commerce is too huge to ignore for all business. Rapid developments in
the technology are improving and provided on-line services very quickly. E-commerce adoption
has its organizational and business implications. It is not a magical solution to revolutionize a
business.
Comprehensive and collaborative efforts are required to make the most from E-commerce in the
industry, and only those models that understand the complex business of construction will survive

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What are some definitions of entrepreneurship mentioned in the text?

What are some definitions of entrepreneurship mentioned in the text?

What are some roles of entrepreneurship in economic development according to the text?

What are some roles of entrepreneurship in economic development according to the text?

TRAINING MANUAL

1|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

The Role Of Entrepreneurship In Economic Development Of A Country

Wealth Creation and Sharing

2|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

Balanced Regional Development

GDP and Per Capita Income

3|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

Increase per capita income

4|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

In recognizing this, large corporations attempt to establish an intrapreneurial spirit in their

SPECIFIC TYPES OF ENTREPRENEURS

5|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

Pattern multiplier Entrepreneurs

Economy of scale exploiters Entrepreneurs

Buy and sell artists Entrepreneurs

Characteristics & Qualities Of Successful Entrepreneurs

6|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

7. Strong leadership qualities

10. Sales ability

This is a look at the top ten myths that need to be dispelled:

8|Page Developed By Ndeveni M.Jonathan For ©MIC/KCB -F 2018

BUSINESS IDEA GENERATION

Means of Generating Business Ideas

Safety and Security Needs

Self Esteem or Ego

3. Building On Your Skills, Hobbies, Or Interests

Christian Disco Bar

4. Spotting A Market Niche

Trend Need Business ideas

5. Listening To What People Say

7. Gaining From Waste

8. Look To See And Listen To Hear

Putting Your Ideas into Action

SCREENING A BUSINESS IDEA

(i) Personal Considerations

Your objectives if group to business

Your personal SWOT Analysis

This is the analysis of one’s strength, weaknesses, opportunities, threats.

Entrepreneurial Self Concept: The process of establishing one’s entrepreneurial potential.

(ii) Business Considerations

Availability of Raw Materials

DEVELOPING SUCCESSFUL BUSINESS IDEAS

 Recognizing opportunities and generating ideas

 Writing a business plan

 Industry and competitor analysis

 Development of an effective business model

Source Of Business Ideas

 Work experience ,Hobby or personal interest ,Family and friends

Techniques For Generating Ideas

 Survey – a method of gathering information from a sample of individuals.

 Other techniques -Customer advisory boards

Identifying Business Opportunity

Ideas about projects may be generated by: -

Assessing Business Opportunities