Explain four internal and four external factors which motivate individuals to develop entrepreneurial behavior

Internal factor include

  • Positive Thinking

A positive attitude can motivate you to accomplish your business goals. It is a must for entrepreneurs starting their own small businesses, as there are always many obstacles to conquer on the way to establishing your own venture. Adopt a positive mindset if you are not an optimist by nature. Do this by banishing negative thoughts, working with upbeat person and reminding yourself of your strong points on a daily basis.

  • Reaching Objectives

Setting goals is a –great self-motivator, Make strong goals and focus on them to push you to succeed. Plan how you will achieve the goals and set a specific time frame. Remind yourself frequently regarding what you are working for to keep yourself on track, reaching incremental steps along the way to overall goals helps keep you inspired. Plan personal rewards for each objective met, such as taking a weekend trip or, celebrating at a favorite;- restaurant.

  • Security

Basic survival is a primal self motivator. The need to provide food, clothing and shelter for yourself propels you to Work, Providing for a family, as well, can be particularly motivating.- You tend to work harder and accomplish more when you know others depend  on you for their needs.

  • Recognition  

Most people enjoy the recognition that comes with a job well done. When others notice your achievement and comment on them, your motivation to excel at an even higher level is triggered. Praise and appreciation is important to spur on your efforts. Share your accomplishments with those who care about you in order to satisfy your personal need for acknowledgement.


External factors include:

  • Financial Rewards

Commissions, bonuses, stock options and employee stock plans are compensatory rewards used to motivate the entrepreneur. Within the range of extrinsic motivations, these are “carrots.” The drive for money and success can often get people’s feet matching.

  • Praise and recognition

Some people aim to please and nothing pleases them more than receiving praise for their hard work. This extrinsic motivation is one of the strongest, most common motivations in the business. Numerous studies show recognition and praise contribute more to job satisfaction than financial incentives. Regularly delivering sincere and genuine compliments is a strong extrinsic motivational method

  • Peer Pressure

The pressure to feel accepted and valued can in fact be a motivator. In business, it may be the reason people work their hardest to keep up with their team or why they take longer or shorter lunches.

  • Consequences and Punishment

When the beats on, many-people, take action or step up their performance. Knowing the client will be if the work is not properly done or if the services are not delivered on time may act as an extrinsic motivation.


  • The type of business owners

Will the business be owned by individuals, corporations, trusts, Kenya residents, foreign residents, or other entities? This factor is important because certain business entities (primarily S corporations) are not available to certain types of owners:


  • The number of business owners

Will there be owner, a few owners, or numerous owners. This factor is important because certain types of business entities are not available to one-owner businesses and other types of entities are either not available or not practicable if the number of owners is too high.


  • The primary purpose of the business venture

Is the primary purpose of the business to provide an employment for the business owners or is investment the primary purpose? Is the primary purpose of the business the same for each owner or are some of the .owners involved primarily for employment purposes and others primarily for investment of other purposes? This is important because the business entity must be capable of being structured so as to accomplish the purposes of all of the owners,

Whether the business, is startup or existing If the business is already in existence, certain types of entities .might not be feasible because of the impracticality of reorganizing the business into that entity; For example, if an business is being operated as a corporation, it may not be practicable (taxwise) to reorganize the business into an LLC company or partnership.

  • How the business will be capitalized?

Will it be capitalized primarily by debt or equity? If it will be capitalized primarily by debt an LLC, partnership, or S corporation might be preferable to a C corporation because a portion of the debt may be includible in. the tax basis of the owners’ interest in the business

  • The importance to the owners of pass-through taxation

If this is important, a C corporation should not be used. If the owners anticipate net losses in the business operation during its early years and if it is important to the owners that these losses be passed directly to them in the year of incurrence, then C Corporation should not be used. An LLC, partnership or S corporation will clearly be preferable in this instance,

  • The importance to the business owners of personal liability protection

If it is important to the owner or owners that they not be personally liable, for the unassumed debts and liabilities of the business, then a sole proprietorship or general partnership should  not be used unless the partnership is a limited liability partnership. As a practical matter, from personal liability standpoint, it is almost never advisable for an individual to operate as a sole proprietor.

Discuss five factors that an entrepreneur should put in consideration before deciding on the form of business ownership



Summarize four sources of internal capital

  • Personal savings

This refers to the owner must have worked and saved income overtime in order to accumulate • enough to start a business.

  • Sale of personal assets

This may mean selling part of the owner’s idle or under-utilized assets. The same assets may also be converted for use in business. They may not be money but are representation of  money therefore the owner’s contribution.

  • Family/relatives and friends

This is a popular source of equity financing. Friends and family in most cases are not worried about quick profits as professional investors are. However, one should be careful when using money from friend’s family because some may want to get involved in running the business.

It may also create conflict and disharmony in families.

  • Operating Income

A better source of capital for a company than debt or equity is a positive operating income from quarter to quarter. This is because the company is generating that positive operating income from its own successful business operations. Operating income is also known as earnings before interest and taxes or EBIT. Operating income or EBIT is used to determine how successful the firm’s business, actually is.

Positively operating income will generate cash reserves for the firm and eliminate the need for equity financing which is the best of all scenarios for a business firm.


Highlight five non-financial incentives that entrepreneurs could use to motivate employees in an enterprise

  • Personalized plaque
  • Trophy
  • T-shirts with company logo
  • . Gift Certificates
  • Standing ovation
  • Balloons
  • Photograph of employee displayed in a prominent place Parking spot
  • Lunch with boss, CEO, manager, etc.
  • Recognition among other co-workers
  • Additional paid vacation days
  • Praise for good work  .
  • Recognition
  • Job autonomy


Summarize five roles that an entrepreneur could play as an innovator in an enterprise

  • To create new products
  • To create new customer demand
  • To build strong teams capable of constant innovation
  • Brand development

With markets and technology changing fast, and good ideas- quickly copied, there is continual  pressure to devise new and better

In relation to the sale of shares, highlight five factors that an entrepreneur would consider before going public

In deciding whether to go public, a-corporation must determine whether it is realistically in a position to support a successful public offering. The following are some of the factors that should be considered in the decision making process and are elements that could prove critical to the success of the offering.


While it is clear that ideal candidates for successful public offerings  are companies with a consistent record of growth over several years, many development Stage companies with innovative products and services (such as in the software, Internet or biotechnology sectors) have successfully raised funds based on the potential of their business and  management. Thus, a corporation with a short financial history can attract investor interest by showing a strong momentum in sales and profits and by being able to identify anticipated growth opportunities and competitive advantages.


A corporation must have a market value after the issue that is large enough to attract institutional investors.


A corporation must have either a solid net worth supported by tangible assets or, if technology based, Proprietary intellectual property with strong business prospects. The quality of a corporation’s patent portfolio and other intellectual property protection is critical

Business plan

A corporation must think about its long term business goals and whether going public is the best way to finance its growth .Prospective underwriters and investors as well as securities regulators, will require that a corporation have a clear plan for the use of the proceeds from the issue. On occasion, a two-step process whereby a smaller, private placement precedes the initial public offering may be more appropriate and financially advantageous, as if may reduce dilution to the founding shareholders. .




The going public process is typically heavily influenced by precedent. Having a good .grasp of a corporation’s industry and market, as well as its competitive strengths and weaknesses, is critical to building a credible “case” with underwriters and potential investors.

Management and board of directors

A corporation’s management roust possess sufficient depth and experience to carry out a successful public offering. Prospective underwriters and investors are particularly interested in the strength of the management team. A corporation must therefore ensure that management is willing and able to assume the responsibilities involved in going public. In addition, changes, to the bound of directors and the establishment of appropriate committees of the board are very often acquired. Board of directors plays a significant role in both the management of public companies and in their public image.

A corporation will often need to add to its board individuals, with experience expertise, expertise or the necessary independence.

Corporate structure and governance

A corporation must consider whether its existing corporate,-capital, management and governance structures are appropriate for a public corporation, as well as whether all of its corporate records and contracts are in order.

Internal controls

A corporation must have internal controls, systems and procedures that are capable of supporting the demands associated with both the process of going public and the requirements to report reliable financial information to investors following the public issue.


Explain the patent process

An application may be filed with either a provisional .or complete specification. The application should contain

  1. a request (Form IP 3)
  2. a description
  3. one or more claims
  4. one or more drawings (where necessary) and
  5. ‘an abstract

The following apply if an application is filed with a provisional specification

  1. Unless the applicant-files a final specification within one year after, the application is  filed, the application should be deemed to have been withdrawn;
  2. The final specification should not go beyond the disclosure in the provisional specification and
  3. The filing of the final specification should not affect the filing date accorded.



The description should disclose the invention and at least one mode for carrying out the invention in such full clear concise and exact terms as to enable any person having ordinary skills in the art to make use and to evaluate the invention and that description should include any drawing and relevant deposits as the case of micro-organisms and self-replicable material which are essential for the undertaking of the invention. The description should

  1. State the title of the invention.
  2. Specify the technical field to which the invention relates
  3. Indicate the background art which, as far as it is known to the applicant, can be regarded as useful for the understanding, searching arid examination of the invention; and
  4. Indicate how the invention is industrially applicable



The claim or claims should, define the matter for which protection is sought and should be clear and concise and fully supported by the description. In defining the matter for which protection is sought a claim should set out

  1. the technical features that are necessary to define the subject matter of the invention but that are part of the prior art; and
  2. The technical features that, in combination with the features referred to in paragraph (1) above, define, that for which protection is sought.

The features set out in the claim under paragraph (2) above should be preceded by the words ‘“characterized in that”, “characterized by”, “wherein the improvement comprises” or any other words to the same effect

“Claims should not rely in respect of the technical feature of the invention, on references to the description or drawings. In particular they should not rely on such references “as described in part of the description, pr “as illustrated in figure… of the drawing”.

A referenced, feature should be included in parentheses if the intelligibility of the claim can be increased by doing so.

If more than one claim is included in the application, the claims should be numbered consecutively, in Arabic numerals

An application may include a claim stating the essential technical features, of an invention with one; or more following claims setting out particular embodiments of the invention. the claims setting out particular embodiments of the invention should include a reference to the claim stating the essential technical features of the invention. The claims setting out particular embodiments of the invention  should state the features that it is desired that those claims protect

The claims should be grouped together to the extent possible and in the most appropriate way. If more than ten claims are included in the application, the application fee should be increased by the excess claims fee payable for each of the claims in excess often


The drawings should Comply with the following:-

  1. The drawings should not be coloured
  2. The lines of the drawings should be black, durable, uniformly thick and well defined and should be drawn with the aid of drafting instruments’
  3. The drawings, including their scale and the distinctness of their lines, should be such that all details can be distinguished without difficulty when the drawings are reproduced photographically at two thirds their actual size;
  4. if the scale is given on a drawing, it should be given graphically
  5. cross sections should be indicated by hatching that does not impede the clear reading of  the reference signs and reading lines
  6. all numbers, letters and other references signs should be at least ,32 centimeters  high and should be circled or within brackets or inverted commas;
  7. If the drawings show a feature mentioned in the description, that feature should be denoted in the drawings by a reference sign and that reference sign should be used throughout the application to denote that feature;
  8. The lettering on drawings should use the Latin alphabet or, where customary the Greek alphabet;
  9. The different figures in the drawings should be numbered consecutively in Arabic numerals independently of the numbering of the sheets on which the drawings appears and
  10. the drawing should not include text other than single words or phrases



The abstract should merely serve the purpose of technical information in particular; it should not be taken into account for the purpose of interpreting the scope of the protection sought.

The abstract should .include the title of the invention and a summary of the disclosure included in the description. The summary should indicate the technical field to which the invention relates and the principal use or uses of the invention.

The abstract should be drafted in a way that it can be used efficiently for searching in the relevant technical field and so that it is possible for a reader to assess, from the abstract whether the description should be consulted. The abstract should not include statements about the merits or value of the invention or about uses that are speculative.

If applicable, the abstract should include the formula that best characterizes the invention. Unless it is impractical, the abstract should not contain more than one hundred and fifty words


Summarize five benefits that could accrue to an entrepreneur from business amalgamation

  • Generate cost efficiency through economies of scale
  • Enhance the revenue through gain in market share
  • Generate tax gains
  • Get out the target company of a difficult financial situation
  • Help entering in a new market
  • Lower the labour costs, through staff reductions
  • Provide new technology and intellectual property

Suggest five measures that an entrepreneur could take in order to improve cash flow in an enterprise

  • Fast Payment Incentives

Offering a discount for early payment is a quick and easy way for a business to cut down the time spent waiting for payment and improves cash flow. Typically, a small discount will suffice. Some businesses offer one percent or two percent off if the bill is paid within ten days.

  • Bill Regularly

Sometimes, businesses-especially smaller enterprises–do not bill regularly. This creates liquidity problems. Having a scheduled billing system in place ensures bills are sent out on time. This also helps clients get used to being billed at the same time each month so they budget accordingly. This provides the enterprise with steady income.

  • Avoid Slow-Paying Clients

Lose the slow and no-paying clients. They hurt businesses by reducing cash flow and usually become an expense rather than income.

  • Check Credit History

Conduct a background check to ensure that non-paying consumers are not added as clientele. Have clients fill out a simple credit application listing three credit references. Call references and inquire about the payment history. Only offer credit to consumers who pay on time. Deal with everyone else on a cash basis. Accept credit cards only if the business has a system in place to immediately verify the purchase.

Review the rates a id terms for each business related loan. A business with good payment history can often consolidate loans and negotiate for a lower interest rate. This provides a positive impact on cash flow. When consolidating two or more loans, look into changing it into a longer-term one in exchange for lower monthly payments.

  • Cut Tax Bill

Several legal ways exist to cut down the money that goes to Kenya Revenue Authority Improve liquidity with smarter tax-deductible decisions. Buy a client a thank-you gift rather than taking her to lunch, for example.

  • Describe five legal requirements which entrepreneurs need to fulfill in order to continue being in business.
    • Licenses -Seek license to operate the business from the local authorities. This mandates the entrepreneur to operate the line of business for which he has registered.
    • Labour laws -Comply with all the labour laws to avoid international strikes.
    • Workman’s Compensation Act -Register workers with trade unions.
    • Factory Act
    • Health and safety regulations -This governs the work environment


  1. I) Explain the term “Global marketing”

Global marketing is the process of conceptualizing and then conveying a final product or service worldwide with the hopes of reaching the international marketing community. Proper global marketing has the ability to catapult a company to the next level, if they do it correctly.

  1. ii) highlight six common mistakes that entrepreneurs make in global marketing
  • Sidelining of local industries- agriculture and industries in developed and even developing countries have been sidelined in the interest of keeping a breast with what is happening elsewhere.
  • Investing in sweatshops.
  • Unable to manage the cultural effects within their organizations.
  • Investing even when the exchange rates do not favour them.
  • Inabilities to manage the competition that they face hence most of them fail.

Many organizations today have realized the need for promotion of corporate entrepreneurship.

In relation to the above statement, argue the case in support of corporate entrepreneurship

  • It can be used to improve competitive positioning and transform corporations, their markets, and industries when opportunities for value-creating innovations are developed and exploited.
  • companies build layers of advantage by combining distinctive bases for competitive superiority
  • CE can improve a company’s growth and profitability
  • The empirical evidence that CE improves performance by increasing the company’s pro-activeness and willingness to take risks by pioneering the development of new products, processes, and services
  • Innovation and new business development can be initiated by independent individuals or by existing enterprises.


Describe the procedure of registering a private company

  • Name Search

Proposed name must be reserved pending registration (Name can only be reserved for thirty days). Application for reservation are made in writing and be accompanied with the prescribed fee.

  • Documents prescribed for incorporation of a company


  • Memorandum and Articles of Association – Highlights the objectives of the company, the subscribers to the shares of the company and the subscribers to the Articles of the company.
  • Form 201 – Form of company registered office and address
  • Form 203 – Form describing the Secretary and directors to the company.
  • Form 208 – Form of compliance with provisions of the companies Act.
  • Statement of nominal capital – Declaration of Nominal Capital of the company.


  • All companies must appoint a Registered Certified public secretary as the company secretary
  • The Memorandums and Articles of Association are required to be stamped at the lands office upon payment of the prescribed revenue duty fee’s. Hi is stamp duty fee is determined by the value of the nominal capital of the company.
  • Certificate of Incorporation is processed thereafter,averagely in 10 days.


Distinguish between an acquisition and a merger

  • Although merger and acquisition are often used as synonymous terms, there is a subtle difference between the two concepts.
  • In the case of a merger, two firms together form a new company. After the merger, the separately owned companies become jointly owned and obtain a new single identity. When two firms merge, stocks of both are surrendered and new stocks in the name of new company are issued. Generally, mergers take place between two companies of more or less same size. In these cases, the process is called Merger of Equals.
  • However, with acquisition, one firm takes over another and establishes its power as {he single owner. Generally, the firm which takes over is the bigger and stronger one. The relatively less powerful, smaller firm loses its existence, and the firm taking over, runs the whole business with its own identity Unlike the merger, stocks of the acquired firm are not surrendered, but bought by the public prior to the acquisition, and continue to be traded in the stock market.
  • Another difference is, when a deal is made between two companies in friendly Terms, it is typically proclaimed as a merger, regardless of whether it is a buyout. In an unfriendly deal, where the stronger firm swallows the target firm, even when the target company is not willing to be purchased, then the process is labeled as acquisition.

Briefly explain three methods of financing a takeover

  • The target’s assets are often used as the collateral for the large loan needed.
  • The takeover can also take the form of a tender offer meaning that there is a public invitation for all shareholders to sell their stock. Often times the price to sell is higher than what the stocks are worth and the takeover will take place once the firm or individual taking over has purchased enough shares to obtain control.
  • Creeping tender offer where a group of investors gradually purchase company shares.



The table below analyses three forms of business ownership and their characteristics:


Factors Sole proprietor Partnership Company
Ownership Individual No limitation on the a)
number of partners
Liability of owners Individuals liable for In general partnership Amount of capital
business liabilities contributed is the
Individuals are liable initial shareholders
for business liabilities. liability
Partners are liable for
capital contribution
Costs of starting b) c) Created only by
business statue, articles of
incorporation, filling
fees, taxes and fees
for states in which
corporation registers
to do business
Continuity of Death dissolves the d) Enjoys greatest form
business business of continuity. Death
or withdrawal of
owner(s) will not
affect legal existence
of business
Transferability of Complete freedom to General partners can e)
interest sell or transfer any transfer their interest
part of business only with the consent
of all other general
Limited partners
interests without
consent of the general


Capital requirement Capital raised only by f) New capital could be
loan or increased raised by sale of stock
contribution by or bonds or by
proprietor borrowing (debts) in
the name of the
Management control Proprietor makes all g) h)
decision and can act
Distribution of Proprietor is Depends on Shareholders can
profits responsible and partnership agreement share in profits
receives all profits and investment by
and losses partners
Attractiveness for i) Depends on capability j)
raising capital of partners and
success of business



Describe the missing characteristics (a)-(j) for the above forms of business ownership


Factors Sole Proprietorship Partnership Company
Ownership Individual No limitation on the number of  partners (a) shareholders
Liability of owners Individuals liable for business liabilities In general partnership.

Individuals are liable for business liabilities. Partners are liable for capital contribution.

Amount of capital contributed is the initial shareholders liability
Costs of starting business (b) individuals savings, loans or grants (c)partners capital contribution Created only by statue, articles of incorporation, filing fees, taxes and fees for states In which corporation registers to do business.
Continuity of business Death dissolves the business (d) By default a partnership will terminate upon the death, disability, or even withdrawal of any one partner.

However, most partnership agreements provide for these types of events, with the share of the departed partner usually being purchased by the remaining partners in the partnership.

Enjoys greatest form, of continuity. Death or withdrawal of owner(s) will not affect legal existence of business
Transferability of interest Complete freedom to sell or transfer any part of business General partners can transfer their interest only with consent or all other general partners. Limited partners can sell partners interests without consent of general  partners (e) Transfer by sale of shares
Capital requirement Capital raised only by loan or increased contribution by proprietor. (f) Capital raised by partners. New capital could be raised by sale of stock or bonds or by borrowing(debt) in the name of the company
Management control Proprietor makes all decisions and can act immediately. (g) partners (h)the board of  directors
Distribution of profits Proprietor is responsible and receives all profits and losses. Depend s on partnership agreement and investment by partners Shareholders can share in profits by
Attractiveness for raising capital (i)depends on the attrac­tiveness of the business enterprise Depends on capability of partners and success of business Depends on the liquidity position of the company



List five challenges facing small and medium sized enterprises (SMEs) in your country.

  • Economic fluctuations such as boom, recession, depression and recovery can find a business at any stage of its progress.
  • Fluctuating interest rates which grossly affect SMEs in the export import business.
  • Interruption in supplies caused by war, or piracy in the sea for business which import their commodities.
  • Government regulations and restrictions which sometimes are costly to SMEs to comply with such as taxation policies.
  • Natural catastrophes and disasters such as fire and floods which may hinder operations and break down the supply chain and major routes

Personal factors may also affect entrepreneurs engaged in the SMEs some of which may include;

  • Financial risks involved such loss of all personal savings which may discourage entrepreneurs.
  • Career risks such as giving up on employment to pick up business.
  • Lack of skills and experience in a given business area.
  • Mismanagement of business which leads to failure of many SMEs in the country.

Poor business ethics such as unfair business ethics in order to make quick gains may be a contributing factor to failure of many SMEs

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