6 Steps to Successful Computerization Which Every Entrepreneur Needs

Before you computerize some of your business operations, here are 6 steps to ensure a successful start.

For the small business entrepreneur there are a number of preliminary questions to be resolved regarding computerization before venturing into it.

Although, it is pretty obvious that every business needs to computerize in order to improve on its efficiency and effectiveness.

The following questions are still pertinent.

  • Should you computerize?
  • If so, what operations should be computerized?
  • How soon?
  • At what cost?
  • How should it be accomplished?
  • Which software and hardware consultants/vendors should be engaged?
  • What precautions should the firm take in order to ensure the success of the project?

The answers to some of these questions are, no doubt, clearly outside the scope of this post. However, we shall attempt to respond to most of them.

Although, there is no hard and fast approach to computerization, the process should be systematic. Below is an outline of the steps we recommend. In recommending these steps, we have assumed that the entrepreneur who wants to computerize some of his/her business operations may not personally have the needed expertise in computer software and hardware. This means that he/she has to depend extensively on outsiders, notably consultants and software and hardware vendors (sellers).

The recommended steps are as follow:

Step 1: Preliminary Investigations

For novice in computer novice, the purpose of the preliminary investigation is to acquire more information about computers, the uses to which the computer can be put in his/her business and associated costs.

This is to facilitate his or her decisions:

  • On whether or not to computerize;
  • When to computerize;
  • How much to budget for the computerization exercise; and
  • The activities to computerize for a start.

The investigation should be conducted by holding informal discussions with staff, friends, relations and business associates who are familiar with computers or who employ computers in their own businesses. Hardware and software vendors should also be consulted.

In particular, software vendors may be interested in showcasing application packages which are considered relevant and applicable to small business operations.

In conducting the investigations, the major concern should be:

  • Gathering enough information to be able to decide on the operations to computerize;
  • The objectives of the computerization efforts;
  • The options available both, in terms of hardware and software;
  • The probable costs;
  • The duration of the computerization exercise; and
  • Requirements for successful computerization.

The investigation should therefore continue until these objectives are achieved. We wish to emphasize that published articles, advertisements and books on computers or information technology and consultants can be very useful sources of information.

Finally the entrepreneur or manager may acquire the needed information by attending a relevant short course such as a computer appreciation course.

The danger associated with skipping this stage or doing it in a haphazard manner is that of ending up with a computer system that is unsuitable for your purposes. You could also end up being ripped off.

We know managers/business owners who acquired computers that they did not ever put to use before they became obsolete. This kind of situation should be avoided through preliminary consultations and investigations.

Step 2: Objectives of the Computerization Effort

On the basis of the information obtained from the preliminary investigation, the entrepreneur should specify what he or she needs the computers for and what he or she needs to achieve by computerizing those operations. For example, he/she may decide that at the initial stage, the computers will be used simply for processing, desktop publishing ‘internet/e-mail services and for maintaining a customer database.

The specific objective of word processing and desktop publishing may be to reduce the cost and improve on the quality of the letters, memoranda and other and booklet/pamphlets typed by the company. Ft may also be envisaged that this will impact positively on the company’s public image. For the internet/e-mail, the objectives may be to open up and maintain constant link with the outside world in the most efficient way and have unrestricted access to modem information network as a way of reaching out more to customers, venders and information on general developments in the world of business.

At this stage, these objectives can only be as specific as the entrepreneur’s knowledge/expertise in information technology and computers will permit However, information technology consultants can be quite helpful in this connection. There is also a high probability that in the course of the computerization exercise he/she will acquire sufficient additional computer knowledge and experience to warrant a revision of the objectives stated earlier. Otherwise, the objectives may have to be refined by the project consultants, if any.

Step 3: Request for Proposal/Quotations From Computer Software/Hardware Dealers

Upon the formation of clear intentions regarding his/her computer requirements, the entrepreneur is now in a position to reach out to software/hardware vendors.

To guide vendors in assessing his/her requirements, he/she would need to supply them the following information:

  • The nature of his/her business whether manufacturing service or otherwise the type of goods or services provided;
  • The size of the company in terms of sale strength, total assets, annual turnover, market coverage, and future expansion plans/projections;
  • The operations to be computerized the objectives of the computerization exercise problems currently encountered in the operations in question;
  • The kind and content of the reports or output to be generated by the computerized system from time to time; and
  • The resident computer expertise available within the firm.

In addition, other specific information may be required depending on the specific operations to be computerized.

As a minimum, quotations from three different firms will be required. This will enable the company compare the terms and conditions proposed by different vendors. It will provide some of the facts needed by the entrepreneur to negotiate effectively win the vendor that will be selected.

We expect, and indeed recommend, that the quotations submitted by vendors will cover both software and hardware requirement. They should also include the cost of the installation and adaptation of the software package and the training of the staff who will use the system on a day-to-day basis.

The first advantage of this holistic approach (of obtaining quotations covering both hardware and software) is that inter-vendor comparisons will be easier. Also, it is easier to hold one supplier accountable for the entire system than to hold one accountable for the software and another for the hardware.

In the case of multiple suppliers, there is likely to be buck-passing if the system does not function as expected. Software vendors are familiar with the hardware requirements for their application packages and should have a vested interest in ensuring that both the hardware and software are compatible.

From, this perspective, software vendors are in a better position to design and implement any fairly complex and sophisticate computerized set of operations.

Step 4: Selection of a Vendor and Software/Hardware

Different vendors may recommend different types and brands of software and hardware. Each vendor’s submission should be evaluated, therefore, on the basis of three sets of factors, namely, vendor factors or considerations, software factors or considerations and hardware factors or considerations.

The vendor factors which should inform hardware/software choice are the:

(a)        reputation and integrity of the vendor

(b)        resources at the disposal of the vendors;

(c)        vendor’s organizational capabilities, competence and experience,

(d)       vendor’s standing in the market in terms of its ability to satisfy its existing client;

(e)        suitability of the products and service being proposed by the vendor,

(f)        quality of customer service offered by the vendor;

(g)        vendor’s prices/fees.

Software considerations would include the followings:

  • The Reliability of the Package: This implies its correctness and robustness. Does it perform well consistently (reliability)? Is it easily corrupted or grounded at the slightest sign of invalid data input or hardware problems (robustness)?
  • Efficiency: This relates to both the time it takes the programme to execute the assigned job and the memory space requirement for doing so. Unfortunately, efficiency sometimes conflicts with program simplicity and clarity. Even then, simplicity and clarity should never be sacrificed for speed and memory space requirements.
  • The Suitability of the Software: Is it able to do the job as required?
  • Portability: A portable computer programme is one that can easily be adapted to run on computer systems other than the one for which it was originally designed. Adaptability is important if one is to eliminate the effort, time and expense of having to start from the scratch in attempt to produce a similar programme for another hardware.
  • Maintainability: which is the ease with which a programme can be debugged improved upon with time.
  • Testability: Is it possible to determine the suitability and reliability of the package based on a selected number of trial runs?
  • Usability: Usability is related to user-friendliness. A good package should be easy to use and sufficiently practical even for amateurs. Various ways of achieving user-friendliness are through the use of windows, menus, help facilities, in-built tutorials and easy-to-follow manuals. Differences in user preferences often make the implementation of user friendliness a difficult and tricky matter.

Hardware Considerations

This is refers to the factors which a buyer should take into account in evaluating the personal computer hardware being proposed by vendors.

The key considerations are as follows:

i. The Brand: The brand of the computer is certainly a factor. There are two broad categories; branded and unbranded (or clones). The attraction of branded computers is the assurance that no reputable company will put its brand name on a product which it does not trust. Branded computers are also backed up with warranty and other kinds of support services. But they are also a lot more expensive than clones.

ii. Memory Capacity: The memory capacity of a computer is the size of the main storage area where programmes which are being executed or awaiting execution and data which are being processed or awaiting processing are stored.

The bigger the memory the better, at least, in two respects. First, if the capacity is not large enough, it may be unable to accommodate some large packages. In other words, some packages may not run on the computer as a result of memory limitations. Second, limited memory capacity can slow down programme execution and data processing. Computer memory is measured in kilobytes, megabytes and gigabytes.

iii. Hard Disk Capacity: The hard disk is the secondary storage in which data, programmes and files are stored for long periods of time. Generally, you have to store a programme in the hard disk to be able to run it. The alternative is to run it from a diskette or a compact disk (CD). This option is largely impracticable these days because many programmes are too large to be stored in a diskette. Besides, running a programme from a diskette or CD is much slower than running it from the hard disk. Hard disk capacity determines how many programmes, files and how much data can be stored in your computer for use or retrieval as needed. The larger the hard disk the better. Hard disk capacity is measured in kilobytes, megabytes, gigabytes.

iv. Speed: The speed of a computer is measured in megahertz (MHz). It determines how long it takes to carry out operations submitted to the computer. It also affects length of time it takes the computer to boot (that is, to be ready for use from the time it is switched on). If a computer is slow you may have to wait for three or more minutes for the computer to boot instead of say one minute or less. Similarly, instead of waiting for one minute or so for certain voluminous and complex operations to be executed, you may have to wait for a longer time. Therefore, the higher the speed the better. Some personal computers have a speed of 300 MHz while others are as high as 600 MHz.

v. Other Hardware Factors: Other hardware considerations that may be important to users are the size of the image area of the monitor, the quality of the text, colour and graphic display of the monitor, the number of keys on the keyboard (the more the better), and the portability of the computer (how much space it occupies the less the better). It is also important whether the computer has multimedia facilities (modern, CD drive and speakers). A modern is required for data communication (e-mail and internet services) while a CD drive and loudspeakers are essential for playing music and watching films.

Step 5: Concretize Budget and Sign Agreement with Vendor

Based on the quotations from vendors and decisions regarding preferred programmes/packages and hardware, it should be possible to draw up a budget indicating the volume and timing of expenditures for the computerization project. In order to be sure that the budget estimates are realistic, the entrepreneur can further shop around with the list of preferred hardware and application packages. This will enable him or her compare prices and get the best possible price deals and other terms.

Having concluded negotiations, there is need to enter into a concrete agreement with a vendor on the terms and conditions that have been mutually agreed between the parties. The agreement must be specific on the:

i. Timing of supply and installation;

ii. Warranty coverage and duration;

iii. Types of hardware: systems unit, monitors, speakers, printers, ups (uninterrupted power supply), stabilizers, anti-glare shields, etc;

iv. Type and version of software to be installed (usually, the buyer should ensure that at least one of each of the following software types is installed – word processor, spreadsheet, database, presentation, anti-virus, multi-media, internet, e-mail and data analysis package; and

v. Training for staff.

Step 6: Program Design, Installation, Testing Change-Over and Follow-up

It is the responsibility of the vendor to design, write or adapt the packages that will be installed and to install them, test them and to train the entrepreneur and his employees on how to use them.

The entrepreneur and his/her managers should ensure that:

  • All the agreed hardware parts are delivered correctly according to agreed specifications and are functioning properly.
  • All the agreed software versions are installed and are functioning properly;
  • The system is adequately tested to ensure that it is capable of intended specification bargained.
  • Selected staff of the client organization are properly trained to use the system as agreed with the vendor.
  • All the manuals, diskettes, compact disks and other spares which normally accompany the computer system have been dully supplied.

An expert should check these. Once these requirements have been fulfilled what is left is to ensure a smooth change over from the old uncomputerized system to the new computerized system.

However, before discarding the old manual system, there is need for caution. Both the old and the new systems should run side by side until one is sure that the new system is sufficiently reliable to function independently.

Finally, arrangements should be made to ensure that the vendor or consultants can be reached at short notice in times of difficulty. It is also important to evaluate and review the system from time to time to make sure that the needs of the organization are continuously being met by the computerized system.

Somewhere along the line, especially during the test-run stage, there are bound to be initial problems. The problems may arise because of situations not anticipated by the designers of the software or because of user unfamiliarity with the system.

They could also be due to unexpected hardware problems. This should be no course for alarm. A good vendor/consultant should have no difficulty dealing with these problems.


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Importance of Computers in the Business World

Computers and Business Communication

Communication is the process by which an individual, group or organization shares information with another for a defined purpose.

Communication is the life wire of every organization. It is the soul of business. In business management, communication makes possible important processes and functions such as planning, organizing, leading, supervising decision-making, delegating and motivating. It is also involved in budgeting, negotiations, representing and controlling.

Communication may be internal or external. Internal communication occurs within organization while external communication is between people within the organization and those outside.

Through the internet, the computer has made business communication in various forms possible. Internet is meant for communication both within and across national boundaries.

The internet is a world-wide communication matrix that provides users with access to electronic mail, news, training, instruction, maps, computer files, games and countless volume of information on virtually and subject. The internet even links customers to commercial websites where one can compare and buy products without leaving home.

The World Wide Web

World Wide Web (WWW) is part of the popular system setup within the internet specifically for publishing and accessing information. It is made up of websites which are linked to one another in a network. A website is made up of web pages which may contain texts of various sizes and formats, graphic designs and hyperlinks. A hyperlink enables a visitor to a website (a browser) to jump from one part of the web to another place either on the same web page or to another page or another website in another part of the world.

Individuals, groups, companies, researchers, associations or organizations can and do develop and maintain websites of their own. Available at such a website could be information about the company or organization (its history, owners, vision, mission, plans, structure, goods and services) which it wants to share with the rest of the world.

It thus offers even a small-scale business owner an opportunity to publicize and advertise itself and its products to the whole wide world.

Electronic Mail (e-mail)

E-mail is short for “electronic mail”. It is an electronic or paperless mail that is sent from one computer to another computer in any part of the world. To send an e-mail the potential sender types out the letter, message or document, using a word processor. It is dispatched at the click of a button. The mail so sent is received, in the recipient’s computer instantly. The addressee will receive it on switching on his or her computer and checking his/her e-mails. Although each mail is paid for, it is generally very cheap. To be able to send and receive e-mails both the sender and the receiver should have e-mail addresses and e-mail accounts with Internet Service Providers (ISPs).

Computer Conferencing

A computer conference is an ongoing discussion among a number of people over the computer. Each member makes a contribution electronically by sending messages to all other members. It is similar to teleconference.

Electronic Catalogs and Billboards

Internet and World Wide Web have made it possible for companies, individuals and other organizations to post bills and notices electronically on bulletin boards for browsers to read. Similarly, a company can prepare and display its catalog on the internet. Browsers can scroll through and obtain the required information from the catalog.


The computer has become a wonderful tool serving various domestic and office purposes, including entertainment. Among the entertainment facilities which the computer offers are paying music (CD, DVD, VCD), television viewing, listening to radio, and playing games. These have become a veritable source of relaxation not only at home but also during break and other leisure times at work.


The resourcefulness of the computer extends to its use in Computer Aided Instruction and Computer Aided Learning. Programmed instructions are possible in any area of education and training.

The lessons to be taught are organized into modules. The student or trainee can run and follow the lessons at his or her own pace. Difficult lessons can be repeated as often as the learner pleases. This facility has make distant learning possible be very easier.

Another advantage of this form of earning/instruction is that the learner can use it in his privacy at any time he wishes. Finally, the student or trainee can learn without the possibility of being ridiculed in front of colleagues for being slow.


E-commerce is used as the short form of electronic commerce, e-commerce refers to ‘all online transactions’. As the name implies, e-commerce is achieved through the use of computers. Individuals and organizations, using online facilities are able to buy and sell on the internet.

A potential buyer can assess a company’s website, fill out an order form, e-mail it to the company and effect the needed payment. In return, the company receives and processes the order and dispatches or mails the goods ordered to the customer.

There are two types of e-commerce; business-to-consumer (called B2C, for short) and business-to-business (called B2B for short). Business-to-consumer e-commerce involves online sales to final users or consumers while business-to business is concerned with online sales by one business organization to other businesses.

There are two major distinctions between business-to-consumer and business-to-business e-commerce.

They are as follows

  • Negotiation: Selling to another business involves haggling overprices, delivery and product specifications. Not so much with consumer sales. That makes it easier for retailers to put a catalog online and it is why the B2B applications were for buying finished goods or commodities that are simple to describe and price.
  • Integration: Retailers do not have to integrate with their customers’ systems. Companies selling to other businesses, however, need to make sure they can communicate without human intervention.

The first difference is founded on the notion that retailers’ prices are fixed and are not subject to bargaining. To a very large extent this is not true of the Nigerian situation where well over 95 per cent of shopping transactions involve haggling over prices. The only exceptions are retail purchases in supermarkets/department stores, fast food shops, petrol filling stations and a few other retail outlets. This does not suggest the inapplicability of e-commerce to retail trade in Nigeria. What it does indicate is that when adopted, it would have to make room for haggling, at least in the short run until the practice of fixed prices becomes prevalent e-commerce may well promote the use of fixed price tags in Nigeria.

E-commerce involves the use of sophisticated software packages and is founded on the knowledge that individual customers and business customers have access to computer. Again, there is a serious limitation in this regard in developing countries where the majority of businesses, especially small-scale ones, and the vast majority of shoppers, including the so-called elite either does not have access to computers both at home and at work. Worse still, many are not computer literate.

A final obstacle to e-commerce in Nigeria is die high incidence of fraud and the consequent lack of trust between businesses and their customers.

In spite of these limitations, we expect that in a couple of years e-commerce could become a reality in Nigeria and more Nigerian organizations might begin to sell online. Already, in the banking, hotel, air travel and stock exchanges, some operators have either gone online or are experimenting with online transactions. Other Nigerian businesses and Nigerian shoppers can also begin to take advantage of online facilities offered by companies overseas.


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Uses of Computers for the Small and Medium Scale Businesses

Word Processing and Desktop Publishing

This is electronic typesetting and or manipulation of words using a specialized computer software package designed to retrieve, compose, edit, print, copy, delete and store electronic documents.

It is a specialized form of data processing in which the data are characters, words and other symbols.

Word processing involves typing memoranda, circulars, letters and any other kind of document. It offers facilities for affecting corrections and editing the document, merging two or more documents, and moving words, sentences, paragraphs, pages and sections from one part of a document to another. Parts of one document can also be moved to another document entirely.

It provides opportunities for choosing from among several typefaces or fonts, font sizes and other forms of enhancements such as bold text, italics, strikeout and underscore.

Finally, every copy produced by a word processor is an original copy. A document or file created using a word processor can be stored electronically in the computer or a diskette, flash drive for future use.

It permits the user to produce high quality, professional looking text and graphics using basic principles of typology, graphics and page layout. It is particularly useful for producing bulletins, newsletters, pamphlets, booklets, magazines, journals and reports.

The term desktop publishing is more appropriate than word processing when the material to be produced is the type (in terms of the volume and the number of copies) that would have been handled by publishers rather than typists in pre-microcomputer era.

A word processor has very many advantages over the manual typewriter, formatting the page layout is a lot easier. Return carriage at the end of each line is automatic. Editing and corrections are easier, faster and neater. It is easy to merge two or more files as it is to cut and paste parts of a document. Document can be produced in color. Pictures and other graphics can be added to a document easily. It has a lot of formatting enhancements. Neither erasers nor correction fluids are needed.

Word processed electronic documents can be stored. They can be copied into diskettes, flash drives or other computers. You can choose to print only a part of the document. The production quality of the printout is better.

Popular word processing applications packages (word processors) include Microsoft Word, WordPerfect, PageMaker and Microsoft Works.

Database Management

Imagine a big-time trader who obtains his supplies from one hundred odd wholesalers and companies. He or she desires to have reliable records of these business partners – their names, addresses, town, state, items supplied from time to time, terms of sale, etc.

In addition, the trader wants to be able to search the records for suppliers who satisfy specified conditions from time to time. For example, the list of suppliers who are located in the North-West, or those who stock or manufacture a certain items or whose annual sales exceed a certain value and so on.

Or rather consider a clinic that attends to thousands of patients each year. From time to time, it may want to reach those who have ever complained of a particular ailment, or those with debts of more than three months old, or those who have patronized it for upwards of three years.

What each of these businesses needs is a database application package.

  • A database is a collection of related files.
  • Each file in the database is a collection of records.
  • A record is a set of data pertaining to one element or case.
  • A case is one element of the population or sample of interest.

If we have a customer database, each customer is a case. All data pertaining to one case in a file is called a record.

An example of a database will be an employee database. One file in the data base may contain information about the sex, employee number, age, date of employment, qualifications, department, section, marital status, number of children, next-of-kin, local government area of origin, town of origin, home address and telephone number of each employee. The data will be arranged in a tabulated form in the database.

Note that each employee is a case or record, in the file. Another file in the employee database may contain the medical information about each employee while a third file may contain the productivity and performance evaluation records of the same employees.

You should have noticed by now that data or values for the employees all pertain to the same set of variables or attributes.

Another possible database would be a customer database in which there will be a file containing the personal or company data of each customer. Another file in the same database may contain information relating to each customer’s transactions with the company.

It is also possible to create another database for materials management which will contain records of stock items, quantity of the items in stock as at a particular date, quantity supplied, quantity ordered and quantity issued out.

A company can also maintain a price list in the database. Finally there can be a database for a company’s assets and liabilities.

A software application package for creating, updating and using a set of databases is called a Database Management System or a Database Application Package.

Examples of popular database application packages are:

  1. dBase; and
  2. Microsoft Access.

The benefits of having a computerized database management system are as follow:

  • With a computerized database, it is easy to update the records and to retrieve needed data;
  • It enables and encourages the company to keep accurate and up-to-date records;
  • The records kept in a database are stored and maintained in a standardized and consistent manner;
  • With a computerized database management system, it is possible and easy to reorganize the data in a file to reflect one’s needs. For example, certain columns can either be relocated or omitted. Similarly, data from different files in the database can be brought together, modified and printed as if they were originally stored in the same table or file.
  • It is easy to query a database, that is, to request the computer to select from the database data or records which meet certain criteria. For example, a customer database can be requested to provide data for all customers who are owing more than a given sum and/or whose indebtedness is of a given age. Similarly, an employee database can be required to list all employees who are less than, say, one year old with the company or who are due to retire in the next five years or who have ever received a loan from the company.


A spreadsheet is a big table made up of very many columns and rows which cross one another to form cells. For example, imagine an accountant who wants to make a table of projected monthly expenses for several items for, say three years.

The spreadsheet is designed for computations which involve figures in the cells. In our example, the totals for each month and for each item can be computed automatically. The spreadsheet can make these and other calculations involving items in the table automatically using a formula entered into the cell where the computed value is to be stored

Once the formula has been ensured and the required value has been computed, any alteration in a column or row concerned automatically causes the computed value to be recomputed and stored in the corresponding cell instantaneously. The programme is sensitive to cell references and can thus perform mathematical calculations using formulae and cell references.

The electronic spreadsheet has one time been described as the most brilliant computer software invention of the Microsoft era. It is quite valuable in the preparation of financial statement and other tables which involve calculations.

It is noteworthy that data displayed in a spreadsheet can easily be converted into graphs of various types simply at the click of the mouse.

Two popular spreadsheets application packages:

  1. Microsoft Excel; and
  2. Quarto Pro.

Statistical Analysis Software Packages

These are sophisticated application package dedicated to the statistical analysis of data.

These packages are quite versatile and so can conduct a variety of analyses including the Mean, Median, Mode, Mean Deviation, Standard Deviation, the Correlation Coefficient as well as other parametric and nonparametric statistics. They are also capable of computing inferential statistics such as those needed for conducting tests of difference between two means, F-ratio tests and Chi-square. They are also suited for even more sophisticated analysis such as cluster, factor and other analyses.

Furthermore, these packages can plot graphs and charts using the data submitted to them. Such graphics are useful for making presentations at meetings, conferences, seminars and training programmes. Such graphs and charts may also prove useful in writing management reports.

These packages are designed mainly for, and are quite useful to university lecturers, professional researchers, and students undertaking research. They also aid marketing researchers in established organizations who conduct market surveys from time to time.

Other Specialized Packages

A number of other specialized computer packages are available for use in various businesses and in various functional areas. For example, there a presentation software designed specifically for making formal presentation of reports and for use in training sessions. They have multimedia facilities, making it possible to combine audio, text and graphics along with other special effects which determine how the materials are introduced and featured in the presentation.

Similarly, software are available for specialized tasks such as those for engineering designs, medical services, personal income management, asset management, project management and on-line banking.


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Basics of Computers: Classification, Applications, Advantages and Limitations

Classification of Computers

With the advent of computers, many office and home appliances now have in-built computerized components which enable them to function autonomously or semi-autonomously. Such systems are said to be computerized.

Although, we generally do not call them computers but they actually have in-built computers which are programmed to perform some specific and specialized tasks. Such computerized systems are to be found these days in refineries and other industrial installations and equipment can be (e.g., the brain box), camera, airplanes, wrist watches, video and television sets, compact disc players and mobile phones. However, we are concerned here with computers which are intended to serve a wide range of purposes including word processing, data analysis graphic designs and playing games and music. They are also called general purpose computers or simply, computers.

General purpose computers may be classified on the basis of their:

  1. Capacities
  2. Prices
  3. Sizes
  4. Speed
  5. Uses

The different classes are:

  1. Microcomputers: The miniaturization of processors, thus making it possible to build small-sized processors, which gave birth to the microprocessor. Thus, it is now common to have personal computers which in view of the size, capacity, cost and functions are suitable for individual home and office uses.

In this category are desktops (which are suitable for use on office tables), laptops (which are small and light enough to be placed and used on the user’s lap while in transit by air rail or road) and the so-called palmtop. This palmtop is suitable for managers and business persons who are constantly on the move. We should not underrate these computers because of their small sizes. Some palmtops have more main memory, disk space and speed than some desktops. In any case, microcomputers are generally powerful enough to deal with the complexities of the operations of a typical office.

  1. Minicomputers: This lies between microcomputers and mainframes in terms of size and capacity. Since the advent of microcomputers, they have become much less popular and are generally now restricted to large businesses which handle a large volume of very complex activities.
  2. Mainframe Computers: These are large-scale machines designed to handle more demanding and complex computations. They are more expensive than microcomputers and computers.
  3. Supercomputers: They are the fastest computers. They are used for computations which involve massive data, millions of instructions, a lot of storage space and complex calculations. They are the most expensive type. They are commonly used for scientific calculations, weather forecasts, oil explorations and special effects in scientific films.

Advantages of the Computer

The growing and awesome popularity of the computer is largely attributable to the immense benefits that it offers. The most outstanding of the benefits are its speed; cost-effectiveness, accuracy, versatility and its ability to handle complex jobs. It is also quite flexible.

A computer works several hundred times as fast as a genius doing the same computations manually. For instance, using a spreadsheet or a database application package a computer can compute the payroll of all company employees within seconds once the data have been fed in and the command given.

Similarly, an electronic mail can be sent from say Nigeria, and delivered to its destination in, say Japan or China within a few seconds. Such is the mega speed of the computer.

Computers have features to handle computation with high degree of accuracy and error-free services. As a general rule, a computer will not make a computational error. It will give you the level of precision and accuracy that you request.

Therefore, it is quite useful for making sensitive calculations such as those relating to space travel, military operations and medical operations. The reason the computer is able to achieve this level of accuracy is because the instructions are carefully written and well tested before they are commercialized.

General purpose computers are versatile and flexible. They are said to be versatile because they can handle a variety of tasks. Flexibility relates to their ability to handle “what if” questions or the ability to provide answers to questions based on different scenarios or sets of assumptions.

To illustrate this, a computer may be requested to determine total earnings of a group of employees based on one set of assumptions about overtime rates, other allowances, number of days worked and bonus earned.

If, however, a different set of assumptions is now made, the computer will have no difficulty whatsoever to re-computing the desired set of answers without any form of boredom.

A computer can easily handle complex computations involving large volume of data. Neither the volume nor the complexity will enhance the likelihood of errors except those relating to data entry which are human in nature.

Finally owning and using computers are good for the image of the small firm. Especially in a developing country where everything including owning mobile phone is a status symbol, owing computers signifies to both employees and external people that the company is viable, innovative, progressive and good to do business with.

Limitations Associated with Computers

The cliché, “garbage in garbage out” refers to “the quality of the output is governs by the input”. In other words, it is refers to the fact that a computer works with whatever set of instructions and data the user submits to it. If they are garbage, the computer will obey the instructions to the letter, using the data provided by the user. It will go ahead and report the results dispassionately, even if they be garbage.

If we submit wrong bonus rates to the computer, it will apply chose rates. Unless the package had been informed earlier that the rate must lie within a certain range, the computer would have no means of verifying the entries. It is for this reason that we say that computer is a zombie who will do whatever it is instructed to do provided the instructions and data can be fed into it, using a language it understands. It is in this sense that the computer is sometimes referred to as an “idiot”.

It is generally believed in Nigeria that computers are expensive to acquire, install and use, especially from the point of view of the small business. In at least two respects, this is not exactly correct.

As at the year 2003, one could acquire a complete system with a printer for N100,000 (one hundred thousand naira) only. Given the immense benefits, this is a relatively small amount. The second way to evaluate this cost is to compare it with the other options available. Handling some business operations manually rather than computerizing them can be quite expensive and inefficient in terms of the associated delays, inconvenience, poor quality output, customer dissatisfaction and image.

Computer fraud is a fact of life. Whereas the computer cannot itself commit fraud, fraudsters can take advantage of its facility and the computer-illiteracy of the entrepreneur and other employees to perpetrate fraud.

We sometimes hear of computer-aid bank frauds running into millions of naira. Although manual (uncomputerized) operations are also vulnerable to fraud, computer-aided frauds are usually easier to perpetrate and often run into much larger amounts.

However, it is heartening to know that security checks and balances can be built into computer programmes or computer systems to prevent unauthorized persons from having access sensitive data. It is also possible to make fraud difficult for those who have legitimate or authorize access to the system.

Another problem related to computer fraud is that or insecurity of data stored or transmitted via the computer. Hackers, crackers and virus can attack computer contents and tamper with or corrupt the data and the programmes. Again, it is easy to protect against these threats to data and programmes.

Two additional problems which are peculiar to developing countries are the unreliability of electric power supply and widespread computer illiteracy even among otherwise well-educated business owners, entrepreneurs, managers, workers, suppliers and customers.

In spite of the several limitations just discussed above, we have no doubt that the computer will become an inevitable ally of every business person. Even in Nigeria and other developing countries, it will be difficult if not impossible to operate any serious business without computers in future.


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Computer Applications and the Small-Scale Businesses

It is not at all surprisingly that the word ‘computer’ still elicits different reactions from different individuals including business people. This is particularly the case in the developing world. To a very large extent, each person’s reaction depends on his or her degree of computer literacy.

For those who are very literate in computers, the term conjures a world of dizzying opportunities waiting to be explored. They see in computers, not only opportunities for word processing ‘without tears’ and do-it-yourself desktop publishing of leaflets, posters, pamphlets and books, but also avenues for fast-paced world-wide communication on the world information highway.

Further, the computer offers opportunities for simple and complex analysis of data, massive information storage and retrieval and access to virtual libraries on the world-wide web. Even those seeking entertainment and fun can find them in the computer in the form of music, films and computer games.

More importantly, the computer offers investment opportunities in various ways. There are investment opportunities in the manufacture and sale of computer hardware, peripherals, accessories and consumable, development and sale of computer software, hardware and software maintenance, website development, business centres and cybercafés.

Entrepreneur can also take advantage of advertising on the internet and e-commerce, that is, on-line buying and selling of goods and services via the computer “without leaving the comfort of their homes or offices.

Understanding Computers and Computer Systems

A computer is an automatic, electronic, input-output device or machine that can accept store, process and output data by following a set of carefully written instructions called a programme.

Although it is manly electronic, it has some electrical and mechanical components.

A computer system refers to a particular combination of computer hardware and software programmes which together perform assigned tasks.

The term system implies interdependence as one part of the system cannot function effectively and efficiently without the others. For example, the hardware subsystem cannot function as desired without the software or programmes. Similarly, the software cannot function without the hardware.

Note that some authorities consider the procedures, database and the people involved in computer use as part of the system. This should not surprise us at all because such a broad view simply underscores the importance of the interrelationships among all of these variables in determining the benefits derivable from computers.


Computer hardware refers to the computer machines or physical devices that make up part of the computer system. This is in contradistinction to the software. Usually the hardware is what you see on desktops in offices.

It is made up of the following parts.

(a)        Input Devices: These are the machines or gadgets which constitute the media or gateway for loading programmes and entering data into the computer. Input devices include the keyboard, the mouse, the card reader (now defunct) and the scanner.

(b)       The Central Processing Unit (CPU): The Central Processing Unit is made up of Control Unit, the Arithmetic/Logic Unit (ALU) and the Main Storage. The Control Unit is the ‘brain’ of the computer. It plays a coordinating role. It signals the Main Memory to accept data from the Input Units and controls the interchange of data and instructions between the Main Memory and the Secondary Storage as well as between the Output Devices and the Arithmetic/Logic Unit. To put it briefly, the CPU controls and coordinates all the operations of the different parts of the computer.

(c)        The Arithmetic/Logic Unit (ALU): This is responsible for all the calculations and logical operations of the computer. The calculations involve carrying out the arithmetic operations of addition subtraction, division and multiplication. The logical operations are those which require comparing and arranging data in a given order. For example, arranging values in ascending or descending order and arranging names in alphabetical order.

The main memory is the storage area where the data awaiting processing and the instructions waiting to be carried out are stored until required by the ALU. It consists of both the Read-Only-Memory and the Random Access Memory.

The Read-Only-Memory (ROM) contains a small programme required for starting up or booting the computer. The programme in this memory was written and stored in it by the manufacturer. It can neither be cleaned nor modified. It is not volatile since the contents are not affected when the electric power supply to the computer is switched off.

In comparison, the Random Access Memory (RAM) is where the user’s programmes and data are stored while awaiting, and during processing. It is volatile. Unless saved in the secondary storage, the contents of RAM disappear when power supply fails or when the computer is turned off.

(d)       The Output Unit: This is the medium through which the results of the Arithmetic/Logic operations and other information are displayed or relayed to the computer user. The information are displayed in form that the user will understand. The main output devices are the monitor or video display unit the printer and the plotter.

(e)        The Secondary Storage: Also called the auxiliary storage, the secondary storage or external storage is capable of holding large amounts of data and programmes. Data stored in the secondary storage is not volatile they are not lost when the electrical current to the computer is switched off. Examples are the hard disk and floppy disk.

(f)        Peripherals: These are devices connected to a computer to provide communication (as input or output) or extra storage capacity. Therefore, peripherals include printers, monitors, plotters zip drive, and loud speakers.


For any computer system to function efficiently, five equally important and mutually dependent component of the system must be in place. These are the hardware, software, people (user), procedures and database.

The term software may be defined as instructions given to a computer to carry out a set of operations on data. These instructions may be written in a language which the computer machine can understand directly. However because machine language is difficult to work with, instructions or programmes are usually written in special but simple programming languages which the computer can ‘understand’ through the assistance of other “interpreter programmes” called compilers. Examples of these programming languages are BASIC (Beginner’s All-Purpose Symbolic Instruction Code), COBOL (Common Business Oriented Language) PASCAL, C+ and HTML (Hypertext Markup language).

There are two broad categories of software:

  1. System Software: This refers to a set of programmes which coordinate the operations of the various hardware components of the computer. It is a computer-oriented in the sense that it enables the computer to function as designed. Examples of operating systems software are Microsoft Windows, MS DOS, Mac Dos, Unix, etc.
  2. Application Software: This is a set of programs that directs the computer to solve particular problems or to perform certain tasks. It is a user-oriented by doing what the user wants done. Examples of application software are SPSS PC (Statistical Package for the Social Sciences for Personal Computers), dBASE and Microsoft Office suite. Today, there are so many application packages available in the market.

Application packages may be bought off the shelf from computer software shops. In the alternative, a company which has software experts may decide to write its own dedicated software packages for a specific purpose. For example Quicken is an off accounting package. A company can develop its payroll software package.


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Retirement Planning for Small and Medium Scale Entrepreneurs

A major reason many people prefer paid employment is the attraction of the compensation package attached to their jobs. An important component of the package is the retirement pension plan which assures the individual of a stream of periodic payments throughout his life-time.

On the other hand, the attraction of entrepreneurship includes the independence or autonomy associated with it as well as the prospect of a large financial gain. The financial gains of successful entrepreneurs are usually high, most times higher than the level of earnings they could have received as paid employees.

But to the entrepreneur the responsibility for making plans to maintain a continuous flow of income upon retirement or ill-health is entirely his. Most entrepreneurs’ feel that retirement is something in the distant future something that can wait but when it comes as if inevitably would; most entrepreneurs are not prepared for it.

It is a fact no one can keep working actively all his lifetime; we must naturally retire from active work at a point in rime. Do not think your expenses will drop when you retire because, in our society we cannot be certain when our children will complete their education and become gainfully employed.

It is a misconception to believe that children will always provide for their aged parents because that belief presupposes that they will be gainfully employed and will not be overwhelmed by the need of their own immediate families.

Thus, everyone must plan for the future when he can no longer work to earn income. That is, the entrepreneur must save during his active years in order to provide himself a satisfactory income when he is no longer able to work.

Another common misconception is that there is plenty of time to start saving for retirement. The earlier one starts saving and draws up a retirement plan, the cheaper and better the benefit when retirement comes.

Retirement can be a rewarding phase of life if adequately planned for. Thinking about retirement in advance can help the prospective retiree anticipate future changes and gain some control over the future through planning.

He that is not proactive and does not plan for his retirement will be forcibly retired by old age or ill-health. This unplanned retirement can lead to poverty, depression, dissatisfaction and untimely death. It is evident that most self-employed workers do not plan for retirement, and many have limited knowledge about retirement savings.

Types of Benefits

(a)        Retirement Grant: Qualifying conditions include that the claimant must have attained the age of 60 and above and retired from employment having 12 monthly paid contributions. Entitlement payable is a lump sum payment of the final monthly contribution multiplied by the number of months of paid contributions.

(b)        Retirement Pension: Qualifying conditions include employee who had attained the age of 60 and above, and retired from employment; having at least 120 monthly paid contributions.

Entitlement is minimum of 300% a maximum of 65% of final average insurable earning depending on number of contributions paid. Amount Payable in either case not to be less than of national minimum wage.  Transitional basic pension is payable to a member who has a period of insurable employment amounting to at least 75% per centum of the months between his age at the start of the scheme and the retirement age subject to a minimum of 36 months.

Reduced Pension Option: Voluntary retirement is possible from the age of 55 with a reduced pension computed as a percentage of full pensions. To qualify for a reduced pension option, a member must be 55 and above but below 60 years of age. He must have a minimum contribution of 120 months in aggregate, and the pension is computed accordingly:



56 57 58


Percentage of full pension


76 82 88


(c)        Invalidity Grant: Qualifying conditions are that the employee is permanently incapable of working, and there must have been at least 12 monthly contributions paid. Invalidity may arise by reason of some specific diseases, bodily or mental disablement in any occupation.

Entitlement is an amount equal to the final monthly contributions multiplied by the number of months of paid contributions.

(d)       Invalidity Pension: Qualifying conditions include employee permanently incapable of working. At least 36 monthly contributions paid out of which he is expected to have worked continuously for 12 months. Claim must be made within a year.

Entitlement is minimum of 30% and a maximum of 65% of final average insurable earnings. Amount payable in either case not to be less than 80% of national minimum wage.

(e)        Survivor’s Grant: Qualifying conditions include where a dependant is not entitled to survivor’s pension but deceased employee had at least 12 monthly paid contributions. Application for the grant must be made within a year of the death of the member.

Entitlement is the equivalent of the deceased employee’s invalidity or retirement grant paid as lump sum to his registered dependant(s).

(f)        Funeral Grant: On the death of employee receiving invalidity or retirement pension which currently amount to N2,000 for meeting funeral expenses. This small sum is subject to review periodically.

(g)        Lump Sum Payment: To emigrants usually paid to any member finally emigrating from Nigeria. Qualifying conditions include membership and proof of final emigration.

(h)     Management Transfer Options: If the business is still a good going concern, retiring and handing over can be to either family members (especially children) or employed managers. Most people will prefer family member because of real or perceived loyalty and commitment. Managers may be used when members of the family are not of age, do not have any interest in running the business or lack adequate knowledge and experience for the line of business.

Voluntary retirement is advantageous, as it will enable you select and train family members who will eventually take over or select and put in place control measures for professional managers. For relatives, it is recommended that they be trained at all levels with similar businesses of friends before gradually bringing them in for professional managers, a reporting framework, targets and professional auditors/period must be put in place.

All these will improve success factors for the new management and thus your income will be guaranteed especially when retired to become salaried non-active directors. It is best assumed however, that profit performance after disengagement may not be high, thus we must plan for uncertain future.

(i)     Disability and Survivors’ Benefits Variants: These are very important to entrepreneurs. A retirement plan must include disability benefit because retirement can be forced by ill-health or accidents. At qualification for disability benefits, the disabled can either qualify for bulk payment or receive benefits for life if he remains disabled. A married entrepreneur may die shortly after or even before retirement, joint and survivor option allows the investor to provide for a lifetime for the spouse on a monthly basis.

(j)        Survivor’s Pension: Qualifying conditions are death of an employee receiving retirement or invalidity pension with dependants as survivors. Entitlement is 100% of deceased employee’s pension.


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10 Retirement Planning Steps Everyone Should Take

Below are the basic steps to take for retirement planning.

Step 1

Get involved and be proactive about your future by educating yourself on investment and retirement planning options while still working. Investing can be easy or complex depending on the way you handle it. Read books, newspapers, financial magazines and newsletters, and use Google (internet facilities) to teach yourself.

Step 2

Conduct a financial analysis. Analyze your current assets and liabilities. Your assets include all what you own that has value such as cash on hand and in the bank, current value of your financial securities such as shares and bonds, current value of your other financial investments, the current value of your life insurance, other endowments, and pension if any; the current value of your jewellery, furnishings, cars and house.

Your liabilities are everything you owe including claims outstanding on behalf of members of the family including polygamy and extended family claims: loans and mortgages, rents, car loan repayments, other credit facilities including overdrafts, taxes due, bills due such as electric bills and school fees. The difference between your assets and liabilities is your net worth which you should increase as you move towards your retirement.

Assets (What We Own)

Such as:

Cash On hand

Current account

Deposit account

Fixed deposits




Mutual funds


Life insurance

Education endowment



Business inventory of sole trader

Houses (resale value)

Furniture and appliances

Jewelry and other valuables



Loans to people

Prepaid expenses

Liabilities (What We Own Others)

Such as:

Current unpaid bills including rents, utilities and school fees

Unpaid mortgages

Unpaid vehicle loans

Property taxes

Step 3

Identify your personal goals and strategies, and assess your post-retirement needs and income. Retirement years can be analyzed using long-range goals.

What does retirement means to you?

Are you going to stop work completely and relax or are you going to take a contract job?

Are you going on holiday, get involved with community activities, political activities or start a hobby such as golf and singing?

Where and how do you want to live during your retirement?

Determine your housing need. Know that the nest will soon be empty as children mature and more out. Thus, large housing will become difficult to maintain.

Large housing may also include a feeling of loneliness. Small unit housing is preferable as it simultaneously provides company and privacy and allows for security of property.

High-income areas may be less preferred because of distance from public transportation, shopping, where to worship and entertain. Other important considerations include children’s education including those of relations, medical care, and community activities.

Step 4

Evaluate the most of implementing your plans and assess whether you can afford it, knowing that work related expenses, clothing expenses, housing expenses, and income taxes will decline. While insurance, medical, leisure and gift expenses may increase.

Adjust your retirement income and expenses for inflation. The potential loss of buying power due to inflation is what makes planning ahead so important. To adjust your estimated retirement income and expenses for inflation, multiply by the inflation factor.

Step 5

Get your personal finances in order to:

(a) Protect yourself and family against risks (insurance)

(b) Eliminate debt (minimize), track your progress, consolidate your high interest debt to lower interest loan if possible. Do not spend your savings, invest them.

(c) Develop savings and retirement plans

(d) Build reserves

Step 6

Determine your investment profile; preserve capital, stay liquid, and appreciate capital growth.

Step 7

Contact a good financial adviser/broker/manager that will provide financial education, assist to develop consistent investment philosophy, design affordable retirement options, implement and provide regular status of account. Check their recommendations and references, and if not adequate switch to another or do direct purchases.

Step 8

Consider small stocks as well as multinationals in banking, conglomerate and brewery sub-sectors in your portfolio in preference to bonds because higher and less predictable inflation rates increased the volatility and covered the real return on bonds. However, irredeemable convertible stocks as well as government securities can be useful diversification.

Step 9

Get a plan with strategies:

(i)         Accept risk and reduce it. You have business failure risk such as bad management and unsuccessful products and market risk due to behaviour of investors in the marketplace. Diversification directly or through mutual funds will minimize these risks.

(ii)        Index to inflation to handle inflation risk.

(iii)       Apply the power of compound investing to your portfolio.

(iv)       Measure and maintain your progress.

Step 10

Make a Will. A good and intelligent business man need to be encouraged to make his will when he is fit, that is when he is strong before the old age. Consider post-retirement employment (contact employment) to augment income during retirement and minimize on-set of senility, and dampen impact of inflation on unindexed pension.

In conclusion, we recommend that an entrepreneur must provide for his retirement, and it must be done as early as possible. He must also provide for his employees to be able to retain high fliers, and staff provision must be within a similar package to ease monitoring.

We also recommend either packaged plans from pension managers or internally designed plans (with registered and recognized professional managers) parallel with the mandatory. Check the nature of annuity and portability. Interestingly, the pension market in Nigeria is an investment dream for an enterprising investor; many managers are small firms in developed countries.


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9 Highly Effective Negotiation Tactics Anyone Can Use

A tactic is a move or a combination of moves by one negotiator that are designed to affect the decisions of the other negotiator so that he or she acts in a manner desired by the first party. All good negotiators adopt and apply strategies and tactics in negotiations.

These tactics include:

1. Good Guy/Bad Guy

This tactic is effective where more than one person is involved in the negotiations on the same side. One of the negotiators appears to be rigid unpleasant and unreasonable while the other pretends to be reasonable, pleasant and almost seems to take sides with the opponent. Elderly people often use this tactic when interrogating suspects. To counter this tactic, it is well to remember always that the good guy and the bad guy are on one and the same side and that the two of them want to achieve the same goal.

2. Limited Authority

The negotiator pretends that he has less authority than he really has; he says that whatever is agreed will be subject to the approval of his boss or somebody else. This is done to provide an opportunity for the negotiator to make new demands or change his mind.

3. The Bluff

The bluff is one of the most frequently used tactics in negotiations. A bluff occurs when a negotiator makes an offer, which is different from what he knows he will give or accept but makes it appear to his opponent that it is his last offer. For a bluff to succeed, the negotiator must do something or act in a way that is convincing to the opponent.

There are various ways of making a bluff appear real and convincing. Among them are:

  • Commitment to a Precedent: A negotiator claims he cannot change his offer because doing so would set a dangerous precedent for future negotiations.
  • Commitment via Obstinacy: The negotiator pretend to be obstinate in order to convince opponents that whatever their arguments he is not going to change his position. The buyer who walks away from a shop hoping chat the shop owner will call him back is pretending to be obstinate.
  • Invoking an Alternative: The negotiator can, in fact, claim that he has an alternative offer.
  • Commitment to a Deadline: The negotiator makes an offer and says that if the offer is not accepted by a certain date, then everything is over.
  • Use of Someone who has no Authority: An individual who has absolutely no authority outside the clear instructions he has been given is used to conduct the negotiations.
  • Commitment to the Public: The negotiator makes his offer public and then claims that he cannot deviate from the position he has taken without losing credibility.

For a bluff to be effective, it must not be used frivolously or prematurely. Given the right circumstances, bluffs are very effective tactics in negotiations. However, it is necessary that the negotiator has a loophole through which he can get out of the commitment in case the opponent calls the bluff. The loophole may be allowing the opponent to persuade him.

4. Last-Minute Escalation

After an agreement has been essentially reached, one party can attempt to change some aspects of it in his favor. This is achieved by seeking to make marginal changes in the agreement.

5. Threats

A threat is a demand by a negotiator that is accompanied by indicating or alluding to the conditions that would prevail if the demands were not met. A threat can be strong or weak depending upon:

(a)        What each of the parties stand to lose if the deal falls through, and

(b)        Whether the person making the threat is perceived to have the capacity and willingness to carry out the threat.

Like the bluff, the person making the threat, needs to have a loophole, which will enable him withdraw from executing the threat without loss of face in case the other party is not moved to change his mind by the threat.

6. Fading Beauty

After an agreement has been reached, one party begins to attach conditions to its acceptance and implementation. The conditions make the agreement less attractive but not totally unacceptable.

For example, a tenant negotiates what appears to be an attractive rent for a property with the landlord. After an agreement has been reached on the rent for the property, the tenant is very pleased as he considers not only how good the rent is but also how suitable the place will be for his business, Then the landlord adds, ‘but you will have to fix the roof which is leaking, I think in two places. And oh, the tank that supplies water to the building is also leaking. You will have to fix that as well. Then, of course, as you are aware the boys’ quarters part of the property. I will be using that place as my office. As can be seen the initial offer, (the rent for the property) raises expectations and commitments are made. Shortly after the landlord finds a reason to reduce the value of the offer after the tenant has become hooked by the raised expectations.

7. Leaking of Information

A very effective tactic could be to leak information deliberately to the other party. The information could be that the negotiator has found an alternative or that intends to rake a particular course of action. The effect is to increase the anxiety of the other party, mislead to make him unprepared for what is going to happen.

Negotiations are an everyday aspect of our lives; we negotiate with members of our families with our friends, opponents and even casual acquaintances. How skillful we are in these interactions determines to a great extent how satisfied we become to our lives. For the owners of the small business, being good or bad negotiators can make the difference between success or failure of the business.

8. Intimidation

Abuses, rudeness and intimidation may be used to change the mind of the opponent. Intimidation is not always expressed as rudeness and abuse. Sometimes, it could take the form of jokes, telling stories, being too nice, too pleasant, too understanding and too cooperative. The point to remember here is the cooperation, understanding and pleasantness may be nothing more than Greek gifts.

9. Emotional Outbursts

The ability to express, the appropriate emotion is a key tactic in negotiations. Example, whereas controlled anger can be effective, uncontrolled or spontaneous emotional outbursts are usually counter-productive.


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Negotiation Strategies Every Small – Scale Entrepreneur Should Know

Negotiation is to bargain and deliberate about a particular issue for the purpose of mutual arrangement.

Negotiation means conferring between parties for the purpose of reaching an agreement over issues on which they differ.

This view-point suggests four different aspects of negotiation:

The above four features are the basic elements in negotiations, but sometime we find occasions when negotiations occur that either do not lead to an agreement. Negotiations can also take place without the parties making any concessions. These facts are very important for the owner of the small – scale business.

It is the nature of interactions that determine whether they are negotiations or some other form of social activity. The essence of negotiations is that parties interest for the purpose of reaching an agreement over issues on which they differ.

For this reason, negotiations need to be understood as:

Acts of strategic conduct through which two or more individuals/parties, who are in a situation of interdependence, attempt to reach agreement in relation to an issue, position or subject over which they differ or feel that they differ.

From this definition we bring out the following characteristics features of negotiation:

1. Negotiations are Acts of Strategic Conduct

Strategic conduct means that the parties act in expectations of the other’s expectations in a way to influence the choices of others. Such strategic conduct may take the form of giving and taking concessions conferring, play acting manipulation, strategy misrepresentations, threats, etc.

2. Negotiations are Between Parties who Depend on Each Other

For negotiations to occur, there must be a situation of interdependence between the parties involved. Interdependence means that each party has something that the other wants. The father may want the respect of the child while the child may want the approval of the father. It is crucial in negotiations that each party has some right to refuse to give consent

Therefore, a stronger party will need a weaker party for a deal to take place. If the stronger party goes ahead to make use of the resources or skills owned by the weaker party without the consent of the weaker party, then force rather than negotiation becomes the key element in the situation. This type of situation will be unstable because it will lack legitimacy.

Differences Between Parties May be Real or Imagined

If there are no real or perceived differences between the parties, there will be no need for negotiations. Differences mean that what one party wants or believes is not the same as what the other party wants or believes. They mean that each party seeks the best for himself or herself, usually at the expense of the other party.

Differences may be in me form of beliefs, attitudes and orientations. Two parties may favor different approaches to the solution of a problem. The differences between the parties may arise as a result of certain beliefs or attitudes of the parties. Whatever the case is, the differences are strong enough, given conditions of interdependence, to motivate parties to attempt to reach agreement.

The Main Purpose of Negotiations is to Reach an Agreement

An agreement means commitment by both parties to a common position and the consequent expectation that each party will honor it. Although agreements are important and in fact constitute the ultimate goal of negotiations, it is important to recognize as we have indicated earlier that not all negotiations lead to agreement.

Negotiations may become stalemated and break down. When this happens, it does not mean that negotiations have not taken place.

Importance of Negotiation Skills for the Owner of the Small – Scale Business

As acts of strategic conduct, negotiations are at the soul of every transaction that a small – scale entrepreneur gets involved in. The owner of the small business must purchase materials, equipment or services. Entrepreneur will need to sell whatever is produced or provided to customers. He will also need to hire workers and specify the work to be done and the conditions under which it will be done. Very often the owner of the small – scale business may need a loan from the bank.

In each of these and other forms of transactions that are important for the operation of the business, the small – scale entrepreneur will need to negotiate, to engage in acts of strategic conduct.

Negotiation skills deal with how well an individual negotiates the degree to which the individual is able to resolve differences and reach agreements that lower his costs in the situation.

Reasons Why Negotiations Skills are Important for the Small – Scale Entrepreneur:

  • The entrepreneur experiences a sense of personal satisfaction in the agreement that he strikes with others.
  • The business is able to operate at lower costs than would otherwise have been the case.
  • The entrepreneur is able to gain access to resources and facilities that would otherwise not have been available.
  • The entrepreneur is better able to plan for contingencies and uncertainty.

Types of Negotiations

There are different types of negotiations. The negotiations between the owners of the book publishers about what types of books to stock in his bookshop will be different from this negotiation with small bookshop with his landlord.

Therefore, the small – scale entrepreneur needs to be able to differentiate between types of negotiations because each type may require a different approach.

Negotiations can be classified in a number of ways – for example:

  • By the number of parties involved;
  • Type of parties involved;
  • The issues over which negotiations take place; and
  • The attitudes/orientations of the parties to the negotiations.

The most important criterion in terms of the consequences for the conduct of the parties is the attitude/orientation of the parties to the negotiations.

By using this criterion, identify two major types of negotiations:

(i)         Win-Lose or Distributive Negotiations

In win-lose negotiations, each part attempts to maximize his/her gains at the expense of the other party. As such, there is a great conflict of interest with respect to the gains of each party. What is available to both parties is fixed therefore what one party gets represents a loss for the other party.

Examples of win-lose negotiations are:

  • Purchase negotiations between a buyer and a seller.
  • Union-management negotiations over wages and conditions of service.
  • Budget allocation between departments.
  • Husband-wife divorce negotiations, which involve a clash of claims over rights to property, alimony or custody of children.

Win-lose negotiations sometimes require the parties to be on alert, not to trust each other and to employ a lot of tactics and strategies.

(ii)        Win-Win or Integrative Negotiations

In win-win negotiations, the problem allows a solution from which both parties can benefit. The gains of one party do not represent equal losses to or sacrifices from the other party.

The followings are examples of win-win negotiations.

  • Negotiations between competitors on restrictive trade and related practices (e.g., price fixing, market sharing deals between competitors).
  • Negotiations between members of the same group in terms of their relationships with external groups or groups seen as the opposition.
  • Interdepartmental negotiations involving company-wide objectives and policies.
  • Union-Management negotiations involving safety, training productivity schemes and procedural matters.
  • Contract purchase negotiations involving kickbacks.
  • Negotiations with agents (e.g., architects) about the design of needed facilities.

In the case of the owner of the small bookshop, win-win negotiation could take place between the owner of the bookshop and book publishers over what books to stock, at what prices they should be sold and even how the books could be packaged and advertised.

Win-win negotiations require the parties to trust each other, share information and collaborate. The strategies in such negotiations are thus very different from those that may be employed in win-loss negotiations.

Stages in the Negotiation Process

Every negotiation passes through a number of stages or phases.

These stages are:

(i)         The Preparation Stage

The first stage of negotiation is preparation during which the negotiator gathers and analyses all information that might be relevant to the negotiation. If the owner of the bookshop wants to buy a vehicle for his business he must gather information about which type of vehicle is most appropriate for his business, the places where the vehicle may be purchased, the prices at which different vendors offer the vehicle for sale, the conditions that may be obtained for buying from the different vendors and so on. The negotiator must also prepare himself emotionally and psychologically. He must try to learn as much as possible about the preferences, needs, strengths and weaknesses of the person with whom he is going to negotiate.

(ii)        The Bargaining Stage

The bargaining stage is when the actual negotiations begin. This stage has a number of phases.

These are:

  • The Orientation Phase: This is when pleasantries are exchanged and personal introductions take place. The parties may engage in small talk as they try to break the ice and get a feel of each other.
  • Agenda and Rules Setting Phase: In more formal negotiations opening statements are made- the agenda and rules that will guide the negotiations are discussed. Sometimes, disagreement can occur about the agenda and ground rules. An important part of this phase is determining the authority of the negotiators. The questions are: does the person you are negotiating with have the final say or will everything she accepts be subject to the approval of somebody else? If so, by whom?
  • Concession Making Phase: In this phase, the parties position themselves and argue their cases. All issues are reviewed in some detail. The negotiators explain and defend their positions, question and attack those of their opponents, probe for soft spots, try so get an idea about what the opponent is striving for. This phase is often characterized by the use of tactics and strategies. It is often also characterized by crisis and deadlocks. This phase can mean the end of the negotiations, but also the search for ways to reach an agreement.
  • Agreement Phase: In this phase, the search for solution starts. The framework of the agreement emerges. The most difficult issues are resolved, agreement is reached, a written contract is drafted and reviewed, and finishing touches are put to the agreement. Sometimes, last minute problems arising out of second thoughts or misunderstandings are solved.
  • Conclusion Phase: if somebody else has to consent to the agreement, the entire agreement is set to the person for endorsement. This phase may require further negotiations in case the person does not endorse all aspects of the agreement.

(iii)       Implementation and Follow-up Phase

At this stage, parties are expected to honor their obligations under the agreement and ensure that the other parties do the same. Differences in interpretations are resolved. Sometimes, unanticipated situations arise and have to be negotiated or re-negotiated.


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