EXPLORING BUSINESS ACTIVITY

PROVIDING AN ENGAGING AND MOTIVATING INTRODUCTION TO THE PURPOSE,

STRUCTURE AND LANGUAGE OF BUSINESS ORGANIZATION

Presented by:
Kirubi Kimiti
(Student, INtel College)

Presented to:
Mr. Evans Kyaa
(Lecturer, INtel College)

A document presented to INtel College in fulfillment of the requirements of an Award of

Certificate in foundation in business

INtel College
September/October, 2015

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Table of Contents
SMEP Microfinance Bank Limited................................................................................................3
Purpose.................................................................................................................................... 3
Business activity....................................................................................................................... 3
Faulu........................................................................................................................................... 4
Purpose.................................................................................................................................... 4
Business activity....................................................................................................................... 4
B)................................................................................................................................................. 5
describe the different types of stakeholder who influence the purpose of SMEP microfinance
bank and another contrasting organization of your choice...........................................................5
Outline the rationale of the strategic aims and objectives of SMEP microfinance bank and
another contrasting organization of your choice...........................................................................6
Strategic Aims.......................................................................................................................... 6
Strategic Objectives................................................................................................................. 6
Your small-business strategic objectives detail the small steps to your aims. These small
steps become your strategy for reaching your larger aims.......................................................6
The purpose of having aims and objectives;............................................................................7
Describe the functional activities, and their interdependencies of SMEP Microfinance bank and
another contrasting organization of your choice...........................................................................8
Introduction.............................................................................................................................. 9
Functional Organizational Structure.........................................................................................9
Example of the Functional Organization Structure.................................................................10
Advantages of the Functional Organization Structure............................................................10
Disadvantages of the Functional Organization Structure........................................................11
Describe how three external factors are impacting upon the business activities of SMEP
Microfinance bank and another contrasting organization of your choice....................................12
External Competition.............................................................................................................. 12
Economic factors.................................................................................................................... 13
Technological factors.............................................................................................................. 13
How external factors will affect in future?...................................................................................14

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SMEP Microfinance Bank Limited
SMEP is a public limited company in the tertiary sector incorporate under the companies and
licensed under the microfinance Act to offer banking, focusing on Group banking, Retail
banking, Church banking, Asset financing, microfinance and related services. they are a Use :
SMEP is a company owned by over 10,000 shareholders with the majority shareholder being the
National Council of Churches of Kenya (NCCK) and SMEP now has a subsidiary company

Purpose
SMEP Insurance Agency provides insurance services to the diverse client insurance
needs.SMEPs two main product categories of credit include group and retail loans. These loans
are given to micro and small entrepreneurs who have registered with self-help groups and have
complied with SMEP group rules and regulations.

Business activity
The primary goal of SMEP is to improve the standard of living of economically poor and
marginalized entrepreneurs by providing access to credit and other services that can stimulate
economic growth. In the long run, SMEP hopes to increase income generating activities among
low income entrepreneurs, improve the business management skills of its clients and create an
economically sustainable credit program. Is SMEP business activity local, national, international
or? (Pls specify)

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Faulu
Faulu Microfinance ltd is a contrasting organization to SMEP microfinance as they deal with
similar areas and share similar goals.Choice MFB is wholly-owned Kenyan company limited by
shares.The microfinance bank prides itself as one of the first diaspora driven initiatives in the
financial services sector in Kenya.

Purpose
To enable formal and informal groups such as chamas, self-help groups, welfare groups,
Partnerships create wealth through investments
Investment groups who have a Faulu Chama Account for wealth creation and welfare activities
of its members.
Chama members will range from 5 and above.

Business activity
Improved access to financial services promotes the fundamental freedoms of choice and financial
literacy thereby enhancing the decision making process and economic opportunities available to
Kenyans.This is aimed towards the promotion of financial inclusion and economic growth in
Kenya, which are key tenets of Kenyas economic development blueprint, Vision 2030.
Is Faulu business activity local, national, international or? (Pls specify)

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describe the different types of stakeholder who influence the purpose of SMEP
microfinance bank and another contrasting organization of your choice.

A stakeholder is a person or parties with an interest or concern in a business's activity. In the case
of SMEP and Faulu the following are examples of their stakeholders.

Customers - for SMEP and choice MFB their customer are a major influence on their purpose as
they have to ensure they are providing quality services in terms of low interest rates for those
who take loans, offering a diverse selection of savings accounts for different situations e.g for
childrens fee so as to improve their competitive edge.

Employees - Their stake is that the company provides them with a means of securing the
necessities of life. Hence the company must ensure the security of their jobs in context to SMEP
and choice MFB the employees should be able to access the services easier and for the company
to be more lenient to them.

service providers - For SMEP and choice they may not have suppliers as such but rather they
would have service providers such as cash management services for the cash they receive at their
branches to be delivered to the banks safely by companies such as BM security who would
expect prompt payment so as to build a better relationship.

Owners - In companies such as SMEP and choice it would be the shareholders. Owners are often
thought to be the most important stakeholders because they have set up the business and give a
lot of time into the company to make it successful. Owners like to see their share of profit
increasing, and the value of their business rising hence it is in the company's best interest to
ensure this happens so as to keep their shareholders happy.

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Local communities - The actions of a business can have a dramatic effect on communities. With
SMEP and choice providing their services to community this is most likely to improve the
people's financial literacy as well as contribute to improving the economy of the local county or
the nation as a whole.

Governments - The government wants businesses to become successful, to create jobs and to
pay taxes. They want to see good businesses that take a full responsibility on looking after the
welfare of society and hence providing their financial services will definitely help the citizens.
ADD: Management and suppliers as stakeholders

rationale of the strategic aims and objectives of SMEP microfinance bank and another
contrasting organization of your choice.

Strategic Aims
Strategic aims include large goals you want to reach through your strategies. These can include
things such as gaining a majority of market share

Strategic Objectives

Your small-business strategic objectives detail the small steps to your aims. These small
steps become your strategy for reaching your larger aims.

1) To set direction and priorities: First and foremost, you need a strategy because it sets the
direction and establishes priorities for your organization. It defines your organizations view of
success and prioritizes the activities that will make this view your reality. The strategy will help
your people know what they should be working on, and what they should be working on first.
Without a clearly defined and articulated strategy, you may very well find that your priority
initiativesthe ones that will drive the highest successor being given secondary treatment.
2) To get everyone on the same page: If you find that you have departments working to achieve
different aims, or going in different directions, you need a strategy. Once you define your
strategic direction, you can get operations, sales, marketing, administration, manufacturing, and
all other departments moving together to achieve the organizations goals.

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3) To simplify decision-making: If your leadership team has trouble saying no to new ideas or
potential initiatives, you need a strategy. Why? Your strategy will have already prioritized the
activities necessary for success. Priorities make it easier to say no to distracting initiatives.
4) To drive alignment: Many organizations have hard-working people putting their best efforts
into areas that have little to no effect on strategic success. Theyre essentially majoring in the
minorsbecause their activities arent aligned with the priorities. Your strategy serves as the
vehicle for answering the question, How can we better align all our resources to maximize our
strategic success?
5) To communicate the message: Many leaders walk around with a virtual strategy locked in
their headsthey know where their organization needs to be and the key activities that will get it
there. Unfortunately, the strategy isnt down on paper and hasnt been communicated thoroughly.
As a result, few people are acting on it. When your staff, suppliers, and even customers know
where youre going, you allow even greater opportunities for people to help you maximize your
success in getting there. Once you recognize the need to plan, you now have the role of
becoming the catalyst: for facilitating the buy-in and commitment of your leadership team and
the rest of your organization. Ive found that very few executives truly understand how to
maximize their role in facilitating strategy.vital role you play in facilitating strategy throughout
your organization.

The purpose of having aims and objectives;

Is to plan a way forward which will help the businesses to identify the future of how their
business will be in a few years. So they have an indistinct concept of how they will achieve their
aims in a few years.
The aims and objectives also help managers manage business, so they are able to follow them to
know exactly what they want to achieve by the end of the day or the year.
Having the aims and objectives also help to measure performance for example they will be able
to see if the profit they made is better than the previous year or if it measures up to the set goal
and this can be used to inform the necessary parties.
SMEP and Faulu being in the same field of business have similar aim and objectives for their
businesses;
SMEP redesigned their project to now giving small loans to the sex workers so that they may
invest in small businesses and be sustainable than to have them as dependents.

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 SMEP started feeding the malnutrition children of the sex workers, while Faulu began by
providing to the active poor of mathare.
Aim is having the intention of achieving a SMART target.
Objective is a thing sought or also known as a goal.

Aims

To provide a broad selection of finances to the people.

To feed the children of the commercial sex workers in mathare.
Strive to ensure living standard of Kenyans improves as a result of easy access to finance
services
To provide nutritional support to families of mathare.
To provide the active poor of mathare with loans to be self-sustainable.
Objectives
To improve community awareness of the bank's services by launching a branch marketing
program within a period of 1 year

to increase the provision of small loans to the mother's ( commercial sex workers) from 20% to
35% within a period of

These are some examples of the aims and objectives that SMEP and Faulu set for their
organizations.
I) Other objectives may include: Profit maximization, business growth in terms of size and
market share (pls include this in your list of objectives and make the to be SMART)

II) Try to bring out the objective of the two contrasting organisation in a proper manner- that is
both organizations are not the same in terms of size, market share, branches etc

Task two

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 Functional activities, and their interdependencies of SMEP Microfinance bank and Faulu
bank
Introduction

Interdependence in functional activities in SMEP Microfinance bank and Faulu there is a

functional interdependence as different functions must need to communicate with each other in
order to meet the business aims and objectives. Finance and Administration function do have
interdependence between each other as to increase efficiency on record keeping, this shows us
how the interdependence takes place.

Functional Organizational Structure

The functional organizational structure organizes the activities of SMEP and Faulu around areas
of specialization. This approach involves a considerable amount of process standardization
within a companies, with the real decision-making authority centered at the top of the
organization in the case of SMEP and Faulu the shareholder. For example, there may be a finance
department that focuses solely on finance activities, a customer care department that only
engages in customer care activities, and a research department that only designs new loan types
and banking services.
The functional organizational structure is the dominant mode of organization in larger
companies, since these entities deal with such large sales and production volumes that no other
form of organizational structure would be nearly as efficient.It is particularly effective in the
following situations:
Large volume of standardized product or service sales
Reduced level of change within the industry
Large fixed asset base
Minimal amount of entirely new product line introductions
Minimal changes due to fashion or other changes in taste or technology
Competition is primarily based on cost
In other words, this system works well in a stable environment.

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 Example of the Functional Organization Structure
(This introductory statement should relate to the two organisations and not KK LTD))
KK ltd has just passed $5 million in sales, and its CEO believes that this is a good
time to restructure the business to improve efficiencies through job specialization.
Accordingly, he clusters employees into the following functional areas:
(Mention briefly on the various tasks performed in these departments that you have
identified)

Accounting department- The purpose of the accounting department for SMEP and
Faulu is for them to take care of the companies finance sector and for them to keep the
financial records. They are to ensure company taxes are paid and keep all records of those
who have taken loans and their progress on paying them back.
Human resources department- this department deals with the controlling the
employees recruitment and retrenchment and their life at the company. They are to take
care of the employees
Corporate department-this department deals with identifying barriers to achieving
company objectives and develops an approach that allows you to overcome the obstacles.
Customer service department- this department deals with taking care of the
companys customers and ensuring they have been attended to with the services they
wanted from the organization.
Sales and marketing department- this department deals with creating awareness
of the business to the public and driving more people to come and use their services.
Public relations department-Public relations functions are categorized by the
publics with which relationships are established and to whom appeals are made to
understand and/or accept certain policies, procedures, individuals, causes, products or
services.

Advantages of the Functional Organization Structure

Of the following advantages, the first one is the most important; the functional structure can
introduce a great deal of efficiency into the operations of SMEP and Faulu. The advantages are:
Efficiencies. When employees are allowed to focus on one specific functional area to the
exclusion of all else, they can achieve significant efficiencies in terms of process flow and
management methods.

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 Chain of command. There is a very clear chain of command in this structure, so everyone
knows which decisions they are allowed to make, and which ones to hand off to their
supervisors.
Promotions. It is easier to set up career paths for employees and monitor their progress toward
the goals outlined for their functional areas.
Specialization. A company can use this approach to cultivate a group of extraordinary specialists
who can strongly impact the functions of the company.
Training. It is easier to monitor and update the training of employees when they are focused on
narrow functional areas.

Disadvantages of the Functional Organization Structure

Despite the advantages of the functional organizational structure, it can also twist the
fundamental process and decision flow within a business, with the following results:
Fast growth. When a company is growing rapidly and is therefore continually modifying its
operations to meet changing conditions, the functional structure can reduce the speed with which
changes are made. This is because requests for decisions must move up the organizational
structure to a decision maker, and then back down to the person requesting a decision; if there are
multiple levels in the organizational structure, this can take a long time.
Queue times. When processes cross the boundaries of multiple functional areas, the queue times
added by each area can greatly increase the time required to complete an entire transaction.
Responsibility. With so many specialists involved in a process, it is difficult to pin the blame for
a specific product or service malfunction on any individual.
Silos. There is a tendency toward poor communication across the various functional silos within
a business, though this can be mitigated by using cross-functional teams.
Small businesses. This approach is not needed in quite small businesses, where employees may
be individually responsible
It is a useful strategic tool for understanding market growth or decline, business position,
potential and direction for operations. Political factors include areas such as tax policy,
employment laws, environmental regulations, trade restrictions and tariffs and political stability.
Economic factors are economic growth, interest rates, exchange rates and inflation rate. Social
factors often look at the cultural aspects and include health consciousness, population growth
rate, age distribution, career attitudes and emphasis on safety. Technological factors include
ecological and environmental aspects and can determine barriers to entry, minimum efficient
production level and influence outsourcing decisions. Technological factors look at elements

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 such as R&D activity, automation, technology incentives and the rate of technological change.
Political- Employment laws which governs the employees e.g. minimum wages.

three external factors that impact upon the business activities of SMEP Microfinance bank
and Faulu another contrasting organization of your choice.

External Competition
One of the most critical external business factors is competition. Whether you operate in a
concentrated industry with a few major competitors or a large industry with many competitors,
you need to know the competition. Many companies do competitive analysis to compare their
offerings and prices to those of competitors. When developing business philosophies and
products, it is helpful to use your strength in quality production, customer service or operational
efficiency to build competitive advantages that benefit your customers.

However the most common and suitable external factors that affect a business are referred to
using the acronym P.E.S.T.E.L:
Political factors that affect businesses include new legislation such as the national minimum
wage and setting tax rates such as VAT or Corporation Tax.
Economic factors that affect firms are inflation and unemployment, interest rates and exchange
rates (if importing or exporting goods abroad).
Social factors that can affect businesses include fashions, tastes and trends, and also
demographic factors such as the ageing population of the UK. This has seen the rise of what is
called the 'grey pound' an increased number of wealthier older people with a disposable
income.
Technological factors consist of the rapid automation of factory and industrialized work, or the
worldwide increase of retailing online, e-commerce.
Ergonomic factors that affect firms are mainly concerned with being sustainable and being
ethical. Examples of these issues are the recycling of used products, whether products are bio-
degradable and the disposal of industrial waste.
Legal factors

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Economic factors

SMEP and Faulu are however greatly affected by political factor in Kenya especially by the
recent economic situation given that Over the past half-decade, Kenyas economic freedom score
has declined by 1.8 points pushing the economy further down into the ranks of the mostly
unfree. Corruption is a serious problem. The 2010 constitution increased transparency and the
independence of the judiciary Fiscal Freedom 78.0Create a Graph using this measurement
The top individual and corporate income tax rates are 30 percent. Other taxes include a value-
added tax and a tax on interest. Total tax revenues are equivalent to 20.1 percent of gross
domestic product. Government expenditures equal 30.5 percent of Kenyas GDP, and
government debt is equal to 50 percent of annual output.These factors affect both SMEP and
Faula given that there is high inflation in the country hence even as they give their loans to
customers a higher interest rate must be demanded. they also are affected by this as the have to
pay more tax to the government due to the hiked percentage due to the poor economic situation.

Technological factors
Internet/broadband consumer & business markets
Does technology offer companies a new way to communicate with consumers e.g. Social media,
Customer Relationship Management with services like the internet around it expand the market
of the business as there are customers who prefer to get their goods and services from online as
they find it easier as they can do this from the comfort of their home. This forces businesses like
SMEP and Faulu to have to develop a website to provide for these customers.
The technological factors also influences them positively as it could save time on loan giving as
they could simply make a computer program that determines the eligibility of a loan seeker by
the filling in all their details and providing their records. This will mean that not as many people
will be needed for physical analysis which is good for the business as it will help them cut down
on costs.
Also for the company it will be easy to store its own documents on a computer and backed up as
opposed to the old fashion way of keeping papers filed in large doers even taking up large
amounts of space in offices.

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 Office furniture(Machinery)
Office Equipment

The development of these meanskeeping your documents safe is a lot easier since if the
following are implemented the documents will be harder to access than files in an office
which can be broken into. Secure Systems: encryptions, digital certificates, SSL (secure
sockets layer protocol mechanisms)

How external factors will affect in future?

Competition I the future competition will affect the business both positively and negatively.
For starters the business will be kept on toe to produce the best quality they can as fast as
possible for SMEP and Faulu they will be forced to be more innovative and come up with

Political- Lack of political stability in a country effects business operations. This is especially
true for the companies which operate internationally.For example, an aggressive takeover could
overthrow a government. This could lead to riots, looting and general disorder in the
environment. These disrupt business operations. Such as during the post-election violence.

Technological- Technology changes every minute and therefore companies need to stay
connected along the way and integrate as and when needed. Also, these factors are analyzed to
understand how the consumers react to technological trends and how they utilize them for their
benefit.

Evidence criteria 4.3, conclusion and references

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