Chapter 1: A Perspective on Entrepreneurship
3. Pay taxes
1. Define entrepreneurship, entrepreneurs.
2. Know what innovation means in terms of
entrepreneurship.
3. Know the overview of concepts and tasks
relating to entrepreneurship.
Entrepreneurship is an important component of
a capitalist economy, it thrives in economic systems
that support innovation and handwork. When
entrepreneurs become successful, the nation is
immensely benefited.
ECONOMIC DEVELOPMENT
 It is scheme aimed at improving the living
standards of nation’s citizenry.
 To achieve such, proper management of the
following elements is necessary:
1. Human resources
 Labor supply, education,
discipline, motivation.
2. Natural resources
 Land, minerals, fuel, climate.
3. Capital formation
 Machines, factories, roads.
4. Technology
 Science, engineering,
management, entrepreneurship.
 The effective and efficient utilization of various
element contributes to the economic growth.
 Such growth will occur when the elements of
entrepreneurship is performed well by the
players.
 There is a need for entrepreneurs to perform the
functions of: ----- to achieve economic
development.
1. Harnessing the potential of any or all of
the various elements.
2. Determining the right quantity of
resources needed
3. Applying the elements at the right time.
ENTREPRENUERSHIP
 Refers to the economic activity of a person
who stars, manages, and assume the risk of
a business enterprise.
Entrepreneur
 Refers to the person who undertakes
entrepreneurial activities.
THE ENTREPRENEURS’ TASK
The entrepreneur can assume his role in the
development of the economy when all the economic
requirements are in place.
 Basic task of entrepreneurs in relation to the
development of economy:
1. Provides goods and services for
customers and producers.
2. Provides employment.
4. Demand for suppliers’ product and
services
5. Helps in training facilities for future
entrepreneurs.
 Basic task of entrepreneurs in relation to
attempt to make profit:
1. To supply necessary capital.
2. To organize production by buying
and combining inputs like materials
and labor.
3. To decide on rate of output, in the
light of his expectation abound
demand.
4. To bear the risk inherent to the
venture.
The freedom of competition afforded by the
capitalist economy serves to drive the entrepreneur to
innovate and get ahead of his competitors lest he is
driven out of the market.
 Buyers tends to buy or patronize innovative
offerings of any kind, hence the entrepreneur
must take in to consideration this motivations if
he wants to gain patronage.
INNOVATION
 Defined as the introduction of new method,
procedures, custom, and device, among others.
 Innovation can be any of the following:
1. New product;
2. New process of production;
3. Substitution of cheaper materials in
unaltered product;
4. Reorganization of production, internal
function, or arrangement. --- leading to
increased efficiency better product
support and lower cost.
 Improvement in instrument or methods of doing
innovation.
 It the last stage in the process of making new
products and process.
1. Invention --- refers to the discovery or
devising of new products and processes;
2. Development --- which refers to the
process by which the ideas and principles
generated from the stage of invention are
embodied in concrete product and
techniques;
3. Innovation --- refers to the actual
introduction of a new product or process
 Examples of successful innovations
o Cordless microphone
o Cellular phone
o Laser treatments
o Use of computers in architectural in
engineering fields.
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 Factors Of Economic Limiting Factor For
NEW VENTURES AND LONG TERM Production Reward Rewards Received
ENTERPRISES Land Rent Supply and demand
New venture cannot remain as such forever. Industry rate/
The entrepreneur must develop it into a small business Capital Interest government
or make it grow into a mature and bigger company if he mandated rates
is to recoup the cost of opening a new venture and take Supply and demand
Labor Wages/ salary
advantage of the opportunities presented by a mature legislation
business. Skill of
Entrepreneur Profits
entrepreneur
*4 major stages of transition from new venture to a  Rent
long-term enterprise: o refers to specifically to the price paid
per unit of time for the services of a
1. Prestart-up stage
durable good, which, most often refers
2. Start-up stage
to land or building.
3. Early growth stage
 Interest
4. Late growth stage
o Refers the compensation paid to owners
*Prestart-up stage of invested capitals.
 Wages
 Happens when the entrepreneur starts to
o Determined on a piece-rate basis
question the feasibility of an idea, product, or
 Salaries
service.
o Based on time-rate
 He seeks answers to question regarding
 Profit
potential markets, production, and financing.
o The residual amount after deducting all
*Start-up stage expenses to the gross income.
 Involves the following activities: THE ENTREPRENEUR’S PREDICAMENT
1. Formation of the business;
2. Generation of necessary capital; In the creation of a new venture, the
3. Purchase of facilities and equipment; entrepreneur may be successful in offering innovative
4. Constructing prototype products; products or services. At this stage he will reap the profit
5. Testing the market. for being ahead of the competitors.
 No full-scale activity must be undertaken at this This situation may be temporary because the
stage for simple reason that feasibility must be competitor may attempt to improve his position by
establish and verified. making moves to outpace the entrepreneur in the race.
*Early growth stage The competitor may either imitate or offer
 Activities will be on small scale, i.e., selling to better innovation, if so the profit of the entrepreneur
limited markets within limited resources. might decline.
 Of the enterprise is successful at this stage, the BUSINESS SIZE
option to move to the next stage can be
exercised. To many, entrepreneurship means running a
small business. New ventures, however, can also be
*Late growth stage undertaken on a large scale.
 The final stage before the new venture matures To effectively compete, business of whatever
into a stable enterprise. size must adapt innovative approaches t its activities.
 This is when the management is structured, Example:
long-term financing is established, and facilities
planning are undertaken. 1. Offering services on weekends or holidays.
 This is also the stage where the skills of the 2. Manufacture and sale of new product.
entrepreneur are less needed. Instead, the 3. Selling on a deferred payment scheme.
skilled manager begins to take over.
 Small business have the advantage of swathing to
another business concept whenever necessary
REWARDS FOR SUCCESSFUL  Large business cannot do the same without
ENTREPRENEURSHIP spending must. However, large businesses have
The use of any of the factors of production started to engage in “entrepreneurship” where a
deserves to receive some form of compensation. person with entrepreneurial skills and is employed
by and is tasked to launch new product.
Factors of Production and Their Rewards

2
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Chapter 2: THE NATURE OF SMALL BUSINESS
1. Define small business
2. Know the types of small business
3. Know the characteristics of small business
4. Know the economic importance of small business
5. Know the advantages and disadvantages of small
business.
Business size is one factor that does not prevent one
from engaging in entrepreneurship. Since only a small
number of people have capital large enough to start a large
enterprise, the bigger the number of people with minimal
resources are forced to operate on small-scale basis.
SMALL BUSINESS (SB)
 Can be defined by using of two approaches:
Market Share or Total Assets.
o Under the MARKET SHARE
APPROACH, --- small business is
defined as one which is independently
owned and operated and which is not
dominant in its field of operation.
 “Independently owned” – means
ownership is by a private
individual, a partnership, or a
corporation.
 “Not dominant” – indicates that a
small business does not control\ a
sizable share of its market.
o Under the TOTAL ASSETS APPROACH
--- defines small business as one having
total assets that fall within a certain
bracket.
 For example the Magna Carta for
small enterprises (R.A. 6977)
indicates that a firm must have
total asset valued at above Php
1.5 million to Php 15 million to
be considered as small business.
*TYPES OF SMALL BUSINESS
1. Manufacturing
2. Service
3. Wholesaling
4. Retailing
5. General construction firms.
*Manufacturing business
 It is one involved in the conversion of raw
materials into products needed by the society.
 Example of SB engaged on manufacturing
o Bakeries
o Motor assembly shop
o Clothes manufactures
o Others
*Service business
 Those that provide service in one way or another.
They may be further classified into the following:
1. Business services
 Provide service to other business.
 Example – accounting firms,
janitorial service firms, security
service firms, collection agencies and
alike.
2. Personal services
 Provide service to the person.
 Example – tutorial services, massage
parlors, and alike.
3. Repair services
 Provide repair service to owners of
various machinery and appliances.
 Example – auto repair shop, watch
repair shop, plumbing service and
alike.
4. Entertainment and recreations
 Includes movie house, resorts, billiard
pool center4s and alike.
5. Hotel and Motels
 Provides accommodation and lodging
6. Education services
 Business which provide education.
*Wholesaling
 Refers to activities of persons or establishments
which sell to retailers and other merchants, and/or
to individual, institution, and commercial users,
but who do not sell in large amount to final
consumers.
*Retailing
 Covers all activities involved in the sale of goods
and/or services to the final consumers.
 Example – drugstores, fast food shops, appliance
stores, and others.
*General Construction Firms
 Those engaged in the construction of buildings
whether for private individuals or firms, or for the
government.
 Many of them perform subcontracting jobs for the
bigger contractors such as installing electrical
facilities and sewerage.
CHARACTERISTICS OF SMALL BUSINESS
1. Independent management
 The owner is also the manager.
2. Small capital requirement
 Small business requires only small capital
and this can be supplied by a single or
few individual.
3. Mostly local operation
 Small business usually operates in a
certain locality although there are cases
when the market is not confined to a local
area.
ECONOMIC IMPORTANCE OF SMALL BUSINESS
Small business play an important role in the
development of an economy. They assume the following
functions:
1. Providers of economic opportunities for
entrepreneurs
4
  People who do not feel comfortable as an damage that happen as a result of his faulty decision-
employee have the option of engaging in making. However, he afforded the following benefits:
small businesses.
1. Opportunity to gain control over his own destiny
2. Provides of product and services to consumers
2. Opportunity to reach his full potential
 The production of many products and
3. Opportunity to reap unlimited profits
services is oftentimes not feasible with
4. Opportunity to make a contribution to society and
big and medium business operation.
receive recognition for his efforts.
These limited opportunities are naturally
fitted for small businesses. DISADVANTAGES OF OPERATING A SMALL
3. Suppliers of product and services to other BUSINESS
businesses
 Some businesses require raw materials, 1. Uncertainty of income;
semi-finished parts, finished components, 2. Risk of losing your entire capital investment;
or, even labor, which they cannot 3. Lower quality of life until the business gets
economically produce. established;
4. Distributors of products and services of other 4. Complete responsibility;
business 5. Having to serve undesirable customers;
 Some manufacturers do not have the 6. Paperwork and other chores;
ability to distribute their product and 7. Long hours and demanding work condition.
service. Many small businesses assume
this role for them.
5. Supporters of government
 Small businesses support the government
with the taxes they pay, as well as
performing other functions.
6. Providers of employment
 A large proportion of the labor force are
employed by small businesses.
ADVANTAGES OF OPERATING A SMALL
BUSINESS
An individual has various option to improve his
economic lot. They are the following.
1. Be an employee;
2. Be a professional;
3. Be a small business operator(SBO)
 Employee
o Enjoys fixed working schedule like
8:00 A.M. to 5:00 P.M. the pay he
receives, however, is limited and
dependent to a large extent on
industry norms and financial
capability of the company.
 Professional
o May generate higher income through
the effective practice of his
profession.
The first two options, however, can only be
considered depending on certain conditions. Finding a job
is not an easy task. The rate of rejection for job applicants,
is just too high. In reality there are too many people who
cannot exercise this option.
Entering a certain profession is also not an easy
task, first, one must undergo long years of study, and
second, one must pass a rigorous entrance requirement
like passing the board examination. There are too many
people who cannot exercise this option.
The last option is SBO. Although entrance
requirements are not as difficult as the first two options, it
does not mean this option is easier to put into practice. A
SBO keeps long working hours and absorbs whatever

5
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Chapter 3: The Ethical and Social Responsibilities
1. Define Ethics
2. Know the factors influencing ethical behavior
3. Know how ethical behavior is encouraged
4. Know the Ethical issues
ETHICS
 It is the study of moral obligations involving
the distinction between right and wrong.
 The study of ethics paved the way for the
adaption of the general rules of conduct in
society.
Business Ethics
 It is the rules about how entrepreneurs ought
to behave.
Adherence to ethical standards contributes to
the smooth flow of business exchanges. It establishes
trust between buyers and sellers and between lenders
and borrowers.
FACTORS INFLUENCING ETHICAL
BEHAVIOR
Ethical behavior, whether by a person or
business entity, is influenced by any or a combination
of the following:
1. Situation
 For an instance, a firm that behaves
ethically during prosperous times may
act unethically in times of financial
hardship.
2. Reward system
 The expectation of high rewards for
committing unethical behavior
motivates a person to do it.
3. Individual differences
 People are different from one another
and that includes differences in
reacting to specific situations
 For instance, a trader may think
selling food products which had
already expired is not bad, others
might think otherwise.
4. Other factors.
 When a person is in competition with
others, and he wants to be sure of
winning, he is more inclined to adapt
unethical behavior.
Circumstances vary, and the reactions of
firms or individual also vary.
HOW ETHICAL BEHAVIOR IS
ENCOURAGED
If the entrepreneur believes that business
success requires good ethical behavior, his next
concern would be to encourage his people to adapt
good ethical behavior.
Ways to encourage ethical behavior
1. Adaptation of code of ethics;
2. Institution of rewards and punishment
concerning ethical behavior;
3. Adaptation of internal program for resolving
conflicts;
4. Creation of ethics review committees;
5. Provision of training ethics for employees;
6. Top management support.
*Code of Ethics
 It is a formal document indicating the
entrepreneurship’s adapted principles of
appropriate behavior.
 It is very useful to the firm espousing ethical
behavior.
 It serves as a basic reference for employees
who make big or small decisions.
 A code of ethics can be made effective if the
following requirements are met:
o It should refer to specific unethical
practices like receiving gifts, avoiding
warranty claims, bid-rigging, making
fictitious claims and among others
o It must be supported by top
management.
 Support might come in various
forms such as providing
sufficient funds for its
implementation and assigning
specific employees to handle
infractions of other employees
and the like.
*Rewards and punishments concerning ethical
behavior
 A code of ethics is sufficient for some people
if ethical behavior is required.
 For many people, however, this may not be
enough to motivate them to act ethically.
o Rewards
 May be given in the form of
cash gifts, promotions. Or
citations.
o Punishments
 Could take form of dismissal,
demotion, suspension, or
reprimand.
*Internal Programs for Resolving Conflicts
 Conflict arise, even when ethical conduct of
personnel is concerned.
 It is important for entrepreneurs to adapt a
program of resolving conflicts.
7
*Ethics Review Committees
 To encourage ethical behavior, the
entrepreneurship may create an ethics review
committee.
 Ethics Committee
o Is usually composed of company
employees as well as some who are
not employed by the company.
o These persons have undergone special
training in ethics.
o It provides advice to the entrepreneur
and his staff concerning sensitive
ethical issues.
*Provision of Training in Ethics for employees
 Company personnel who are exposed to
activities that are ethically charged must be
provided with sufficient training ethics.
 Such training should make them sufficiently
prepared to deal with various ethical issues
they would encounter in their respective
works.
 Ethics training is more appropriate for the
persons occupying sensitive positions:
o Purchasing
o Waste disposal
o Personnel
o Research and development
o Sales
o Manufacturing
*Top Management Support
 It is very difficult for any program or activity
to succeed without sufficient support from top
management.
 For instance, when unethical conduct is
committed and no sanction is imposed by top
management, it can be expected that more
violations of good ethics will be made.
ETHICAL ISSUES FACING
ENTREPRENEURSHIP
Entrepreneurship face ethical questions on a
daily basis. These spring from the following
relationship:
1. Between the company and customers;
2. Between the company and its personnel and
employees;
3. Between the company and its business
associates
4. Between the company and the investors and
financial community.
**Relations with Customers
 When ethical abuses are committed, the most
probable victims are customers.
 This is expected because of the high
frequency of transactions between the
company and the customers.
 Entrepreneurs are expected by society to treat
their customers fairly and not to act in ways
that will be harmful to them.
 Entrepreneur should provide support for
consumer rights are as follows:
1. The right to be safe;
2. The right to be informed;
3. The right to choose;
4. The right to be heard.
**The Right to Be Safe
 Consumers expect that the products and
services that they buy will do them no harm,.
 They are expected to be free from bodily
harm when they are inside the entrepreneur’s
business premises.
 For example, Manufactured Drugs should be
approved by the DFA to guarantee safety.
**The Right to Be Informed
 Consumers make purchasing decisions often.
The quality of their decisions, however, will
depend on whether or not they are properly
informed.
 Advertisements and information printed on
labels are some of the ways of providing
information to consumers about products and
services.
o Example: Expiry date labels, and other
information.
**The Right to Choose
 Firms that intends to adhere to business ethics
should strive to protect consumers’ right to
choose, what products and services they need
and intend to purchase.
o Example: right of the consumer to
choose between generic and branded
drugs.
**The Right to Be Heard
 Customer have the right to communicate their
concerns to entrepreneurship they patronize.
 This right may be used to express
appreciation about what the company is
doing, or to provide information about defects
in the products the customers bought.
o Some company install a system of
receiving and processing complaints.
o Like the costumer care number.
***Relations with Personnel and Employees
8
  There is always the possibility that business
firms, including entrepreneurships will
commit unethical acts toward their
employees.
 Since entrepreneurs and their staff make
decisions on various business activities like
hiring, promotion, transfer, compensation,
and dismissal.
 It is not uncommon for ethical lapses to
happen every now and then.
o Example; giving priority in hiring
officers and higher officials relatives.
Good ethical conduct requires entrepreneurs
to be aware of their responsibilities to employees.
These are the following:
1. Workplace safety;
2. Quality of life issues;
3. Avoiding discrimination;
4. Preventing sexual harassment.
***Workplace Safety
 The ethical entrepreneur is one who makes
sure that he workplace is safe for employees.
 He sees to it that adequate measure are
adapted to prevent accidents from happening
in the factory and in the office.
o Example, sufficient ventilation must
be maintained
o Fire exist must be provided
o Machines and chemicals must be
handled by properly trained personnel
***Quality of Life Issues
 Many employees are burned by problems
about maintaining a good balance between
work and family. Caring for children and
elderly are two of the most common
responsibilities that make life difficult for any
employees
o Some progressive companies provide
day-care facilities for the children of
employees.
o Housing is provided near the work
sites. If measures like those are not
feasible, entrepreneurship can still
provide assistance in locating or
facilitating arrangement.
***Avoiding Discriminations
 Everyone has the right to work in a place
where discrimination is not practice.
 Factors like age, sex, race, religion, political
beliefs and the like must not be allowed to
affect any person’s chance of getting
employed or promoted.
***Preventing Sexual Harassment
 Sexual Harassment --- refers to unwelcome
sexual advances, request for sexual favors,
and other verbal; or physical contact of a
sexual nature.
 Entrepreneurs have the moral responsibility
of keeping the workplace free from sexual
harassment and where everybody is treated
fairly.
 In preventing sexual harassment, the
entrepreneur needs to do the following:
1. Issue a specific policy statement
prohibiting sexual harassments;
2. Develop a complaint procedure for
employees to follow;
3. Create a work environment that
encourages sexually harassed
employees to report their experiences.
4. Establish a committee to investigate
sexual harassment claims;
5. Take disciplinary actions against
harassers.
Relations with Business Associates
 Entrepreneurship operate in conjunction with
efforts of suppliers, agents and various types
of middlemen.
 In the course of business transactions between
the players mentioned and the firms, some
ethical questions may come into force.
o A supplier who badly needs a
contract, for instance, may attempt to
bribe the company’s purchasing
officers.
Relation with investors and the Financial Community
 The country’s financial system survives partly
because investors and other player have
placed a certain degree of trust in firms they
deal with.
 The degree of trust is maintained at a high
level if the investors and the financial
community feel that business firms practice
good business ethics, especially if they think
that their investment are well protected.
 Trust and confidence, however, are eroded by
wrongdoings of some firms
o Investment scams perpetrated by some
scheming persons
o Misrepresentation concerning the
financial health of the firms. Land
swindles, embezzlement and
misleading reports about non-existent
asset are some of the unethical and
illegal practices that undermine our
country’s financial stability.
9
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Chapter 4: Entrepreneurial Personality
1. Know the different characteristics of a good
entrepreneur.
2. Know what motivates people to become
entrepreneur.
Operating a business enterprise is a very
challenging occupation. The rate of failure among
those to make attempts is high. Only few become
successful and the levels of their success differ.
*Drive
 Success in entrepreneurship becomes possible
when entrepreneurs is self-motivated enough
to pursue his chosen course without relenting
even in the face of adversity.
 An entrepreneur must try multiple times to
succeed.
 The tension that occurs when a need is not
met.
*Thinking Ability

Two complementary factors that determine
success or failure in an entrepreneurship:
1. Environmental factors
2. Personality of the entrepreneur
THE ENVIRONMENT AS A FACTOR
 The entrepreneur’s job involves solving
problems and making\g decisions.
 When he finds the correct solution to
problems that confronts him and then makes
decisions that are implemented, he comes
closer to realizing his goals.

Entrepreneurship will survive and grow only * Human Relations Ability

in economic environments of free enterprise. Full  There are three types of persons that will
blooming entrepreneurships cannot be expected to determine the survival and growth of business
flourish in economies that are not fully supportive of firms:
free enterprise. 1. The customer
Classification of economic environments: 2. The employee
3. The third party with interest to the firm.
1. Fully supportive of entrepreneurship  Customer
2. Moderately supportive of entrepreneurship  Makes decisions whether to
3. Not supportive of entrepreneurship patronize the firm or not.
Economies that fully support entrepreneurship makes  His decisions, however will
it easy for entrepreneurs to succeed. depend on what he thinks of
the firm.
THE ENTREPRENEUR’S PERSONALITY  Perception on customer
Every person has a personality that is unique relation will definitely be a
and different from others. factor.
 Employee
Personality  Can be productive and loyal
to the firm.
 Refers to the pattern of characteristics that
 He can help avoid
distinguishes one person from another.
production delays and
 It includes the person’s traits, values, motives,
shortages, wasteful
generic blueprints, attitudes, and emotional
consumption of resources,
reactivity, self-image, intelligence and visible
dissatisfied customers, and
behavior patterns.
the like
CHARACTERISTICS OF ENTREPRENEURS*  He can be an asset depending
on what his superiors do to
1. Drive;
him.
2. Thinking ability;
 Third party with interest to the
3. Human relations ability;
firm.
4. Ability to communicate;
 They can help the business
5. Technical knowledge;
depending on how the
6. Reasonable risk taker;
business relates to them
7. Self-confident;
 Agencies
8. Goal setter;
 LGU
9. Accountable;
 Public
10. Innovative.
 Other Stake holders
 All the interest cited above can be useful
partners of the firms, but this will depend to a

12
 large extent on the ability of the entrepreneur
to relate with them.
*Ability to communicate
 Communication skill is very important
characteristics an entrepreneur must have if
success is expected.
 The ability to understand and be understand
makes it easier for the entrepreneurs to
transact business with customers, bankers,
government and the likes.
*Technical Knowledge
 Operating an entrepreneurship requires the
performance of the major and minor tasks.
 The entrepreneurs must be at least be familiar
with and possess some technical knowledge
about how the various tasks are performed.
 It will be easier for him to devise a strategy
on how he will manage his firm to effectively
compete with others.
*Reasonable Risk-taker
 When a person starts a new venture, he has
already begun to assume the risk of business
failure.
 Entrepreneurs, however, normally do not
assume unreasonable risk.
 Entrepreneurs are expected to be reasonable
risk-takers, not conservative but also not
gamblers.
 They assume risk but only after they are
convinced that they have the skills and
resources to overcome the difficulties
inherent in a new venture.
*Self-confident
 A person cannot achieve much unless he has
sufficient confidence in himself.
 In any undertaking, including
entrepreneurship, a person’s belief in his
ability leads him to actual performance and
eventual success.
 When a person has self-confidence, he does
his job without inhibitions.
*Goal Setter
 Goals are very useful motivational tools,
especially those related to accomplishing the
objectives of entrepreneurs.
 Functions of Goal
o It directs one’ attention to specific
target
o It encourage one to exert effort
towards achieving something specific.
o In encourage persistence
o It fosters the creation of strategies and
actions plans.
 It is easy to understand that persons who are
goal setters would make entrepreneurs of high
success potentials.
*Accountable
 The success of an enterprise will depend
much on the willingness of subordinates to
comply with the wishes of the entrepreneurs.
 Compliance can be expected if the
entrepreneur is accountable enough to take
responsibility for what happens to the firm.
*Innovative
 A free enterprises economy like ours allows
business enterprises to flourish. This will
depend, however, on how well the public is
convinced to patronize them.
 Buyers will have to be persuaded to buy from
the entrepreneur’s firm rather than from the
competitors. The innovative entrepreneur,
however will be able to handle this problems
o Innovation may be the only way the
entrepreneur can achieve the
following:
1. Penetrate the market
2. Improve employee turnover
3. Reduce manufacturing cost
4. Improve collection rate
What Motives People to Become Entrepreneurs
4 MOTIVATION to be an Entrepreneur:
1. Desire to be one’s own boss;
2. Desire for financial rewards;
3. Desire to create one’s own job security;
4. Desire to improve one’s quality of life.
**Desire to Be One’s Own Boss
 There are times when an employee sees some
opportunities for his employers business.
 When he recommends action to be undertaken
and is ignored, the employee may just
proceed to take the opportunity and organize
his own business.
** Desire for financial rewards
 Some people, do not get satisfaction from
fixed monthly income which often, is
inadequate.
 Some think that they deserve to be properly
rewarded for their skills. The means open to
them is entrepreneurship.
** Desire to create one’s own job security
13
  Some people feel their jobs are not secure. For the firm to get along in the first three stages, the
They think they could be fired for a variety of entrepreneur skill is required. The last two stages
reasons like downsizing, management errors requires the skills of the manager. (See Table 2)
 Person who cannot bear to worry about job
Entrepreneurs Tasks vs. Managers Tasks
security may just decide to become
entrepreneurs
** Desire to improve one’s quality of life. Enterpris Entrepreneur Managers
Activity involvement involvement
e Stage
 To some people engagement in
entrepreneurship provides them with some
control over their work schedules. Feasibility of idea, Full None
 An entrepreneur can choose a type of Prestart- Product or service,
business that will be compatible with the up Among others, is
quality of life he desires. scrutinized
 Specifically, the business locations and Business is formed, Full none
the type of products sold can be chosen to necessary capital is
generated, facilities
jibe with the personal and family needs of
and equipment are
the entrepreneurs. Start-up
purchased,
The Entrepreneur and the Manager Distinguished prototype of
product are built,
The term “entrepreneur” and “manager” are market is tested
sometimes used interchangeably. Although both jobs With limited full none
are useful to the economy, each performs distinct Early resources, selling is
functions. growth undertaken in
limited markets
Table 1: Activity Emphasis of New Ventures Structured Declining Partial
ENTERPRISE FACTORS EMPHASIS management, long
Late
STAGE term financing, and
growth
facilities planning
Business idea Full
I. Prestart-up are established
Human resources None
Stage With bigger none full
capital None
resources, recurring
Business idea None
II. Start-up Stable sales and profits,
Human resources Limited
Stage enterprise selling is
capital Limited undertaken in
III.Early Business idea None bigger markets
Growth Human resources Escalating
Stage capital Escalating
IV. Later Business idea None A major distinction between the entrepreneur and
Growth Human resources Full manager is about orientation.
Stage capital Full
Business idea None The Entrepreneur (Also alternatively called
V. Stable Promoter) feels confident of his ability to seize’ a
Human resources Full
Enterprise business opportunity regardless of the resources
capital full
under his current control.
The Manager (Also alternatively called Trustee)
emphasize the efficient utilization of resources.

14
15
Chapter 5 - Business Environment and SWOT  Items covered by this force are – quality and
Analysis sources of raw materials, machinery and
equipment, production efficiency, etc.
Objectives:
1. Identify the types of business environment, Human resources
understand the different environmental forces •Pertains to the people of the organization
2. Understand the meaning and importance of  It includes motivation, compensation.
SWOT analysis. Training and development, promotion,
recruitment, etc.
Objective 1: Identify the types of business
environment understand the different environmental Macroenvironment External Environment Forces
forces
1. Social forces
ENVIRONMENT 2. Economic forces
 Consist of forces that are expected to affect 3. Technological forces
company operations 4. Competitive forces
5. Regulatory forces
Two Sets of Environment 6. Natural forces

1. MICROENVIRONMENT(Internal Environment) Social forces

 Includes forces affecting operations.
 The company can manipulate these forces
towards the firm’s advantages.
2. MACROENVIRONMENT (External Environment)
 Consisting of forces that are beyond a
company’s control.
Microenvironment Internal Environment Forces
1. Management
2. Marketing
3. Finance
4. Production and operations
5. Human resources
• Includes the characteristics of people, income
and values.
Economic forces
•Includes inflation, depletion and recession
Technological forces
•Development in existing technology
 Some marketing activities where
technology can be useful:
1. Generation of marketing
information.
2. Development of new products.
3. Understanding the consumer.

Management Competitive forces

• Pertains to the organizational setup, including
goals and objectives, organizational structure,
managerial compositions, company philosophy,
vision-mission, policies, programs, etc.
Marketing
• Includes the marketing program of the company Pure competition
covering the basic marketing mix.
 Items covered by this force are -- product
quality, packaging, pricing strategies,
intermediaries used, advertising effort, etc.
Finance
• Includes the company’s resources.
 Items covered by this force are --
profitability indices, financial performance,
assets, liabilities and equity, expenditure, etc.
•Includes the following forms of competition:
1. Pure competition.
2. Monopolistic competition
3. Oligopoly
4. Monopoly
• There are many competitors offering for sale
identical product or services.
• The price of products is determined by the
market and not by any individual.
 Characteristics:
1. Firms sell similar products
2. It is easy for prospective sellers to
engage in the industry.
3. There are many buyers and sellers
who fully know the market

Monopolistic competition
• There are many sellers (but less than those in
pure competition) in a particular market
competing with each other.
Production and operations • Manufacturers often promote certain features of
• Includes all aspect of manufacturing and their products, then charges higher price.
operations

16
Oligopoly  Ex. Political unrest, dumping of low-
• Few firms compete in a given industry. priced items from Asian neighbors,
• The product sold are homogeneous or etc.
identical like gasoline, steels, cement, etc.
• Price are set by the oligopolist in collusion
with one another

Monopoly
• There is only a single seller in a particular
market.
• Prices are sometimes regulated by the
government.

Regulatory forces
• Includes law enacted by the national government
and local ordinances by provincial and municipal
government.
 Purpose of restriction:
1. To protect consumers from unsafe
product and unfair trade practices.
2. To ensure business competition and
fair trade practices.

Natural forces
• Includes typhoons, earthquakes, and other
environmental phenomena.

Objective 2: Understand the meaning and

importance of SWOT analysis

STRENGTH
• Is something that a company is good at doing.
• A characteristic is said to be a strength if it
belongs to the internal environment and is
expected to affect company operations in a
positive manner.
 Ex. High technical expertise, superior
financial resources, etc.

WEAKNESS
• Is something that a company lacks.
• A quality is said to be a weakness if it belongs
to their internal environment and has a
detrimental effect on company operations.
• Ex. Below-par financial performance,
poor product quality and availability, etc.

OPPORTUNITY
• Is a factor in the external environment that is
expected to work favorably towards company
operations.
 Ex. Improvement in the economy,
high population rate, etc.

THREATS
• Is a factor in the external environment that is
expected to have a negative effect on
company operation.

17
18
Reminders in choosing and staring a business BRAND MARK
Good day dear reader!  It is the part of the brand that appears in the
form of a symbol, design, distinctive coloring,
This reminder and pointer will give you bits of
or lettering.
information’s you need to note in the preliminary
preparation of your business. It contains the BE CREATIVE AS MUCH AS POSSIBLE, your
description and overview of the company. imagination and creativity is your limit,
Your goal in establishing a business will start with A logo can be a combination of Letters, words and
the generation of a SOUND IDEAS coming from the symbols. You can incorporate the name of the
members of your team, next you must screen such business to the logo itself or it can be a plain symbol
idea and choose the best and most realistic and
Pointer
attainable among such ideas.
1. Find a font that is most suitable to your
Then formulate the following:
business.
I. Description / overview of the company 2. Decide on what color to use --- it is wise to
a. Name use the colors that has meaning for you or can
b. Logo be related to the core values of your business
c. Tagline or directly related to the main color of your
d. Vision company
e. Mission 3. Choose a Symbol – you should know the
f. Core values meaning of the symbols that you will use.
g. Type of business 4. Give importance to symmetry
h. Form of business 5. The simple the better
i. Organizational chart
Characteristics of Good Logo
j. Location
1. It should be attractive, and appealing to the
NAME
consumer.
BRAND 2. It should be distinct form other symbol --- one
of a kind.
 It is a name, term, symbol, special design, or 3. It should have a lasting impact.
a combination of these elements that is
intended to differentiate the goods or services *** KNOW THE MEANING OF YOUR LOGO
of a company from those of its competitors.
BRAND NAME
 It is the verbal part of the brand.
TAGLINE
 It consists of words, letters, and/or numbers
that can be uttered or vocalized.
Below, take a look at five essential qualities that
Characteristics of Good Brand Name describe the best taglines. Use them to evaluate your
tagline and see how well it works!
1. Suggestive of the products characteristics – its
benefits, use, or actions. 1. Clear: Your tagline is not the place to be subtle; it
2. Easy to pronounce, spell, and remember. should be informative. Its job is to communicate,
3. Distinctive quickly and clearly, what it is that you do and what
4. Adaptable to new products that may be added you have to offer.
to the product line.
5. Capable of being registered and legally How to Do It: Ask yourself what your company’s
protected. mission is. What is your purpose? What’s your
focus? Knowing that is half the battle because once
Pointers you know what you’re trying to say, it’s much easier
to find a way to say it. 
1. Make it short. ...
2. Make it memorable. ...
2. Concise: The best taglines have one thing in
3. Make it pronounceable. ...
common: they’re simple. It doesn’t matter what your
4. It should be easy to spell a single way. ...
industry is—even a company that makes electrical
5. It should be “descriptive” or “brandable.”
rubber gloves can do this with a tagline like “the best
value in safety solutions since 1946.” Write your
LOGO tagline to be easy to remember and within 10 words
or less.

19
How to Do It: Streamline your company’s message
into one simple, short phrase.  most strategic initiatives. Vision that is clear
3. Relevant: So you make flame resistant clothing—
so what? Why should anyone care about that? Your
tagline needs to be the answer to that question, the
information that speaks to the reader’s “What’s in it
for me?”
How to Do It: Take time to name client benefits:
these clothes will protect you from fire, keep you
comfortable while you work, free you up to focus on
your tasks, get you home safely, last a long time, dry
quickly, etc. Then take that knowledge and build your
tagline around it.
4. Branded: A good tagline is reflective of the brand
it represents. It must seamlessly match the overall
sense of your style and other marketing efforts in
order to enhance your impact.
How to Do It: Ask yourself what differentiates you
from the competition. What is your style: witty or
formal, clean-cut or colorful? Take your particular
business tone and find a way to work it into your
tagline to strengthen your other marketing efforts.
5. Consistent: Don’t be one of those companies who
changes its tagline all the time. A tagline’s greatest
strengths lies in its consistency—that clients can
count on it, year after year, to stay the same.
VISION
Use these characteristics to help you evaluate your
current vision and if necessary to guide you in
creating a new one.
1. Future Focused: An effective vision answers
the question “what will our business look like
in 5 to 10 years’ time?”  It describes
the organization’s desired future. A vision
makes clear the organization’s direction,
providing a clear picture of what the business
will look like in 5 − 10 years’ time. Vision
provides the “big picture”. Vision provides the
“north star” by which everyone in the
organization navigates. It sets the context for
action.
2. Directional: An effective vision provides
direction and makes clear where the
organization is going. This means that a vision
needs to be specific enough to shape decision-
making and appropriately broad to allow
innovative strategies for realizing the vision.
3. Clear: An effective vision provides guidance
for decision-making and independent action.
This requires the vision to be clearly
articulated and easily understood. The vision
must clarify focus, direction and constraints, to
ensure that scare resources are focused on the
enables effective allocation of scare resources.
Clarity allows individuals across the
organization to have a shared sense of what’s
important and what’s not, to ensure that they
are free to act within those constraints.
4. Relevant: An effective vision is grounded in
and an extension of the organization’s past.
Visions don’t exists in a vacuum. They exist
within the current reality and talks to the
context in which the organization exists. The
vision must be relevant to the organization and
the times, it reflects the organizations response
to the challenges of the day. An effective
vision is a good fit with the organization’s
history, current reality, culture and values. An
effective vision connects what has happened in
the past to the desired future this gives the
vision credibility.
5. Purpose-Driven: An effective vision
provides a larger sense of purpose for the
organization and its people. That purpose must
be more meaningful than getting bigger or
beating the competition. Purpose is about why
we exist and why anyone should care. Vision
connects people to a meaningful purpose,
allowing them to feel that they are part of
something bigger than themselves. As Steve
Jobs said, “We’re here to put a dent in the
universe. Otherwise why else even be here?”
6. Values Based: An effective vision connects
people to the organization’s core values.
Values are the beliefs or ideals that the
organization shares about what’s good or bad.
They influence the behavior and attitude of
people. Given this values are deeply connected
to an organization’s vision. Vision implies a set
of values and beliefs that are required to
support who organizations need to become to
execute the vision.
7. Challenging: An effective vision challenges
us, it’s an invitation to greatness. A vision is a
goal that should challenge us, stretch us and set
a high standard for the organization. Effective
visions represent a future that is beyond what is
possible today or what we think possible
tomorrow. It is the highest level goal that
unites and challenges an organization.
8. Unique: An effective vision reflects
what’s unique about the organization, it
recognizes what makes it different. A vision is
unique when it declares what makes the
organization stand out and why it matters.
Vision must make clear the activities that the
organization will and will not pursue, the
capabilities to be developed and the market
position it will occupy.
9. Vivid: An effective vision provides a vivid
mental image of what the organization will be
like in the future. Well-crafted visions describe
the future in a way that is easy to imagine and
20
 to picture in the mind’s eye. What would it feel
like to work in the future organization? What
would it be like for customers who engage with
this organization?
10. Inspiring: An effective vision engages and
inspires people to commit to a cause. Vision
appeals to the hearts and minds of people.
Vision is inspiring when it captures the hearts
of people. Vision is inspiring when it stops you
in your tracks, grabs your heart and causes you
to pay attention. An effective vision moves you
emotionally, creating a desire to sign up to the
cause.
MISSION
The purpose of a mission statement is to give a
concise explanation of the business's reason for
existing and its long-term goals. The exact form of a
mission statement can vary, but effective mission
statements typically include nine elements.
1. Function: The mission statement needs to
include some description of the function of
the business. For example, "to promote
Pointers:
industrial excellence," tells customers and
employees nothing. A more effective
description would be "To provide
management consulting services."
2. Target Consumers: An effective mission
statement sets out, in broad terms, the target
market. A manufacturer that makes nuts and
bolts might set its target market as retail
hardware stores, machine manufacturers, or
both.
3. Target Region: The business must determine
what region it serves best and relay that
information by way of the mission statement.
A garage, for example, might limit its target
region to the community while a magazine
company might target an entire country.
4. Values: Mission statements typically include
a statement of company values. Values such
as customer service, efficiency and eco-
consciousness often appear on lists of
company values. At their best, company
values should express principles the company
explicitly tries to affirm in day-to-day
operations.
5. Technology: For businesses that rely heavily
on technology, the mission statement should
include a description of the essential
technology the company does or plans to
employ. If nothing else, this directs
purchasing agents toward the appropriate
vendors for goods and services.
6. Employees: Every company has a policy
regarding its relationship with employees. A
mission statement provides an opportunity to
describe that policy in brief so employees
know the essentials of where they stand.
7. Strategic Positioning: Effective mission
statements also include a brief description of
the business's strategic position within the
market. For example, the company might
excel at serving residential clients and seek to
maximize that strategic advantage.
8. Financial Objectives: For for-profit
ventures, businesses require clear financial
objectives. A start-up company might set one
of its financial objectives as making an initial
public offering of common stock within two
years. This lets the employees and potential
investors know the company intends to go
public, with all of the legal and record
keeping ramifications that entails.
9. Image: Like people, companies develop
public images. Careful companies craft the
public image they want to establish and lay
out the major features of it in the mission
statement. This helps manager’s direct
employees that stray from the sanctioned
public image.
1. Make it as succinct as possible
a. A mission statement should be as
short and snappy as possible –
preferably brief enough to be printed
on the back of a business card. The
detail which underpins it should be
mapped out elsewhere.
2. Make it memorable
a. Obviously partially linked to the
above, but try to make it something
that people will be able to remember
the key elements of, even if not the
exact wording.
3. Make it unique to you
a. It’s easy to fall into the ‘motherhood
and apple pie’ trap with generic
statements that could equally apply to
any institution. Focus on what it is that
you strive to do differently: how you
achieve excellence, why you value
your staff or what it is about the
quality of the student experience that
sets you apart from the rest.
4. Make it realistic
a. Remember, your mission statement is
supposed to be a summary of why you
exist and what you do. It is a
description of the present, not a vision
for the future. If it bears little or no
resemblance to the organization that
your staff know it will achieve little.
5. Relate it to your Vision Statement
21
CORE VALUES o Unlimited liability and risk
 Core values are the fundamental beliefs of a PARTNESHIP
person or organization. These guiding
principles dictate behavior and can help  By contract of partnership, two or more
people understand the difference between persons binds themselves together to
right and wrong. Core values also help contribute money, property, industry into a
companies to determine if they are on the common fund with the intention of dividing
right path and fulfilling their goals by creating the profit among themselves.
an unwavering guide.  Advantages
Example o Pooling of resources – fund, idea,
1. Accountability knowledge, etc.
2. Balance o Easier to form than corporation
3. Commitment o Lesser legal restrictions than
4. Diversity corporation
5. Empowerment o Limited liability and risk
6. Innovation  Disadvantages
7. Integrity o Easy to dissolve
8. Safety o Conflict in decision making arises
o Harder to form than sole
Pointer:
proprietorship.
1. Know the meaning of your core values for it o More legal restrictions
will help the company
2. Relate your core value to your vision and CORPORATION
mission  Is an artificial being, created by operation
law, having the rights of succession, powers,
attributes and properties expressly authorized
by law od incident to its existence.
 Advantages
o Unlimited fund
o Limited liability and risk
TYPE OF SIMPLE BUSINESS o Ease of transferring ownership
 Disadvantages
6. Manufacturing o Hard to dissolve
7. Service
o Conflict in decision making arises
8. merchandising
9. General Construction firm o Harder to form
o More legal restrictions
Choose what type of business you will put up.
***this will be discussed further in the following
FORM OF BUSINESS lesson.
1. Sole Proprietorship
2. Partnership
3. Corporation ORGANIZATIONAL CHART
I would suggest that you choose the partnership form An organization chart or "org chart," as it's more
of business, for it can transition to a corporation. commonly known, is a diagram that displays a
reporting or relationship hierarchy. The most
SOLE PROPRIETORSHIP
frequent application of an org chart is to show the
 There is only one owner, the owner of the structure of a business, government, or other
business is the one who handle all the organization.
operation of the business. Org charts have a variety of uses, and can be
 Advantages structured in many different ways. They might be
o Easy to form used as a management tool, for planning purposes, or
o Easy entry to the industry as a personnel directory, for example. Perhaps your
o Less conflict in decision making organization doesn't operate in a "command and
o Less legal restriction control" style, but instead relies on teams.
 Disadvantages
o Limited source of fund Organization Chart Types and Uses

22
Organizational charts are useful in a number of ways.
1. Show work responsibilities and reporting
relationships.
2. Allow leadership to more effectively manage
growth or change.
3. Allow employees to better understand how
their work fits into the organization's overall
scheme.
4. Improve lines of communication.
5. Create a visual employee directory.
6. Present other types of information, such as
business entity structures and data hierarchies
Example:

***this will be discussed further in the following

lesson.

LOCATION
Choose a location which is accessible to all
consumers.
Your location must be strategically planned.
It should be near to your sources, suppliers, and
agencies

***this will be discussed further in the following

lesson.

23