ATS 2209 Entrepreneurship 1

Republic of the Philippines
Polytechnic University of the Philippines

Office of the Vice President for Academic Affairs
SENIOR HIGH SCHOOL DEPARTMENT
Sta. Mesa Manila
INSTRUCTIONAL MATERIAL FOR

ATS 2209:
ENTREPRENEURSHIP
Compiled by:
Prof. Ivee C. Cobarrubias

Prof. Mark Christian Catapang
PUP A. Mabini Campus, Anonas Street, Sta. Mesa, Manila 1016

Direct Line: 335-1730 | Trunk Line: 335-1787 or 335-1777
Website: www.pup.edu.ph | Email: shs@pup.edu.ph
THE COUNTRY’S 1st POLYTECHNIC

TABLE OF CONTENTS
Page Number
Overview 3
Module Objectives 3
Grading System 3
Course Materials
Lesson 1 Nature and Relevance of Entrepreneurship 4
Lesson 2 Opportunity Identification and Developing A Business Plan 14
Lesson 3 Getting to Know the Market 37
Lesson 4 Marketing 44
Lesson 5 Intellectual Property 64
Lesson 6 Production/Operations Management 70
Lesson 7 Human Resource Management 76
Lesson 8 The Business Model 80
Lesson 9 Financial Accounting and Management 83
References 122
Entrepreneurship | ATS 2209 2

 OVERVIEW
Entrepreneurship has become a major force in the global economy. It is perceived to be the
symbol of business innovation, determination, perseverance, and achievement. Policy makers
across the world are discovering that economic growth and prosperity lie in the hands of
entrepreneurs – those dynamic, driven men and women who are committed to achieve success
by creating and marketing innovative, customer-driven new products and services.
The Philippines is basically an entrepreneurial country where the big bulk of the businesses
are micro, small, and medium enterprises. As a developing country, entrepreneurship has
contributed significantly to our national economic growth and in the development of our society at
large.
This course deals with the concepts, underlying principles, processes, and implementation of
a business plan. The preliminaries of this course include the following: 1) discussion on the
relevance of the course; 2) explanation of key concepts of common competencies; 3) explanation
of core competencies relative to the course; and 4) exploration of career opportunities.
 MODULE OBJECTIVES
Upon the completion of this module, you will be able to:

• demonstrate understanding of key concepts, underlying principles, and core
competencies in Entrepreneurship;
• demonstrate understanding of concepts, underlying principles, and processes of
developing a business plan;
• demonstrate understanding of environment and market in one’s locality/town; and
• demonstrate understanding of concepts, underlying principles, and processes of starting
and operating.
 GRADING SYSTEM
Written Work 25%

Performance Task 45%
Quarterly Assessment 30%
Total 100%

 COURSE MATERIALS
LESSON 1: NATURE AND RELEVANCE OF ENTREPRENEURSHIP

Entrepreneurship is an important driver of economic growth especially in today’s
generation of globalized economy. Businesses regardless of the size are well recognized
worldwide as vital and significant contributors to not only economic development but also job
creation and general health and welfare of economies. In fact, according to the United Nations
report, in developing countries, small and medium enterprises (SMEs) are responsible for more
than 90% of all jobs and sales. Truly, entrepreneurship plays a key role in any economy.
This module specifically focuses on the key concepts and core competencies of
entrepreneurship as well as the different job opportunities for entrepreneurship as a career. The
aim of this module is to also equip the learners with deeper analysis on the different
entrepreneurial competencies, explain the entrepreneurship decision-making process as core
competency and provide deeper understanding of what entrepreneurship is including its
relevance to the economic growth and society. Each lesson provides activities that will motivate
the learner to actively participate in the accomplishment of the objectives expected for this
module.
After studying this lesson, you are expected to be able to:

• Explain the concept of entrepreneurship;
• Discuss the core competencies in entrepreneurship;
• Explore job opportunities for entrepreneurship as a career; and
• Discuss the relevance of entrepreneurship in economic growth and society.
CONCEPT OF ENTREPRENEURSHIP
Over the years, the definition of entrepreneurship has had a lot of variations. These are
some of the definitions that have been given to entrepreneurship from early on to the present
time.
Contributor Definition
Knight (1921) Having profits from bearing uncertainty and risk.
Carrying out of new combinations of firm organization – new

Schumpeter (1934) products, new services, new sources of raw material, new
methods of production, new markets, new forms of organization.
McClelland (1961) Taking moderate risk.
Process of creating something new with value by devoting the

necessary time and effort; assuming the accompanying financial,
Hisrich & Brush (1985)
psychic, and social risks and uncertainties; and receiving the
resulting rewards of monetary and personal satisfaction.

Contributor Definition
An activity that involves the discovery, evaluation and exploitation

of opportunities to introduce new goods and services, ways of
Shane (2003)
organizing, markets, process, and raw materials through
organizing efforts that previously had not existed.
Dynamic process of vision, change, and creation that requires an

application of energy and passion toward the creation that
Kuratko (2009)
requires an application of energy and passion toward the creation
and implementation of new ideas and creative solutions.
Conceiving an opportunity to offer new or improved goods or

services, showing the initiative to pursue that opportunity, making
Dyck & Neubert (2012)
plans, mobilizing the resources necessary to convert the
opportunity into reality.
Although each of these definitions views entrepreneurship from a slightly different

perspective, they all contain the following common elements:
• Innovation
• Opportunity seeking and exploitation
• Resource mobilizing
• Encountering risks and uncertainties
• Economic and personal rewards
ENTREPRENEURIAL COMPETENCIES
Entrepreneurial competencies are associated with the entrepreneurs’ creativity, ability to

be innovative, be able to identify opportunities, identify strengths and weaknesses. Numerous
studies done in the past showed the different personal characteristics that are often attributed to
successful entrepreneurs such as confidence, flexibility, responsibility, commitment, creativity and
many more. The following is a compilation of some of the most common characteristics of
successful entrepreneurs based on various sources:
1. Calculated Risk-taking. Pertains to doing everything possible to get the odds in their favor,
and they often avoid taking unnecessary risks.
2. Commitment. Refers to the unwavering dedication to work for the common good of the
society through one’s business.
3. Feedback-seeking. Refers to the taking of steps to know how well they are doing and how
they might improve their performance.
4. Perseverance. Pertains to the determination to succeed by overcoming obstacles and

setbacks.
5. Drive to achieve. Refers to the internal desire to pursue and attain challenging goals.

6. Self-confidence. Refers to the belief that together with the other people, things can be done
in the business.
7. Opportunity Orientation. Refers to the constant awareness of opportunities that exist in

everyday life.
8. Innovativeness. Refers to the ability of someone to come up with something different or

unique every time.
9. Responsibility. Refers to someone’s willingness to put himself in situations where he is

personally responsible for the success or failure of the business operation.
10. Tolerance for Failure. Refers to when someone uses his/her failures as a learning
experience.
In a research conducted by Man and Chan (2012), they said that the different entrepreneurial
competencies can be explained from a process perspective where the actual behavior of the
entrepreneur can be reflected. They have categorized entrepreneurial competencies into six
namely:
1. Opportunity Competencies. Competencies related to recognizing and developing market

opportunities through various means.
2. Relationship Competencies. Competencies related to person-to-person or individual-to-

group-based interactions like building a context of cooperation and trust, using contacts and
connections, persuasive ability, communication, and interpersonal skill.
3. Conceptual Competencies. Competencies related to different conceptual abilities, which

are reflected in the behaviors of the entrepreneur such as decision skills, absorbing and
understanding complex information and risk taking, and innovativeness.
4. Organizing Competencies. Competencies related to the organization of different internal

and external human, physical, financial, and technological resources, including team building,
leading employees, training and controlling.
5. Strategic Competencies. Competencies related to setting, evaluating, and implementing

the strategies of the firm.
6. Commitment Competencies. Competencies that drive the entrepreneur to move ahead with
the business.
ENTREPRENEURIAL DECISION-MAKING AS A CORE COMPETENCY
Entrepreneurs are constantly faced with a lot of instances where they must make
decisions. As organization grows, decision-making became even more frequent and more difficult
to make. The entrepreneur’s ability to make decisions can make or break the organization that is
why they must have good decision-making skills. There are different ways on how someone
makes a decision and it is important to be aware on how to make them. Understanding how one
makes a decision is necessary as this is a starting point to make a more informed decision.

STEPS OF THE DECISION-MAKING PROCESS
The following are the seven key steps of the decision-making process.
1. Identify the decision. The first step in making the right decision is to recognize that there is
a problem or an opportunity that needs to be addressed. Determine why this decision will
make a difference to your customers or fellow employees.
2. Gather information. Next to gather all the necessary information. It is important that you
base your decision on facts and data. This requires making a value judgment, determining
what information is relevant to the decision at hand, along with how you can get it. Ask yourself
what you need to know in order to make the right decision, then actively seek out anyone who
needs to be involved.
3. Identify alternatives. Once you have a clear understanding of the issue, the next step is to
identify the different solutions that are available to you at the moment. It is possible that you
will have many different options on how to solve the issue. It is important that you know all
your different options as this would help you in determining which course of action is the best
way to address the issue.
4. Weigh the evidence. The next step is to evaluate for feasibility, acceptability, and desirability
of the different options you have. It is important to be able to weigh the pros and cons and
then select the option that has the highest chances of success. You can also seek for opinions
of other people so that you will have other people’s perspective.
5. Choose among alternatives. After weighing your pros and cons, it is now time to choose
your best alternative, but you have to be sure that you have a clear understanding on the risks
that are involved in your chosen route.
6. Take action. After deciding on your best alternative solution, it is now time to implement your
decision.
7. Review your decision. This last step, while often overlooked, is a very important one. This
step pertains to evaluating the effectiveness of your decision. It is important to ask yourself
how well you did and what can be improved next time.
STYLES OF DECISION-MAKING
1. Collective Reasoning. People with this style naturally gather a group of opinions before
making any decision.
2. Knowing Style. People with this style base their decision on facts. They often conduct
research first before making any decision.
3. Gut Reaction. People with this style of decision-making base their decisions on their “gut
feel”. These are people who use intuition to arrive at a decision.
4. Affect Infusion. This suggests that entrepreneurs’ current moods influence judgments or
decisions by influencing the ease with which information consistent with positive (e.g. happy)
or negative (e.g. angry) moods can be brought in mind.

5. List Approach. People with this approach will only make a decision after considering the
pros and cons of any decision. Their researched lists give them confidence and a pre-planned
path for the future.
6. Rational/Scientific method. This involves using the standard process to arrive at a decision
namely, identify the problem, gather data, analyze data, formulate alternative solutions, select
the best alternative, implement the decision.
ENTREPRENEURSHIP CAREER OPPORTUNITIES FOR THE ACADEMIC TRACK
Having a degree in entrepreneurship allows graduates to work in numerous sectors.

Students who want to have a career in entrepreneurship must develop their skills in creativity,
leadership, willingness to take risky decisions, and their ability to be innovative. While some
individuals have a clear vision of what type of business they want to put up after completing their
entrepreneurship degree, others may feel like they are not yet ready to start their own business.
In this case, in an article written by Mike Michalowicz (2011) he had listed the different career
options that they can venture with.
1. Business Consultant. There are many start-ups and struggling businesses that need people
who can go to a client site, identify problems, and fix them.
2. Sales. Someone who works in sales or runs the department needs to know how businesses
run. They need to know how to represent a company, manage accounts and follow up on
leads.
3. Research and Development. To work in research and development, there is a need to

understand business concepts, procedures, and practices.
4. Non-for-profit Fundraiser. Being able to raise funds requires understanding the importance
of business and networking relationships.
5. Teachers. Teach students how to increase their entrepreneurial intention through acquiring
the attitude towards entrepreneurship, as well as the benefits of math to business, history to
innovation, and literature to persuasive advertising.
6. Talent Recruiter. Companies who use recruiters rely upon someone being not just people
savvy but having an in-depth business sense as well.
7. Business Reporter. If one can write articles, or pick up a quick class to learn it, one is in a
prime position to take the lead on covering a local business beat.

RELEVANCE OF ENTREPRENEURSHIP AND ENTREPRENEURS IN ECONOMIC
DEVELOPMENT AND SOCIETY
Entrepreneurship has a huge impact on the economy and society at large. Globally, the
level of entrepreneurial activity as contributed significantly to the national level of economic growth
of many countries. Specifically, it has these contributions to the economy and society:
1. Creates employment. When entrepreneurs put up their business, they employ people who
possess different competencies and personal values to help them operate the enterprise.
2. Develop new markets. Entrepreneurs are opportunity-seekers, creative, and resourceful.

They seek new buyers or customers of their product or services. They go beyond the existing
places where their products are sold and look for another pole who will be interested.
3. Introduces innovation. This innovation is done for the product, service or technology
towards commercialization and generates economic wealth.
4. Generates new sources of materials. Entrepreneurs are always in constant search for
better and cheaper sources of materials they need. Finding new material providers help in
the economic growth of the place. These could be sourced from because of the value
creation.
5. Stimulates investment interest in the new business ventures being created. When
entrepreneurs engage in a new business, it stirs curiosity for other people to invest in the
business because of the benefits it offers.
6. Improves the quality of life. The new products and services developed by the entrepreneur
contribute to the increase in the personal benefit and convenience of people in society.
7. Serves as role models. Entrepreneurs people to be emulated by younger generations in the

community and society at large.
8. Brings social benefits to the people. Entrepreneurs pay taxes for every product or service
sold in the market as well as pay for permits and licenses to operate their businesses. The
income derived from all of these by the government are then used for the people especially
the poor to have more access to social services such as education and health and many more.
9. Utilizes and mobilizes indigenous resources. Small and medium enterprises will always
look for cheaper and local materials to supply their needs. This saves much in terms of foreign
currency as local enterprises patronize their own resources and they do not become
depended on imported materials.
10. Provides more alternative for consumers. The stiff competition in the market for quality
and cheaper products and services requires entrepreneurs to come up with more products
and services consumers can choose from.

ACTIVITY 1
Directions: Answer the following questions. Write down you answers on the space provided.
1. What are the differences between the meaning of entrepreneurship as defined by Schumpeter
and Kuratko?
2. Aside from the different characteristics of entrepreneurs mentioned above, give at least five
more qualities that you think entrepreneurs need to possess and explain how each of these
qualities help an entrepreneur.
3. Identify at least three local entrepreneurs that you know and describe the different
entrepreneurial qualities that they possess.
4. Describe how a degree in entrepreneurship could help you to have a career in the following
job opportunities.
a. Business Consultant

b. Sales Manager
c. Teacher
d. Business Reporter
5. Make a poster that shows the contribution of entrepreneurs/entrepreneurship to the economic

development and explain it below.

The following rubric will be used in evaluating your output.
Criterion 3 2 1 Score
Excellent Most details Poor coverage

coverage of relate to the of topic with little
Coverage of topic; captures topic but or no relevant
topic all the important includes some information
and relevant irrelevant
information information
Images and
Excellent use of
Moderate use of graphics are
Use of Images images and
images and mostly irrelevant
and Graphics graphics to help
graphics with and hardly helps
put message
some put message
across to target
unnecessary across to target
audience
audience
Very good Satisfactory
Poor design
design concept design concept
Layout and concept and
and layout and layout
Design layout execution
execution that execution that
that attracts
attracts attention attracts attention
attention and
and easily and easily
easily viewable
viewable viewable
The poster was

explained in a
The explanation The explanation
Quality of very accurate
was accurate was inaccurate
explanation and very
and organized and unorganized
organized
manner
Few Many
No grammatical,
grammatical, grammatical,
spelling, or
Mechanics spelling, and/or spelling, and/or
punctuation
punctuation punctuation
errors
errors errors

LESSON 2: OPPORTUNITY IDENTIFICATION AND DEVELOPING A
BUSINESS PLAN
Identifying business opportunities is an essential key in starting a business. Generally, an
entrepreneurial opportunity is a favorable set of conditions that will enable the entrepreneurs to
create new products or services by combining resources that will result, not only to a profit but for
the common good of the society and the environment.
At the end of this lesson, you will be able to:
1. Identify the market problem to be solved or the market need to be met; and
2. Propose solution/s in terms of product/s and service/s that will meet the need using
techniques on seeking, screening, and seizing opportunities:
a. Analyze the market need;
b. Determine the possible product/s or service/s that will meet the need;
c. Screen the proposed solution/s based on viability, profitability, and customer
requirements; and
d. Select the best product or service that will meet the market need.
OPPORTUNITY SEEKING, SCREENING, AND SEIZING
Shane (2003) noted that business opportunities can be in the form of new products or
services, new ways of organizing, new raw materials, new markets, and new production
processes. Entrepreneurs should be able to identify, seize and pursue business opportunities.
Successful entrepreneurs are those who can exploit business opportunities.
OPPORTUNITY SEEKING
Entrepreneurs are innovative opportunity seekers. They have endless curiosity to

discover new or different ideas and see whether these ideas will work in the marketplace. This is
what separates entrepreneurs from the ordinary businessman whose main objective is simply to
earn profits from producing, buying, and selling goods.
Entrepreneurs create value by introducing new products or services or finding better ways
of making them. These may include innovation in terms of product design or addition of new
product features to existing ones. They may also tinker on improving their operational capability
by employing new technologies that will bring them greater efficiency, better economies, and even
enable them to reach unparalleled superiority. They may also consider expanding their reach by
creating new markets or maximizing existing market reach. Essential to an entrepreneur’s
opportunity seeking are the entrepreneurial mind frame, heart flame, and gut game.
The entrepreneurial mind frame allows the entrepreneur to see things in a very positive
and optimistic light in the midst of crisis or difficult situations. Instead of being discouraged, the
entrepreneur is able to see these problematic situations as inspiration in creating something
innovative. This is the ability of an entrepreneur to see things in a very positive and optimistic
light in the midst of crisis or difficult situations.
If there is one commonality between an entrepreneur and an inventor, it is their surging

passion or the entrepreneurial heart flame. This is the entrepreneur’s great desire to achieve or
fulfill a mission. It is about wanting something so much that a person would be willing to totally

devote one’s self to the quest. Despite several setbacks or disappointments, the entrepreneur is
not easily disheartened, but is rather driven to persevere even more. Entrepreneurial heart flame
is also about emotional intelligence (EQ) which is often manifested in the entrepreneur’s efforts
to nurture relationships with customers, employees, and suppliers.
The final ingredient is the entrepreneurial gut game. This refers to the ability of the
entrepreneur to sense without using the five senses. This is also known as intuition. Somehow,
the entrepreneur just knows whether something will work or not without necessitating logical,
systematic, and sequential thinking. The gut game also connotes courage or, in the local dialect,
“lakas ng loob” (strong intestinal fortitude). It is simply confidence in one’s self and the firm that
everything is within reach so long as you aspire for it.
MACRO ENVIRONMENTAL SOURCES OF OPPORTUNITIES

The macro environment refers to the big or macro forces that affect the area, the industry
and the market which the enterprise belongs to. They influence how businesses should be
conducted, how consumers will behave, how supply and demand will move, how different
competitors would position themselves, and how the cost of doing business will proceed.
Macro environment forces can be divided into five categories known as SPEET or the
Social, Political, Economic, Ecological, and Technological dimensions.
1. Socio-cultural Environment. This includes the demographics and cultural dimensions that
govern the relevant entrepreneurial endeavor. Taking this aspect into consideration helps the
entrepreneur assess the trends and dynamics of the bigger consumer population, their beliefs,
tastes, customs, and traditions.
2. Political Environment. This defines the governance system of the country or the local area
of business. It includes all the laws, rules, and regulations that govern business practices as
well as the permits approvals, and licenses necessary to operate the business. Specifically,
it regulates the use of natural resources, the disposal of wastes, the taxation of income,
importation of goods and services, the accounting and reporting of business financial
statements, public and private education, health programs, use of public funds, and other such
concerns.
3. Economic Environment. Supply and demand forces mainly drive the macro economic
environment. They are the same factors that drive the interest and foreign exchange rates
that fluctuate with the movement of the market forces. In any country, the income levels and
the purchasing power of its people as well as the competitiveness of its industries and
enterprises are sources of opportunities.
4. Ecological Environment. This includes all of the natural resources and the ecosystem,
habitat of men, animals, plants, and minerals. There is a growing awareness in the world
today that will make this factor more and more important for countries, industries, and
businesses. The threats of ecological degradation have generated countless opportunities
such as smoke and spill detectors, filters and screens, pollution counters, and energy-saving
devices. Opportunities abound for greener, cleaner, and healthier products, whose objectives
are to save the planet and prolong lives.
5. Technological Environment. This pertains to the emerging of new technologies, which often
lead to launch and commercialization of new products.

POTENTIAL SOURCES OF OPPORTUNITY
Wilhite (2020) in her article entitled Peter Drucker’s 7 Sources of Opportunity for
Businesses discussed the other sources of opportunity that entrepreneurs can take a look at.
Sources of
No. Situations
Opportunity
Opportunities can be found when situations and events are

unanticipated. The event might be an unexpected success/good
news or unexpected failure/bad news that can be an opportunity
for entrepreneurs to pursue. When disaster strikes,
entrepreneurs who can meet the needs of the people first will
1 The unexpected have a massive opportunity. One example of this were the
powdered toothpastes and powdered beauty products that were
allowed in carry-on baggage after restrictions of the amount of
liquid that passengers can bring on airplanes in an attempt to
prevent attempted terrorist bombings where bringing tube of
shampoo, toothpaste and even shaving cream were prohibited.
Incongruous situations happen when there are inconsistencies in

the way they appear or when there is a gap between what is and
what should be in terms of performance. When you are not living
2 The incongruous up to the expectations of your customers or you are not able to
meet the standards set by your customers, this can be a great
opportunity for you to improve your products/services or make a
new one that will surely meet the demands of your target market.
Entrepreneurial opportunities could also surface throughout the

process of discovery such as the process of research and
3 The process needs
development done by the researchers and technicians of a
product or service.
Changes in technology, social value and customers’ tastes can
Industry and change the structure of an industry and market. These situations,
4
market structures however, will give entrepreneurs opportunities to innovate their
product or services.
Changes in demographics will influence industries and markets,
upon their target market and market segmentation. There can be
5 Demographics
entrepreneurial opportunities in anticipating and meeting needs of
the population.
What suddenly becomes a trend or a hot new thing usually takes
off in the market. In the same way, when a certain product is
associated with scandal or considered as out of date or something
Change in
6 that is not a trend anymore, this can definitely affect the sales of
perception
this particular product. Changes in people’s perception can
potentially create market opportunities that can alert
entrepreneurs.
New knowledge can be a source of opportunities for
7 New knowledge entrepreneurs such as new technologies and new discoveries
that can be a source of information for entrepreneurial innovation.

OPPORTUNITY SCREENING
After opportunity seeking comes the rigorous process of opportunity screening. Because
of the many opportunities possible for the entrepreneur, it is important to come up with a short list
of a few very promising opportunities, which could be examined in detail.
In screening opportunities, the entrepreneur first has to consider his or her preferences
and capabilities by asking three basic questions:
1. Do I have the drive to pursue this business opportunity to the end?
2. Will I spend all my time, effort, and money to make the business opportunity work?
3. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual
comforts to succeed in this business opportunity?
If “yes” is your answer to all of the above, then you can begin your earnest pursuit of that
opportunity. However, a more complex screening uses twelve criteria for screening opportunities.
THE 12 RS FOR OPPORTUNITY SCREENING
1. Relevance to vision, mission, and objectives of the entrepreneur. The opportunity must be
aligned with what you have as your personal vision, mission, and objectives for the enterprise
you want to set up.
2. Resonance to values. Other than vision, mission, and objectives, the opportunity must match
the values and desire virtues that you have or wish to impart.
3. Reinforcement of entrepreneurial interests. How does the opportunity resonate with the
entrepreneur’s personal interests, talents, and skills?
4. Revenues. In any entrepreneurial endeavor, it is important to determine the sales potential

of the products or services you want to offer.
5. Responsiveness to customer needs and wants. If the opportunity that you want to pursue
addresses the unfulfilled or underserved needs and wants of customers, then you have a
better chance of succeeding.
6. Reach. Opportunities that have good chances of expanding through branches,

distributorships, dealerships, or franchise outlets in order to attain rapid growth are better
opportunities.
7. Range. The opportunities can potentially lead to a wide range of possible product or service
offerings, thus, tapping many market segments of the industry.
8. Revolutionary impact. If you think that the opportunity will most likely be the “next big thing”
or even a game-changer that will revolutionize the industry, then there is a big potential for
the chosen opportunity.
9. Returns. It is a fact that products with low costs of production and operations but are sold at
higher prices will definitely yield the highest returns on investments.

10. Relative ease of implementation. Will the opportunity be relatively easy to implement for
you or will there be a lot of obstacles and competency gaps to overcome?
11. Resources required. Opportunities requiring fewer resources from the entrepreneur may be
more favored than those requiring more resources.
12. Risks. In an entrepreneurial endeavor, there will always be risks. However, some
opportunities carry more risks than others, such as those with high technological, market,
financial, and people risks.
These 12 criteria can be better managed if put in a matrix to help the entrepreneur
concretize the evidence that the chosen opportunity is well worth pursuing.
Opportunity Screening Matrix

Very Very Sample
Criteria High Average Low Score
High Low Weight
Opportunity Screening Grid for each Opportunity
Rating 5 4 3 2 1 Weight Score*
1. Relevance 2
2. Resonance 1
3. Reinforcement of
entrepreneurial 1
interests
4. Revenues 2
5. Responsiveness 1
6. Reach 1
7. Range 1
8. Revolutionary impact 2
9. Returns 4
10. Relative ease of
1
implementation
Rating 1 2 3 4 5
11. Resources required 1
12. Risks 3
Total Score
*Rating x Weight = Score
Note: Criteria numbers 1 to 10 are positive indicators, meaning, the more of them, the better.
Criteria numbers 11 and 12 are negative indicators, meaning, the less of them, the better. Hence,
the rating system is reversed for the negative indicators.
OPPORTUNITY SEIZING
After opportunity seeking and screening, the entrepreneur is ready for opportunity seizing,
the final stage. By now the entrepreneur has an idea as to where he or she will locate the business
and how he or she will market the product or service. At this stage, the entrepreneur must be
able to determine the critical success factors that enable other players in the same industry to
succeed while, at the same time, be vigilant about those factors that cause other businesses to
fail.

The question for the entrepreneur in opportunity seizing is “Will I be able to manage, to
my advantage, the critical success factors and avoid the critical failure factors?” The critical
factors may change depending on what market segment the enterprise is addressing. If the
market segment wants very high-quality products and can tolerate higher prices, the critical
success or failure factors here would be different from a market segment that is very price
conscious but is not too demanding on quality. Thus, it is important for the entrepreneur to
establish the positioning of the business enterprise in the marketplace.
FACTORS TO CONSIDER IN STARTING A BUSINESS
There are numerous reasons why someone would want to engage in starting a business
such as for financial stability, self-fulfillment, provide employment to others and many more. An
entrepreneur has also a lot of ways to start a new venture like start-up, buying an already existing
business and franchising. A start-up enterprise is a company which is recently formed, where the
founder establishes completely new business from scratch. Buying an existing business is
acquiring either the shares of an existing company or all of the assets of an existing enterprise.
Franchising is wen the “owner of the company that already has a successful product or service,
licenses its trademark, trade name, and methods of doing business to others in exchange for an
initial franchise fee and royalty payments. Examples of these are Jollibee, Mang Inasal, Ricky
Reyes Salon, 7-Eleven, Mini Stop, and Tapa King franchise.
Aside from these given forms of starting a business, there are also other important factors
to consider before starting an enterprise. These are the following:
1. Focus and Direction. It is imperative to have a very good objective grasp of the business
and where it will be headed many years from the start of operation. It means that there should
be a clear and documented vision-mission and strategies to begin with.
2. Sources of Capital. There are different sources of capital that can be used depending on
the needs to start the venture. These can be from personal funds, family and friends, a
retirement account, bank loans, etc.
3. Good Network. Building good relationships and working with other people could help start
the business. Formal networks like associations and professional groups, as well as informal
networks like childhood friends, family members can be drivers to build self-confidence and
direction, providers of information that are not readily accessible to others, suppliers of raw
materials, and serve as mentors/coaches.
4. Legal Requirements. It is important to know the laws and regulations that govern the type
of business that will be opened to avoid major problems that can arise if legal requirements
are overlooked. Examples are the copyright and patent laws, environment and sanitation
regulations of the municipality, and labor laws.
5. Degree of Risk. A business is said to be risky when the probability or chances of failure is
high. It means the odds are great in many aspects against starting the business like limited
market, stiff competition, high cost of financing the business, and few supply of needed labor.
6. Research and Development. The presence of new technology, science and knowledge
transfer from schools and public research centers to new and growing businesses, and the

support for the creation of new technology-based ventures, are good indicators to start a
business in this area.
7. Personal Competencies. Personal competencies like creativity, opportunity seeking, self-

confidence, persistence, commitment, and risk-taking as well as technical background such
as in accounting and personal computing are necessary to start running the business.
8. Availability of Resources. Resources pertain to raw materials, human resources, and

machineries/equipment. Knowing where and how to get access to these resources is very
important in starting a business.
TYPES OF BUSINESSES AVAILABLE FOR ENTREPRENEURS
There are a number of ways to classify enterprises which entrepreneurs can choose from
such as according to size. The size of the enterprise is based on its total assets or number of
employees who work for it. The Department of Trade and Industry, through Bureau of Small and
Medium Enterprise Development (BSMED) categorized them as the following:
Types of Businesses According to Size
1. Micro Enterprise. It has an asset size not exceeding Php 50,000. It is usually a home-
based enterprise, operating in make shift or temporary quarters. The owner heads the
enterprise and employs from one to not more than 10 people to help him/her. Examples of
these are the self-employed vending food like taho, puto, or fishballs; those selling in the
public market; and those having sari-sari or rolling stores.
2. Cottage Enterprise. It has an asset of Php 250,000 but not exceeding Php 500,000. It is a
home-based business which is often managed and operated by the members of the family.
Examples of these are the subcontractor of footwear like shoes and slippers; and food
manufacturers of peanut butter/coco jam or pastillas, as well as decorative products like
vases, candles, and lanterns.
3. Small Enterprise. It has an asset of Php 500,000 but not exceeding Php 2.5 million. It is
owned by an individual or group and has enough resources to continue operating. It employs
from 10 to 20 people. Examples of these are groceries, bakeshops, beauty salons,
medical/dental clinics, toy makers, jeepney manufacturers, and travel/tour agencies.
4. Medium Enterprise. It has an asset of Php 5 million to less than Php 20 million and employs
100 or more workers. It is owned by a single individual, business partners, or a corporation.
It employs more than 20 to 100 people. These workers are more skilled and possess
technical expertise to run the business with machines/equipment and utilize various quality
controls to make the products. Examples of these are fine dining restaurants with branches,
computer importer-dealers, garment manufacturers, human resource providers, and private
educational institutions.
5. Large Enterprise. It has an asset of Php 20 million or more. It is often owned and managed
by a corporation. It is large in scope of operation and number of products or services that it
offers to the market. It employs 100 or more workers who are hired on the basis of their
expertise. Its Board of Directors is responsible for its governance and it has a Chief
Operating Officer to oversee the implementation of the directives of the Board. It Operates
in highly formalized but complex systems of management. Examples of these are the big

fast food chains, large department stores, big bookstores, family-owned commercial banks,
and insurance companies.
Types of Businesses According to Forms of Ownership
There are four forms of businesses based on ownership. The table below briefly describes
each form of ownership with its corresponding advantages and disadvantages culled from DTI
handbook and other sources.
Forms of Business
Advantages Disadvantages
Ownership
Single Proprietorship is owned • Easy to set up • Demanding on owner’s
and usually managed by one • Decision-making left entirely personal time
person. They register with the to the owner • Growth limited by owner’s
Department of Trade and Industry • Easy to dissolve financial means
(DTI). • Retention of all profits • Unlimited liability
• More flexibility • Lack of stability
• Tax incentives and less • Limited access to credit
government regulation • Limited business skills and
knowledge
Partnership is an association of • Relatively easy to set up • Partnership may be
two or more persons who act as • Check and balance endangered by conflicts
co-owners of a business. Each maintained with two or more between partners
partner contributes money, owners • A decision made by one
property or service to the business. • Availability of more capital and partner is binding on all other
They register with Securities and credit partners
Exchange Commission (SEC). • Retention of profits to fewer • Generally, liability for debts
owners incurred is unlimited
• Lack of stability
Corporation is an artificial being • Risks and losses are shared • Complicated setting-up
created by operation of law, having with the other shareholders process
the right of succession, and the • Maximum flexibility for growth • Individual stockholders may
powers, attributes and properties • Limited liability of individual have limited influence on
expressly authorized by or incident shareholders management
to its existence. They register with • Greater room for • Tendency to institutionalize a
the Securities and Exchange professionalism in bureaucracy
Commission (SEC). management • Strictly regulated and
• Easy to raise capital supervised by the government
• Assured of at least 50 years of
existence of law
Cooperative is a duly registered • Least likely to be dissolved • Shared control of the business
associated of persons, with a • Limited liability • Consensual decision making
common bone of interest, who • More people benefit from the
have voluntarily jointed together to business
achieve a lawful common social or • Professional managers may
economic end, making equitable be employed by the members
contribution to the capital required,
and accepting a fair share of the
risks and benefits of the
undertaking in accordance with the
universally accepted principles of
the cooperatives. They register
with the Cooperative Development
Authority (CDA).

Types of Businesses According to Industry Classification
There are many types of businesses based on the Philippine Standard Industrial
Classification (PSIC). They either produce goods or services for the use of individuals, groups,
or organizations in society. Goods are products that are processed from raw materials that are
consumable such as clothes, shoes, tables, books, cosmetics and many more. services are
activities which help are demanded by consumers based on their needs and wants such as
medical, dental, banking, transportation, printing, insurance, education and many more. usually,
starting entrepreneurs with limited capital engage in the retailing and trading business.
These industries are the following:
1. Agriculture, Forestry and Fishing. This section includes the exploitation of vegetal and
animal natural resources, comprising the activities of growing crops, raising and breeding of
animals, harvesting of timber and other plants, animals or animal products from a farm of their
natural habitats.
2. Mining and Quarrying. This section includes the extraction of minerals occurring naturally
as solids (coals and ores), liquids (petroleum) or gases (natural gas). Extraction can be
achieved by different methods such as underground or surface mining, well operation, seabed
mining, etc.
3. Manufacturing. This section includes the physical or chemical transformation of materials

substances, or components into new products.
4. Construction. This section includes general construction and specialized construction

activities for building and civil engineering works. It includes new work, repair additions and
alterations, the erection of prefabricated building or structures on the site and also construction
of a temporary nature.
5. Wholesale and Retail Trade; Repair of Moto Vehicles and Motorcycles. This section
includes wholesale and retail sale (i.e. sale without transformation) of any type of goods and
the rendering services incidental to the sale of these goods.
6. Transportation and Storage. This section includes the provision of passenger or freight
transport, whether scheduled or not, by rail, pipeline, road, water or air and associated
activities such as terminal and parking facilities, cargo handling storage etc.
7. Accommodation and Food Service Activities. This section includes the provision of short-
stay accommodation for visitors and other travelers and the provision of complete meals and
drinks fit for immediate consumption.
8. Information and Communication. This section includes financial service activities, including
insurance, reinsurance and pension funding and activities to support financial services.
9. Real Estate Activities. This section includes acting as lessors, agents and/or brokers in one
or more of the following: selling or buying real estate, renting real estate, providing other
estate services such as appraising real estate or acting as real estate escrow agents.

10. Professional, Scientific and Technical Activities. This section includes specialized
professional, scientific and technical activities. These activities require a high degree of
training, and make specialized knowledge and skills available to users.
11. Administrative and Support Service Activities. This section includes a variety of activities
that support general business operations. These activities differ from those in Section M since
their primary purpose is not the transfer of specialized knowledge.
12. Arts, Entertainment, and Recreation. This section includes a wide range of activities to
meet varied cultural, entertainment and recreational interests of the general pubic including
live performances, operation of museums sites, sports, gambling and recreation activities.
13. Public Administration and Defense; Compulsory Social Security. This section includes
activities of governmental nature, normally carried out by the public administration. This
includes the enactment and judicial interpretation of law s and their pursuant regulation, as
well as the administration of programs based on them, legislative activities, taxation, national
defense, public order and safety, immigration services, foreign affairs and the administration
of government programs.
14. Education. This section includes education at any level or for any profession, oral or written
as well as by radio and television or other means of communication. It includes education by
the different institutions in the regular school system at its different levels as well as adult
education, literacy programs, etc.
15. Human Health and Social Work Activities. This section includes the provision of health
and social work activities, involving a wide range of activities, starting from health care
provided by trained medical professionals in hospital and other facilities, over residential care
activities that still involve a degree of health care activities to social work activities without any
involvement of health care professionals.
16. Other Service Activities (as a residual category). This section includes the activities of
membership organizations, the repair of computers and personal and household goods, and
a variety of personal activities not covered elsewhere in the classification.
GOVERNMENT SUPPORT AND LEGAL REQUIREMENTS
The Department of Trade and Industry report shows that small enterprise promotion and
development has, in fact, attained the status of a national movement, participated in by more than
50 government agencies, each of which offers support services to the small business. The Small
and Medium Enterprise Development (SMED) Council was created in 1991 to integrate and
synchronize the various efforts. The SMEDC has an array of programs to assist small businesses.
The areas of assistance cover finance, marketing, training and human resource development,
and product development and technology assistance. These are the support services they
provide:
Finance
Government banks, like the Development Bank of the Philippines (DBP), Land Bank of
the Philippines (LBP), Small Business Corporation (SBCorp), Quedan and Rural Credit
Corporation, Philippine Export-Import Bank, and the National Livelihood Support Fund, have

agreed in 2003 to simplify and standardize lending procedures, lower interest rates, and facilitate
loan releases to small enterprises under a unified scheme called SULONG.
For micro enterprises, countless micro finance institutions now proliferating throughout the
country are doing a god job of providing small but quick and no hassle loans that require no
collateral. Before are some of the financing programs and their providers.
Micro Financing Programs
1. Asia Development Bank

• Salary Loans
2. Department of Social Welfare and Development (DSWD)
• Self-employment assistance – Kaunlaran (SEA-K) Program
3. Development Bank of the Philippines
• Microfinance Program
• Retail Lending for Micro and Small Enterprises
4. GSIS Family Bank (GFB)
• GSIS Family Bank Microfinance Lending Program
5. Land Bank of the Philippines (LBP)
• Microfinance Program for Microfinance Institutions – Retailers
• Credit Program for Cooperative
SME Financing Programs
1. Department of Science and Technology (DOST)

• Small Enterprise Technology Upgrading Program (SET-UP)
2. Development Bank of the Philippines
• DBP Lending Program for Small and Medium Enterprises
• Negosyo Credit Program for Government Employees “Puhunang Pangnegosyo Para
sa Kawani ng Gobyerno”
3. Land Bank of the Philippines
• Easy Pondong Pang-Asenso (EPPA)
• SME Unified Lending Opportunities for National Growth (SULONG)
• LBP Negosyo Program for Displaced Workers due to Global Financial Crisis
4. Philippine National Bank (PNB)
• Small Business Loan (SBL)
5. Social Security System (SSS)
• The SSS Special Financing Program
• Financing Program for Tourism Program
• SSS Financing Program for Educational Institutions
Source: Department of Trade and Industry (2010)
Marketing
The DTI, through its various agencies, provide marketing support to small enterprises by
means of:

• Exposure in local and international trade fairs, expositions, trade missions to various
countries-trading partners, and other trade events through the Center for International
Trade Expositions and Missions (CITEM)
• Provision of domestic trade database, including local suppliers courtesy of the Bureau
of Domestic Trade (BDT)
• Provision of export trade database and consultation services by the Bureau of Export
Trade Promotion (BETP) and the Bureau of International Trade Relations (BITR)
Training and Human Resource Development
The DTI, in cooperation with local government units and local industry associations, has
set up SME Centers nationwide manned by business counselors who are trained to assist
entrepreneurs in their finance, marketing, technology, and training needs.
In terms of formal training, entrepreneurs may check out the following services in SME
Centers:
• Skills and other production-related training – from the Cottage Industry Technology Center
(CITC) and the Technical Education and Skills Development Authority (TESDA)
• Entrepreneurship, managerial training, including business improvement – from the UP
Institute for Small-Scale Industries (UPISSI) and small business extension institutes of
other schools and universities
• Export marketing training – from the Philippine Trade Trading Center (PTTC)
Product Development and Technology Assistance
For assistance in product design and development, the agency to approach is the Product
Development and Design Center of the Philippines (PDDCP). For packaging design, testing and
analysis, it is the Packaging Research and Development Center (PRDC).
On the other hand, the Department of Science and Technology (DOST) has a number of
research and development institutes that undertake R&D for new products and product
innovations. These include: The Industrial Technology Development Institute (ITDI), the
Technology Application and Promotion Institute (ITDI), the Technology Application and Promotion
Institute (TAPI), the Metals Industry Research and Development Centre (MIRDC), the Philippine
Textile Research Institute (PTRI), and the Forest Products Research and Development Institute
(FPRDI).
Legal Requirements
A new enterprise has to be registered in various government agencies. Below is the list
of various government agencies and local government units where the entrepreneurs should
secure the necessary legal requirements to operate their business.
Registering with the Department of Trade and Industry (DTI)
1. Obtain application forms (duplicate copy) and fill these up completely. Only the owner of
the business or his/her Attorney-in-Fact (who is authorized in a proper legal instrument) is
authorized to sign all the forms.

2. Meet the following requirements (for single proprietorship)
• Must be a Filipino citizen, at least 18 years old
• Certain types of businesses may have other requirements, such as service and repair
shops, real estate brokers, dental/medical clinic/hospitals, pawnshops, manpower
services, engineering/architectural services and other series provided by professionals
3. Submit application form to the DTI Processor who will check if the business name is still
available, if yes, you will be asked to pay the application fee.
4. Pay the required and processing fee.
5. After showing the receipt to the Processor, the Business Name Certificate will be released.
6. Your Business Name Certificate is valid for 5 years from date of registration. (Note:
During peak season, the applicant will be given a schedule date to file his/her application).
Registering with the Securities and Exchange Commission (SEC)
1. Verify/reserve proposed name with the Name Verification Unit

2. Draw up the Articles of incorporation and By-Laws in accordance with the Corporation
Code. Blank forms are also available from the CRMD.
3. If required, get endorsements from other government agencies.
4. Deposit paid-up capital/contribution (for foundations only) in the bank.
5. Present six (6) sets of the accomplished forms and documents for preprocessing at the
CRMD. Only complete application documents are accepted for processing. All
documents executed outside the Philippines must be authenticated by the appropriate
Philippine Embassy or consulate in the area concerned.
6. Pay the filing fees to the cashier.
7. Claim the certificate/license from the releasing unit, Records Division upon presentation
of the official receipt issued for payment of filing fee.
THE BUSINESS PLAN
Business plan is a blueprint of the business that the entrepreneur would like to start. The
goals of a business plan are to assess the feasibility of the business idea, develop business
strategies to make the business idea doable, and to use it for obtaining resources, especially
loans from financial institutions like banks. According to the Department of Trade and Industry
through the Bureau of Small and Medium Enterprise Development (BSMED), the following are
the reasons why an entrepreneur still needs to make a business plan, no matter how good the
business idea seems to be:
1. Reduce, if not remove, the risk of losing money invested in a poorly researched or
unstudied business idea.
2. Avoid costly mistakes. Every sudden or careless decision the entrepreneur makes for the
business entails costs that one might not be able to recover.
3. Anticipate the financial requirements. It is always wise to foresee sudden increases or

decreases in the demand for the product or service so that the entrepreneur can plan for the

lean months and ensure that the business will have enough resources to meet business
obligations during the periods when sales are low.
4. Organize the activities beforehand. As a road map on unfamiliar territory, it allows the
entrepreneur to estimate how the business will perform in the future and to prepare for
contingencies in case things will not turn out as planned.
5. Assess actual performance against set goals. It enables the entrepreneur to set targets
in terms of sales volume and revenues, as well as expenses, among others.
6. Apply for financing from lending institutions. A well-prepared business plan can be the
back-up support to convince possible sources of capital, especially banks, that something
good will come out of the business idea.
Business Plan Outline
1. Executive Summary
a. Description of the proposed business and business model
b. Description of the market opportunity to capture, or market problem the business solves
c. Reasons for why this is an attractive business opportunity
d. Key distinctions or differentiators of the business versus competitors
e. Overview of the sales, marketing, and operations strategy and plan
f. Description of the execution plan and timeline
g. Overview of projected financials containing revenues, costs, profits, and assumptions
2. Management and Organizations

a. Company Name, logo, and address
b. Vision and mission statements
c. Key personnel
d. Workforce and support personnel
e. Organizational chart
f. Ownership, capitalization, compensation, and incentives
g. External management support
3. Product/Service Plan
a. Purpose of the product/service
b. Product’s unique features
c. Material requirements and sources and supply
d. Process an equipment that will be used to manufacture the product/render the service
e. Production/service process and controls
f. Distribution logistics
g. Regulatory and other compliance issues
4. Market Plan
a. Market analysis which includes demand and supply vis-a-vis competitors
b. Marketing and sales strategies
c. Product/service characteristics and features
d. Pricing policy
e. Sales projections

5. Financial Plan
a. Start-up Costs requirements
b. Financial projections
c. Breakeven analysis
d. Budget
Sample of an Actual Business Plan

My T-shirt Company
1. Executive Summary
My T-Shirt Company will offer personalized, good quality and fashionable printed casual
T-shirt wear that are attuned to the needs of the youth in Bulacan. Historical data shows that
there is an increasing demand for t-shirts among the high school and college students in Bocaue,
Bulacan. However the existing five big competitors are not able to meet such demand resulting
to a big gap. This means that there is a big unmet demand of the market in the printed silkscreen
t-shirt. Our primary strategy is to offer customers a variety of options for choosing their own
custom shirts. Most of the orders will be for white t-shirts; however other colored t-shirts will be
available both for women and men. The customers may choose from the existing designs, supply
their own, or have our graphic designer create a design for them. Our business will initially
operate a home-based and use social medial (e.g. Facebook and Twitter) to showcase designs
and actual t-shirts with silk screen designs for ease of browsing and ordering. Any customer will
have the option to pick-p their merchandise or have it delivered at their convenience. The pre-
designed shirts will also be available on school bazaars, local bazaars in Bocaue, and fairs on
some occasions. My T-shirt products have a number of competitive features that will be used to
its advantage to achieve market penetration such as its large catalog of graphics and the
affordability of the shirts.
Initial capitalization for the business is Php 49,700 good for a one-month expense.
Expected revenue for Year 1 is Php 147,532.80 while total cost of goods sold amounted to Php
568,800.
2. Management and Organization
Company Name: My T-Shirt Company
Logo:
Address: 88 Ocampo Street, Bocaue, Bulacan
Vision Statement: My T-shirt will be a leading provider of personalized good quality, and
fashionable printed casual t-shirt wear that are attuned to the needs of the
youth.
Mission Statement: My T-shirt is a socially responsible company providing high quality,

personalized, and reasonably priced printed t-shirt which caters to the
clothing needs of the youth in Bulacan.
Key personnel: Manager

Workforce and
Support Personnel: Graphic designer/production assistant
Organizational Chart:
Owner/Manager
Advisory Council
Graphic Designer and

Production Assistant
Ownership: Single Proprietorship
Capitalization: Php 49,700.00
Compensation
and Incentives: Minimum wage based on daily rate as provided by law.
External
Management
Support: Parents and Entrepreneurship teacher will be tapped as Advisory Council
3. Product Plan
Purpose of the Product

My T-shirt will offer customers a variety of options for choosing their own custom shirts.
Most of the orders will be for white t-shirts; however other colored t-shirts will be available both
for women and men who are looking for casual yet trendy shirts. The customers may choose
from the existing designs, supply their own, or have our graphic designer create a design for them.
Product’s Unique Features

My T-shirt have two unique features. The first is the wide array of graphic designs and
create your own or personalized design, graphics, and slogans that connect with the customers
and reflect their opinions and personality. The second unique feture is the high quality of scren
printing which is made from the premier silkscreen ink and paints, and handled with utmost care
in every print. Below is the sample of a t-shirt design.

Sample t-shirt
Material and Equipment requirements and sources of supply
The materials requirements and their sources are as follows:
MATERIALS SOURCE
Screen printing press Silkscreen printing specialty store in Divisoria
Wood screen Hardware store in Bocaue, Bulacan
Silkscreen fabric ink Silkscreen printing specialty store in Divisoria
Photo emulsion Silkscreen printing specialty store in Divisoria
Lightbulb Hardware store in Bocaue, Bulacan
Shirt Wholesale store in Divisoria
Transparency or acetate film Bookstore in Bocaue, Bulacan
Production Process and controls that will be used to manufacture the product
Below is the silkscreen process using the photographic emulsion method:
1. Create your design

a. Print out a solid image design on a transparency paper
b. Or cut out a stencil pattern depending on the design
2. Prepare the frame

a. Coat the screen with photo emulsion
b. Leave it to dry in a darkroom from light and heat, especially direct sunlight

3. Transfer image
a. Lay the screen on top of a black cloth or board for better light absorption
b. Place the transparency or stencil on the screen with scotch tape or lay a piece of glas
over the image to hold it tight to the screen
c. Expose the emulsion under a light source, preferably a lightbulb or in direct sunlight, for
20-30 minutes to harden
4. Clean the screen

a. After emulsion has been exposed, remove transparency
b. Rinse off the ink on the screen with water until the design can be seen
5. Screen the shirt

a. Lay the shirt top of the silkscreen press
b. Mount the screen in the clamps of the press and push the screen down on your fabric
c. Place a small amount of printing ink along the top of the screen then pull it over the image
with a squeegee.
6. Clean up
a. Lift the screen and remove the shirt to dry
b. Immediately wash off the ink in the screen so it can be used again in the future, as the ink
dries fast and can ruin the screen
c. Iron or oven the shirt after has been dried to heat set it and prevent the design from
washing out after repeated washing
The t-shirt printing quality control will be ensured in each of the step in the production
process based on standard since screen printing is an old technique that has stood the test of
time. The Photographic Emulsion Method is one of the most popular methods for printing onto t-
shirt; screen printing can produce durable and long lasting result. However, a labor intensive
initial setup means screen printing is the most cost effective when printing in bulk.
Distribution Logistics
My T-shirt Company will initially operate home-based and use social media (e.g. Facebook and
Twitter) to showcase designs and actual t-shirts with silkscreen designs for ease of browsing and
ordering. Any customer will have the option to pick-up their merchandise or have it delivered at
their convenience. The pre-designed shirts will also be available on school bazaars local bazaars
in Bocaue, and fairs on some occasions.
Regulatory and other Compliance Issues
My T-shirt Company will be registered as a single proprietor enterprise with the Department of
Trade and Industry provincial office. A barangay clearance will also be secured before it applies
for a mayor’s permit to operate as a home-based business micro enterprise. The BIR registration
will also be done after getting all the necessary registration documents and permits from DTI,
barangay, mayor’s office. The owner/manager and the graphic designer/production assistant will
be registered with the Social Security System.

4. Market Plan
Marketing Strategy
An aggressive marketing campaign will aim to increae the visibility for My T-shirt. This will
emphasize the customer’s preference to completely customized or personalize their design. My
T-shirt will utilize a number of different venues to communicate this message.
• Social Media – the company will be active on social media platforms specifically Twitter,
Facebook, Instagram and Pinterest, to increase awareness and visibility to the younger
generation, particularly the millennial.
• Student organizations – the company will attempt to gather data of the various student
groups who actively purchase t-shirts with their members.
Sales Strategy
The sales strategy will emphasize that ordering and buying a shirt from My T-shirt is very
easy, accessible, and a pleasing experience. The sales effort will work on the possibility of having
its own website in the long run, the main tool used for ordering. It will be quite important to have
a friendly, easy to se web interface in the future course of the business.
My T-shirt will also rely on three other factors to help boost sales. The first is exemplary
customer service. Having excellent service will provide the customer with the feeling that the
business is looking out for the customer’s interest. Second, when a customer places an order,
they will probably be excited to see the finished product, so My T-shirt will ensure the shortest
turnaround time possible. Lastly, sales will be boosted by offering customers a very good product.
My T-shirt will ensure economical value for the t-shirt without sacrificing its quality.
Product Characteristics or Features
My T-shirt products have a number of competitive features that will be used to its advantage to
achieve market penetration.
• Large catalog of graphics – customers will be offered an array of designs or graphics to

choose from which are conceptualized by the in-house graphic designer.
• Affordability of the shirts – teenagers still being dependents and having a limited budget
to splurge, it is favorable for them to have access to inexpensive yet quality shirts.
Pricing Policy
My T-shirt Company will adopt the differing price based on the size and the complexity of
the design policy. As such, below is the pricing scheme that will be adopted:
SIZE OF THE T-SHIRT PRICE (PESO)

Small 160
Medium 170
Large 180
Extra Large 190

Sales Projections
Year 1 Year 2 Year 3 Year 4 Year 5

Price
Size Quanti
ty per
Month Peso Peso Peso Peso Qty Peso
Qty Qty Qty Qty Unit
Units Units Unit Unit s
s s
Small 160 37 444 71,040 488 78,080 537 85,920 591 94,560 650 104,000
(10%)
Mediu 170 93 1116 189,720 1228 208,760 1350 229,500 1485 252,420 1634 277,780
m (25%)
Large 180 185 2220 399,600 2442 439,560 2686 483,480 2995 531,900 3250 585,000
(50%)
Extra 190 55 660 125,400 726 137,940 799 151,810 878 166,820 966 183,540
Large (15%)
Total 370 4440 785,760 4884 864,340 5372 950,710 5910 1,045,730 6501 1,150,320
Note: There will be a 10% increase in the quantity of T-shirts to be sold as well as its price.
Market Analysis Summary
The demand for silkscreen printed shirts in Bulacan has shown steady growth over the
last 5 years. It was observed that high school and college students are among the biggest market
for the product. These market segments favor trendy and quality shirts at an affordable price. To
increase market penetration, My T-Shirt will offer a large catalog of graphics aside from the
affordable shirts to its intended market segment. At the same time, aggressive marketing
campaign will be done to increase the visibility for My T-shirt through the use of the social media
and tapping the various school student organizations. My T-shirt offers price differential based
on the size and the complexity of the t-shirt design with price ranging from Php 160-190.
5. Financial Plan
• Start-up costs requirements

• Financial projections
• Breakeven analysis
• Budget
Expenses Cost/pc 370 shirts Year 1

Screen printing press 4,500.00 4,500 54,000
Wood screen (50 uses/pc) 600.00 3,600 43,200
Squeegee 400.00 400 4,800
Silkscreen fabric ink (60 shirts @ 300.00 1,800 21,600
Php 5/shirt)
Photo emulsion (10-15 screens @ 250.00 4,500 54,000
Php 16/shirt)
Lightbulb 100.00 100 1,200
Shirt 50.00 18,000 216,000
Transparency or acetate film 5.00 1,500 18,000
Utility 800.00 800 9,600
Labor cost 13,000 156,000
Permits and licenses 1,500 18,000
TOTAL 49,700 596,400

5 Years Profit/Loss Statement
My T-shirt Company
Projected Income Statement for Years 1-5
Revenue 785,760.00 864,340.00 950,710.00 1,045,730.00 1,150,320.00
Cost of goods sold: 568,800.00 625,680.00 688,248.00 757,073.00 832,780.00
Materials 412,800.00 454,080.00 499,488.00 549,437.00 604,380.00
Other direct 156,000.00 171,600.00 188,760.00 207,636.00 228,400.00
expenses
Gross Profit (Loss) 216,960.00 238,660.00 262,462.00 288,657.00 317,540.00
Gross Income 216,960.00 238,660.00 262,462.00 288,657.00 317,540.00
Expenses:
Other Operational
Expenses
Permits 1,500.00 1,500.00 1,500.00 1,500.00 1,500.00
Utilities 9,600.00 10,560.00 11,616.00 12,778.00 14,055.00
Income before 216,960.00 238,660.00 262,462.00 288,657.00 317,540.00
interest and taxes
Tax 69,427.20 76,371.20 83,987.84 92,370.24 101,612.80
Net Income (Loss) 147,532.80 162,288.80 178,474.16 196,286.76 215,927.20
5 Years Cash Flow
My T-shirt Company
Beginning Cash 49,700.00 67,005.60 139,983.20 220,385.52 308.959.24
Balance
Cash Inflows
(Income):
Cash Sales 785,760.00 864,340.00 950,710.00 1,045,730.00 1,150,320.00
Total Cash Inflows 785,760.00 864,340.00 950,710.00 1,045,730.00 1,150,320.00
Cash Outflows
(Expenses)
Payroll 156,600.00 171,600.00 188,760.00 207,636.00 228,400.00
Supplies 412,800.00 454,080.00 499,488.00 549,437.00 604,380.00
Taxes & Licenses 1,500.00 1,500.00 1,500.00 1,500.00 1,500.00
Utilities & Telephone 9,600.00 10,560.00 11,616.00 12,778.00 14,055.00
Other: 69,427.20 76,371.20 83,987.84 92,370.24 101,612.80
Subtotal 649,327.20 712,611.20 783,851.84 862,221.24 948,447.80
Other Cash
Outflows:
Loan Principal
Owner’s Draw 119,127.20 77,251.20 84,955.84 93,435.04 102,724.08
Subtotal 119,127.20 77,251.20 84.955.84 93,435.04 102,724.08
Total Cash 768,454.40 791,362.40 870,307.68 957,156.28 1,052,671.88
Outflows
Ending Cash Balance 67,005.60 139,983.20 220,385.52 308,959.24 406,607.36

1 Sheet
5 Years Balance
My T-shirt Company
ASSETS
Current Assets:
Cash at hand 147,532.80 162,288.80 178,474.16 196,286.76 215,927.20
Total Current Assets: 147,532.80 162,288.80 178,474.16 196,286.76 215,927.20
Fixed Assets:
Total Fixed Assets: 0 0 0 0 0
Total Assets 147,532.80 162,288.80 178,474.16 196,286.76 215,927.20
LIABILITIES & EQUITY
Current Liabilities
Income Taxes Payable 69,427.20 76,371.20 83,987.84 93,370.24 101,612.80
Short-term Loan Payable 800.00 880.00 968.00 1,064.80 1,171.28
Total Current Liabilities 70,227.20 77,251.20 84.955.84 93,435.04 102,784.08
Total Liabilities 70,227.20 77,251.20 84.955.84 93,435.04 102,784.08
Capital 49,700.00
Add: Net Profit 147,532.80 162.288.80 178,474.16 196,286.76 215,927.20
Less: Drawings 119.227.20 77,251.20 84,955.84 93,435.04 102,724.08
Net Capital 77,305.60 85,037.60 93,518.32 102,851.72 113,203.12
Total Liabilities and 147,532.80 162,288.80 178.474.16 196,286.76 215,927.20
Equity
ACTIVITY 2
Directions: Answer the following questions as best you can. Write down your answers on the
space provided.
1. Social media has been very active in terms of spreading the word about practically anything
and everything. As a budding entrepreneur, how can you take advantage of this trend to
churn out potential opportunities. List down 10 potential business opportunities that you see.
2. A contractor of a fast food giant failed to deliver the expected output of an inventory systems
upgrade. This resulted in more than 70 branches closing due to inventory problems. It
compromised the sales for the month. What do you think were the potential opportunities
opened up to other players in the fast food industry?

3. Explain the meaning and importance of a business plan.
4. The business plan starts with the market idea. Generate about five products or services that
you want to start a small business. Describe each briefly. Then, identify to whom you intend
to sell your product(s)/service(s). Use the table below to write your answers.
Products/Services Description Target Market
5. The next step in a business plan is the production aspect. Choose one product/service that
you like the most to be your future business. Research how you will produce it and the raw
materials and equipment/machinery needed for its production. Use the table below to write
your answers.
Name of the Product/Service: __________________________________________________

Production Process Raw Materials Equipment/Machinery

LESSON 3: GETTING TO KNOW THE MARKET
A successful entrepreneur knows his//her market well. He/she should exert al efforts to
know the market that he/she wants to exploit. Entrepreneurs always bear in mind that the more
they know about their market, the better for them to be able to determine customer needs and
wants.
At the end of this lesson, you will be able to:

• Describe the unique selling proposition and value proposition that differentiates one’s
product/service from existing products/services;
• Determine who the customers are in terms of:
o Target market;
o Customer requirements; and
o Market size
• Validate customer-related concerns through:
o Interview;
o Focused Group Discussion (FGD); and
o Survey
MARKET RESEARCH
Market research is the process of gathering information which will make the company
more aware of how the people the company hopes to sell to, will react to the company’s current
or potential products or services. It is simply an information gathering exercise to determine the
viability or acceptability of a product or service an entrepreneur intends to offer in the market.
Entrepreneurs conduct market research so that they have information needed to make informed
business decisions about start-up, innovation, growth and the 7Ps. Today, business owners
conduct market research for a lot of reasons such as the following:
1. Identify potential customers. Who is going to use your product/service? How old are they?
Are they male or female? Are they married, single or divorced? Do they have children?
Where do they live? What is their level of education?
2. Understand existing customers. Why do customers choose your product over competitors?
What do they value? Is it service, product quality or the prestige associated with consuming
your product/service? Who influences their buying decision? What magazines do they read?
What websites do they visit? What do they enjoy doing?
3. Set realistic targets. From the information you collect you will be able to set realistic targets
for areas such as growth, sales and the introduction of new products/services.
4. Develop effective strategies. From your research you will be able to make informed
marketing decisions about how to price your product/service, how to distribute your
product/service, which media channels to use or whether to develop a new product/service.
5. Examine and solve business problems. If you have identified a business problem, research
will help you work out what is happening.

6. Prepare for business expansion. Research will help you identify areas for expansion and
test the market’s readiness for a new product/service like when you are looking to open a new
retail store and you need to find the right location or you could plan to make changes to your
distribution channels and need to determine how that will affect your customer base.
7. Identify business opportunities. Through research, you could identify changing market
trends such as population shifts, increasing levels of education or leisure time which bring
new opportunities.
Basic Questions in Market Research
There are seven basic questions that you must ask in preparation for any major market
research.
Why Purpose and objective for conducting the market research.

Determines the scope and the limitations of the market research to be
What
conducted.
Determines which segment of the market must be studied; this must be the
Which
market segment that the entrepreneur is eyeing.
Identifies who among the members of the selected market segment will
Who
participate in the market research.
Determines the time and timing of the research. This is critical for
When entrepreneurs whose product or service will be offered to a time-constrained
market such as office workers.
Where Pinpoints the relevant location of the market research.
How Determines the methodology to be used for the market research
MARKET RESEARCH METHODOLOGIES
The more the entrepreneur knows about his or her relevant market, the more customers
can be properly segmented and reached, products can be positioned, brands can be promoted,
prices can be set, and locations can be pinpointed. That is why market research is so important.
There are a lot of relevant market information that can only be obtained through conducting a
market research. Morato (2016) listed different methodologies in order to aid in conducting
market research.
Observation Technique
Observation technique is probably one of the best ways of gathering data about customers
in their natural setting without having to interact or talk to them. One has to simply observe people
as they goa about their usual activity such as buying and using products and services and assess
how they behave. Having a clear objective in mind will help the researcher focus on the important
things to observe or watch out for. Recording the event as it happens may be the best means to
capture the information. However, the researcher must discreet so as not to attract the attention
of the one being observed. In the absence of a video recording, jotting down observations will
do.
These observations must be documented and tallied for proper analysis later on. Prior to
doing the observation, it is important for the researcher to ensure that the following conditions are
met:

1. The needed information must be observable or inferable from the behavior that can be
observed. For example, if a fast-moving consumer goods company wants to know the first
thing that a person does upon entering a bathroom after waking up in the morning, then
observation is not the. Most appropriate research methodology. The person probably does
not want anyone watching him or her in the morning.
2. The subject matter contains some sensitivity that needs detached observation. For example,
during Philippine elections, vote buying is rampant. However, when a research group
conducted a nationwide Voter’s Behavior Survey, only a measly 3% admitted to selling their
votes. Next time, it might be better for the research group to just observe what happens
outside voting precincts.
3. The behaviors of interest must be repetitive, frequent, or predictable in some manner. For
example, if a local food manufacturer wants to know customers’ buying behavior of canned
goods, then observation technique is highly recommended. The canned goods section of any
supermarket is often frequented by shippers and this category of products almost always ends
up in the grocery cart of a shopper.
4. The behaviors of interest must be of a relatively short duration. For example, a popular fast
food chain wants to know the customers’ buying behavior in their outlets (e.g. do they look at
the menu board and decide or do they immediately know what to order?). In this case, an
observation research would yield the answers because the whole process would probably
take no more than 10 minutes.
Advantages of Observation Research
1. It allows the researcher to see what customers actually do rather than rely on what
they say they do.
2. It allows the researcher to observe customers in their natural setting.
3. It does not subject the researcher to the unwillingness of customers or their inability to
reply to certain questions.
4. Some information is better gathered quickly and accurately through observation.
Disadvantages of Observation Research
The researcher can only see the outside behavior of the customer but cannot determine
the inner motivation of the customer.
1. The researcher cannot get the reasons behind the behavior

2. The researcher can only focus on the “here and now.” It cannot cover the past nor
cover the future.
3. Finally, the observation technique may border on the unethical because respondents
have not agreed to be observed.
Survey Research
Survey research is the most preferred instrument for in-depth quantitative research. The
respondents are asked a variety of questions which are often about their personal information,
their motivations, and their behavior. Surveys can be conducted via telephone, personal (face-
to-face interview), and mail interview (either printed or electronic mail).

Questionnaire Design
There are some basic rules that have to be followed in question formulation. These are:
1. The questions, in their totality, should be able to elicit all the necessary information
required in the research.
2. Each question should be clear and definite.
3. Each question should cover one topic at a time.
4. Each question should be presented in a neutral manner.
5. Each question should be translated into the dialect that the target respondents are familiar
with.
Focus Group Discussion (FGD)
Focus group discussion (FGD) is one of the most common qualitative research tools. It is
effective in extracting consumer and non-consumer experiences regarding products, places, or
programs. This method can also be used for generating initial insights.
FGD can be used to address substantive issues such as:
• Understanding consumers’ perceptions, preferences, and behavior concerning a

product category;
• Obtaining impressions on new product concepts;
• Generating new ideas about older products;
• Developing creative concepts and copy material for advertisements;
• Securing price impressions; and
• Obtaining preliminary consumer reaction to specific marketing programs
The FGD is an interview by a facilitator of a small group of people that normally lasts for
an hour and a half up to three hours. The participants are selected because of their knowledge
about the topic. The objectives must be clear and precise. It takes a great deal of planning from
the researcher’s end to ensure that objectives set are met. There are four key decisions to be
made: (1) respondent selection; (2) sample size; (3) data gathering; and (4) data analysis.
Respondent selection includes:
1. The definition of the respondents;

2. The classification of the respondents; and
3. The screening of the respondents.
The number of respondents per group should range from six to eight, depending on the
skill of the facilitator and the topic being discussed. If the number falls below six, the likelihood of
generating a momentum and group dynamics necessary for a good discussion will not happen.
However, if the group exceeds eight, it may be too crowded, resulting in the passive participation
of some respondents and a discussion that is not cohesive.
Data gathering methods in FGD involve:
1. The selection and preparation of the venue and equipment;

2. The formulation of the discussion agenda; and

3. A facilitator who is very skilled in moderating and possesses the ability to draw out
significant insights from the participants.
Data analysis includes:
1. The integration of the information gathered;

2. Some observations on respondent behavior; and
3. Listing of recommendations and report writing.
Nine steps in conducting a focus group discussion
1. Develop the research objectives. What is the research all about?

2. Determine the participants’ profile. Who are the most knowledgeable or most relevant
participants?
3. Determine the appropriate token or “compensation” for the participants.
4. Develop a participant screener questionnaire.
5. Recruit the participants.
6. Select a good facilitator.
7. Develop a facilitator’s discussion guide.
8. Arrange for the venue and logistics.
9. Analyze the results of the focus group discussion.
In analyzing FGD, the researcher should compare and contrast all points raised by the
different respondents and note from what point of view they are coming from. The researcher
must summarize the points where the participants strongly agreed upon or disagreed on about
an issue. The researcher must also write down quotations that seem particularly relevant to his
or her identified objectives and must group similar comments together in order to identify
participants’ preferences.
In the final analysis, the objective of the FGD must be addressed and conclusive insights
must be drawn to help the entrepreneur improve his or her business. Again, insighting is needed
after the results of the FGD have been documented to generate superior ideas or modify existing
ones.
ACTIVITY 3
Part 1: Essay
Explain the meaning of market research and give at least five reasons for business owners to
conduct market research.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

Part 2: Case Analysis
Case No. 1
Chocolate Bar Market Research Activity
A company that makes chocolate bars is looking to invest in a new chocolate bar created
by a young entrepreneur. However, it has yet to find an innovative and exciting new product and
brand that caters specifically to the market of youth ages 12-19. In addition to a new chocolate
bar idea, the company would like market research about its feasibility before investing.
Develop a 5-question market research survey to research what the best type of chocolate
bar would be to sell to youth ages 12-19. Remember to ask questions that will help you design a
new product that people in that age group will want to buy. Write your questions in the space
provided below.
Question 1: __________________________________________________________________
Question 2: __________________________________________________________________
Question 3. __________________________________________________________________
Question 4: __________________________________________________________________
Question 5: __________________________________________________________________
Case No. 2
An investor has given you Php 1,000,000 to start a business. Conduct a simple market
research to know the different business opportunities that can be found in your neighborhood.
You can conduct a simple interview with your housemates and come up with at least 5
opportunities. Compile the listed opportunities and business proposals into a report following the
format below. Be as creative as you can be. Do not be afraid to come up with expensive ideas.
Assume you have Php 1,000,000 to invest. (25 points)
Example:
Opportunity Business Proposal
1.1 Establish an internet café

1. Lack of internet access in most
1.2 Set up low-cost wi-fi hotspots for
barangays/towns
restaurants and eateries
2.1 establish a repair and vulcanizing shop

specializing in motorcycles
2. Growing demand for motorcycles
2.2 establish a motorcycle distributorship
2.3 establish a motorcycle rental shop

Opportunity Business Proposal

LESSON 4: MARKETING
The American Marketing Association (as cited in Kotler & Keller, 2007, p.3) defines
marketing as “an organizational function and a set of process for creating, communicating, and
delivering value to customers and for managing customer relationships in ways that benefit the
organization and its stakeholders.” Marketing is also the performance of activities that seek to
accomplish an organization’s objectives by anticipating customer needs and directing a flow of
need-satisfying goods and services from producer to customer (Canon, Perrault, McCarthy,
2008). It is not only the selling of the product or service but more importantly, to know and
understand the customers very well that the product or service meets their need, so it sells itself.
At the end of this lesson, you should be able to:

• recognize the importance of marketing mix in the development of marketing strategy;
• describe the Marketing Mix (7Ps) in relation to the business opportunity vis-à-vis:
o Traditional Marketing Mix
▪ Product
▪ Place
▪ Price
▪ Promotion
o Extended Marketing Mix
▪ People
▪ Physical Evidence
▪ Process;
• develop a brand name and logo; and
• discuss marketing management practices that can be adopted.
THE 7Ps OF MARKETING
The traditional marketing mix elements comprised of product, place, price, and promotion
has enjoyed tremendous popularity over the years in an era where most businesses sold
products. It was developed by an American Professor of Marketing, Jerome McCarthy, in 1960.
In 1981, Bernard H. Booms and Mary J. Bitner extended the marketing mix by 3 new Ps that
directly relate to the service provision industry. These new elements are people, physical
evidence, and process. The marketing-mix decisions are made for influencing the trade channels
as well as the ultimate customers’ solution, cost, convenience, and awareness of what is being
offered in the market.
PRODUCT
Product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need. It includes physical objects, service, persons,
places, organizations, and ideas.

Other Marketable Entities
As mentioned above, there are other marketable entities. These are the:
1. Organization Marketing - consists of activities undertaken to create, maintain or change the

attitudes and behavior of target consumers towards an organization.
2. Person Marketing - consists of activities undertaken to create, maintain, or change attitudes
or behavior towards particular people.
3. Place Marketing - involves activities undertaken to create, maintain or change attitudes or
behavior towards places.
4. Ideas - you may advertise ideas through:
a. Social Ideas – may be in the form of public health campaigns to reduce smoking,
alcoholism, drug abuse, child abuse and overeating, environmental campaigns to promote
wilderness protection, clean air and conservation, and other campaigns such as education
reforms, organ donations, family planning, human rights, and racial equality.
b. Social Marketing – includes the design, implementation and control of programs seeking
to increase the acceptability of a social idea, cause, or practice among a target group.
To be successful in marketing product, as an entrepreneur, you should be able to answer the

following questions:
1. What is the product’s function, appearance, quality, design, features, packaging, and brand?
2. What value does the product offer to its customers?
3. What makes the product unique?
4. What is the product Unique Selling Proposition (USP)?
UNIQUE SELLING PROPOSITION (USP)
It is the factor or consideration presented by a seller as the reason that one product or service
is different from and better than that of the competition. It is just like answering the question
“What you have that competitors don’t?”
All these questions must be answered with the product’s target market in mind!
Product Attributes
The product attributes are the benefits that the product will offer, its quality, features, Style,
and Design.
1. Product Quality. The product should be free from any defects.

2. Product Features is the competitive tool for differentiating the company’s product from the
products of its competitors.
3. Style. Its describe the appearance of a product.
4. Design – more than skin deep – It goes to the very heart of a product. It will offer one of the
most potent tools for differentiating and positioning products of all kinds.
Branding
The brand is a name, term, sign, symbol or design, or a combination of these, intended to
identify the goods or services of one seller or group of sellers and to differentiate them from those
of competitors.

Branding helps buyers in many ways. Brand names tell the buyer something about
product quality. Brand names also increase the shoppers efficiency. Lastly, brand names help
call consumers’ attention to new products that might benefit them.
Branding also gives the supplier several advantages.

The brand name makes it easier for the supplier to process
orders and track down problems. The supplier’s brand name
and trademark provide legal protection for unique production
features that otherwise might be copied by competitors.
Branding also enables the supplier to attract a loyal and
profitable set of customers. Finally, branding helps the supplier
to segment markets.
Branding adds value to customers and society. How?

Branding leads to higher and more consistent product quality.
Branding increases innovation by giving producers an incentive to look for new features that can
be protective against imitating competitors. Furthermore, branding helps shoppers because it
provides much more information about products and where to find them.
Responsibilities that Accompany Branding

1. All products carrying the brand must have quality consistency.
2. The brand must be advertised and promoted.
Characteristics of a Good Brand Name

Short and simple Suggestive products benefits
Easy to spell and read Adaptable to packaging/labelling needs
Easy to recognize and remember No undesirable imagery
Easy to pronounce Always timely (does not go out -of-date)
Can be pronounced in only one way Adaptable to any advertising medium
Can be pronounced in all languages (for Legally available for use (not in use by
international markets) another firm)
Packaging
Packaging serves to contain and protect, and sometimes, identify and promote the
product. It is the activities of designing and producing container or wrapper for a specific product.
Purposes of Packaging
1. It protects the product.
2. It makes products storage and display more practical and effective.
3. It preserves the product for further customer use.

Types of Packaging
1. Plastic. It is the most common packaging material. It is also the one of the most difficult to
dispose of.
2. Brick Carton. It is a light, strong air-tight packaging material. This type of packaging is ideal
for transporting storage. Its complex composition makes it difficult to recycle. Becoming the
main packaging material used for basic foodstuffs.
3. Cardboard Boxes. It is a type of a packaging that is easy to recycle and reuse. It may be in
the form of boxes, sheets, or corrugated cardboard.
4. Metal. This type of packaging is appropriate for packaging foods (e.g. canned foods). For
drinks, such as soft drinks and beers, aluminum is often used.
5. Bubble Wrap. A packaging material that can also be a source of entertainment long after the
items are unpacked.
6. Shrink Wrap. It is commonly used as an overwrap on many types of packaging, including
cartons, boxes, beverage cans, and pallet loads. A variety of product may be enclosed in
shrink wrap to stabilize the products, unitize them, keep them clean or add tamper resistance.
When deciding on product packaging, the following must be considered:

• How much quantity of the product should be contained in the package?
• What physical attributes should the packaging have to facilitate customer use?
• What legal requirements must the package comply with?
• What is the most appropriate shape of the package?
Labelling
Labelling is a display of information about a product on its container, packaging, or on the
product itself. It is considered as the “Silent Salesman” because it advertises the product.
Types of Labelling
1. Brand Label. Gives information about the brand. It can be removable or non-removable.
2. Descriptive Label. It specifies product usage.

3. Grade Label. It describes the aspect and features of the product.
The following factors must be considered in deciding on the labelling of a product:
1. Establish the image or personality of the product based on the tastes and preferences of the
target market.
2. Determine the most important features of the product to the target market.
3. Determine where the product will be sold and the applicable regulatory requirements if any.
4. Determine the placement of the product in relation to other products, particularly competitors.
Functions of Labelling
1. Defines the product and its content. A label must be informative about the product’s usage
and caution to be taken while using the product.
2. Recognition of product. Labelling assists in the identification of the product.
3. Assorting of products. Classification or grading of products according to different categories
in the market.
4. Label assist promotion of the products.
5. In compliance with the law.
Importance of Labelling
1. Labelling is significant as it fetches customers’ attention to purchase the product because of
visual appeal.
2. It promotes the sale of the product as it can make or break the sale of a product.
Product Levels
There are three product levels: the core or generic, formal, and augmented products.
1. Core or Generic Product. It is the purpose for which the product was created.

2. Formal Product. It includes factors that could effectively differentiate products manufactured
by one company over those manufactured by others with the same core or generic function.
It may be the product’s features, styling, price, or color.
3. Augmented product. It is the non-physical part of the product, and usually consists of lots of
added value, for which you may or may not pay a premium. It may be in the form of warranty,
credit terms, installment terms, installation service, repair, and maintenance.
Classification of Products
1. According to Use
• Consumer Products. These are the goods that are purchased for consumption.
• Industrial Products. These are the goods that are purchased to make other goods, to
serve as a raw material or input in the production of other goods.
2. According to Differentiation
• Undifferentiated Products. These are the products whose physical characteristics are so
identical that it would be difficult to distinguish one purchased from one vendor or another.
One example of this are the products that are sourced from nature.
• Differentiated Products. These are the products that varied in their characteristics and
features that they are readily distinguishable from one another. Branding is used to
differentiate products from one another.
3. According to Durability
• Consumable Products. It is a product whose benefit can only be used by a consumer for
only a short period of time, sometimes only a few minutes.
• Semi-durable Products. It provides benefits to the consumer for a longer period, usually
spanning several months.
• Durable Products. These are products that are manufactured to last a long time. These
can provide consumers with years of beneficial use.
4. According to Type
• Convenience Products. These are goods that are purchased frequently, inexpensive, and
do not require much purchase effort and evaluation.
• Shopping Products. These are goods that purchased less frequently than convenience
goods, relatively more expensive, and require some amount of information search and
evaluation prior to purchase.
• Specialty Products. These are goods that require unusually large effort on the part of
consumers to acquire. Consumers are usually willing to travel great distances to where
these goods can be purchased.
• Unsought Products. These are goods that consumers seldom actively look for, and are
usually purchased for extraordinary reasons, such as fear or adversity, rather than desire.
PLACE
Place is the element of marketing mix that ensures that the product is distributed and
made conveniently available for the consumer (study.com, n.d.). It refers to the distribution or
methods and location you use for your products or services to be easily accessible to the target
customers. Your product or service dictates how it should be distributed (The Marketing Mix, n.d.)
How can a company deliver its product to its customers effectively and efficiently?

Distribution Channels
A distribution channel can be defined as the activities and processes required to move a
product from the producer to the consumer. Also included in the channel are the intermediaries
that are involved in this movement in any capacity (Martin, 2014).
Product Distribution Types

1. Exclusive Distribution. Distribution is limited to a selected number of dealers usually one or a
few.
2. Intensive Distribution. Distribution where the product is available in as many retail outlets as
possible.
3. Selective Distribution. Positioned between intensive and exclusive distribution; not limited
and not too many dealers.
PRICE
Price is the relation to the value of benefit that the customer expects to derive form the
product or service.
With a product, the materials that go with it can be measured and its actual tangible cost
of production is also measurable. Therefore, it is not that difficult to put a price tag on it.
However, “since a service cannot be measured by what material goes into its creation nor is
the actual tangible cost of production measurable, it can be challenging to put a price tag on it.
There are some tangibles of course, such as the labor costs and overheads. But additionally,
the ambiance, the experience, and the brand name also factor into the final price offering.”
Product Cost Estimation

The product cost estimation approximates the probable cost of a product, program, or
project computed based on available information. It is one of the key areas in manufacturing and
processing industries. It refers to the cost incurred by a business when manufacturing a good or
providing a service.
Types of Cost for a Physical Product
1. Unit Variable Cost. It is the amount or cost of manufacturing one unit of the product. This
includes the cost of direct material, direct labor, and direct overhead.
• Direct Materials. These are the materials and supplies that are consumed during the
manufacture of a product, and which are directly identified with that product
(accountingtools.com, 2019). Below is an example of the direct materials used to
manufacture one single unit of a shirt. The total direct material cost for producing each
shirt would be Php 260.00.

Materials Cost Cost per Shirt
Fabric Php 100.00 per meter Php 200.00
Thread Php 4.00 per meter Php 20.00
Buttons Php 5.00 per piece Php 30.00
Cardboard Box Php 10.00 per piece Php 10.00
Total Php 260.00
• Direct Labor. It is the production or services labor that is assigned to a specific product,
cost center, or work order (accountingtools.com, 2018). Going back to our example, the
total direct labor per shirt would then be Php 65.00 include the wages of all workers.
Process Labor Cost

Fabric Cutting Php 30.00
Sewing Php 25.00
Collar Attachment Php 5.00
Button Attachment Php 5.00
Total Php 65.00
• Direct Overhead. It is the amount that was spent in the manufacturing overhead (energy,
water, and other utility costs) for every product produce. In our example, if the total factory
manufacturing overhead for a month is Php 20,000.00, and the total number of shirts
produced within the same month is 4,000 pieces, the direct overhead cost per unit would
be Php 5.00 (Php 20,000.00/4,000).
2. Fixed Costs. These are the expenses incurred by the organization that are not related to the
manufacture of the product. In our example, if in a month, the shirt factory incurred total fixed
costs of Php 400,000.00 and was able to produced 4,000 units of shirt for the same month,
each shirt would have to absorb Php 100.00 of fixed costs (Php 400,000.00/4,000).
Therefore, if the shirt factory can sell each of the 4,000 shirts it produced in a particular month
at its unit cost of Php 430.00.
Cost Component Amount
Direct Materials Php 260.00
Direct Labor Php 65.00
Direct Overhead Php 5.00
Unit Fixed Cost Php 100.00
Total Php 430.00
Pricing Strategies
1. Mark-up Pricing. It is the pricing strategy that allows the seller a fixed mark-up every time the
product is sold. To compute for the mark-up pricing the following formula is used:
𝑉𝐶 𝐹𝐶
𝑈𝐶 = +
𝑈 𝑈𝑆

Where:
UC = Unit Cost FC = Fixed Cost
VC/U = Variable Cost per Unit US = Unit Sales
For example:
VC/U = Php 10.00 US = 50,000
FC = Php 300,000.00 DMU (Desired Mark-up) = 20%
Solution:
𝑉𝐶 𝐹𝐶 300,000
𝑈𝐶 = + = 𝑃ℎ𝑝 10.00 + 𝑃ℎ𝑝 = 𝑃ℎ𝑝 16.00
𝑈 𝑈𝑆 50,000
𝑈𝐶 𝑃ℎ𝑝 16.00
𝑀𝑈𝑃 = = = 𝑃ℎ𝑝20.00
(1 − 𝐷𝑀𝑈) (1 − 0.20)
The Mark-Up Price (MUP) is Php 20.00.
2. Target Return Pricing. It is a pricing method that allows a product manufacturer to recover a
certain portion of his/her investment every year. The formula for obtaining a product’s target
return is:
𝐷𝑅(𝐼𝐶)
𝑇𝑅𝑃 = 𝑈𝐶 +
𝑈𝑆
Where:
TRP = Target Return Price IC = Invested Capital
UC = Unit Cost US = Unit Sales
DR = Desired Return
For example:
Given:
UC = Php 16.00 IC = Php 1,000,000.00
DR = 25% US = 50,000 units
Solution:
𝐷𝑅 ∗ 𝐼𝐶 1,000,000
𝑇𝑅𝑃 = 𝑈𝐶 + = 𝑃ℎ𝑝 16.00 + 𝑃ℎ𝑝 = 𝑃ℎ𝑝 21.00
𝑈𝑆 50,000
The Target Return Price (TRP) is Php 21.00.
3. Odd Pricing or Psychological Pricing. It is a pricing method is premised on the theory that
consumers will perceive products with odd price endings as lower in price than they are. As
such, consumers may find products priced at Php 99.95 closer to Php 99.00 than to Php
100.00. There are about an equal number of researches that say this is true, and those that
say that it is inconclusive.
4. Loss Leader Pricing. It is a pricing strategy frequently used by supermarkets. It is based on

the practice of housewives using only a few selected essential products, e.g. sugar, coffee,
eggs, laundry detergents, and some canned good products, as their sole basis for price
comparison. Supermarket retailers will deliberately price these “loss leaders” or comparison
items low to make their products appear more affordable than others. The markup lost on
these loss leader items are recovered from other items where markups are higher.

5. Price Lining. A pricing strategy designed to simplify a consumer’s buying decision. This
method involves reducing the number of price points on merchandise to as little as possible,
in extreme cases to only one price point. For example, the Japan Home Center prices all the
merchandise in their store at Php 66.00 or Php 88.00.
6. Prestige Pricing. A pricing strategy that disregards the unit cost of a product or a service.
Instead, it capitalizes on the high value perception or positive brand reputation of a product or
service. It charges a price much higher than its unit cost. This is a pricing strategy
implemented by some fragrance and skin care products. Using prestige pricing, it would not
be unusual for a fragrance brand to have a unit cost of Php 1,300 and a selling price of Php
3,500.
7. Marginal Pricing. A pricing strategy w here a business organization prices its product at a
range below its unit cost but higher than its unit variable cost. This is to offer the lowest price
in a sealed bidding or other highly competitive situations. The failure to adequately cover
some or all the company’s fixed costs is justified by citing that these fixed costs are “sunk” or
would be incurred whether the order is acquired. The main objective of marginal pricing is to
outmaneuver competition, expand customer base, and increase market share.
8. Predatory Pricing. A pricing strategy where the firm prices its product lower than unit variable
cost, initially resulting in short-term losses. The objective of this pricing strategy is to price a
new or persistent competitor out of the market. After its purpose is achieved, the product’s
original selling price is restored, and short-term losses are recovered. Predatory pricing is
illegal in most countries including the Philippines (under Republic Act 8479).
9. Going Rate Pricing. A pricing strategy where a company prices its product at the same level
as or very close to its competitors’ prices. This effectively maintains the product’s price
competitiveness in its market. The danger of going rate pricing is that it may result in price
wars, with each company trying to outprice another, to the detriment of all industry
participants.
10. Promotional Pricing. A pricing strategy involving a temporary reduction in the selling price of
a product/service to induce trial or to encourage repeat purchase. Almost all companies,
especially those involved in Fast-Moving Consumer Goods (FMCGs), implement promotional
pricing at one time or another.
When new products are introduced into the market, one of the two following pricing
strategies can be used:
• Price Skimming
• Penetration Pricing
11. Price Skimming. It is a pricing strategy where the product’s selling price is way above its unit
cost. It allows the company to recover its research and development costs and expenses. It
is usually accompanied by intense expensive advertising and promotional campaign. It is
usually effective with electronic products. It is especially true when similar products are still
non-existent in the market.
12. Penetration Pricing. A pricing strategy where the new product is priced only marginally above
its unit cost. The objective of this strategy is to capture a large part of the market at an early
stage by making the product affordable to the greatest number of people. An advantage of

this strategy is that it an discourage competitors from entering the market because of low price
markup. The major disadvantage of this pricing method is that it can prolong the recovery
period for research and development, advertising, and promotion costs.
Pricing Strategy Selection
The choice of pricing strategy depends almost exclusively on a company’s objectives. The
correspondence between pricing strategy and objective is illustrated below:
Pricing Objectives Pricing Strategy

Penetration Pricing
Marginal Pricing
Maximum Revenue
Going Rate Pricing
Promotional Pricing
Penetration Pricing
Marginal Pricing
Maximum Market Share
Going Rate Pricing
Promotional Pricing
Price Skimming
Maximum Profit
Prestige Pricing
Survival Marginal Pricing
PROMOTION
Promotion includes all the ways you tell your customers about your products or services
and how you then market and sell to them (entrepreneur.com, 2004). It includes advertising,
promotions, personal selling, publicity, and public relations.
Types of Promotion
1. Trade Promotions. This type of promotion is intended for marketing intermediaries. Its
purpose is to encourage the intermediaries to increase purchase, to stock a product, to
accelerate purchases or payments for purchases, or to extend preference towards a brand.
2. Consumer Promotions. This type of promotion is intended for consumers. Its purpose is to
induce product trial, to encourage brand switching or to reward consumer patronage.
Advertising
Any paid and public presentation of products, services, or ideas by an identified sponsor
through a medium is called advertising.
Objectives of Advertising
1. To build awareness
2. To inform
3. To persuade
4. To remind

Brand Awareness
Brand awareness is the extent to which consumers are familiar with the distinctive qualities
or image of a brand of goods or services. Achieving a high level of awareness provides the brand
the following advantages:
• Learning Advantages. Heavily influence the formation and strength of associations that
compromise the brand's image.
• Consideration Advantages. Increase the likelihood that the brand will be included in the
consumer's "consideration set", or the set of brands that receive serious consideration for
purchase.
• Choice Advantages. Can affect choices among brands included in the consideration set,
even though there may be no other associations to those brands.
Advertising Campaigns Process

1. Identifying the target market.
2. Establishing advertising objectives.
3. Determining advertising message. There are three types of advertising campaigns.
• Functional. It attempts to provide a product brand as the solution to a current
consumption problem experienced by the customers.
• Symbolic. It attempts to associate brand ownership with an aspirational group.
• Experimental. It attempts to promote brands using high sensory value.
4. Selecting Media. There several types of media and techniques used in advertising.
Types of Media and Techniques Used in Advertising

• Radio. The system or process that is used for sending and receiving signals through
air without using wires. It is one of the most accessible media available.
Relatively inexpensive Audio only
Target marketing possible Frequency required for effectiveness
Passive medium
• Print. It may be in the form of magazines and newspaper. Many advertisers still favor
newspapers as their national circulation, population penetration, and pass-on
readership.
Newspaper
Credible Spillage
Pass-on readership Obsolescence
Target marketing possible Poor image quality
Magazine
Good image quality Long lead time
Target marketing possible Difficult to time advertising
Pass-on readership
Not subject to obsolescence

• Television (TV). It is a system for transmitting visual images and sound that are
reproduced on screens, chiefly used to broadcast programs for entertainment,
information, and education.
Audio, video, and movement Expensive
Target marketing possible Frequency necessary for effectiveness
• Alternative Media and Techniques

o Cinema o Direct Response Advertising
o Billboard o Point-of-Purchase, Signs,
o Social Networking Sites Posters, and Leaflets
o Directory Advertising o Sales Events
o Product Placement o Window Display
o Email Advertising o Fashion Show
o Transit Advertising o Product Sampling
o Online Ads
5. Managing and cording the marketing communication process.
PEOPLE
Anyone who encounters customers who make impression,
and that can have a profound effect – positive or negative – on
customer satisfaction. The reputation of your brand rests in your
people’s hand. They must, therefore, be appropriately trained, well-
motivated and have the right attitude.
It is essential to ensure that all employees who have contact
with customers are not only properly trained, but also the right kind of
people for the job. Many
customers cannot separate the product or service from staff
members who provides it. The level of after sales support and advice provided by a business is
one way of adding value to what the business offer and can give an important edge over its
competitors. This will probably more important than for many customers.
PROCESS
It is the process and processes that deliver a product to a
customer. All processes are concerned with the consistent creation
and delivery of customer value. The customer’s experience is affected
directly at those points at which her or she interacts with the
organization. Processes should be continuously reviewed and
coordinated to improve the customer experience and demonstrate
customer consideration.
The process of giving a service and the behavior of those who

deliver are crucial to customer satisfaction. Issues such as waiting times, the information given
to customers and the helpfulness of staff are all vital to keep customers happy.
Customer are not interested in the detail of how the business runs. What matters to them
is that the system works. The systems are not usually designed by marketers, it is designed for
the company’s benefit, not the customers.

PHYSICAL EVIDENCE
Physical evidence is the elements of the physical environment the customer experiences.
It should be consistent through the entire customer experience. A service cannot be experienced
before it is delivered. This means that choosing to use a service can be perceived as a risky
business because of its intangibility. This uncertainty can be reduced by helping potential
customers to see what they are buying. Case studies and testimonials can provide evidence that
an organization keeps its promises. Facilities such as a clean, tidy, and well-decorated reception
area can also help to reassure. If your premises aren’t up to scratch, why would the customer
think your service is?
Corporate
identity
Evidence of
Packaging
Ownership
Physical
Evidence
Product
Environment
Design
MARKETING MANAGEMENT PRACTICES

1. Estimate potential market demand. Estimation is an educated guess. The best way to be
very certain and confident about estimates for potential market demand is to look for facts
about the industry where the entrepreneur intends to enter. Census data is a good source of
estimates to be able to project sales.
2. Analyze the competitors. It is first knowing what the competitor’s marketing is and then,
understanding why the target market is buying or will buy from the competitor. Knowing what
the competitor is marketing includes: the competitors products or services, how much they
cost, how they are distributed, and how they are made known to the target market. The best
way to do this is to go out there and see the competition yourself. Some entrepreneurs even
go to the extent of buying the products or using the services of competitors. In this way, they
can assess and differentiate their own and the competitor’s product or service, determine the
marketing needed, be ahead of the competition, and ride with the market trends.
3. Price the product/service reasonably. A product can have great features and benefits, but
the price of the product can have a greater influence on how it will sell in the marketplace.
Some people will pay a higher price for a particular product if it is of better quality and will
perform better quality and will perform better and last longer. For others, if the price of your

product or service is higher than what the customers can afford or are willing to pay, chances
are they will not patronize your business. Set your price, after considering all costs, at an
affordable amount for your target market.
4. Adopt a good product name for branding. Will my product’s name be remembered? When a
name is different or unusual, it may attract attention, and perhaps arouse curiosity. Is it
something that interesting, such as one that is part of a rhyme or evokes humor? A good
example is Jollibee. Consider a name that creates a mental picture of image. Example: Red
Ribbon provides an image that is easy to remember. Is it distinct enough from other names,
to prevent people from confusing your product with another? If the name is meaningful and
fits with the product, it tends to generate higher recognition and recall.
5. Put price tags. All goods which are being sold must have a price tag. A price tag is a label to
the price of an item being sold in a store. It is the amount of money a buyer pays in order to
own the item. Placing a price tag on goods being sold have the following advantages:
• The price of an item is readily available to a buyer;
• It eliminates inconveniences on both the seller and the buyer as to the process of inquiry
regarding the prices of goods being sold;
• A buyer can save time in choosing goods because he can easily pick out goods he can
afford; and
• The government can easily monitor stores which are selling goods at a higher price that
the prices specified by the Price Control Council.
6. Promote the products/services in various ways to increase sales. Products or services of the
firm need to be advertised in order to generate sales. The entrepreneur has to devise ways
of making people know and want to buy their products.
7. Attend to the complaints of customers. Among the practices being resorted to by business
establishments are the following:
• Supermarkets and department stores have a customer service counter which attend to
the needs and complaints of customers;
• Customers are given a certain number of days within which can return a product for
replacement or refund;
• Goods being sold have an expiration date to prevent the sale of expired or stale
products; and
• In restaurants, waiters repeat the orders of customers to ensure that they take the right
orders.
8. Issue official receipts to customers. All business establishments are required to issue official
receipts. However, there are some which do not issue receipts unless the customers ask for
it. Others do not issue receipts at all. Failure by a business establishment to issue a receipt
means a financial loss to the government in terms of payment of taxes. The official receipt is
one of the ways by which the government determines how much sales have been made by a
business establishment and how much taxes need to be paid. This is also an ethical
management practice that shows the honesty of the entrepreneur.
9. Practice courtesy and efficiency in serving customers. When customers experience

courteous and efficient service in a business establishment, most likely, they will patronize
again the business and even recommend it to others. Treating customers in a courteous
manner means greeting them upon entering the store and thanking them upon leaving,

promptly attending to their orders, informing customers as to the length of time an order can
be finished, requesting people to sit down while waiting for their orders, answering all queries
from the customers, and delivering the service or product on the date and/or time promised
to the customers.
10. Observe the rights of consumers. The government realizes that consumer need protection
form manufacturers who produce poor quality goods and from service providers who provide
inefficient service. It has passed several laws protecting the following rights of consumers
which the entrepreneur should comply with:
Rights of Consumers Description

This right ensures availability of basic goods
Right to basic needs and services to consumers at affordable prices
and of good quality.
Consumer have the right to be safe against
goods that are harmful to one’s health and life.
Right to safety
All products are required to be checked for
safety, reliability, and quality.
This is the right of consumers to be protected
against dishonest or misleading advertising or
Right to information labelling and the right to be given the facts and
information needed to make an informed
choice.
This deals with the right to choose products

Right to choose and services at competitive prices, with an
assurance of satisfactory quality.
The right to representation is also known as

the right to be heard. This is the right to
express consumer interest in the making and
Right to representation
execution of government policies that will have
an impact on the supply of goods and services
to consumers.
This is the right of consumers to be

Right to redress compensated for misrepresentation, shoddy
goods, or unsatisfactory services.
This is the right to acquire the knowledge and

Right to consumer education
skills necessary to be an informed consumer.
This right assures consumers to live and work

in an environment which is neither threatening
Right to a healthy environment
nor dangerous and which permits a life of
dignity and wellbeing.

ACTIVITY 4
1. If we look at one of the most popular companies in the Philippines, Jollibee, we may tell that
food and drink are products and services are a place to eat and children's parties.
Facility Goods Services
Theme Park
Movie Theater
Bowling Alley
Bookstore
Night Club

2. Explain the elements of marketing mix inside the diagram.
Marketing Mix
Definition
Elements
Traditional Marketing Mix
Product
Place
Price
Promotion
Extended Marketing Mix
People
Physical Evidence
Process

3. The brand name is given to a company to distinguish it from other similar companies. It makes
companies stand out. There are some very important brand names in leisure and tourism.
What brand names come into your head when you think of the following types of companies?
Name 5 each. What do you think the reasons why you remember these brand names?
Restaurants Sports
Delicacies Banks
Explanation:
4. Many organizations combine their brand names with logos that make the company instantly
recognizable. A logo is a symbol that helps identify an organization. The most famous logo
of all is for McDonald’s. The Golden Arches are well known all over the world and they
symbolize the fast food chain. On the space provided, formulate a brand name, and draw a
logo for your future company.

5. Explain the meaning of marketing management.
6. Describe the rights of the consumers to be observed by the entrepreneurs.

LESSON 5: INTELLECTUAL PROPERTY
The intellectual property (IP) is one of the most important and, at the same time, one of
the most delicate assets to handle of the new technology-based venture. IP can be any product
of the human intellect that has value in the marketplace, that is, products technologies, methods
processes, new services, and new designs. It is also one of the most important and one of the
most delicate assets to handle of the new technology-based venture. Recognizing the value of
the knowledge contained in these assets and identifying and legally protecting the parts that are
the original property of the entrepreneur can become the heart of any commercialization strategy.

• discuss the nature and concept of intellectual property;
• identify the main instruments of intellectual property protection; and
• explain the filing system for patents, utility model, and industrial design.
NATURE OF PROPERTIES
Properties may be:
1. Tangible. Properties that are discernible by the senses. These are the goods of material
nature. Examples are buildings, real estate, vehicles, gadgets, equipment, and precious
metals.
2. Intangible. These are the properties that are incapable of being perceived by the senses.
These are the goods of immaterial nature. Examples are the science of knowing what to
do, our relations with the clients, our operative processes, the technology of information
and databases, capacities, abilities, and innovations, and intellectual property and
goodwill.
THE PHILIPPINE INTELLECTUAL PROPERTY SYSTEM

Intellectual property is governed by a special law. The Republic Act of 8293, under the IP
Code, intellectual property right consists of patents, utility model, industrial design, lay-out of
integrated circuit, trademark, geographical indications, trade secrets, and copyright.
Patents
It is an exclusive right granted for a product, process, or an improvement of a product or
process which is new, involves inventive step and is industrially applicable. In return, the patent
owner must share the full description of his invention through publication in the IPOPHL official
gazette. It follows the first to file system, which has a non-renewable protection term of 20 years.
The process of obtaining a patent is usually lengthy and expensive. Patenting an invention
costs between $10,000 and $15,000 in most industrialized countries. If patents are sought in all
major countries where the invention might be practiced, the cost can easily reach around
$100,000 per patent.

Example of Patented Products
Thomas Edison’s Electric Lightbulb Alexander Graham Bell Telephone
Utility Model
Any technical solution of a problem in any field of human activity which is new and is
industrially applicable. It has a protection term of seven years from the filing date without renewal.
Industrial Design
Any composition of lines or colors or any three-dimensional form that gives special
appearance and serves as pattern to an industrial product or handicraft. The term is 5 years from
the filing date but can be renewed for not more than 2 consecutive periods.
Layout of Integrated Circuit
It is an original topography (picture of the surface) of elements. It is a three-dimensional

disposition prepared for an intergraded circuit intended for manufacture. Its term of protection is
10 years, and it is not renewable.
Trademarks
Trademarks are words, names, or symbols that identify a company, product, or service
and distinguish it from others. Its protection term lasts for 10 years and renewable every 10 years
as long as they remain in use. They need to be officially registered. Obtaining a trademark is
typically much faster and easier than obtaining a patent.
Functions of Trademark
1. Enable a consumer to identify a product (goods or services).

2. Enable companies to differentiate themselves and their products from those of their
competitors.
3. Play a pivotal role in the branding and marketing strategies of companies.
4. Provide incentives for companies to invest in maintaining or improving the quality of their
products.

Geographical Indications
Identify a good as originating in territory, region, or locality, where given quality, reputation,
or other characteristic of the good id essentially attributable to its geographical origin.
Examples of Geographical Indicators
Copyrights
Copyright is a protection for tangible output of a person or a company such as books,

article, software, etc. Copyright is protected after 50 years of the death of the owner. It grants
official ownership and the right of commercialization. It is not necessary to indicate that something
is copyright protected. However, attaching a copyright note helps make it more official and
explicit.
Types of Copyrights
Economic Rights Moral Rights
To require that authorship be attributed to
Reproduction
him
Transformation To make any alterations
First public distribution To object to any distortion
Rental To restrain the use of his name
Public display
Public performance
Communication to the public
Trade Secrets
Going beyond what is written in the technical description of a patent, trade secrets include
business or technical knowledge that is kept secret for the purpose of gaining an advantage in
business over a competitor. They are for example, customer lists, sources of supply, faster
delivery, or lower prices. The protection is established by the nature of the secret and the effort
to keep it secret. Not all forms of protection are applicable to all forms of intellectual property.
However, the main controversy that still has not been finally resolved is the role and the extent of
patent protection of IP.

LICENSING
Closely linked to protecting IP are the topics of licensing or transferring IP. All IP that is
protected can essentially be licensed to another company in exchange for money or access to its
IP and other resources.
A license is a contract by which one party commits to do or pay something in return for
the others party’s doing or paying something. Any contingency that can be written into a contract
can be written into a licensing agreement. Usually the licensee, who receives a right, pays an
initial payment an ongoing royalty for permission to use the IP. This permission can be either
exclusive (only the licensee is entitled to use the protected technology) or nonexclusive (others
are also allowed to exploit the object of the license). A license can also be restricted to a specific
purpose or geographic region.
The importance of licensing is that the owner of the property, the licensor, retains
ownership. He/she does, however, partially transfer the rights to the licensee in a formal contract
that binds both parties legally. This requires a careful definition of the content and scope of the
contract, in particular, which has the right to exploit what, where, and when.
Negotiating Licensing Contracts
Negotiating license contracts is frequently intricate, especially from the licensor’s

perspective.
1. The entrepreneur always walks a fine line between attracting the potential licensee’s interest
and not revealing too much confidential information.
2. Basic legal knowledge is imperative to understand the contractual obligations.
3. Determining the payment conditions requires some serious attention.
FILING SYSTEM FOR PATENTS, UTILITY MODELS, AND INDUSTRIAL DESIGNS
To file for a patent, utility models, and industrial designs, entrepreneurs need to follow the
following:
• First to file system;
• Coursed through an ITSO (Innovation & Technology Support Office); and
• Must comply with documentary requirement including the prior art search.
Prior Art
Prior Art is the evidences that your invention is already known. An existing product is the
most obvious form of prior art. This can lead many inventors to make a common mistake: just
because they cannot find a product containing their invention for sale in any shops, they assume
that their invention must be novel. It does not need to exist physically or be commercially
available. To know if an invention is already existing, a prior art research is needed. The most
important place for further prior art searching is the worldwide patent system. Some patent
databases contain 90 million documents, collected, and indexed over many years by patent
offices in many countries.

Patent Search Engines
Below are the patent search engines used in prior art searching.
1. Espacenet - https://worldwide.espacenet.com/
2. Patentscope - https://patentscope.wipo.int/search/en/search.jsf
3. USPTO - http://patft.uspto.gov/netahtml/PTO/search-bool.html;
http://patft.uspto.gov/netahtml/PTO/search-adv.htm
4. Japan Patent Office: J-Platpat - https://www.j-platpat.inpit.go.jp/
5. Google Patent - https://patents.google.com/?scholar
ACTIVITY 5
1. Using the table, based on the Philippines Intellectual Property System, identify the details of
each given IP protection as to what is protected and how long the protection lasts?
How long protection

Type of IP Protection What is protected?
lasts?
Patents
Utility Model
Industrial Design
Layout of Integrated Circuit
Trademarks
Geographical Indications
Copyrights
Trade Secrets

2. What would you have to check to ensure that someone else does not have intellectual
property rights over a product or design?
3. What can you do to stop another person from copying your product or design and using it or
selling it?
4. What else would you like to know about intellectual property rights?

LESSON 6: PRODUCTION/OPERATIONS MANAGEMENT
Management is the art of getting things done with and through other people. For the
owner-manager of the business, there are basic managerial concerns that should be attended to.
There are a lot of ways to manage business so that it operates effectively and efficiently. The
business model that works best for an entrepreneur will be related to one’s vision, objectives,
what its product or service is, and the entrepreneur’s personal operational style. As such, the
marketing, production, human resource, and finance functions of every business need to e
addressed on a day-to-day as well as long-term bases. It is imperative for an entrepreneur,
especially the starting ones, to know about how to keep the business running with the least effort.

• Discuss the 6Ms of production management; and
• Explain the production/operations management practices that can be adopted.
Production is an activity that converts materials into useful forms. The materials may be raw
materials, semi-processed or semi-finished goods, or even finished products. The 6Ms of
operations are the basic elements of production.
THE 6MS OF OPERATIONS
Money
Money should ensure that the physical facilities are set up, employees are hired, and
operating systems are installed. When investing in an automation or equipment piece, you must
be sure that it will pay for itself before you buy it. If the machine solves problems are enables you
to understand the outcomes you are hoping for in your company, you should see a wonderful
payback and have instant beneficial effects on your outcomes.
Manpower
Consider the ideal number of people it will take to perform methods and what positions
should they be in. it enables the entire transformation process to operate by manning the
machines or rendering the services required. You have labor to undertake certain duties in order
to create your product. You may also discover your activities struggling if your workforce is not
pleased.
Materials
These are the input that must be converted to the final output. Each method has materials
to be processed or assembled into the job region. When designing an automated solution for use
on the store floor, incoming and outgoing material flows should be strongly regarded. Making
machinery that promotes simple material flow can pay enormous dividends to those who
recognize that minimizing material movements is essential to be a successful lean implementer.
Machines
These includes hardware technology that covers all the machinery and equipment. Each
device used in a method must be able to execute its planned function or task accurately and

reliably. Machines can also include characteristics that enable ideal components to be passed
down stream to subsequent processes in process inspections, self-diagnosis, and error proofing.
Methods
It includes software technology which covers all the operating systems and work methods.
Each item has a process or various procedures before it is prepared to be supplied to a client as
a final product. The techniques used for the product’s value-added job must be consistent and
monitored. The machine should ensure that each process has been carried out correctly and that
each part or assembly being processed is right or complies with the part’s quality requirements.
Management
It determines the organizational modality of the enterprise. It specifies what parts of the
system should be implemented by the enterprise itself and what parts would be outsourced and
subcontracted. It is also defining the precise relationships between and among the different
departments, divisions, and sections of the enterprise as goods and services are being produced.
OPERATIONS MANAGEMENT
Operations management refers to the activities, decisions, and responsibilities of

managing the resources. It is dedicated to the production and delivery of products and services.
It can significantly contribute to the success of the business by using one’s available resources to
effectively produce products and services in a way that satisfies customers. To do this, you must
be creative, innovative, and energetic in improving processes, products, and services. The four
main advantages an effective operation can provide to the entrepreneur’s business incudes:
• reducing the costs of producing products and services, and being efficient;
• increasing revenue by increasing customer satisfaction through good quality and service;
• reducing the amount of investment that is necessary to reduce the required type and
quantify of products and services, by increasing the effective capacity of the operation;
and
• providing the basis for future innovation, by building a solid base of operations skills and
knowledge within the business.
PRODUCTION/OPERATIONS MANAGEMENT PRACTICES
Plan and Control Production. Production planning and control is the key to efficient and
effective production management. It deals with decisions that will enable the entrepreneur to
produce goods or offer services:
• according to customers’ specifications or needs;
• in the quantity demanded;
• by the schedule demanded; and
• at minimum costs.
When the entrepreneur plans, one can anticipate problems, and work out solutions to prevent
problems form occurring.
Adopt the standard production models. Whatever the business needs to produce to able to
sell, it means it is vital to have a production process in place that will help the entrepreneur make
certain that the company has a quality product/service that is needed and produced the way it

was planned. Adopt the standard production models that can help make this part of the business
operate efficiently and economically. (“Operating a small business,” n.d.)
Design plant layout for the better efficiency. Layout pertains to the way machines, workplaces,
and storage areas are in relation to one another. This means arranging and putting together the
right space, appropriate furniture, and proper equipment in such a way as to minimize the
movement and handling of materials to accomplish the tasks called for by the business.
Choose the right machines and equipment. The choice of machine and equipment affects the
overall profitability of your business. Moreover, the money used to buy machines and equipment
is a form of investment. From the very beginning, the entrepreneur has to decide whether the
firm’s production process will be of the machine-driven or automated, or labor-intensive or manual
type, or a combination of both.
The Department of Trade and Industry - Bureau of Small and Medium Enterprise
Development (DTI- BSMED) indicated that when choosing machines and equipment, the
following considerations should be kept in mind by the entrepreneur:
• Operating characteristics. The most important thing to consider in selecting the supplier
or brand for a particular production machine is the operating characteristics of the machine
you need. Establish first your requirements, the intended function of the equipment, and
the operating characteristics of the machine you need for your operations.
• Engineering features. Closely related to the machine’s operating characteristics are its
engineering features. These features must be compatible with your other equipment,
process, and plant layout. Consider the machine’s physical size, power requirements,
maintenance, and safety features.
• Cost. After you have found several machines that fit your requirements, analyze and
compare the cost of each machine in relation to its capacity, efficiency in its use of fuel,
and other technical considerations.
• Quality factors. Consider all possible suppliers before making a final decision. Who
among them is willing to provide installation assistance, warranty and/or maintenance
service? You can buy a second-hand machine, lease equipment, even fabricate your own
machine. You can also consider subcontracting part of your process, so you need not buy
an expensive piece of equipment. There are advantages and disadvantages to each
option. Carefully study each option before deciding on one.
• Purchase based on needs and on time. It is imperative to procure the raw materials,
components, machinery, equipment, supplies, and necessary series need in the
production process on time. This can reduce costs and ensure the quality of needed
materials. To be able to do these, determine correctly what needs to be ordered, the
reliable sources of supply, the quotations, prices and terms for supplies, and the
contracting for the supplies or services. Check the goods upon delivery, or service upon
completion, before final payment.
• Maintain machines and equipment. It is important to keep machines and equipment in

good running conditions. Their proper care and maintenance ensure that there is no
disruption of production due to machine breakdown. Machine breakdown cause delays,

as well as financial costs for repairs. According to the DTI-BSMED Guide (2010), some
tips for proper maintenance are:
o cleaning machine parts after every use;
o applying lubrication on machines regularly at least once a week;
o checking for worn-out parts at least once a month; and
o calibrating machines regularly.
Manage inventory/story well. Stock/inventory pertains to “all the goods a business has for sale,
and all raw materials or parts a business keeps ensuring continuous operations.” Avoid poor
inventory practices by keeping just the right amount of stocks of merchandise, supplies, raw
materials, in-process, and finished goods that are needed to meet sales targets. It is not good
practice to keep too much or too little quantities of materials and goods in stock. To know the right
quantity, keep track of your fast- and slow-moving items, check stocks regularly, and arrange
stocks properly for easy inspection.
Ensure quality control. Defective products can be a result of lack of control. Some guideline to
observe to ensure quality control in production:
• check the quality of your raw materials;
• calibrate measuring and testing equipment regularly;
• maintain machines properly and make sure they are in good condition;
• conduct adequate tests to verify whether the product meets quality standards or not; and
• inspect for quality.
ACTIVITY 6
1. Explain the meaning of production of operations management.
2. Describe the guidelines on how to choose the right machine and equipment for the business.
3. Read through a newspaper’s business section. Find out how an entrepreneur undertakes the
operation management of his/her business.
4. Make a list of the material items you will need to start your business. Write these items in the
box on the following page. Try to estimate the quantities of items you will require when your
business is just starting. Think about how you will transport these items to where your business
is located.

Item Quantity Where to obtain it?
Regular
One-off
or periodic

5. Are my materials easily available at a reasonable price? Remember, transporting materials
over long distances is expensive and not always reliable.
6. If any of the items you need are too expensive, how will you overcome this difficulty?

LESSON 7: HUMAN RESOURCE MANAGEMENT
• describe the definition of human resource management; and
• discuss the human resource management practices that can be adopted.
HUMAN RESOURCE MANAGEMENT DEFINITION

Human Resource Management, according to Cabrera, Altarejos, and Riaz (2016), is the
management of the organization’s personnel and includes recruitment, selection, placement, and
training and development, among others.
According to Noe, Hollenbeck, Genhart, and Wright (2006), human resource management
or HRM refers to the policies, practices, and systems that influence employees’ behavior,
attitudes, and performance. HRM practices, as viewed by\ them, include analyzing and designing
work, determining human resource needs (HR planning), attracting potential employees
(recruiting), choosing employees (selection), teaching employees how to perform their jobs and
preparing them for the future (training and development), rewarding employees (compensation),
evaluating their performance (performance management), and creating a positive work
environment (employee relations). As cited further by Noe, et.al (2006), effective HRM has been
shown to enhance company performance by contributing to employee and customer satisfaction,
innovation, productivity, and development of a favorable reputation in the firm’s community.
HUMAN RESOURCE MANGEMENT PRACTICES

Design an effective recruitment strategy. Recruitment is any practice or activity carried on by
the organization with the primary purpose of identifying and attracting potential employees.
However, because of differences in companies’ strategies, they may assign different degrees of
importance to recruiting. In general, all companies must make decisions in three areas of
recruiting: personnel policies, recruitment sources, and the characteristics and behavior of the
recruiter. These aspects of recruiting have different effects on who the organization ultimately
hires. An applicant’s decision to accept a job offer – and the organization’s decision to make the
offer – depend on the match between vacancy and applicant characteristics (Noe, Hollenbeck,
Genhart, & Wright, 2004).
Adopt a good selection process. Selection is the process by which the organization attempts
to identify applicants with the necessary knowledge, skills, abilities, and other characteristics that
will help the organization achieve its goals. The process of selecting the employees varies
considerably from organization to organization, and from job to job. In most organizations,
selection includes the steps of screening application/resumes; testing and reviewing work
samples; interviewing candidates; checking references and background; and selection among the
applicant. (Noe, Hollenbeck, Genhart, & Wright, 2004).
Develop effective training programs. Training is a set of activities aimed to facilitate learning
of knowledge, attitude, and skills among people in the organization, to, in turn, improve their
current job performance and contribution to the achievement of organizational goals. It has
become part of organizational learning and change in employee performance. Noe (2002)
believed that training is a planned effort by a company to facilitate employees’ learning of job-
related competencies. These competencies include knowledge, skills, or behaviors that are
critical for successful job performance.

Conduct performance management. Performance management is the process through which
managers ensure that employees’ activities and outputs contribute to the organization’s goals
(Noe, et.al., 2004). Performance management is crucial, especially when the business is more
complex, and goals are constantly changing. Measuring and managing performance is a
challenging task and one of the keys to gaining competitive advantage. The conduct of regular
performance assessment either twice a year or yearly will enable the employees to know how
they are doing in their job. During this occasion, skills and abilities gaps must be identified and
appropriate training must be given to fill in these gaps. In other word, if they are not doing as
expected, the employees can be quipped with the right skills and knowledge to positively
contribute to the achievement of business goals.
Implement an attractive compensation scheme. Compensation refers to all forms of financial

returns and tangible services and benefits that employees receive as part of an employment
relationship. Employee benefits refers to the part of the compensation package, other than pay
for time worked, provided to employees in whole or in part by employer payments (e.g. life
insurance, pension, worker’s compensation, and vacation). Compensation also pertains to the
methods and practices of maintaining balance between the interest of operating the company
within the fiscal budget, and attracting, developing, retaining, and rewarding high quality staff
through wages and salaries which are competitive with the prevailing rates for similar employment
in the labor markets.
Design work-family balance programs. Work-family balance may be defined as the degree to
which an individual is able to simultaneously balance the temporal, emotional, and behavioral
demands of both paid work and family responsibilities (Hill, Hawkins, Ferris, and Weitzman,
2001). Work-life balance has been an increasing concern for employees. The increased
demands on the job and at home have made managing work and family life increasingly difficult
(Shore, 1998). But there are ways to help employees balance their work and personal lives, such
as flextime and flexplace programs.
Observe fair employee relations practices. Employee relations or labor relations pertains to a
set of processes and procedures utilized in the interaction between employees and employer to
attain their respective goals, while communication, interpersonal relationships, participation,
discipline, and grievance resolution.
Determine the entrepreneur’s role in the business. Many small businesses being with the
founder-owner doing all the management functions of marketing, production, human resource,
and finance without the help of specialized staff. However, a few would rather concentrate on
one function, and be on top of that function. The DTI-BSMED Handbook Guide (2010) indicated
the following factors which can help the entrepreneur to choose which role(s) to take in one’s
business:
• Education and Training. If you are an engineer or you have some technical training, it will
be natural for you to consider being in the technical or production area. Or if you are an
accountant or have a background in banking or finance, you may want to handle the
finance function.
• Experience. Have you experience working for a manufacturing firm? Were you ever a
member of the kitchen staff of a hotel? How successful were you in doing automotive jobs
for the service center? Your experiences will be handy in performing certain management
functions. You might ask, “What if I don’t have any work experience of all?” or “What if
I’m just a fresh graduate and trying my luck in entrepreneurship?” Did you learn some

skills while helping a relative in the ceramic business during one of those summer breaks?
What did you gain from your summer job or during internship? Remember the skills you
learned from these experiences. You might need them when deciding which management
function to assume in your business.
• Interest and Talent. Not having the education or the experience to back up your inclination
to take on a specific management function will not disqualify you. For all you know, you
might have the interest or the talent for it. If you have people skills, are cheerful but
commanding and persuasive, you may do well in sales or in personnel management even
without any experience or formal training. After all, you can develop these skills by
attending some seminars or short courses. On the other hand, if you enjoy working with
your hands and putting things together, you can handle production.
• Time. Granting you have training, the experience, and the interest and talent to assume
a management function, do you have the time for it? Can you devote most of your time
to the particular management area you selected? Take time to do an objective personal
assessment of the situation. Ask yourself if you are able and will have the time to handle
all the management functions in case you decide to be on top of everything. Remember,
you are not only an entrepreneur. Ours is a pluralistic society. Besides being a spouse,
a parent, an offspring, or even a sibling, you can be a jack-of-all-trades and be everywhere
in our business without sacrificing any of life’s essential, then go for it!
• The Pros and Cons of Having a Bird’s Eye View. Finally, weigh the advantages and
disadvantages of having a broad view of your business. Being “everywhere” in your
business will allow you t o see the interrelationship among the four management areas;
where one area supports and draw support from the three other areas. While the age-old
sayings “jack-of-all-trades, master of none” is true, consider the setback if you have indeed
plan to become a master of something. If you concentrate in one area, say in finance, you
might neglect the other areas that are just as important. Let us say you opted to
concentrate on production. As you look for ways to become more efficient in order to
produce more at a faster rate, you might lose sight of the other areas, like sales and
finance. This could lead your business to end up with too many unsold stocks and incur
losses due to overproduction and an over investment in machines.
Get the right people. In starting a business, the entrepreneur may begin with family members,
relatives, friends, neighbors, or acquaintances as the workforce, but be clear about requiring them
to be professional in the workplace, especially when dealing with you. Match each position with
someone who will meet the requirements of the position with someone who will meet the
requirements of the position. Do not limit applicants to the trained and experienced. Be open to
those who can help the enterprise grow. Choose people who possess the expected work values
and are willing to be trained and to stay in the company after being trained.
Prepare an employee manual. It is always advisable to prepare an employee manual. This

should contain information pertaining to company policies and procedures on working conditions,
compensation, other benefits, discipline, and grievance, processing, among others.
Invest in human capital. Human capital is the quality and quantity of skills, education, and
talents a person has. When people attend classes, become apprentices, obtain graduate
degrees, and receive on-the-job training, they are investing in or improving their human capital.
Allocate sufficient budget for the cost of specialized training that human resources may need to
meet the skills necessary to be able to make the product or complete the service to be offered to

acquire or develop market. There should also be a budget allocated for training people on human
relations and leadership skills.
Motivate people in the workplace. Motivation is a function of willingness and ability (skills) to
do the job, as well as help employees work at high energy levels. Open communication, respect,
fair compensation, training, work-life balance, and empowerment activities and programs will
definitely motivate people in the workplace.
Maintain employees’ commitment and loyalty. When we have doing this is to ensure that the
work environment is safe, healthy, caring for employees, an at least complaint with government
rules and regulations, her as well as company social responsibility. Competitive compensation
and training will also help a lot toward this objective.
Effective communicate policies and practices with employees. communication is very

important so that employees feel they are really part of the organization and, thus, work more and
better. When employees know that what are expected of them, how they will accomplish their
task, instructions are clear, and they are given the opportunity to give feedback to the concerned
stakeholders in the enterprise, they will feel valued and respected. This can lead to better
performance and higher productivity.
ACTIVITY 7
1. Explain the meaning of human resource management.
2. Get hold of the Labor Code of the Philippines. List about 10 Labor Code provisions that the
entrepreneur should comply with in managing his business with regards to his or her workers.
Prepare a collage on this using a bond paper.
3. Select a task that needs to be carried out within a business. Identify the work that needs to be
done and determine the professional profile of the person needed to do that work.

LESSON 8: THE BUSINESS MODEL
• describe the concept of business model;
• identify the different business model basic building blocks; and
• create a business model canvas.
BUSINESS MODEL DEFINITION
Business Model describes the rationale of how an organization creates, delivers, and captures
value. A business model essentially defines how a firm competes in the marketplace and how it
earns profits from this activity. This includes, in particular, how the firm structures its relationships
with customers and suppliers. All else being equal, the profit that can be made from the technology
depends on choosing the right business model. The tradeoff is to find a balance between quick
market access and, at the same time, maximizing the returns from the investment made. It also
relates to decisions on whether to make or buy, whether to sell or license products or components,
and whether to sell a product or a service or a combination of both.
Internal factors that influence the choice within this continuum are the founder’s long-term
ambition Versus the immediate economic and promotional needs of the technology at the
particular moment. Externally, it depends on the ability to mobilize particular market partners to
deliver the technology effectively and quickly. The latter, can serve as a strategic asset,
preventing other companies from entering a particular market. The best product is no good if one
cannot get the resources to build it or deliver it to the customer. Bearing this in mind, it is
particularly important to understand that the business model goes well beyond the boundaries of
the firm. It needs to be defined in relation to other market actors: partners to deliver the product
or service, customers, and its competitors. As it is naturally difficult for small an unknown venture
to enter these types but partnerships, it is advisable to seek out collateral benefits that could
convince potential partners.
A word of warning needs to be issued at this point: there is no standard business model. It
might even be dangerous just to copy successful business models because their success
depends not only on the model as such but also on the ability to execute it. The dependence on
outside partners makes each firm's situation unique. And what works for one company will not
necessarily work for another. That is why spending ample time on answering the questions and
analyzing the company's capabilities and its access to outside partners is so important.
BUSINESS MODEL BASIC BUILDING BLOCKS
A business model includes nine basic building blocks.
1. Customer Segments
• For whom are we creating value?
• Who are our most important customers?
2. Value Propositions
• What value do we deliver to the customer?
• Which one of our customer’s problems are we helping to solve?
• Which customer needs are we satisfying?
• What bundles of products and services are we offering to each customer segment?

3. Channels
• Through which channels do our
customer segments want to be
reached?
• How are we reaching them
now?
• How are our channels
integrated? Which ones work
best? Which ones are most
cost-efficient?
• How are we integrating them
with customer routines?
4. Customer Relationships
• What type of relationship does each of our customer segment expect us to establish and
maintain with them?
• How costly are they? How they integrated with the rest of our business model?
5. Revenue Streams
• For what value are our customers willing to pay? For what do they currently paying?
• How are they currently paying? How would they prefer to pay?
• How much does each revenue stream contribute to overall revenues?
6. Key Resources
• What key resources do our value propositions require? Our distribution channels?
Customer relationships? Revenue streams?
7. Key Activities
• What key activities do our value propositions require? Our distribution channels?
Customer Relationships? Revenue streams?
8. Key Partners
• Who are our key partners? Who are our key suppliers? Which key activities do partner
performs?
9. Cost Structure
• What are the most important costs inherent in our business model? Which key resources
are most expensive? Which key activities are most expensive?
ACTIVITY 8
1. Describe business model.

2. Create a business model canvas of the business you wanted to pursue in the future. Use the
diagram below.
The Business Model Canvass
KEY KEY OFFER CUSTOMER CUSTOMER

PARTNERS ACTIVITIES RELATIONSHIPS SEGMENTS
KEY CHANNELS
RESOURCES
COST STRUCTURES REVENUE STREAMS

LESSON 9: FINANCIAL ACCOUNTING AND MANAGEMENT
The resources you need, to run your business and produce the goods or services, our
people, methods, materials, machine, and management. To have all these resources, you need
money. it is important that you know how to gather, organize, coordinate, and record the money
or financial resources of your business. This is called financial management. Managing the
finances of the company is a prime important since without funds, the business will not be able to
operate. Recording, analyzing, and making decisions about the finances of the business are basic
functions of the entrepreneur who owns the business.

• describe the concept of bookkeeping and accounting;
• determine the types of financial statements;
• discuss how to keep business records in the task corresponding to it; and
• Determine how to interpret financial statements and explain how to prepare business
report
BOOKKEEPING
Bookkeeping is the science of recording history. It is the physical recording of someone's

transactions as they relate to assets, liabilities, income, and expenses (Stern, 1993).
bookkeeping is an indispensable subset of accounting. Bookkeeping refers to the process of
accumulating, organizing, storing, and accessing the financial information base of an entity, which
is needed for to basic purposes: a) facilitating the day-to-day operations of the entity, and b)
preparing financial statements, tax returns, and internal reports to the manager. Moreover,
bookkeeping (also called record keeping) can be thought of as the financial information
infrastructure of an entity. Every record keeping system needs quality control built into it, which
are called internal controls. it differs from accounting in that bookkeeping includes less analysis
ad advice.
Keeping good records is very important to your business. Good records will help you do
the following:
• Monitor the progress of your business
• Prepare your financial statements
• Identify sources of your income
• Keep track of your deductible expenses
• Keep track of your bases in property
• Prepare your tax returns
• Support items reported on your tax returns
TYPES OF BUSINESS ACTIVITIES
1. Service Business is a type of business engaged in rendering or providing services to clients

for a fee.
Examples are professional services, utilities, transportation, BPOs, entertainment services,
hotel and restaurant services, advertising, computer and information services, education and
training, etc.

2. Merchandising Business is a type of business engaged in buying and selling of products for
a profit. Examples are supermarkets and grocery stores, department stores, car dealers,
hardware stores, etc.
3. Manufacturing Business is a type of business engaged in the manufacturing or processing
of raw materials into finished products which are then sold for a profit. Examples are:- car
manufacturers, food processors, wine and soft drinks producers, electronics manufacturers,
pharmaceutical companies, etc.
ACCOUNTING
Accounting is the medium of communication through which financial information is

provided to interested parties for economic decision-making. As such it is also called the
“language of business”.
USES OF FINANCIAL INFORMATION
1. Internal Users
• Owners – owner(s) need to know how much return is earned on his/their investment.
• Management – to know if their policies are effective and in using available resources.
2. External Users
• Banks, creditors, and lenders –to determine the ability of borrowers to pay their loans on
maturity.
• Government (such as BIR, SEC, DTI) – to determine compliance of tax and reporting
requirements.
• Prospective investors – to know if the money they are going to invest will be placed in
good hands.
PHASES OF ACCOUNTING SYSTEM
There are four phases of accounting system. These are recording, classifying,
summarizing, and interpreting.
1. Recording involves recording business financial transactions in a systematic and

chronological manner in the appropriate books or databases, usually called a journal.
2. Classifying involves sorting and grouping similar items under the designated name, category,
or account. This phase uses systematic analysis of recorded data in which all transactions
are grouped in one place, usually called a general ledger.
3. Summarizing involves compiling and summing up the data into financial information after
each accounting period, such as a month, quarter, or year. The data must be presented in a
manner which is easy to understand and use by both external and internal users of the
accounting statements.
4. Interpreting is concerned with analyzing financial data and is a critical tool for decision-
making. This final function interprets the recorded data in a manner which allows end-users
to make meaningful judgments regarding the financial conditions of a business or personal
account, as well as the profitability of business operations. This data is then used to prepare
future plans and frame policies to execute financial plans.

FINANCIAL STATEMENTS
Financial Statements are accounting, or financial reports prepared periodically to inform

the owner, creditors, and other interested parties as to the financial condition and operating results
of the business. Financial statements provide the users and other interested parties with useful
information that may affect the decisions they are confronted with.
BASIC TYPES OF FINANCIAL STATEMENTS
1. Income Statement (Statement of Performance). It is the financial statement that shows the
operating results of a business for a specific period of time, usually a month, a quarter, or a
year. The components of an income statement are Revenues and Expenses to determine
Net Income or Net Loss, and is represented by the following formula:
Revenue – Expenses = Net Income or Net Loss
- If revenue is larger than expense the result is a net income.

- If revenue is lesser than expense, the result is a net loss.
2. Capital Statement (Statement of Equity). It is the financial statement that summarizes all
the changes in owner's equity that occurred during a specific period, usually a month or a
year.
The capital statement serves as the bridge between the income statement and balance
sheet. It uses the net income/loss from the income statement in addition to the owner's
drawings as derived from the ledger to determine the Owner's Capital balance.
The major components of capital statement are the:

• Owner's Beginning Capital – contains the capital balance at the beginning of the
period.
• Net Income/Net Loss – contains the final calculation of profit or loss as derived from
the income statement.
• Drawings – contains the owner’s total drawings as derived from the trial balance.
• Capital Balance – contains the final calculation of the capital balance at the end of the
period.
3. Balance Sheet (Statement of Financial Position). It is the financial statement which shows
the amount and nature of a business’ assets, liabilities, and owner's equity (capital) as of a
specific point in time. It shows the current financial position or condition of a business as of a
specific point in time. The key elements of a balance sheet are:
• Assets – properties used in the operation or investment activities of a business.
• Liabilities – claims by creditors to the assets of a business until they are paid.
• Owner’s Equity (Capital) – the owner's rights or claims to the assets of the business
4. Statement of Cash Flows. It is the financial statement that shows the movement of cash in
and out of the business. It presents cash inflows (receipts) and outflows (payments) in the
three activities of business: operating, investing, and financing.

QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS
To be useful and helpful to users, financial statements must have the following qualities
or characteristics (Qualitative Characteristics).
1. Understandable. Accounting information must be comprehensible. Accountants should

present data that can be understood by any users of information and should be expressed in
a form properly classified and with terminology adapted to the user’s range of understanding.
2. Relevant. In order to be relevant, information must not only be timely but should also possess
feedback value and/or predictive value for it to be effective in business decisions.
• Feedback Value – refers to information about what has happened in the future.
• Predictive Value – refers to information that will help guide the user in predicting what
will occur in the future.
3. Reliable. In order to be reliable, information must be:

• Complete
• Free from material error
• Neutral and unbiased
• Faithfully represents the information contained therein.
4. Comparable. In order to be comparable, financial reports should be consistent, which
means that the procedures and methods used in preparing the report should remain
unchanged from period to period. This allows users to compare financial statements of
different entities (businesses) or to compare the same entity (business) over different periods.
Comparisons over time are difficult unless there is consistency in preparing financial reports
across periods. An exception to this concept is when a change would present a better
presentation of economic activity. However, when a change occurs, the reason for the change
must be disclosed and well-explained in the financial statements.
ACCOUNTING PRINCIPLES
Accounting principles are important concepts, assumptions, ideas, rules, procedures,

methods, and/or accepted practices which accountants observe in recording business
transactions and in reporting financial information. These are set of rules that govern the
accounting process and can serve as its foundation to avoid misconceptions and enhance the
understanding and usefulness of the financial statements.
Below are some of the common accounting principles observed by the accounting
industry:
1. Revenue Realization Principle requires companies to record revenue at the time the goods
are actually sold, or the services are rendered even if no cash has been received.
2. Matching Principle requires companies to “match” (or offset) the revenues with the expenses
incurred in generating this revenue during the same period. This principle prevents
understatement of expenses in one period and overstatement of expenses in another period.
3. Cost Concept requires that most assets are recorded at their original acquisition cost and no
adjustment is made for increases in market value.

4. Business Entity Concept requires every business to be accounted for separately from the
owner. Personal and business-related transactions are kept apart from each other. In other
words, the separate personal transactions of owners and others are not commingled with the
reporting of the economic activity of the business.
5. Monetary Unit Assumption assumes that business transactions and events are measured
in money and only transactions that can be monetized (stated in a monetary unit such as the
peso) are recorded and presented in financial statements. Simply stated, money is the
common denominator or measurement used for reporting financial information.
6. Going Concern Assumption assumes that a business will continue operating for a long time
and will not close or be sold in the foreseeable future. If a business is viewed to be closing in
the near future for some reason, there is no point in preparing its financial statements as it will
not be useful to users anymore.
7. Accounting Period Assumption assumes that business operations can be recorded and
separated into different time periods such as months, quarters, and years. This is required in
order to provide timely information that is used to compare present and past performances.
• Calendar Year – is a twelve-month period that starts on January 1 and ends on
December 31.
• Fiscal Year – also a twelve-month period that starts from the first day of any month,
except January, and ends 12 months thereafter.
• Interim Period – is a business period within an accounting period. Some businesses
prepare financial reports at any date even if the 12-month period is still not due, e.g.,
monthly, quarterly, or semi-annually.
DOUBLE ENTRY BOOKKEEPING SYSTEM
The double-entry system is a type of accounting/bookkeeping system that requires every

transaction to be recorded in at least two places (or two accounts) using a debit and a credit.
Every transaction is recorded in a "formal" journal as a debit entry in one account, and as a credit
entry in another account.
The double entry system also has built-in checks and balances. Due to the use of debits
and credits, the double-entry system is self-balancing, i.e., the total of the debit values recorded
must equal the total of the credit values recorded.
ACCOUNTING EQUATION
Accounting Equation is the foundation of double-entry bookkeeping. It is the mathematical

expression of the relationship between the 3 major categories of accounts, i.e., Assets, Liabilities
and Owner’s Equity. The equation is expressed as under:
Assets = Liabilities + Owner's Equity (or Stockholder’s Equity)
Accounting is based on this fundamental accounting equation, which essentially means

that what the business owns is equal to what it owes to creditors and the owner or stockholders.
If a company keeps accurate records, the accounting equation will always be “in balance,”
meaning the left side should always equal the right side. The balance is maintained because

every business transaction affects at least two of a company’s accounts involving a Debit and a
Credit.
ACCOUNTING ELEMENTS AND TYPES OF ACCOUNTS
An account is a separate record for each type of asset, liability, equity, revenue, and
expense used to show the beginning balance, the increases and decreases for a period, and the
ending balance at the end of the period. There are 3 accounting elements: Assets, Liabilities,
Owner’s Equity (or Stockholder’s Equity).
1. Assets are the properties used in the operation or investment activities of a business. They
are a company’s resources, or the things that the company owns.
Current Assets – are cash and other properties normally expected to be converted to cash
or used up usually within a year. Examples are:
• Cash – monetary items that are available to meet current obligations of the business.
It includes currency & coins, bank deposits, checks, money orders, and traveler’s
checks.
• Accounts Receivable – business claims against the property of a customer arising
from the sale of goods and/or services on account.
• Notes Receivable – formal written promises given by customers or others to pay

definite sums of money to the business at specified times.
• Prepaid Expenses - expenses that are already paid in cash during the period, but not
yet incurred or spent as at the end of an accounting period. Examples are:
o Supplies – items used by a business in the course of its operation such as
office supplies, medical supplies, repair supplies, laundry supplies, etc.
o Prepaid Rent – advance payment of rental space.
o Prepaid Insurance – advance payment of insurance coverage.
Non-current (Fixed) Assets – are long-term, tangible assets or properties owned by the
business which are not expected to be consumed or converted to cash in the current or
upcoming fiscal year.
• Equipment – properties used in the business during the production of income such as
computers, repair equipment, medical equipment, laundry equipment, etc.
• Furniture – items used in a business office such as tables, desks, chairs, and cabinets.
• Vehicles – includes trucks, cars, jeeps, motorbikes, etc. used for transportation
purposes by the business.
• Buildings – properties or structures erected on land and used for the conduct of
business.
• Land – parcels of earth on which an office building is constructed for use by the
business.

2. Liabilities are a company’s obligations or the amounts that it owes. It is also referred to as
the claims by creditors against the company’s assets (creditor’s equity).
Current Liabilities – debts or obligations of the business that are expected to be paid within
one year using current resources. Examples are:
• Accounts Payable – creditor's claims against the business's property arising from the
business's purchase of goods and/or services on account.
• Notes Payable – formal written promises to pay definite sums of money owed at
specified times.
• Unearned Revenue – are advanced payments by clients for services to be rendered

or goods to be delivered in the future.
• Accrued Expenses – are expenses already incurred but are not yet paid at the end of
an accounting period. Examples are:
o Salaries Payable – salaries that are unpaid at the end of an accounting period.
o Rent Payable – rental payment that are unpaid at end of an accounting period.
o Interest Payable – interest payment that are unpaid at end of an accounting
period.
o Utilities Payable – utilities payment that are unpaid at end of an accounting
period.
Long Term Liabilities – debts or obligations of the business that are payable for more than
a one-year.
• Mortgage Payable – long-term debts which are secured by collateral.
• Long-Term Notes Payable – notes payable that are due after one-year.
3. Owner's Equity (or Capital), also called net worth, is the rights, claims or interests of the
owner to the assets (or properties) of the business. Included in owner’s equity are additional
investments, either cash or property, which the owner puts in his business.
Sub-categories of Owner’s Equity
• Owner's Drawing – is the amount the owner withdraws from his business for living
and personal expenses.
• Revenue (or Income) – is the amount a business earns by selling services and goods.
Examples are:
o Sales – amounts earned from sale of goods or merchandise.
o Service Income – amounts earned from service rendered by a service
company to its customers.
o Professional Fees – amounts earned from services rendered by a professional
to its clients.
o Rent Income – amounts earned from renting properties or facilities.
o Interest Income – amounts earned representing the time value of money
derived from loans or from promissory notes received by a business.

• Expense (or Cost) – is the cost incurred in conducting the business activities.
Examples are:
o Salaries Expense – expenditures for work performed by employees.
o Rent Expense – expenditures paid to an owner of building or an office space
for the use of the property.
o Supplies Expense – expenditures for incidental materials needed in the
conduct of business, such as office supplies, medical supplies, repair supplies.
o Utilities Expense – expenditures for basic services, such as water, gas,
electricity, and telephone.
o Advertising Expense – promotional expenditures, such as in newspapers,
television, radio, and mail.
o Maintenance Expense – expenditures paid to repair and or maintain buildings
and/or equipment.
o Miscellaneous Expense – other expenditures that cannot be categorized from
the above.
CHART OF ACCOUNTS
Chart of Accounts is a coded or numbered listing of all the accounts used by a business
entity. The chart is prepared by the owner or the accountant to be used in recording business
transactions in books of account. The accounts are listed sequentially in the chart per the
following arrangement:
• Asset accounts – which may be numbered from 101 to 199
• Liability accounts – which may be numbered from 201 to 299
• Equity accounts – which may be numbered from 301 to 399
• Revenue accounts – which may be numbered from 401 to 499
• Expense accounts – which may be numbered from 501 to 599.
Sample Chart of Accounts of a Service Business
Assets Equity
101 – Cash 301 – Owner, Capital
105 – Accounts Receivable 302 – Owner, Drawing
110 – Notes Receivable
115 – Prepaid Rent Revenue
120 – Prepaid Insurance 401 – Service Income
125 – Office Supplies 402 – Sales
130 – Office Furniture 403 – Computer Fees
135 – Equipment 405 – Rent Income
140 – Vehicles 407 – Medical Fees
409 – Consultation Fees
Liabilities 412 – Miscellaneous Fees
201 – Accounts Payable
205 – Notes Payable Expenses
210 – Unearned Revenue 501 – Salaries Expense
215 – Interest Payable 505 – Rent Expense
220 – Salaries Payable 510 – Supplies Expense
225 – Utilities Payable 515 – Advertising Expense
230 – Mortgage Payable 520 – Tax and Licenses Expense
235 – Long-term Notes Payable 525 – Utilities Expense
530 – Transportation Expense
535 – Miscellaneous Expense

FUNDAMENTALS OF DEBITS AND CREDITS
1. Debit – an entry (amount) recorded on the left side (column) of an account that increases
an asset, drawing or an expense, or an entry that decreases a liability, owner's equity
(capital) or revenue. It is also referred to as the value received (VR) by a business.
2. Credit – an entry (amount) recorded on the right side (column) of an account that increases
a liability, owner's equity (capital) or revenue, or an entry that decreases an asset,
drawing, or an expense. It is also referred to as the value parted with (VPW) by a business.
From these definitions, we can deduce that:
• All accounts have a Debit side which is the left column and a Credit side which is the right
column.
• Also, all accounts have a Decrease side and an Increase side.
• However, Debits do not always represent increases to an account's balance. Nor, do they
always represent decreases to an account's balance.
• Likewise, Credits do not always represent increases to an account's balance. Nor, do they
always represent decreases to an account's balance.
• Whether a debit or credit is an increase or decrease depends on the type of account.
• Also, a debit to a particular type of account always does the opposite that a credit does.
In other words - if a debit increases an account's balance, a credit decreases that
account's balance, or vice versa - if a debit decreases an account's balance, a credit
increases that account's balance.
Other important points to consider:
• Debit amounts are always added together.

• Likewise, Credit amounts are always added together.
• But when a debit amount and credit amount are involved, they are subtracted from each
other.
• All Accounts have a Normal Balance which is either a Debit Balance or a Credit Balance.
• Since Asset, Drawing and Expense accounts increases on its Debit side (left side), they
will normally have a DEBIT Balance.
• And since Liabilities, Owner’s Equity and Revenue Accounts increases on its Credit side,
they will normally have a CREDIT Balance.
DEFINITION OF AN ACCOUNT’S NORMAL BALANCE
1. Normal Debit Balance is the amount on the left side (debit side) of an account that is larger
than the amount on its right side (credit side) or the amount that increases the LEFT side
(DEBIT) of an account.
2. Normal Credit Balance Is the amount on the right side (credit side) of an account that is
larger than the amount on its left side (debit side) or the amount that increases the RIGHT
side (CREDIT) of an account.

RELATIONSHIP BETWEEN THE ACCOUNTING EQUATION AND THE DEBIT &
CREDIT RULES
Assets = Liabilities + Owner's Equity

Left Side of Equation Right Side of Equation
Assets Liabilities Owner’s Equity
Left Side Right Side Left Side Right Side Left Side Right Side
or Debit or Credit or Debit or Credit or Debit or Credit
Increase Decrease Decrease Increase Decrease Increase
Normal Debit Balance Normal Credit Balance Normal Credit Balance
Notice in the table that:

• A debit increases the balances on the left side of the accounting equation (assets) and
has the opposite effect and decreases the balances on the right side of the equation
(liabilities and owner's equity).
• Conversely, a credit decreases the balances on the left side of the accounting equation
(assets) and has the opposite effect and increases the balances on the right side of the
accounting equation (liabilities and owner's equity).
FURTHER EXPLANATION ON THE RELATIONSHIP BETWEEN THE ACCOUNTING

EQUATION AND THE DEBIT & CREDIT RULES
• Standard Version:
Assets = Liabilities + Owner's Equity.
+ Revenue
- Expense (contra-equity account)*
- Drawing (contra-equity account)*
*A contra account is an account which is contrary to the expected or

normal balance of a related main account. It offsets the normal balance of
the related main account.
• Expanded Version:
Assets = Liabilities + Owner's Equity + Revenue – Expense – Drawing
• Rearranged Expanded Version (Debit and Credit Equation):

Assets + Drawing + Expense = Liabilities + Owner’s Equity + Revenue
Normal Debit Balance Accounts = Normal Credit Balance Accounts
In this rearranged form of our expanded accounting equation, all the types of accounts
that have a normal debit balance are listed on the left side of the equal sign and all the types of
accounts that have a normal credit balance are listed on the right side of the equal sign.

Based on our Debit and Credit Equation we can state the following:
• Asset, Drawing and Expense Accounts have all normal debit balances.
• Liabilities, Owner’s Equity and Revenue accounts have all normal credit balances.
And to help you to remember which accounts have what kind of normal balance, remember
this acronym:
ADELOR
Which stands for:
Assets, Drawing, Expense Liabilities, Owner’s Equity, Revenue
Normal Debit Balances Normal Credit Balances
ILLUSTRATION OF THE RELATIONSHIP BETWEEN THE ACCOUNTING EQUATION

AND THE DEBIT-CREDIT RULES
Sample Business transactions: Chart of Accounts

Dec 1 - Owner invested P100,000 cash in a repair service
Assets
business.
Cash
2 - Purchased in cash repair equipment worth P 45,000. Accounts Receivable
3 - Purchased on account office furniture worth P Furniture
12,000. Repair Equipment
4 - Received P 12,500 cash for repair services
rendered. Liabilities
5 - Owner withdrew P5,000 for his personal use. Accounts Payable
6 - Paid one-half of the account due to the furniture. Owner’s Equity
7 - Performed service for a customer on account, Owner, Capital
P8,500. Owner, Drawing
8 - Paid the utilities bill for the month, P600 Service Income
9 - Paid salary of shop assistant, P2,000. Utilities Expense
Salaries Expense
10 - Collected partial payment from customer of Dec. 7,
P4,250

ANALYZING BUSINESS TRANSACTIONS
Business transaction, also called a business deal or agreement, is any event or condition
that must be recorded in a company’s books of account because of its effect on the financial
condition of the business. It can also be defined as a barter or exchange of a thing of value from
another thing of value. Thus, in every transaction, if there is a “value received” (VR) there is a
corresponding “value parted with” (VPW).
When analyzing a business transaction, it would greatly help a bookkeeper if he could

determine some factors affecting the accounting elements. He should mentally answer the
following questions:
• What should be the debit entry or value received (VR)?
• What should be the credit entry or value parted with (VPW)?
• What appropriate account title will describe the effect of transaction?
• What accounting elements are affected (Assets, Liabilities, or OE) and what are the
effects? (Is it an increase or decrease)?
Sample Analysis of Business Transactions
The following accounts will be used for recording the debit and credit entries:
Assets Liabilities Owner’s Equity

- Cash - Accounts Payable - Owner, Capital
- Accounts Receivable - Notes Payable - Owner, Drawing
- Office Supplies - Service Income
- Salaries Expense
- Utilities Expense

Transactions VR / Debit Entry VPW / Credit Entry
1) Owner invested cash to new business. Money Obligations to pay back owner
Account Titles: Cash Owner, Capital
Effect on Accounting Elements: Asset - Increase Equity - Increase
2) Bought office supplies in cash. Supplies Money
Account Titles: Office Supplies Cash
Effect on Accounting Elements: Asset - Increase Asset - Decrease
3) Bought computers on account. Computers Obligation to pay vendor
Account Titles: Office Equipment Accounts Payable
Effect on Accounting Elements: Asset - Increase Liabilities - Increase
4) Billed a customer for services rendered. Right to collect from customer Rendered service
Account Titles: Accounts Receivable Service Income
Effect on Accounting Elements: Asset - Increase Equity - Increase
5) Paid the full amount owed for the computer. Offset/cancel obligation to pay Money
Account Titles: Accounts Payable Cash
Effect on Accounting Elements: Liabilities - Decrease Asset - Decrease
6) Received full amount from customer. Money Offset/cancel right to collect
Account Titles: Cash Accounts Receivable
Effect on Accounting Elements: Asset - Increase Asset - Decrease
7) Owner withdrew cash for living expenses. Reduce obligation to pay owner Money
Account Titles: Owner, Drawing Cash
Effect on Accounting Elements: Equity - Decrease Asset - Decrease
8) Paid the electricity bill for the month. Electricity services Money
Account Titles: Utilities Expense Cash
9) Paid the salary of the staff. Employee services Money
Account Titles: Salaries Expense Cash
10) Borrowed money from bank covered by note. Money Obligation to pay bank/note
Account Titles: Cash Notes Payable
Effect on Accounting Elements: Asset - Increase Liabilities - Increase
ACCOUNTING CYCLE
Accounting Cycle is the name given to the collective process of recording the business
transactions or accounting events of a company. It consists of the following processes:
1. Journalizing - the process of recording transactions in a “book of original entry” called a

journal. It is a chronological listing of all the firm’s business transactions.
2. Posting to the Ledger - the process of transferring the accounts from the journal to a “book
of final entry” called the ledger.
3. Preparing a Trial Balance - the process of taking account balances from the ledger and
preparing a list of the debit and credit balances of all accounts. The purpose of preparing a
trial balance is simply to check the mathematical accuracy of the accounts in the ledger.
4. Adjusting the Books – the process of reviewing the ledger balances and making adjusting
entries to bring some accounts to their correct balances. Its purpose is for the financial
statements to present more fairly the financial position and results of operations of a business.
This involves 3 steps:
a. Journalizing adjusting entries
b. Posting adjusted entries to the ledger
c. Preparing an Adjusted Trial Balance

5. Preparing Financial Statements – the process of generating the accounting reports or
financial information to inform interested users as to the performance and financial position of
the business.
6. Closing the Books – this is the process of bringing the nominal or temporary accounts (the
Revenue and Expense accounts) to a zero balance at the end of an accounting period. This
involves three steps:
a. Journalizing the closing entries
b. Posting the closing entries to the ledger
c. Preparing a Post-closing Trial Balance – the post-closing trial balance is only a listing of
the balances of the real or permanent accounts (assets, liabilities, and capital).
BUSINESS PAPERS (OR SOURCE DOCUMENTS)
These are the basis for recording transactions in books of account. These sources of
information provide documentary proofs that a business transaction has occurred. Examples of
source documents are:
• Official Receipt - a document which gives evidence to a transaction involving receipt of cash.
• Invoice - a written itemized statement of service rendered or goods sold to a client, which
include the amount and other particulars of the transaction, such as the name and address of
a client, the date of transaction, the terms of the transactions, etc.
• Promissory Note (PN) - a written promise made by a debtor (maker) promising to pay the
creditor (payee) a certain sum of money at a fixed or determinable future time.
• Cash Voucher - a document which gives evidence to a transaction involving payment of cash.
• Check - a document prepared whenever payment is to be made from cash in bank.
• Bank Deposit Slip - a document which serves as an evidence of placing money in the custody
of a bank.
• Statement of Account - is a bill presented by a creditor requesting payment for sales or

services.
• Payroll Sheet - is a written list of salaries to be paid to employees of a firm.
• Debit Memorandum (DM) - a written notice which informs a client of a reduction in his
account. Ex.: bank service charges or bounced check fees.
• Credit Memorandum (CM) - a written notice which informs a client of an increase in his
account. Ex.: when a customer was overcharged, or when a customer returned defective
merchandise.

ACTIVITY 9
1. Discuss the importance of bookkeeping.
2. Explain the meaning of double-entry bookkeeping
3. Analyze the following business transactions on excel. Observe the proper way of recording
business transactions.
Dr. John Dela Cruz opened the Makati Diagnostic Center, a laboratory where the overseas
contract workers of Cruz Manpower Services (owned also by Dr. John Dela Cruz) go for
laboratory examination as well as the applicants sand employees of Hotel International and
New World. He made the following investments: cash of PHP150,000; laboratory equipment
of PHP 1,500,000; land of PHP 250,000; and building of PHP 2,500,000. The following are
the additional transactions for October:
Oct 3 Purchased furniture and fixtures for cash, PHP 15,000.

Oct 4 Purchased office equipment worth PHP 75,500 on account from Olympia whose owner
is a friend of Dr. Dela Cruz.
Oct 5 Bought office supplies and paid cash of PHP 15,000.
Oct 7 Bought laboratory supplies and paid cash of PHP 30,000.
Oct 8 Received cash of PHP 14,500 from various patients for laboratory work done.
Oct 10 Placed an ad in the Philippine Star to run for three Sundays starting on the 14th. Paid
one third of the amount for PHP 18,000.
Oct 14 Billed the following establishments for laboratory examinations done: Hotel
International PHP 16,000 and New World, PHP 18,000.
Oct 18 Paid for semi-monthly salaries, PHP 25,750.
Oct 19 Paid Olympia PHP 50,000.
Oct 20 Collected PHP 10,000 from Hotel International and PHP 14,000 from New World
Oct 23 Billed Cruz Manpower Services for laboratory examinations of contract workers,
PHP 15,000
Oct 25 Received bills from PLDT – PHP 3,000, and Meralco – PHP 2,500
Oct 27 Returned defective equipment to Olympia and received a reduction of PHP 1,500 from
the outstanding account.
Oct 28 Paid half of the balance owing to Philippine Star.
Oct 29 Paid semi-monthly salaries.
Oct 30 Received cash from various patients for laboratory examinations, PHP 7,500.
Oct 31 Collected in full from Cruz Manpower Services. Used up half of the laboratory supplies
and PHP 5,000 of the office supplies.

JOURNALIZING
Journalizing is the process of recording transactions in a “book of original entry” called a

general journal. It is a chronological listing of all the firm’s business transactions.
A general journal is a two-column journal with the following columnar headings:

• Date – refers to the date when the transaction occurred.
• Particulars – refers to the debit and credit accounts affected by the transaction. A brief
explanation of the transaction is also recorded here.
• Posting Reference (P/R) – refers to the account # of the ledger to which an entry has
been posted.
• Debit – the money column where the debit amount is recorded.
• Credit – the money column where the credit amount is recorded.
GUIDELINES IN JOURNALIZING TRANSACTIONS
1. A complete journal entry should include the following 6 elements:

a. Date of the transaction
b. Debit entry (account)
c. Debit amount
d. Credit entry (account)
e. Credit amount
f. A brief explanation of the transaction
When an entry has only one debit and one credit, the entry is called a simple journal entry.
When an entry has two or more debits or credits, the entry is called a compound journal
entry.
2. The date in a general journal includes the year, month, and day when the transaction
occurred. These complete data are recorded on the first entry of every journal page. Unless
there is a new year or month on the journal page, it is sufficient to record only the day for
subsequent entries.
3. The debit account is recorded at the extreme left margin of the particulars column. If there are
two or more debit accounts, these are all placed alongside the extreme left margin.
4. The credit account is recorded with a half-inch indentation from the extreme left margin of the
particulars column to distinguish it from the debit account. All credit accounts are similarly
placed. It is important to note that all debit accounts are recorded before the credit accounts.
5. The explanation of the transaction must be brief and concise. This is also placed with an
indentation of one inch from the extreme left margin of the particulars column.
6. Usually, a line is left free between transaction entries.
7. When recording the peso amounts in the money columns, no commas or period need to be
used. The journal money columns are designed with specific boxes for each amount.

8. A peso sign may be placed before the first amount in a money column. No other peso sign is
necessary as all numbers in money columns are presumed to be in pesos.
9. When transactions do not include centavos, the centavo column may be left blank. Dashes
(-) or ciphers (00) may also be used.
Sample Illustration of Journal Entries
GENERAL JOURNAL
Page
Date Particulars P/R Debit Credit
2016
1 Jan 1 Debit entry P 1 0 0 0 0 0 -
2 Credit entry P 1 0 0 0 0 0 -
3 Brief explanation
4
5 3 Debit entry 2 0 0 0 0 -
6 Credit entry 2 0 0 0 0 -
7 Brief explanation
8
POSTING TO THE LEDGER
Posting to the ledger is the process of transferring the account balances from the journal
to a “book of final entry” called the ledger.
The ledger or general ledger consists of all the individual accounts maintained by a
company. Each ledger account is identified by an account name and an account number which
are written on top of each ledger. Each ledger is divided into six columns with the following column
titles:
a. Date – date of transaction as recorded in the journal.
b. Remarks – brief explanation of the transaction (optional for our purposes, except when
there is a beginning balance, then a “Balance” remark should be written).
c. Posting Reference (P/R) – indicating the journal page in which the transaction was first
recorded.
d. Debit – amount of the debit entry.
e. Credit – amount of the credit entry.
f. Balance – a running balance of the transaction.
Sample Ledger Template
Acct Title: Acct No.:

Balance
Date Remarks P/R Debit Credit
Debit Credit

GUIDELINES IN POSTING TO THE LEDGER
Posting may be done daily, weekly, or even monthly depending on the needs of a
business. The procedures to follow in posting to the ledger are:
1. Locate the ledger account where the first debit in the journal is to be posted.
2. Transfer to the pertinent columns in the ledger information on date, explanation (optional),
and debit amount.
3. In the posting reference column of the ledger, write down the page number of the journal from
which the debit entry is being posted.*
4. In the posting reference column of the journal, write down the account number of the ledger
to which the debit entry has been posted.*
5. Post the running balance of each transaction.
6. Follow the same procedures for the next entry to be posted. If the next entry is a credit, apply
the same procedures but post the amount on the credit side of the account.
* The process of entering the journal page on the ledger and the ledger account on the journal is called “cross-
referencing”, to enable anyone to trace an entry from the journal to the ledger and vice-versa.
Illustration for Posting to the Ledger

PREPARING THE TRIAL BALANCE
Preparing the trial balance is the process of taking account balances from the ledger and
preparing a list of the debit and credit balances of all accounts.
The purpose of preparing a trial balance is simply to check the mathematical accuracy of
the amounts in the ledger. Trial Balance is a statement that shows the balances of all the ledger
accounts presented in their debit and credit balances which are then totaled. The trial balance
has two main functions:
• To verify if the total debits and the total credits of the ledger accounts are equal; and
• To provide the necessary information required for the preparation of the financial
statements.
The procedures in preparing a trial balance are the following:
• Place the heading at the top center of the report. The heading should include the name of
the company, the name of the statement, and the date of the statement.
• Copy the accounts from the general ledger in the order in which they appear (or
alternatively, in the order in which they appear from the chart of accounts), writing the
account number, account title and the account balances in the appropriate debit and credit
money columns.
• Rule the bottom of the money columns, add the balances in each column and “pencil foot”*
the totals. If the debit and credit totals are equal, write down the final totals in ink and
double-rule them.
*Pencil-footing is the method of writing down in small pencil notation the initial totals of
balances in each column to compare if they are equal before finalizing the totals. This is to
allow the person preparing the report to locate and fix the error first, in the event the initial
summation of the balances is unequal.
Sample Illustration of a Trial Balance
Ace Repair Shop

Trial Balance
December 31, 20xx
Acct # Account Title Debit Credit

101 Cash PHP 58,150
105 Accounts Receivable 4,250
120 Furniture 12000
125 Repair Equipment 45,000
201 Accounts Payable PHP 6,000
301 A. Celis, Capital 100,000
302 A. Celis, Drawing 5,000
401 Service Income 21,000
501 Utilities Expense 600
505 Salaries Expense 2,000
127,000 127,000
PHP 127,000 PHP 127,000

LIMITATIONS OF A TRIAL BALANCE
The Trial Balance only confirms that the total of all debit balances matches the total of all
credit balances. However, trial balance totals may agree despite errors.
Examples of errors that do not create inequality in the totals of a trial balance are:
• Omission of a complete transaction entry in the journal.
• Recording a complete transaction entry more than once in the journal.
• Failure to post a complete transaction entry to the ledger.
• Posting a complete transaction entry more than once to the ledger.
• Posting a complete transaction entry to the wrong accounts in the ledger.
• Posting a complete transaction entry which has been incorrectly recorded in the journal.
Common errors that would cause the trial balance to be unequal or out of balance are:
• Addition or subtraction errors.
• An omitted account.
• An account balance entered in the wrong amount column.
• Transposition error – an error in which the order of the digit is changed, e.g. 542 instead
of 452.
• Slide error – an error in which the entire number is moved one or more spaces to the left
or right, e.g., writing 542.00 as 54.20.
LOCATING TRIAL BALANCE ERRORS
When the debit and credit totals do not agree, the following steps may be followed to
locate errors.
1. Check the addition of both debit and credit totals of the trial balance.
2. Check if the balances entered in the trial balance are the correct balances of the ledger
accounts and if these are written on the correct debit or credit side.
3. Check the correctness of the balances of the ledger accounts.
4. Check all postings back to the journal.
5. Determine the difference between the total debits and the totals credits in the trial balance
and locate the error through any of the following procedures:
• Look for the amount of difference in the ledger accounts and the journal to check if entries
have been posted twice.
• If the difference is divisible by 2, the error is probably a posting of a debit entry on the
credit side and a credit entry on the debit side.
• If the difference is divisible by 9, the error is probably a transposition error which is the
reversing of one or more digits, such as an entry of P132 is entered as P123.
ACTIVITY
1. Journalize the following business transactions using a 2-column general journal/excel.

2. Post to the general ledger, extract the balances, and prepare a trial balance.
Miranda Singh, a medical doctor, invested P 100,000 to open TY Medical Clinic. It began
operations on April 1, 2012 and during the month completed the following transactions:

Apr 1 Received P 50,000 cash from Metro Bank on a note payable that carries an 18% annual
interest rate.
2 Bought furniture worth P 25,000 on credit, terms – 2/10, n/30.
3 Purchased on account medical supplies worth P 8,600.
4 Bought medical equipment worth P 70,000 paying 20,000 in cash and the balance on
terms of 2/10, n/30.
5 Standard Insurance was paid P 3,600 for a one-year fire insurance effective April 1.
6 The building owner was paid P 18,000 as payment for 4 months’ rent starting April 1.
7 Received P 15,600 from various clients for consultation services rendered.
8 Collected from various clients for medical services rendered, P 12,500.
9 Billed clients for medical services rendered, P 14,500.
10 Gave partial payment of P 4,000 on medical supplies of April 3.
11 Paid in full the furniture bought on credit.
12 Collected partial payment of P10,000 from clients billed on April 9,
13 Received P 13,600 from various clients for consultation services.
14 Paid in full the balance of the medical equipment bought on April 4.
15 Received P 16,200 from various clients for medical services.
17 Received P 15,500 cash advance from a client company for services to be provided its
employees.
18 Collected the balance of the billing made on April 9.
20 Paid half a month salary of clinic assistants, P 15,000.
23 Billed a client for medical services rendered, P 10,200.
25 Bought medical supplies on credit worth P 4,700.
26 Miranda Singh withdrew P 10,000 for personal use.
28 Received P 13,500 from various clients for consultation services.
30 Paid miscellaneous expenses for the month, P 3,650.
Chart of Accounts Additional information for adjustments

101 Cash 1. Medical supplies on hand are worth P 3,250.
105 Accounts Receivable 2. Insurance cover for one month has expired.
110 Medical Supplies 3. One-month rent has been used up.
115 Prepaid Insurance 4. The agreement with Metro Bank is that loan amount will be paid
120 Prepaid Rent after 6 months together with the interest. Accrue a one-month
130 Furniture interest on the bank loan from Metro Bank.
131 Accumulated Depr. – Furniture 5. It was determined at the end of April that P 8,600 worth of medical
140 Medical Equipment services has been provided to the employees of the client company.
141 Accumulated Depr. – Medical Eqpt 6. Furniture is estimated to have a useful life of 5 years with a salvage
201 Accounts Payable value of P 3,500. Calculate and record the monthly accumulated
205 Notes Payable depreciation using the straight-line method.
210 Unearned Revenue 7. Medical equipment is estimated to have a useful life of 10 years with
215 Interest Payable a salvage value of P 6,000. Record the monthly accumulated
220 Salaries Payable depreciation using the straight-line method.
225 Utilities Payable 8. Utility bills worth P 3,000 due at the end of April will be paid in the
301 Dr. Young, Capital first week of the following month.
302 Dr. Young, Drawing 9. Salaries of clinic assistants for the second half of April are due to be
401 Medical Service Fees paid on the 5th day of the following month.
405 Consulting Fees
501 Salaries Expense
505 Rent Expense
510 Insurance Expense
515 Medical Supplies Expense
520 Interest Expense
525 Utilities Expense
540 Depreciation Expense
545 Miscellaneous Expense

ADJUSTING THE BOOKS
Adjusting the books is an accounting process made at the end of an accounting period
that involves adjusting and updating certain accounts to their correct balances. These are entries
made at the end of an accounting period to adjust and update certain accounts to their correct
balances. This process involves three steps:
1. Recording adjusting entries in the journal.
2. Posting the adjusted entries to the ledger.
3. Preparing an adjusted trial balance.
Adjusting entries have the following characteristics:

• They are internal transactions - no new source document exists for the adjustment.
• They are non-cash transactions - the Cash account will never be used in an adjusting
entry.
• They will always involve at least one income statement account and one balance sheet
account.
Here are some common adjusting entries:
1. Depreciation – Depreciation is the allocation of the cost of property over its period of use. It
is the decrease in value of a fixed asset, such as property, plant, and equipment over its useful
life. Depreciation is usually calculated using the straight-line method to determine the asset’s
accumulated depreciation and net carrying value at the end of accounting period. When using
the straight-line method for calculation, three factors are considered:
• The cost of the property. Straight-line Method Formula:

• The salvage value of the property. Cost – Salvage Value
• The estimated useful life of the Annual Depreciation =
Estimated Useful Life
property.
*Salvage value is the estimated resale value of as asset at the end of its useful life.
Example Transaction: On January 1, 2012, Company A bought an equipment for P160,000.

The equipment is estimated to have a useful life of 10 years and a salvage value of P40,000.
What is the accumulated depreciation at the end of December 2012.
160,000 – 40,000
Depreciation = = 12,000
10
Journal Entry:
Jan 01 Equipment 160,000
Cash 160,000
Adjusting Entry:
Dec 31 Depreciation Expense 12,000
Accumulated Depreciation 12,000
Depreciation is recognized at the end of the accounting period by recording a journal entry
with a debit to Depreciation Expense and a credit to Accumulated Depreciation. Accumulated

Depreciation is a contra-asset account that is deducted to an asset’s cost value to determine
its carrying value.
Fractional Depreciation – refers to a proportionate amount of depreciation for less than

one year.
Cost – Salvage Value
Monthly Depreciation =
Estimated Useful Life x 12
2. Bad Debts/Doubtful Accounts – is an estimate of the percentage of accounts receivables
that are expected to be uncollectible from the credits a company gave to its customers. Bad
Debts Expense is an Income Statement account (an expense) and is debited in the journal
book, while Allowance for Doubtful Account is a contra-asset account to the Accounts
Receivable account and is therefore always credited in the journal book. The difference
between Accounts Receivable and the Allowance for Bad Debts accounts is the Net
Realizable Value of the Accounts Receivable.
The amount of bad debts is usually estimated on the basis of the following:
• Company’s own experience based on historical uncollected receivables;
• Experience of similar companies;
• Management decision.
Example Transaction: Suppose Company Y has an account receivable of P500,000 at the

end of March, and it was determined that 5% of these receivables may not be collected, i.e.,
500,000 x 5% = 25,000. The adjusting entry at the end of the year is:
Adjusting Entry:
Mar 31 Bad Debts Expense 25,000
Allowance for Bad Debts 25,000
Provision for doubtful accounts.
3. Prepaid Expenses – Also called “deferred expenses”, are expenses that are already paid in
cash during the period, but not yet incurred or spent as at the end of an accounting period.
Prepaid expenses are asset accounts as they are amounts owned by a company that has
economic value. Some common examples are:
• Supplies – Unused supplies at the end of an accounting period.
• Prepaid Rent – Advance payment paid in cash to the lessor for building or office
space.
• Prepaid Insurance – Insurance premium paid at the beginning or during an
accounting period.
Example 1: On January 3, Company A bought supplies costing 1,200.
Original Journal Entry:

At the end of January, an inventory showed that P300 worth of supplies is still unused.
The supplies that were consumed will be analyzed as follows:
Supplies bought 1,200
Less: Actual supplies on hand 300
Supplies consumed 900
Adjusting Entry:
ASSET METHOD EXPENSE METHOD
Jan 31 Supplies Expense 900 Jan 31 Supplies 300
Supplies 900 Supplies Expense 300
Example 2: On January 2, Company B paid P30,000 as advance payment for six months
rent of office space from Spacious Realty.

Jan 02 Prepaid Rent 30,000
Cash 30,000
Advance payment of office rent.
On January 31, one-month rent has been consumed, so the Rent Expense for the month
should be:
Rent Expense = Prepaid Rent ÷ 6 = 30,000 ÷ 6 = 5,000
Adjusting Entry:
Jan 31 Rent Expense 5,000
Prepaid Rent 5,000
Example 3: On January 1, Company C paid a premium of P 18,000 for one-year insurance

up to the end of December.

Jan 01 Prepaid Insurance 186,000
Cash 18,000
Advance payment for one-year insurance.
At the end of January, one-month insurance has expired, so the insurance expense for
January is:
Insurance Expense = Prepaid Insurance ÷ 12 = 186,000 ÷ 12 = 1,500
Adjusting Journal Entry:

Jan 31 Insurance Expense 1,500
Prepaid Insurance 6,000
4. Accrued Expenses – Accrued expenses are expenses already incurred, but not yet paid as
at the end of the reporting period. Accrued expenses (which are liability accounts) are
recorded as adjusting entries at the end of accounting period by debiting an expense account
and crediting a liability account.

The common examples of these expenses are:
• Employees’ salaries for the current month, but still unpaid as of the end of that month.
• Utility expenses for the current month but are still to be paid the following month.
• Loan interest incurred for the accounting period but will not be paid in the current
accounting period.
Example 1: Assuming that salaries worth P15,000 due to the employees were not paid at
the end of March, an adjusting entry should be made as follows:
Adjusting Entry:
Mar 31 Salaries Expense 15,000
Salaries Payable 15,000
Example 2: Assuming that utility bills worth P2,500 has not been paid at the end of March,
a similar adjusting entry should be made thus:
Adjusting Entry:
Mar 31 Utilities Expense 2,500
Utilities Payable 2,500
Example 3: On January 3, Company A made a bank loan of P100,000 from National Piggy
Bank covered by a note payable that carries an annual interest rate of 12%. The agreement
with the bank is that the principal amount plus interest will be paid in 6 months. If the company
prepares financial statements on a monthly basis, at the end of each month the accrued
monthly interest should be recorded. To calculate:
Accrued monthly Interest = 100,000 x 12% ÷ 12 = 1,000
Adjusting Entry:
Jan 31 Interest Expense 1,000
Interest Payable 1,000
5. Unearned Revenues – Also known as “deferred revenues”, “deferred income”, “unearned

income”, are pre-payments or advanced payments for future services to be rendered or
products that has yet to be delivered. It is a liability account. Some examples of unearned
revenues are:
• Advance payment of cash by clients for services yet to be rendered.
• Advance rental payments for the next accounting period, but already received in cash
during the period.
Example 1: On January 10, Company A received P5,000 cash in advance for services yet to
be provided.

Jan 10 Cash 5,000
Unearned Revenue 5,000
Advanced payment of customer

At the end of January, Company A has already provided P3,000 worth of services.
Adjusting Entry:
Jan 31 Unearned Revenue 3,000
Service Income 3,000
Service rendered.
Example 2: On January 2, Spacious Realty received P30,000 as advanced payment for six
months rent from Company A.

Jan 02 Cash 30,000
Unearned Revenue 30,000
Advanced collection of rent
At the end of January, an adjusting entry should be made to recognize the amount of rent
used up for January and will be computed as follows:
One Month Rent Income = P 30,000 ÷ 6 = 5,000
Adjusting Entry:
Jan 31 Unearned Revenue 5,000
Rent Income 5,000
To record revenue
6. Accrued Revenues – Also called “accrued income”, are revenues already earned during the
accounting period but have not yet been billed to the customer as at the end of an accounting
period.
Example 1: On January 3, National Piggy Bank lent P 100,000 to Company A that carries an
annual interest rate of 12%. The loan is due after 6 months in which the principal amount plus
interest is expected to be paid. The bank prepares monthly financial statements, so at the end
of each month starting end of January up to the end of June, accrued monthly interest should
be recorded. To calculate accrued monthly interest:
Accrued monthly Interest = 100,000 x 12% ÷ 12 = 1,000
Adjusting Entry:
Jan 31 Interest Receivable 1,000
Interest Income 1,000
Credit Terms
The terms which indicate when payment is due for purchases or sales made on account
(or on credit). Example of a credit term is:
• 2/10, n/30 – which means, a 2% discount will be given to the buyer if the full amount is
paid within 10 days, otherwise the net amount is due in 30 days.

Note: For purchases of fixed assets with credit terms, if the full amount is paid within the discount
period, the discounted amount is credited to the particular fixed assets.
Example: On July 2, Company A bought furniture worth P 15,000 on account, terms: 2/10, n/30.
On Jul 12, Company A paid the full amount due to the furniture. The journal entries would then
be:
July 2 Furniture 15,000

Accounts Payable 15000
Bought furniture on account.
Jul 12 Accounts Payable 15,000

Cash 14,700
Furniture 300
Paid full amount to the furniture.
PREPARING FINANCIAL STATEMENTS
Financial Statements are accounting, or financial reports prepared periodically to inform

the owner, creditors, and other interested parties as to the financial condition and operating results
of the business. Financial statements provide the users and other interested parties with useful
information that may affect the decisions they are confronted with.
BASIC TYPES OF FINANCIAL STATEMENTS
1. Income Statement is the financial statement that summarizes revenues and expenses for a
specific period of time, usually a month, a quarter, or a year. It is also called Statement of
Profit and Loss because it shows the profit or loss of a business at the end of an accounting
period.
There are 2 formats of Income Statement:
• Single-Step Form – a form of income statement usually prepared for a service
business.
• Multiple-Step Form – a form of income statement usually prepared for a
merchandising business or a corporation.
The major sections of a single-step Income Statement are:

• Heading – contains the name of company, title of statement, and the period covered
by the statement.
• Revenue section – contains the type of revenue accounts earned by the business.
• Expense section – contains the type of expense accounts incurred by the business.
• Net Income/Net Loss section – contains the final calculation of a profit or loss or the
difference between the total revenue and the total expense. If the total revenue exceeds
the total expense, a net income or net profit is reported. However, if the total expense
exceeds the total revenue, it is reported as a net loss.
The guidelines used in preparing an Income Statement are:

a. Place the heading at the center of the statement.

b. Arrange the accounts according to the magnitude (big amounts first) or according to
the relative importance of the information to the user.
c. Place all miscellaneous accounts, whether income or expense accounts, as the last
account in every section.
d. Put a peso sign on the first amount in every money column and after every ruling.
e. Single rule after every arithmetic operation. Double-rule the final net income or loss.
Sample Format of an Income Statement (Single Step Format)
Ace Repair Shop

Income Statement
For the month ended December 31, 20xx
Service Income PhP 21,000

Less: Operating Expenses
Utilities Expense PhP 600
Salaries Expense 2,000 2,600
Net Income PhP 18,400
2. Capital Statement is the financial statement that summarizes all the changes in owner's
equity that occurred during a specific period, usually a month or a year. Also called Statement
of Owner’s Equity.
The capital statement serves as the bridge between the income statement and balance
sheet. It uses the net income/loss from the income statement in addition to the owner's
drawings as derived from the ledger to determine the Owner's Capital balance.
The major components of capital statement are the:
• Heading – contains the name of company, title of statement, and the period covered
by the statement.
• Owner's Beginning Capital – contains the capital balance at the beginning of the
period.
• Net Income/Net Loss – contains the final calculation of profit or loss as derived from
the income statement.
• Drawings – contains the owner’s total drawings as derived from the trial balance.
• Capital Balance – contains the final calculation of the capital balance at the end of the
period.

Sample Format of a Capital Statement
Ace Repair Shop

Capital Statement
Beginning Capital PhP 100,000

Less: A. Celis, Drawing 5,000
Net Capital 95,000
Add: Net Income 18,400
A. Celis, Capital PhP 113,400
3. Balance Sheet is the financial statement which shows the amount and nature of a business’
assets, liabilities, and owner's equity (capital) as of a specific point in time. This is also called
the Statement of Financial Position, as it shows the current financial position or condition of a
business as of a specific point in time (i.e., end of an accounting period). This is also the
statement that represents the accounting equation.
Assets = Liabilities + Owner’s Equity
The key elements of a balance sheet are:

• Assets – properties used in the operation or investment activities of a business.
• Liabilities – claims by creditors to the assets of a business until they are paid.
• Owner’s Equity (Capital) – the owner's rights or claims to the assets of the business
The major components of a balance sheet are the:

• Heading – contains the name of company, title of statement, date of statement.
• Assets section – contains current assets and non-current assets.
o Current Assets – are cash and other properties normally expected to be converted to
cash or used up usually within a year. The current assets are presented in the order
of liquidity or based on how quickly they can be converted into cash.
o Non-current Assets (Fixed Assets) – are assets or properties that are more or less
permanent in nature and are intended for use in business operations.
• Liabilities & Owner’s Equity section – contains the current and long-term liabilities and
the owner’s ending capital.
o Current Liabilities – debts or obligations of the business that are expected to be paid
within one year using current resources.
o Owner’s Ending Capital – the total investment of the owner as taken from the capital
statement.
A balance sheet has two formats: Account Form and Report Form.
• Account Form – is like a T-account listing Assets on the left side (debit side) and
Liabilities and Equity on the right side (credit side).
• Report Form – list Assets followed by Liabilities and Equity in vertical format.

The following guidelines should be followed in preparing a Balance Sheet in report form:
• Place the heading at the center of the statement.
• Place major categories of the balance sheet (in bold letters, if possible) at the center of
the statement.
• Place sub-categories (e.g., current assets, fixed assets, current liabilities, etc.) at the left
margin.
• All other accounts comprising each category are indented away from the left margin.
• Place peso amounts of major classifications on the outer right money column. Individual
amounts are placed in inner money columns.
• Place a peso sign on the first amount in each column and after every ruling.
• Single rule every operation of addition, then pencil-foot the Assets total and the Liabilities
& Owner’s Equity total.
• If both totals are balanced or equal, double rule the final totals.
Sample Format of a Balance Sheet (Report Form)
Ace Repair Shop

Balance Sheet
December 31, 20xx
ASSETS
Current Assets
Cash PhP 58,150
Accounts Receivable 4,250 PhP 62,400
Non-current Assets
Furniture 12,000
Repair Equipment 45,000 57,000
119,400
Total Assets PhP 119,400
LIABILITIES & OWNER'S EQUITY

Current Liabilities
Accounts Payable 6,000
Equity
A. Celis, Capital 113,400
119,400
Total Liabilities & Owner's Equity PhP 119,400
4. Statement of Cash Flows (or Cash Flow Statement) is the financial statement that shows
the movement of money in and out of the business. It presents cash inflows (receipts) and
outflows (payments) in the three activities of business: operating, investing, and financing.
• Operating activities evaluates cash movements from the main operations of the company
such as rendering of professional services, sales of goods, collection of accounts,
purchases of merchandise and supplies, payment of accounts to suppliers, and others.
Generally, operating activities refer to those that involve current assets and current
liabilities.

• Investing activities reports movement of cash from purchases and sales of fixed assets
such as property, plant and equipment. Selling these assets is also considered investing
activities. In general, investing activities include transactions that involve non-current
assets. This section may also be summed up as: "where the company puts its money for
long-term purposes".
• Financing activities refer to cash flow trends of all money related to financing the business,
such as investment of the owner/s, and cash proceeds from bank loan, owner’s drawing,
payment of loans and other long-term payables. Generally, financing activities include
those that affect non-current liabilities and capital. This section may also be summed up
as: "where the company gets its funds".
• To sum that up: Generally, operating activities refer to transactions that affect current
assets and current liabilities; investing activities to non-current assets; and financing
activities to long-term liabilities and capital.
• All inflows are presented in positive figures while all outflows in negative (or enclosed in
parentheses).
• After all inflows and outflows are presented, the net increase or decrease in cash is
computed. Then it is added to the beginning balance of cash to get the balance at the end.
In simple sense, this report presents the cash balance before, the changes to the balance,
and the resulting balance thereafter.
• To verify that the resulting cash balance at the end is correct, it should be the same amount
as the cash balance presented in the company's Balance Sheet.
Sample Format of a Statement of Cash Flows
Ace Repair Shop

Statement of Cash Flows
Cash Flows from Operating Activities:

Cash received from customers PhP 16,750
Cash paid to suppliers/creditors -
Cash paid for expenses (2,600) PhP 14,150
Cash Flows from Investing Activities:

Cash paid for furniture (6,000)
Cash paid for equipment (45,000) (51,000)
Cash Flows from Financing Activities:

Cash received from owner 100,000
Cash paid to owner (5,000) 95,000
Net increase in cash PhP 58,150
Add: Cash, December 1, 20xx -
Cash, December 31, 20xx PhP 58,150

CLASSIFICATIONS OF ACCOUNTS
There are two major categories of accounts. These are the:
1. Real (or Permanent) Accounts – also called Balance Sheet accounts, they are the
Assets, Liabilities, and Equity Accounts. They are called permanent accounts because
their balances are forwarded to the next accounting period and beyond.
2. Nominal (or Temporary) Accounts – also called Income Statement accounts, they are
the Revenue and Expense Accounts. The accounts are called temporary due to the fact
that their balances are closed or set to zero at the end of an accounting period.
CLOSING THE BOOKS
This is the process of journalizing and posting the Closing Entries, which means bringing
all income and expense accounts (the nominal or temporary accounts), including the Drawings
account, to a zero balance at the end of a period. This is done by transferring their balances to a
temporary, single-use account called the Income Summary.
To close an account, you make a journal entry for the exact opposite of that account's
balance. For example, if your revenue account has a credit balance of P5,000, you would close it
by posting a debit entry for P5,000. This is what the closing entries would be like for a sole
proprietorship. You would write them up in the general journal. Once you post them, the temporary
accounts will still exist; they simply will have no balances. After you post these entries, prepare a
post-closing trial balance to prove that your general ledger is in balance before you begin the next
period.
Income Summary account acts as a temporary holding area, to give a spot to park the
balances you intend to close while you sum them up. There is a good reason why you do not just
close them into the regular accounts: There are a lot of temporary accounts to close, and the
entries take up a lot of space. Rather than fill up the pages for an account you may use throughout
the period, this huge entry hits only the income summary account, and the summary numbers go
to the regular accounts.

Illustration of Closing Entries
PREPARING THE POST-CLOSING TRIAL BALANCE
The Post-closing Trial Balance is a trial balance prepared after the nominal or temporary
accounts (revenue and expense accounts) have been closed. It is only a listing of the balances
of the real or permanent accounts (assets, liabilities, and owner’s capital account). A post-closing
trial balance is prepared to prove that the general ledger is in balance before you begin the next
accounting period.
The procedure in preparing the post-closing trial balance is the same as with the other trial
balances (Unadjusted and Adjusted Trial Balances) but without the nominal accounts, i.e.:
• Place the heading at the top center of the report. The heading should include the name of
the company, the name of the statement, and the date of the statement.
• List down only the permanent accounts in the order in which they appear in the general
ledger, writing down the account number, account title and the account balance in the
appropriate debit and credit money columns.

• Rule the bottom of the money columns, add the balances in each column and “pencil foot”
the totals. If the debit and credit totals are equal, write down the final totals in ink and
double rule them to indicate that the statement is correct and complete.
Sample Illustration of a Post-closing Trial Balance
Ace Repair Shop

Post Closing Trial Balance
December 31, 20xx
Acct # Account Title Debit Credit

101 Cash PHP 58,150
105 Accounts Receivable 4,250
115 Furniture 12,000
120 Repair Equipment 45,000
201 Accounts Payable PHP 6,000
301 A. Celis, Capital 113,400
119,400 119,400
PhP 119,400 PhP 119,400
ACCOUNTING FOR MERCHANDISING BUSINESS
Merchandising Business is a type of business engaged in the buying and selling of goods.
ADDITIONAL ACCOUNTS FOR MERCHANDISING BUSINESS
• Merchandise Inventory – the amount of goods bought that remain unsold and still held by
the business for resale at any time in the course of business operation. This is a current asset
account.
• Sales – is the revenue or the gross amount earned from the sale of merchandise.
• Sales Returns and Allowances – Sales Returns refer to cash or credit refund granted to
customers for goods returned because of defects, damages, or wrong specification. Sales
Allowances refer to reduction in the selling price granted to customers for the same reasons
except that the goods are not actually returned. It is a contra-revenue account and is thus a
reduction in the cost of sales.
• Sales Discounts – is the cash discount availed of by the customer if the customer pays the
amount owed in full within the discount period. It is computed by applying the discount rate on
the net sales amount after deducting returns and allowances. It is also a contra-revenue
account and represents a reduction in the cost of sales.
• Purchases – the amount of goods bought that remain unsold and still held by the business
for resale at any time in the course of business operation. This is a purchase expense account.

• Purchase Returns and Allowances – Purchase Returns refer to cash or credit refund
granted by the supplier for goods returned because of defects, damages of wrong
specification. Purchase Allowances refer to reduction in the acquisition price because of the
same reasons except that the goods are not actually returned. It is a contra-purchases
account and is thus a reduction in the cost of goods.
• Purchase Discounts – is the cash discount availed of by the buyer (the business) if the buyer
pays the amount due in full within the discount period. It is also a contra-purchase account
and represents a reduction in the cost of goods.
• Freight-in – also called “transportation-in”, it refers to the cost incurred by the buyer in
bringing the merchandise to his/her place of business. It is an adjunct account of purchases
and is thus added to the purchase amount to get the net purchases.
• Cost of Goods Sold (COGS) – is the total cost of merchandise sold to customer during the
period. It is a purchase expense account.
• Freight-out – also called “transportation-out”, it refers to the cost incurred by the seller in
transporting the merchandise to the buyer. It is an operating expense account.
OWNERSHIP OF GOODS IN TRANSIT
Sometimes, an accounting question may arise as to whom between the seller and the
buyer should be responsible to pay the transportation costs. The following terms are used to
define the ownership of products during transit:
• FOB, Shipping Point – means the ownership of the goods is transferred to the buyer upon
shipment. In short, the buyer pays the transportation or freight cost because the buyer
practically owns the goods while in transit.
• FOB, Destination – means the ownership of the goods is transferred to the buyer only upon
reaching the buyer’s place or destination. In short, the seller pays the transportation or freight
cost because the seller still owns the goods while in transit.
*FOB = Freight on Board or Free on Board
INVENTORY ACCOUNTING SYSTEMS
There are two methods for recording transactions for merchandising business: The
Periodic Inventory System and the Perpetual Inventory System.
1. Periodic Inventory System – in this system, a physical or manual count of the inventory on
hand is done at the end of an accounting period (hence the term “periodic”) to determine the
cost of goods sold for the period. In this system:
• When goods are bought, Purchases account is debited and Cash or Accounts Payable is
credited.
• When goods are sold, Cash or Accounts Receivable is debited, and Sales is credited.

2. Perpetual Inventory System – in this system, a company maintains a continuous record of
the physical quantities (or costs) of inventory on hand. In this system:
• When goods are bought, Merchandise Inventory is debited and Cash or Accounts Payable
is credited.
• When goods are sold, two journal entries are required:
o Cash or Accounts Receivable is debited, and Sales is credited.
o Cost of Goods Sold is debited and Merchandise Inventory is credited.
COST OF GOODS SOLD (COGS)
Cost of goods sold, or COGS, is the total cost of merchandise sold during the accounting
period. Cost of Goods Sold is reported on the income statement and is considered as an expense
for the accounting period. By matching the cost of the goods sold with the revenues from the
goods sold, the matching principle of accounting is achieved.
• When using the Periodic Inventory System in recording business transactions, the Cost of
Goods Sold is calculated after preparing the trial balance and before preparing the Income
Statement.
• In Perpetual Inventory System, Cost of Goods Sold is not calculated as it has its own
ledger account.
• The formula for calculating Cost of Goods sold is:
COGS = Beginning Inventory + Net Purchases – Ending Inventory
Sample format for reporting Cost of Goods Sold
Name of Company
Cost of Goods Sold
For the month ended __________
Merchandise Inventory, Beginning Php xx,xxx
Add: Net Purchases
Purchases Php xx,xxx
Less: Purchase Returns (xxx)
Purchase Discounts (xxx)
Add: Freight In xxx xx,xxx
Cost of Goods Available for Sale (Total Inventory) xx,xxx
Less: Merchandise Inventory, End xx,xxx
Cost of Goods Sold Php xx,xxx
Sample Transactions for Merchandising Business:
Jun 4 - VAN Trading bought goods on account worth P 20,000 on terms 2/10, n/30; FOB
Shipping Point, P 300.
Jun 6 - Received a credit memo from the supplier worth P 500 due to defective goods bought
on Jun 4.
Jun 7 - Sold goods worth P 15,000 on terms 2/10, n/30; FOB Destination, P 200. Cost of goods
sold was P 11,000.
Jun 9 - Made credit refund to the customer for some defective goods sold on Jun 7, P 400.
Jun 11 - Purchased goods in cash, P 10,000.

Jun 12 - Paid freight on goods bought on June 11, P 120.
Jun 13 - Received cash refund worth P 350 from goods bought on June 11 due to wrong
specifications.
Jun 14 - Paid the full amount owed to the goods bought on June 4.
Jun 17 - Received the full amount due from customer of June 7.
Comparative Journal Entries:
PERIODIC INVENTORY SYSTEM PERPETUAL INVENTORY SYSTEM

Date Particulars Debit Credit Date Particulars Debit Credit
Jun 4 Purchases 20,000 Jun 4 Merchandise Inventory
Accounts Payable 20,000 Accounts Payable
Freight In 300 Merchandise Inventory 300

Cash 300 Cash 300
6 Accounts Payable 500 6 Accounts Payable 500

Purchase Ret & Allowances 500 Merchandise Inventory 500
7 Accounts Receivable 15,000 7 Accounts Receivable 15,000

Sales 15,000 Sales 15,000
Freight Out 200 Cost of Goods Sold 11000

Cash 200 Merchandise Inventory 11000
Freight Out 200

Cash 200
9 Sales Ret & Allowances 400 9 Sales Ret & Allowances 400
Accounts Receivable 400 Accounts Receivable 400
11 Purchases 10,000 11 Merchandise Inventory 10,000

Cash 10,000 Cash 10,000
12 Freight In 120 12 Merchandise Inventory 120

Cash 120 Cash 120
13 Cash 350 13 Cash 350

Purchase Ret & Allowances 350 Merchandise Inventory 350
14 Accounts Payable 19,500 14 Accounts Payable 19,500

Cash 19,110 Cash 19,110
Purchase Discounts 390 Merchandise Inventory 390
17 Cash 14,308 17 Cash 14,308

Sales Discounts 292 Sales Discounts 292
Accounts Receivable 14,600 Accounts Receivable 14,600
CLOSING THE BOOKS
This is the process of journalizing and posting the Closing Entries, which means bringing
all income and expense accounts (the nominal or temporary accounts), including the Drawings
account, to a zero balance at the end of a period (a month or a year). This is done by transferring
their balances to a temporary, single-use account called the Income Summary.

Sample Closing Journal Entries
ACTIVITY
1. Explain the meaning and purposes of the following:
a. Profit/loss Statement
b. Balance Sheet

c. Cash Flow Statement
2. Discuss the following components of a balance sheet:

a. Assets
b. Liabilities
c. Owner’s Equity
3. Based on what you have learned from this lesson, with your groupmates, prepare the overall
business implementation and financial reports of your established small business. Be ready
for a 15-minute presentation.

 REFERENCES
3G Elearning. (2016) Essentials of Entrepreneurship. 3G Elearning FZ LLC, UAE

Agustin, Z. (2018) Intellectual Property. Retrieved from https://prezi.com/6bqa75wl1v30/ip-and-
dlsu-d-as-itso/
Brustein, D. (2015) The 7 Styles of Decision Making. Retrieved from

https://www.entrepreneur.com/article/249792
Csponline (2017) 7 Steps of the Decision Making Process. Retrieved from
https://online.csp.edu/blog/business/decision-making-process
Department of Trade and Industry (2010). Managing Your Fund In Your Guide to Starting a Small
Enterprise. Retrieved from
http://www.dti.gov.ph/uploads/DownloadableFiles/2010_Your_Guide_to_Starting_a_Small_
Enterprise.pdf
Edralin, D. M. (2016) Entrepreneurship. Quezon City: Vibal Group Inc.
Entrepreneurship Curriculum Guide. Retrieved from https://www.deped.gov.ph/wp-

content/uploads/2019/01/SHS-Applied_Entrepreneurship-CG.pdf
Experiential Activity: Chocolate Bar Market Research Activity. Retrieved from

https://studylib.net/doc/9023593/experiential-activity--chocolate-bar-market-research-acti...
http://www.ncsb.gov.ph/activestats/psic/browseRes.asp
Ibarra, V. C., & Revilla, C. D. (2014). Consumers’ awareness on their eight basic rights: A
comparative study of Filipinos in the Philippines and Guam. International Journal of
Management and Marketing Research, 7(2), 65-78.
Michalowicz, M. (2011) 8 Jobs You Can Get With An Entrepreneurship Degree. Retrieved from
https://www.americanexpress.com/en-us/business/trends-and-insights/articles/8-jobs-you-
can-get-with-an-entrepreneurship-degree/
Morato, E. A. Jr. (2016) Entrepreneurship. Manila. Rex Book Store, Inc.
UNESCO (n.d.) Starting My Own Small Business
Wilhite, T. (2020) Peter Drucker’s Sources of Opportunity for Business. Retrieved from
https://toughnickel.com/business/The-Seven-Sources-of-Opportunity-for-Businesses-per-
Drucker

ATS 2209 Entrepreneurship 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ATS 2209 Entrepreneurship 1

Uploaded by

Copyright:

Available Formats

Republic of the Philippines

Polytechnic University of the Philippines

INSTRUCTIONAL MATERIAL FOR

Prof. Ivee C. Cobarrubias

PUP A. Mabini Campus, Anonas Street, Sta. Mesa, Manila 1016

THE COUNTRY’S 1st POLYTECHNIC

Entrepreneurship | ATS 2209 2

Upon the completion of this module, you will be able to:

Written Work 25%

Entrepreneurship | ATS 2209 3

LESSON 1: NATURE AND RELEVANCE OF ENTREPRENEURSHIP

After studying this lesson, you are expected to be able to:

Knight (1921) Having profits from bearing uncertainty and risk.

Carrying out of new combinations of firm organization – new

McClelland (1961) Taking moderate risk.

Process of creating something new with value by devoting the

Entrepreneurship | ATS 2209 4

An activity that involves the discovery, evaluation and exploitation

Dynamic process of vision, change, and creation that requires an

Conceiving an opportunity to offer new or improved goods or

Although each of these definitions views entrepreneurship from a slightly different

Entrepreneurial competencies are associated with the entrepreneurs’ creativity, ability to

4. Perseverance. Pertains to the determination to succeed by overcoming obstacles and

Entrepreneurship | ATS 2209 5

7. Opportunity Orientation. Refers to the constant awareness of opportunities that exist in

8. Innovativeness. Refers to the ability of someone to come up with something different or

9. Responsibility. Refers to someone’s willingness to put himself in situations where he is

1. Opportunity Competencies. Competencies related to recognizing and developing market

2. Relationship Competencies. Competencies related to person-to-person or individual-to-

3. Conceptual Competencies. Competencies related to different conceptual abilities, which

4. Organizing Competencies. Competencies related to the organization of different internal

5. Strategic Competencies. Competencies related to setting, evaluating, and implementing

ENTREPRENEURIAL DECISION-MAKING AS A CORE COMPETENCY

Entrepreneurship | ATS 2209 6

Entrepreneurship | ATS 2209 7

ENTREPRENEURSHIP CAREER OPPORTUNITIES FOR THE ACADEMIC TRACK

Having a degree in entrepreneurship allows graduates to work in numerous sectors.

3. Research and Development. To work in research and development, there is a need to

Entrepreneurship | ATS 2209 8

2. Develop new markets. Entrepreneurs are opportunity-seekers, creative, and resourceful.

7. Serves as role models. Entrepreneurs people to be emulated by younger generations in the

Entrepreneurship | ATS 2209 9

Entrepreneurship | ATS 2209 10

5. Make a poster that shows the contribution of entrepreneurs/entrepreneurship to the economic

Entrepreneurship | ATS 2209 11

Excellent Most details Poor coverage

The poster was

Entrepreneurship | ATS 2209 13

At the end of this lesson, you will be able to:

OPPORTUNITY SEEKING, SCREENING, AND SEIZING

Entrepreneurs are innovative opportunity seekers. They have endless curiosity to

If there is one commonality between an entrepreneur and an inventor, it is their surging

Entrepreneurship | ATS 2209 14

MACRO ENVIRONMENTAL SOURCES OF OPPORTUNITIES

Entrepreneurship | ATS 2209 15

Opportunities can be found when situations and events are

Incongruous situations happen when there are inconsistencies in

Entrepreneurial opportunities could also surface throughout the

Entrepreneurship | ATS 2209 16

THE 12 RS FOR OPPORTUNITY SCREENING

4. Revenues. In any entrepreneurial endeavor, it is important to determine the sales potential

6. Reach. Opportunities that have good chances of expanding through branches,

Entrepreneurship | ATS 2209 17