Entrepreneurship Entrepreneurship and Economic

- Important component of capitalism Development

Economic Development

What is Entrepreneurship? - Scheme aimed at providing living standards of the Nation’s

citizenry
- Refers to the economic activity of a person who starts, manages,
and assumes the risk of a business enterprise To achieve Economic Development, proper management of the
➢ Entrepreneur = person undertaking entrepreneurial following elements is necessary:
activities
1. Human Resources 3. Capital Formation

What is an Entrepreneur? ● Labor supply

● Education
● Machines
● Factories
● Discipline ● Roads
Origins ● Motivation

Entrepreneur is derived from the French word “ENTERPRENDRE”

2. Natural Resources 4. Technology
meaning, “TO UNDERTAKE”
● Land ● Science
● Minerals ● Engineering
Entrepreneurs identify economic needs, consider a business solution, ● Fuel ● Management
and proceed to assemble the sources required. All the while assuming the ● Climate ● Entrepreneurship
risk of success or failure.

Net Income = Sales > Expenses

Net Loss = Sales < Expenses The effective and efficient utilization of the various
elements contribute to Economic Growth

Example of Entrepreneurship Activity Note:

An abundance in Natural Resources does not guarantee Economic
Development.

Problem at hand
High income families are not
satisfied with the services
provided by high schools in their
area
Entrepreneur’s Action
Establish a high school education
with higher standards than the
other high schools in the area
As such, there is a need for ENTREPRENEURS to:
Perform the function of harnessing the potentials of all the
various elements
Determining the right quantity of resources needed
Applying the elements at the right time

Resources must be made available Acquire funds, hire people,

construct buildings, and the like
Entrepreneurs and the Government
Businessman Vs. Entrepreneur ➔ Government Restrictions limit the effectiveness of
entrepreneurs
➔ Entrepreneurship thrives in an economic system that Support
motivation and hard work
Businessman Entrepreneur

➢ Individual who operates a ➢ Individual with exclusive When Entrepreneurs become successful, the nation is immensely
business with an old idea to initiate and benefited
business idea establish new venture
➢ Faces much tougher ➢ Called INNOVATORS
competition because of
pre-existing market Thus, people using unique ideas Summary
➢ Risk is lower to run a business are called
➔ Entrepreneurship is an activity that assumes the viability and growth
ENTREPRENEURS
of an economy

➔ An entrepreneur bears the risk inherent to the venture.

If the entrepreneur’s task appears to be a great burden, the
prospect of profits make it bearable

➔ Through entrepreneurship:
◆ Goods and services are produced
◆ Employment rates rises
◆ Taxes are paid to the government
◆ Products and services of suppliers are bought
ENTREPRENEURSHIP​ Types of Small Business:​

AND​SMALL BUSINESS​
Entrepreneurship is accepting the risk of starting and running a business.
1.Manufacturing​
A manufacturing business is one involved in the conversion of raw
materials into products needed by the society. ​
Example:​
Bakeries, Automotive companies, bagoong manufacturers, printing and
publishing industry and others​

Because of its high failure rate, nearly half of all new businesses
fail in the first 5 years 2.Service​
Service Businesses are those that provide service in one way or
Entrepreneurial Spirit: Undaunted by Failure​ another.​
★ Henry Ford wasn’t an instant success. In fact, his early businesses
failed and left him broke five times before he founded the a. Business Services ​
successful Ford Motor Company.​ - provide service to other businesses. ​
★ Harland Sanders’ famous secret chicken recipe was rejected 1,009 Example: janitorial service, security service & accounting firms ​

times before a restaurant accepted it. ​

b. Personal Services​
- provide service to other businesses. ​
Traits of successful entrepreneurs​ Example: Voice lesson, Massage parlors etc.

1. S​ trong leadership qualities​ c. Repair Services​

2. Highly self-motivated​ - provide repair services of various machinery and
3. Strong sense of basic ethics and integrity​ appliances.​
4. Willingness to fail​ Example: auto repair, Watch repair, plumbing
5. Serial Innovators​
6. Know what you don’t know​ d. Entertainment Services​
7. Competitive spirit​ Example: movie houses, resorts, billiard pool centers
8. Understand the value of a strong peer network​
e. Hotels and Motels​

Small Businesses​ f. Education Services​

Small Businesses are independently owned and operated, not dominant
in the field of operation and meet certain standards of size. ​
Businesses are small in relation to other business in their
industries.​
● Small businesses generate 60-80 % of new jobs.​
● Small businesses account for over 50% of the GDP.
Example: Montessori schools, high school
3.Wholesaling​
Refers to the activities of persons, establishments which sell products to
other retailers or merchants in large amounts. ​
Example:​
soft drinks wholesalers in local areas, dealers of supplies and office
equipment and the like.

4.Retailing​
Characteristics of Small Business​ Retailing covers all activities involved in the sale of goods and services to
the final consumers.​
1.Independent Management Wholesaler –> Retailer –> Final Consumer​
- The owner is also the manager​ (Middle man) ​

2.Small capital requirement 5.General Construction Firms​

- Small business requires only small capital and this can be supplied General construction firms are those engaged in the construction of
by a single or a few individuals. ​ buildings whether for private individuals or firms , or for the government. ​

● Many of them perform subcontracting jobs for the bigger

3.Mostly local operation contractors such as installing electrical facilities etc. ​
- Small businesses usually operate in a certain locality although
there are cases when the market is not confined to a local area. ​

Summary
➔ A small business is one which is independently owned and which is
not dominant in its field of operation.​

➔ Small businesses may be classified as manufacturing, service,

wholesaling, retailing, and general construction firms. ​

➔ Small businesses are characterized by the following: independent

management, small capital requirement and mostly local operation. ​

​
​Entrepreneurial ​Mindset​
Economic Importance of Small
Business​
Small businesses play an important role in the development of our
economy.
S.B’s perform the following functions: ​
1. Providers of economic opportunities for entrepreneurs:​
- People who do not feel comfortable as an employee have
the option of engaging in small business operation.​
2. Providers of products and services to consumers:
- The production of many products and services is
oftentimes not feasible with big and medium business
operations.
These limited opportunities are naturally fitted for
small businesses.​
3. Suppliers of products and services to other businesses:​
- Some businesses require raw materials, semi-finished
parts, finished components, or even labor, which they
cannot economically produce.
The small businesses perform this task for them.
4. Distributors of products and services of other businesses:
- Some manufacturers do not have the ability to distribute
their products and services.
Many small businesses assume this role for them.
5. Supporters of government:
- Small businesses support the government with the taxes
they pay, as well as performing other functions.​
6. Providers of Employment​
- A large proportion of the labor force are employed by
small businesses.
Advantages of Operating a Small
Business​
An individual has various options to improve his economic lot. ​
This can be done by being a:
1. Employee
- enjoys a fixed working schedule like 8:00 AM to 5:00 pm.
The pay he receives, however, is limited to a large extent
on industry norms and the financial capability of the
company. In some firms the employee's pay depends on
the whims of the owner. ​
2. Professional
- may generate higher income through the effective
practice of his profession. A physician, for example, may
set his clinic in a certain area and proceed to treat
patients for a fee. His income, however, is limited by the
number of patients he attends to everyday as he cannot
delegate his skills to others. ​
The first two options (employee and a professional), however, can only be
considered in certain conditions. Finding a job is not an easy task. The rate of
rejection for job applicants, especially in the Philippines, is just too high.
Entering a certain profession is also not an easy task. First, one must undergo
long years of study, and second, one must pass a rigorous entrance
requirement like passing the board examination. There are also too many
people who cannot exercise this option.
3. Small business operation
- Although entrance requirements are not as difficult as the
first two options, it does not mean this option is easier to
put into practice.
- A small business operator keeps long working hours and
absorbs whatever damages that happen as a result of his
faulty decision-making. ​
However, he is afforded the following benefits: ​
● Opportunity to gain control over his own destiny
- The prospective small business owner can choose from several
business opportunities that he would like to take advantage of.
- If, after a few years, he thinks that the business is not worth
operating anymore, then he can dissolve it and open a new
one.
This option is not made available to plain employees and professionals. ​
● Opportunity to reach his full potential
- The employee will do his work based on prescribed targets
which may only require less than his full potential.
This is not so with the small business operator.
- The freedom to act is limited only by his potential and he can
revise or amend his targets within short notice.​
● Opportunity to reap unlimited profit
- If the small business succeeds, all profits, big or small, accrue to
the owner. If he is not satisfied, he may exert more efforts to
increase his profits.
This opportunity is not afforded to the plain employee. ​
● Opportunity to contribute to society and receive recognition for
his efforts.
- Entrepreneurs who make innovative products available to the
public are recognized properly by society.
- Some of them, like Henry Ford, become billionaires. Others like
Walt Disney, merited listings in books of eminent personalities. ​
Disadvantages of ​Small Business​
Although certain advantages accrue to the small business operator, there
are certain disadvantages that must be considered.

Such as:
Uncertainty of income​
Risk of losing your entire capital investment​
Lower quality of life until the business gets established​
Complete responsibility​
Having to serve undesirable customers​
Paperwork and other chores​
Long hours and demanding work condition

Disadvantages
➢ Operating a small business does not provide assurance of an
income, unlike getting employment which offers fixed monthly
salaries. ​

➢ Complete independence in making decisions exposes the small

business operator to the consequences of errors of judgment
which in some cases could wipe out his investment.
The high rate of small business failures proves the point. ​

➢ A big company can hire several people to attend to specific tasks.

The small business operator is forced to do these tasks
himself​

➢ It is a well-known fact that small businesses must maintain long

hours of work to keep the business going. If it cannot acquire
sales volume within a short time frame every day, it must stretch
its business hours to accommodate more customers.​

Employment and Small Business operation

compared​

Factor​ Small Business Employment​

Operation​

1. Income​ uncertain​ certain​

2. Capital investment​ Risk of losing​ None acquired​

3. Quality of life​ Lower until business Consistent at a certain

gets established​ level​
4. Responsibility​ Complete/ all Restricted to one's job​
encompassing​
a. gain control over present​ absent​
his own destiny​
b. reach his full present​ absent​
potential ​
c. reap unlimited present​ absent​
profits​
d. make a present​ limited​
contribution to
society​