Lesson 3 Screen the proposed solution/s based on viability, profitability, and customer

An entrepreneurial venture is created out of the business opportunities which the entrepreneur should seek to exploit.
These business opportunities emerge from the entrepreneurial ideas that arise from the changes in the
environment, government policy or technological advancements.
The entrepreneur needs to possess the necessary entrepreneurial character traits, skills, and competencies before
exploiting the business opportunities.

Likewise, segmenting the market is necessary to clearly identify and define the customers of his/her proposed
business venture. Thus, in venturing for a certain business, an entrepreneur must evaluate and analyze the business
environment. The environment where the business venture will operate is an important factor to consider in opening a new
business.

THE ENVIRONMENT OF THE ENTREPRENEURIAL VENTURE

1.Physical environment is the first layer of the environment. It is composed of the natural elements that are inherent in
the earth.
a. Climate
The entrepreneur must consider the prevalent climatic conditions of the area where he/she intends to open the business to
determine whether it can withstand or is fit to the climatic condition in the local area.
b. Physical Resources
The entrepreneur must critically assess the availability of raw materials in the locality before opening a new business.
He/she must evaluate if the
available raw materials to be used for the proposed business are sufficient for a long -term operation.

c. Wildlife
The entrepreneur must ensure that his/her business contributes to the preservation and not the destruction of the
ecological system of the local community and our country in general. He /she must not open a business venture that will
destroy the wildlife reserve. It is an entrepreneur’s task to become a model of social responsibility and environmental
awareness.

2. Societal environment is generally composed of social, political, cultural and economic, legal, and technological forces.
Studies reveal that there is a positive relationship between the evaluation of the societal environmental and the favorable
operating performance of the entrepreneurial venture.

a. Social Forces are elements in society resulting from human interactions that can influence the thoughts, behavior,
attitude, actions, and even the beliefs and customs of the people. Social forces include the following:
1.Values
2.Traditions
3.Literacy level
4.Consumer psychology
5.Time orientation
6.Lifestyle patterns
7.Professional career roles
b. Political Forces are various elements usually comprising of the political parties, political systems, and other
related political groups that substantially influence the political stability of the country.

Political forces include the following:

1.Trade regulations
2.Taxation
3.Government stability
4.Unemployment
5.Workers benefits
6.Election practices

c. Cultural Forces refers to the integrated characteristics of a group of people or ethnic group in a particular society.

Cultural forces include the following:

1.Religion
2.Language
3.Beliefs
4.Customs
5.Education

d. Economic Forces are factors that are primarily caused by changes or movements in the Philippine economy that
have direct or indirect effects on the entrepreneurial venture.

Economic forces include the following:

1.Interest rates
2.Inflation rates
3.Fiscal policies
4.Monetary policies
5.Income
6.Exchange rates
7.Employment
8.Consumer confidence

e. Legal Forces are elements and bodies that are directly involved in the legislation and interpretation of laws and
ordinances directly affecting the business.

Legal forces include legislations on the following:

1.Product control, pricing, and labeling
2.Health and safety of the workers
3.Administration of election process
4.Advertising and promotion
5.Exercise of profession
6.Education administration and fees

f. Technological forces refer to the trends and developments in computer and information technology that have impact on
business.

Technological forces include the following:

1. Internet
2. Social media
3. E-commerce
4. Technological advancement
5. Technological infrastructure

Environmental scanning

is the critical evaluation and thorough study of the environment where the business operates. It is the gathering, critical
evaluation, and utilization of information on events and activities and their
relationships with the physical, societal, and industry environments.

Environmental scanning is very important for the following reasons:

1.It clearly portrays the trends, activities, and developments happening in every environmental layer including the
interrelated relationships between the various forces in the environment.
2.It identifies the expected threats and opportunities existing in the environment.
3.It points out the possible factors that will determine the success of the entrepreneurial venture.
4.It helps define the future path of the business.
5.It assists in the formulation of the most appropriate entrepreneurial strategies.

In scanning the societal environment, the entrepreneur may use the following
analytical approaches:

1.PESTEL analysis is a tabular framework of the trends and developments in the different forces in the external
environment. The acronym PESTEL stands for Political, Economic, Sociocultural, Ecological, and Legal Forces.

Political Sources Economic Sociocultural Technological Ecological Legal Sources

sources Sources Sources Sources
Instability of the High interest rates Low level of Readily available Abundant raw Frequently
Philippine given by education among internet and social materials changed tax laws
Government commercial banks public school media
graduates

Table 1.1 Template of PESTEL Analysis

.
2. Environmental Forces Matrix is a modified version model of the issue priority matrix adopted by Wheelen and
Hunger. It broadly classifies the various environmental forces into their frequency of occurrence and level of effect to
the existing or proposed business. The type of rating used for this matrix is high, moderate, or low. In the process
of evaluating the different environmental forces, the entrepreneur must give preferential attention to the forces that
have high frequencies and effects or those considered high environmental forces.
1. Industry environment is the external environmental layer where the trends and changes are easily and immediately felt
by the business. The industry environment is considered the immediate environment of the business where it
conducts its various operational activities.

Industry forces include the following:

1. Government refers to the system or institution that handles the affairs of a particular country. Since the
government usually has jurisdiction over the major activities happening within its territory, including international trade
relations, the type of government system operating in a particular country highly influences the business. The
Philippine government is both presidential republican and democratic. It promotes entrepreneurial ventures
through its
thrusts, programs and priorities.

2. Suppliers refers to individual persons or companies that provide the required materials, parts, or services to the
business. They play a crucial role in the production of goods and services. They can adversely affect the
production process by delaying the delivery of the required raw materials and supplies or services, or by providing
defective materials or inefficient services.
The entrepreneur must define the criteria in the process of selecting the supplier, such as the quality of the goods or
services, terms of payment, stability, ability to respond to urgent needs, and proximity of the location.

3. Customers are the buyers of goods or services produced or rendered by the business. The business realizes
profit from its transactions with the customers.
It must constantly evaluate and study the behavior, tastes, preferences, inclinations, and even future activities of
the customers. It must protect its customers in order to win their loyalty, and to attract new patrons.

4. Competitors are the forces existing in the industry environment that produce, sell or render products or services which
are similar to those of the business. Competitors can be classified as direct or indirect. Direct competitors produce and
sell similar products or services, while indirect competitors produce and sell substitute products.
For example. Coca Cola Bottling Company is a direct competitor of Pepsi Cola Philippines. On the other hand,
companies that manufacture and sell fruit juices are indirect competitors of Coca Cola and Pepsi Cola.

5. Employees are the work ers of the business who are highly responsible for the production if goods or delivery of
services to the consumers. They help ensure the quality and quantity of products or services provided to the customers.
They help ensure the quality and quantity of products or services provided to the customers. They are the
backbone of the business.

6. Creditors refer to banks, financial institutions, and financial intermediaries engaged in the lending of money to
the borrower usually for a free or charge in the form of interest. Creditors usually provide the much needed funds
by extending credit to the business.

Banks and other financial institutions are the major players in the economy in terms of credit extension. They are
likewise the regulatory arm for the flow of money in the economy. In the Philippines, banks
and other types of financial institutions are highly regulated by the national government.

The entrepreneur must know the different financial services provided by the banks and other financial institutions.
Maintaining favorable financial records and business image with them provides favorable advantage to the entrepreneur
in times of financial needs.