Entrepreneurship

Entrepreneurship
- The art of observing correct practices in managing and operating a self-
owned, wealth-creating business enterprise by providing goods and services
that are valuable to the customers.
- The business. (Aduana)
- The capacity and willingness to develop, organize and manage a business
venture along with any of its risks in order to make a profit.

More Definitions of Entrepreneurship

- It is a process of innovation and new venture creation. It is an art and science
of converting ideas into marketable goods and services to improve men’s
quality of life.
- Is the process of discovering new ways of combining resources.
- It is a creative and innovative response to the environment.
- Is a creative destruction of resources.

Entrepreneurship is the process of creating something different with value by

devoting the necessary time and effort, assuming the accompanying financial,
psychic, and social risks and receiving the resulting rewards of monetary and
personal satisfaction and independence.

Entrepreneur
- Refers to a person who strongly advocates and correctly practices concepts
and principles of entrepreneurship.

Difference between an Entrepreneur and a Businessman

- A businessman makes his place in the market with his efforts and dedication,
whereas an entrepreneur creates the market for his own business.
- A businessman is a market player while an entrepreneur is a market leader
because he is the first to start such a kind of enterprise.
Definition of Terms
- Livelihood
- Is a means of making a living. It encompasses people’s capabilities,
assets, income, and activities required to secure the necessities of life.
- Innovations
- Result from a conscious and purposeful search for new opportunities.
- Sustainable Livelihood
- A livelihood is sustainable when it enables people to cope with and
recover from shocks and stresses (such as natural disasters and
economic or social upheavals) and enhance their well-being and that of
future generations without undermining the natural environment or
resource base.
- Business
- Is an organization that provides goods and services to others who want
and need them.

Types of Entrepreneurship
- Individual entrepreneurship
- Is the independent application of the process of creation and
innovation outside of an established firm.
- New business,
- Organizational or corporate entrepreneurship
- Is entrepreneurship within a large organization. People in charge of
innovations are called intrapreneurs. Most intrapreneurs eventually
become entrepreneurs themselves.
- New products but still carries the name of the company.
- Social entrepreneurship
- Is entrepreneurship that is geared towards solving social and
environmental problems.

Creativity
- “Idea generation.”
- Is an imaginative process as opposed to innovation is a productive process.
- There is no risk involved in creativity, whereas the risk is always attached to
innovation.

Innovation
- Result from a conscious and purposeful search for new opportunities.
 - Starts with the analysis of the possible sources of new opportunities.

Innovation Process
1. Invention
- New products, services, or processes are created.
- Something that never existed before.
2. Extension
- Existing products, services, or processes are expanded.
3. Duplication
- Existing products, services, or processes are replicated.
4. Synthesis
- Existing concepts and factors are combined into a new formulation.

Types of Innovation
- Breakthrough Innovation
- It is an innovation from inside a company that leads the company or
the product to the next level/goal.
- It leads to changes to an existing product, service, or process that have
or will have a significant impact on the business.
- It typically involves a paradigm shift.
- Sustaining Innovation
- A sustaining innovation improves existing products. It does not create
new markets or value markets, but develops existing ones with better
value, allowing companies to compete against each other’s sustaining
improvements.
- Disruptive Innovation
- It is an innovation that creates a new market and value network and
eventually disrupts an existing market and value network, displacing
established market-leading firms, products, and alliances.
- Emerging and new type of innovation.
- Example: Flat screen TV’s instead of the old box type televisions

Financial Responsibility
- Refers to the process of managing money and other similar assets in a way
that is considered productive and is also in the best interest of the individual,
or the family, or the business company.
Learn To Earn, Hone Your Skills
- Earning is the first step in your journey to managing money wisely so that you
can build a successful future.
BIg Ideas, Big Money
- You can earn money doing what you love by becoming an entrepreneur.
Who are entrepreneurs?
- People who have the ability to analyze and evaluate business opportunities.
- People who create and grow enterprises.
- People who see problems as opportunities.
- People who believe there are always better ways to do things.

Personal Entrepreneurial Competencies (PEC’s)

- Achievements
- Persistence
- Does not give up easily.
- Makes sacrifices.
- Takes repeated action to solve problems.
- Not overwhelmed by obstacles and barriers.
- Maintains positive outlook.
- Seizing Opportunity
- Takes advantage of all business opportunities available.
- You are after new advances to satisfy the consumers.
- Commitment
- Accepts full responsibility for problems encountered.
- Helps employees to get the job done.
- Seeks to satisfy the customers.
- Risk Taking
- Prefers situations involving moderate tasks.
- Concern for High Quality and Efficiency
- Always strives to raise standards.
- Aims for excellence.
- Strives to do things better, faster, and cheaper.
- Planning
- Goal Setting
- Sets clear long term goals.
- Short Term: Attainable in one year
- Long Term: More years ahead
- Information Seeking
- Personally seeks information on clients, suppliers, and
competitors.
 - Seeks expert for business and technical advice.
- Systematic Planning and Monitoring
- Develop logical step-by-step plan to reach goal.
- Works into alternatives and weighs them
- Monitors and shifts alternative strategies when necessary to
achieve goals.
- Power
- Persuasion and Networking
- Uses business and personal contact to accomplish objectives.
- Employs deliberate strategies to influence or persuade others.
- Self-confidence
- Believes in oneself.
- Expresses confidence in own ability to complete difficult tasks or
challenges.

Goal
- Is an idea of the future or desired result that a person or a group of people
envisions, plans and commits to achieve.
- Characteristics
- Short-term
- It requires less than 6 months to achieve.
- Medium-term
- It requires less than a year to achieve.
- Long-term
- It takes longer than a year.

Making Smart Goals

- Specific
- Measurable
- Achievable
- Relevant
- Time-bound

Budgeting
- Is the process of creating a plan to spend your money. Creating this spending
plan allows you to determine in advance whether you will have enough money
to do the things you need to do or would like to do.

Types of Expenses
- Flexible Expense
 - Costs that are easily changed, reduced, or eliminated.
- Discretionary Expense
- Is a cost that a household or individual can get by without, if necessary.
These expenses are often defined as things that are “wants” rather than
needs.
- Fixed Expense
- Costs that you need to survive in daily life.
- Usually don’t change in a month.

Budgeting Process
- Phase 1
- Assess your personal and financial situation.
- Phase 2
- Set personal and financial goals.
- Phase 3
- Create a budget for fixed and variable expenses based on projected
income.
- Phase 4
- Monitor current spending patterns.
- Phase 5
- Compare your budget to what you have actually spent.
- Phase 6
- Review financial progress and revise budgeted amounts.

Synthesis
- Budgeting is the first step toward financial freedom.
- “A budget tells us what we can’t afford, but it doesn’t keep us from buying it. ”

The Entrepreneurial Process

- Phase 1
- Identification and Evaluation of Opportunities
- Opportunity identification is a process that involved the search
for and discovery of business opportunities.
Opportunity seeking
- Generate and evaluate ideas.
- Idea vs Opportunity
- Idea is the concept for a product or service that doesn’t exist or is
not currently available in the market.
- Opportunity is an idea with commercial potential.
- Consciously and constantly seek an opportunity.
 1. Start with yourself. (Talent, hobbies, interest, skills, and exposure.)
2. Find solutions to problems.
3. Study the IMPORT list and available local materials
4. Study available skills
5. Study new technologies.
6. Study demands of the market (Market Research)
Needs
- States of felt deprivation
Wants
- The form human needs take as shaped by culture and individual
personality
Demands
- Human wants that are backed up by buying power

Approach to Opportunity Identification

1. Observe changes in the environment.
2. Recognize a need that customers have that is not being satisfied.
3. Recognized problems and finds ways to solve it.

How to evaluate opportunities

- Value
- Problem-solving capacity
- Money-making potential
- Fit
- Capitals
- Human Capital
- Knowledge and skills self
- Psychological Capital
- Self-efficiency, optimism, resilience
- Social Capital
- Network and affiliations
- Economic Capital
- Money, land, equipment, buildings, etc.
Opportunity screening
Opportunity seizing
- After screening, choose the opportunity which you believe has the best value,
problem-solving capacity, money-making potential, and fit to your personality.

- Phase 2
- Development of Business Plan
 - Develop the opportunity
- Determine and obtain required resources.
- Manage the resulting venture.
- Phase 3
- Gathering the resources
- Involves appraisal of current resources
- Does not underestimate the amount and variety of resources
- 3M’s: man, money, machines/materials
- Phase 4
- Management of resulting enterprise
- Implementation of:
- Business plan (planning)
- Management structure (organizing/staffing)
- Management style (leading)
- Control system (controlling)

Target Market Identification

What are markets?
- In entrepreneurship, we regard markets as a group of people who need
products and services and they meet the following criteria:
- Must need or desire a particular product
- Must have the ability to purchase the product
- Must be willing to use their buying power
- Must have the authority to buy specific products

Types of Markets
- Consumer Markets
- Purchasers and individuals in households.
- Purchases are for personal consumption, not profit.
- Business Markets
- Individuals and groups that purchase products for resale, direct use to
produce other products, or use in daily business operations.
- Purchasers classed as producers, resellers, government, and
institutional markets

The Target Marketing Process

1. Market Segmentation
- Identify bases for segmenting the market develop segment profiles.
Segmentation Variables for Consumer Markets
Demographic variables Geographic Variables
- Age - Region
- Gender - Urban, suburban, rural
- Race - City size
- Ethnicity - Country size
- Income - State size
- Education - Market density
- Occupation - Climate
- Social class - Terrain
- Religion
- Family size
- Family life cycle

Psychographic Variables Behavioristic Variables

- Personality attributes - Volume usage
- Motives - End use
- Lifestyles - Benefit expectations
- Brand loyalty
- Price sensitivity
expectations
- Brand loyalty
- Price sensitivity

2. Target Marketing
- Develop measures of segment attractiveness and select target
segments.
- Target Market
- A set of individuals sharing similar needs or characteristics that
the business hopes to serve. These individuals or group of people
are usually the end users of the products.
- What is the purpose of target marketing?
- Identifying a target market helps the entrepreneur reach
his intended/right buyers, by developing effective market
strategies to promote and sell products/services.

3. Market Positioning
- Develop positioning for each segment and develop a market mix for
each segment.
- Refers to the process of Establishing the image or identity of a brand or
product so that consumers/customers perceive it in a certain way.
- Value Proposition Statements
 - The set of benefits or values a company promises to deliver to
consumers to satisfy their needs.
- Value Models

Product Strategy
- Roadmap of a product and outlines the end-to-end vision of the product and
what the product will become.
- Companies utilize the product strategy in strategic planning and marketing to
identify the direction of the company’s activities.
- The STP process
- segmentation→ targeting→ positioning

Marketing mix
- Product
- Is anything that can be offered in a market for attention,
acquisition, use, or consumption that might satisfy a need or
want.
- Two types:
- Goods
- Consumer goods
- Industrial
- Services
- Consumer services
- Industrial or business services
- Price
- Place
- Promotion

What products must have?

- Features
- What are the physical attributes of your products.
- Ex. A “I inch insulation layer” on a sleeping bag is the feature.
- Advantages
- What the features do.
- Ex. “Helps retain body heat on cold nights”
- Benefits
- What benefits they provide to your potential customers.
 - Ex. “When you’re camping, you’ll have a nice warm sleep at night so that
when you wake up you’ll be well rested and ready for a day of fun
activities.”

If the same products have the same fore benefits, how do they differ?
- Value proposition
- Pitch of the company that will catch the attention of the customers
- The set of benefits or values a company promises to deliver to
consumers to satisfy their needs.
-
- Is a clear statement about the “outcomes” that an individual or an
organization can realize from using your product, services, or solution.

Savings and Investments

Saving Tips/Tricks
Trick #1: Four banks, not one!
Trick #2: Set savings goals!
Trick #3: Save first, not last!
Trick #4: Cut your expenses.
Trick #5: When you do spend, be a smart shopper.

How to create an Effective Value propositions:

1. Have a detailed list of problems of the customer.
2. Make it straight to the point simple and specific
3. Highlight the value of the product
4. Adopt the language of the market
5. Differentiate your value proposition from your competitors.
6. Add credibility-enhancing elements to your product

Price is the amount of money charged and /or sum of values that consumers
exchange for the benefits of having or using the product.

Pricing Strategies (Cost-based)

1. Know the unit cost.
- Unit cost = VC (variable cost) + FC (fixed cost)
--------------------
 # of units
- Variable cost
- Expenses that vary or change in direct proportion to the
quantity of production.
- Fixed cost
- Expenses that do not vary or change.
2. Mark-Up Pricing
- Step 1:
- PMV (peso mark-up value) = UC (unit cost) x %Mark-up
- Step 2:
- Mark-up Price = UC + PMV
3. Target Profit
- TPPC = UC + (Target ROI% x I)(investment)
----------------------
# of units
- Pricing strategy where prices are set towards attaining a satisfactory rate of
return.

What is return of investment?

- Helps evaluate their investments.

Example:
If a manufacturer wishes to make a 35% return on investment (ROI) on an invested
capital of 2 million pesos. At what price should the product be sold if the Unit Cost is
PHP 20 and expected units to be sold is 100, 000?

Place Strategy

Distribution Channels
- Direct Distribution
- involves distributing direct from the manufacturer to the consumer
that gives a manufacturer
- Indirect Distribution
 - Involves distributing your product by the use of an intermediary for
examples a manufacturer selling to a wholesaler

Distribution Intermediaries
- Its a set of independent organizations involved in the process of
making product or service

Wholesalers
- The party that buys large quantities of a product from manufacturers and
sells them to retailers. Wholesalers sell goods to other businesses, they do not
sell directly to consumers

Jobbers
- Tradesmen who deals in small lots of goods or ‘jobs’, or acts as an agent ,
middleman, or a sub-contractor, and usually does not deal directly with the
principal customer

Retailers
- Persons or organizations that sell products directly to consumers and end
users; goods are usually sold in small quantities.

Distribution Strategies :

Intensive Distribution
- Used commonly to distribute low priced products or impulse purchases; For
example snacks such as chocolates, soft drinks, and crisps

Selective Distribution
- A small number of retail outlets are chosen to distribute the product; common
with products such as computers, television, household appliances, where
manufacturers want a large geographical spread.

Exclusive Distribution
- Involves limiting distribution to single outlet; The product is usually highly-
priced , and requires intermediary to place much details in its sell.
Promotional Strategy

Promotion
- Is the element in an organization’s marketing mix that serves to inform,
persuade and remind the market about the organization and/or its products

The Promotional Mix

- Is the specific blend of advertising, public relations, personal selling, sales
promotion and direct marketing tools that the company uses to persuasively
communicate customer value and build customer relationships.

a. Advertising
- Is any paid form of non-personal presentation and promotion of ideas,
goods, or services by an identified sponsor
Ex . Broadcast , Print , Internet , Outdoor (Billboards )

b. Sales promotion
- is the short-term incentive to encourage the purchase or sale of a
product or service
Ex. Discounts , Coupons , Displays (Show rooms, Window Displays ,
Store Displays , and Demonstrations (Product Samples)
 c. Public Relations
- Involves building relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image , and
handling or heading off unfavorable rumors , stories , and events.
Ex. Press releases , Sponsorships , Special Events

d. Personal Selling
- Is the personal presentation by the firm’s sales force for the purpose of
making sales and building customer relationships
Ex. Sales presentations, Trade Shows, Incentive programs

e. Direct Marketing
- Involves making direct connections with carefully targeted individual
consumers to both obtain an immediate response and cultivate lasting
customer relationships--through the use of direct mail , telephone ,
email , and the internet to communicate directly with specific
consumers.
Ex. Catalogs , brochures , leaflets , kiosk

Debts and Credits

- Loan
- Is the lending of money by individuals or organizations (banks, lending
companies), to other individuals for either personal and business
reasons. A person that incur loan have a debt.
- Types:
- Personal
- Business
- Auto
- Mortgage
- Student
- Credit
- Refers to an agreement to purchase a good or service with the express
promise to pay for it later.
1. Installment Loans VS Revolving Credit
- Installment Loan
- Used to finance a specific purchase for a specific amount of time.
- Revolving Credit
- An open line of credit that can be used for any purchases as long as
you’re under the credit limit.
 2. Secured VS Unsecured Debt
- Secured Debt
- Debt is tied to a specific asset that can be used as collateral and
repossessed if borrower does not make payments.
- Unsecured Debt
- Debt is not tied to a specific asset; there is no collateral that can be
repossessed if borrower defaults.
3. Variable VS Fixed Rate
- Variable Rate
- Interest rate can change during the duration of the loan based on the
prime rate.
- Fixed Rate
- Interest rate remains constant during the duration of the loan.

Credit Card
- Is a payment card issued to users (cardholders) to enable the cardholder to
pay a company or enterprise for purchased goods and services based on the
cardholder’s agreement to the card issuer to pay them for the amount plus the
other agreed charges in a set period of time.
Principal Amount
- This is the amount you’re looking to borrow.
Loan Term
- Time (month or year) on how long the loan will be paid.
Interest Rate
- Is the percentage of principal charged by the lender for the use of its money.
Amount of interest (excess payment) due per period, as a proportion of the
amount lent, deposited, or borrowed.
- Usual IR is 3% - 5% on personal, business, and care loans. Interest rate is
usually upon discretion of the bank.
- The profit of the bank.

Types of Business Organizations

Sole Proprietorship
- companies owned by one person who is usually hands-on in managing the
day-to-day activities
- They own the entire business, including all assets and profits and are
responsible for all the liabilities of the business
Partnership
- Shared by 2 or more members
- Partners mutually agree as to how decisions will be made and how the profits
or loses will be shared.

Corporation
- Has distinct personality
- Can enter into contracts, secure loans, sue and be sued, hire employees and
pay taxes
- Has minimum of 5 and a maximum of fifteen owners called shareholders
- Owned and established under the corporation code and regulated by SEC
- Non-stock or stock

KEY FUNCTIONS IN BUSINESS

Customer Service

Operations Administration and

IT support

The main functional

areas
Finance Marketing
and sales

Research and Human

development resources

Financial Terms
Revenue - money from the sale of products and services
Net Income - profit after all expenses are deducted (at the very bottom)
Cost of goods sold (variable cost) - direct costs attributable to the
production of goods which includes material cost and direct labor cost
Gross Profit - difference between revenue or income and the cost of making a
product or providing a service.
OPEX (operating expenses)[fixed cost] - it is an ongoing cost for creating a
product and running a business.
Capital Expenditure (CAPEX) - it is the cost of developing or providing non-
consumable parts for the product or service. They are not included in the income
statement.

Financial Requirements
Fixed Capital - these are usually one-time expenses, and will generally last
the lifetime of the business.
Ex. cost of land and building, lease deposits, cost of improving the land
or renovating the building, furniture, furnishings, fixtures, machinery, and
equipment.
Working Capital - this is the reserve money you need to run the business until
it becomes self-supporting, which may take from one to six months or even longer.
Ex. to purchase raw materials, to compensate workers, to pay for the
following: transportation, telephone, electricity, and water bills.
Pre-operating Capital - this is money that you spend before your business
begins to operate.
Ex. to register the business, to acquire licenses for franchises

Sales = revenue - profit

——————
Units

Financial plan
3 types of financial statements
- Income statement - how you spend it, the amount of money we get and where
it goes
- Statement cash flow
- Balance sheet

Projected income statement

- A financial statement that indicates how the sales is transformed into the net
income. (profit or loss statement)
- You need to forecast your estimates sales for a period of time (month, semi-
annual, annual)
- You can forecast how many customers will buy your product.
Projected Sales
- How much you think you can sell
- How much materials you need (purchasing)
- How many people you need to hire (HR)
Income Statement
- To see the company’s sales and losses

Formulas
Revenue/sales = price of product x no. of units
Cost of goods sold = unit cost x no. of units
Gross profit = sales - cost of goods sold
Net income = gross profit - operating expenses

Writing an Income Statement