ENTREPRENEURSHIP

Student Learning Packet

Name _____________________________________________ Strand __________________

PRELIMINARIES

Module 2 Recognizing the Potential Market

Module Overview

This module will help you understand all the resources needed to operate a new business
venture, but it will never be easy to start one. Also, you will learn the proper and efficient ways of
starting a business. You will be introduced to the entrepreneurial process, which starts with
identifying and evaluating the opportunity to start a business.

Learning Competencies

At the end of the module, you are expected to:

1. Recognize a potential market by:
a. Analyzing the market need
b. Determining the possible product/s or service/s that will meet the need;
c. Screening the proposed solution/s based on viability, profitability, and customer
requirements; and
d. Selecting the best product or service that will meet the market need.

Instructional Materials
Gamatero A. Entrepreneurship (second edition). Makati City, Philippines. Diwa Learning Systems Inc.

INTRODUCTION

PRE-ASSESSMENT

OOOPS!!
Before you proceed to the next step, you have to answer first this pre-assessment section to know your
prior knowledge on Entrepreneurship. Read each statement carefully and encircle the letter of the best
answer.

1. This is the part where the entrepreneur should use the resources allocated for the new venture.
a. Running the business b. Developing a business plan
c. determining the capital needed d. opportunity spotting and assessment

2. This is a mnemonic for sociocultural, technological, economic, environmental, political, legal,

ethical, and demographic factors.
a. Industry b. New discovery or knowledge
c. STEEPLED d. Futuristic opportunities

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 3. This is exactly the same as brainstorming except that the channel used is to face-to-face, but in
writing or online.
a. Focus group discussion b. Brainstorming
c. Brain writing or internet brainstorming d. Problem inventory analysis

4. This factor should be given much importance in conducting a business especially when the world
has already suffered severely from human-induced calamities.
a. Environmental or ecological factors b. Economic factors
c. Technological factors d. sociocultural factor

5. ____ are government laws and regulations that can restrict or allow business activities.
a. Ethical factors b. Legal factor
c. Political factors d. Demographic factors

Hello, you are now in the first part of this module. You are going to give some description of the
pictures below. Best of luck!

INTRODUCTION
 Motivation
In this activity, you are to analyze the three pictures below and identify which of the following pictures
best describes Health and Safety Law. Write your answer on the lines provided.

1 2

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 Linking Statement

At the end of this module, you will be able to understand that the entrepreneurial process
is an important procedure in establishing any kind of business that an entrepreneur has to undergo.

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 INTERACTION
Learning Activities
Hello! I am here to give you some reading materials for you acquire information about the
module lesson. You are also tasked to perform some activities in this part. Hope you enjoy
this. Goodluck!

 Reading Materials
The Entrepreneurial Process
The entrepreneurial process is step-by-step procedure in establishing any kind of business that an
entrepreneur has to undergo. It is composed of four aspects.
1) Opportunity spotting and assessment. This is the beginning of process and is considered the most
difficult. Entrepreneurs at this point take note of interesting trends in their environment.
Consumers are reliable sources of opportunity information because market needs originate from
them.
2) Developing a business plan. Entrepreneurs should formulate a business plan when they have
already spotted and assessed the opportunity for a market. A business plan is a comprehensive
paper that details the marketing, operational, human resource, financial, strategic direction, and
tactics of the business.
3) Determining the capital needed. A big idea can never be translated into reality if the
entrepreneur’s resources are limited. Therefore, it is mandatory in the entrepreneurial process to
calculate the resources needed to establish the business and compare this against the
entrepreneur’s current resources.
4) Running the business. This is the part where the entrepreneur should use the resources allocated
for the new venture. The business plan prepared in step 2 should already have been implemented
Table 2.1 Components and steps in the entrepreneurial process
Opportunity spotting and Developing a business Determine the capital Running the business
assessment plan needed

Evaluate the identified Come up with a business Calculate the intrinsic and Practice leadership as a
opportunity description and analysis extrinsic capital needed way of life

Conceptualize and measure Perform industry Calculate the existing Recognize critical
the opportunity analysis capital success factors

Identify the perceived value
of the opportunity to the
company and the customers
Do cost-benefit analysis of
the opportunity including
risk analysis
Come up with the Calculate the difference
marketing plan between the needed capital
and the existing capital.
Choose the most cost-
efficient suppliers or
service providers
Prepare the operations Develop contact and
plan including the relationship with suppliers
organizational plan and service providers
Identify existing and
foreseeable problems
and issues
Employ risk-mitigating
controls and monitoring
systems

Match the opportunity with Come up with the Devise an

the entrepreneur’s skills and financial plan expansion/sustainability
objectives strategy
Scan the strengths and Identify strategies and
weaknesses of competitors tactics

Perform monitoring and

control

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Scanning the Marketing Environment
Scanning the marketing environment is the starting point of any new venture that involves
understanding and knowing the intricacies of the macro-environment, micro-environment, and internal
environment. With this process of scanning the general environment, an entrepreneur can recognize
various opportunities and at the same time understand thoroughly the arena where the future business will
operate. The process of seeking, scanning, and seizing is adapted to create the most suited product or
service for an opportunity. The general rule is to find the opportunity first before coming up with a new
product or service, not the other way around. This is one of the mistakes that budding entrepreneurs
commit in starting a new venture.
Seeking, Screening, and Seizing
The 3S of opportunity spotting and assessment is the framework that most of the promising
entrepreneurs use to finally come up with the ultimate product or service suited for a specific
Opportunity. An opportunity is an entrepreneur's business idea that can potentially become a commercial
product or service in the future. The entrepreneur serves as the catalyst of creating a value for the
customers through the new or innovated product or service. As a reward, the entrepreneur earns profits
when the customers are satisfied and delighted.
S1 - Seeking the Opportunity
Opportunity seeking is the first step and is the most difficult process of all due to the number of
options that the entrepreneur will have to choose from. It involves the development of new ideas from
various sources as follows:
1) Macro environmental Sources
a. STEEPLED. This is a mnemonic for sociocultural, technological, economic,
environmental, political, legal, ethical, and demographic factors. This represents the
general environment where the entrepreneur can identity business opportunities from and
where the future business is about to operate.
b. Industry. This is the source of current trend on what is happening in the industry where
the future business will belong to. For example, the entrepreneur should be fully
acclimated on what is happening with the rice industry it he or she wants to establish a
rice retailing business.
c. New discovery or knowledge. These are new trends that can be the core business model
of a new venture. For example, the influx of mobile applications necessitates businesses
to have this platform as one of their transaction channels.
d. Futuristic opportunities. These are projected new opportunities that can possibly affect
the new business while it is running. For example, Sari-sari stores in the future will be
able to incorporate financial transactions Such as accepting bills payment and process
remittances.
2) Micro market
a. Consumer preferences, inte
b. rests, and perception. These are the current needs and wants of potential customers that
should be discovered right away by a budding entrepreneur. This way, he or she will be
able to take a chance of the opportunity. A need is recognized when a customer believes
that there is a difference between his or her current situation versus his or her desired
condition.
c. Competitors. Recognizing and understanding potential competitors will aid the
entrepreneur to develop a product or service that is unique and will surely stand out from
the competition. The 4Ps of marketing (product, place, price, and promotion) will be
competitively positioned if the entrepreneur is familiar with his or her competitors.
d. Unexpected opportunities from customers. Oftentimes, the most brilliant ventures come
from the most unexpected opportunities. It may happen in unlikely situations, unlikely
places, and with unlikely people. Existing problems and bottlenecks often give rise to an
unexpected opportunity. What entrepreneurs usually do is be on top of the situation and
change the market's perception of a product or service or build a new market.

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 e. Talents, hobbies, skills, and expertise. Business opportunities do not just come from
outside forces, but also from within the entrepreneur. The entrepreneur's talents, hobbies,
skills, or expertise can be a source of business opportunity.
f. Irritants in the marketplace such as deterrents, problems, complaints, and delays.
Generally, entrepreneurs see opportunities in situations where there is a recurring
problem or sometimes when there is no more hope in solving the problem. When
customers are already sick and tired of the same old issue or problem, that is when the
opportunistic entrepreneur should come in and make a difference.
g. Location. Often, entrepreneurs just have to look at their ecosystem and they will be able
to spot a business opportunity right away. For example, if the entrepreneur's location has
many schools, then a restaurant, an eatery, or probably a computer shop might be a good
business to establish. If the entrepreneur is in an island with an awesome beachfront, why
not put up a hotel?
Methods of Generating Ideas
Recognizing and understanding the vast sources of opportunities is one difficult activity to do.
Also, the methods of generating ideas may be overwhelming to undergo through. Either one or a
combination of the methods given can be employed by the entrepreneur in generating new ideas.
a. Focus group discussion (FGD). In this method, a moderator handles a very open, free- flowing,
and in-depth discussion with a group of people who can provide insightful ideas about a new
product or service that will fill a market need.
b. Brainstorming. Similar to an FGD, brainstorming is an activity that allows the participants to
share creative ideas using the following rules: (a) no destructive criticism or judgment is allowed,
(b) wilder ideas are accepted, (c) more ideas are preferred, and (d) improvement of others' ideas is
allowed. In short, brainstorming is a fun discussion with lenient rules.
c. Brain writing or Internet brainstorming. This is exactly the same as brainstorming except that the
channel used is not face-to-face, but in writing or online. The results of brain writing or Internet
brainstorming usually take longer, as the answers depend on the availability of the participants in
answering the questionnaires online
d. Problem inventory analysis. This method is similar to the FGD except that the participants are
already given an inventory of product or service problems. The participants will just identify from
the list given the compelling problems) of a potential product or service instead of generating the
ideas from them.
Macro environmental Sources: Examples of Findings
STEEPLED Analysis
The result of the STEEPLED scan will aid the entrepreneur in deciding what product or service to
set up and whether this new venture will succeed or not. The focus of this scan is only on the macro
environment. Again, not all factors can have an effect on the new venture. The important thing is for the
entrepreneur to fully scan these factors so he or she can decide if there is a compelling business
opportunity or an impending threat.
1. Sociocultural factors. These factors represent a general view of a locality's traditions, Customs, beliefs,
norms, and perceptions. These factors affect how a person of the locality behaves and reacts to marketing
and selling activities.
The entrepreneur should take note of the following sociocultural factors:

 Health consciousness
 Education level
 Attitudes toward imported goods and services
 Attitudes toward the person's lifestyle
 Attitudes toward product quality and customer service
 Attitudes toward saving and investing
 Emphasis on safety
 Buying habits

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  Religion and beliefs
2. Technological factors. These are composed of innovations of an existing technology or an invention of
a new one mostly on applied science and engineering research areas. Entrepreneurs should always be up-
to-date with the technological changes, as these are catalysts in improving a product or service or
replacing them entirely.
The entrepreneur should take note of the following technological factors:

 Basic infrastructure level

 Rate of technological change
 Spending on research and development
 Technology incentives
 Legislation regarding technology
 Communication infrastructure
 Access to newest technology
 Internet infrastructure and penetration
3. Economic factors. These factors play a vital role in the scanning of marketing environment because
economic factors directly affect any business venture. These factors include income, expenses, and
resources that can influence the cost of doing business and generating income.
The entrepreneur should take note of the following economic factors:

 Growth rates  Trade flows and patterns

 Inflation rates  Level of consumers’ disposable income
 Interest rates  Monetary policies
 Exchange rates  Fiscal policies
 Unemployment trends  Price fluctuations
 Labor costs  Stock market trends
 Stages of business cycle
4. Environmental or ecological factors. These factors should be given much importance in conducting a
business especially when the world has already suffered severely from human-induced calamities. The
sean of these factors will help the entrepreneur determine if the business he or she is entering into will
comply with the environmental standards or will just be a hazard to people, animals, and nature.
The entrepreneur should take note of the following environmental factors:

 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution
 Recycling
 Waste management
 Attitudes toward "green" or ecological products
 Endangered species
 Attitudes toward and support for renewable energy
5. Political factors. These factors are mostly induced by government policies and administrations, which
can have a strong effect in the entrepreneur's business. The entrepreneur should take note of the following
political factors and examples:

 Government stability and likely changes

 Bureaucracy
 Corruption level Tax policy (rates and incentives)
 Freedom of press
 Rule of law
 Government effectiveness
 Political rights

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6. Legal factors. Related with political factors, legal factors are government laws and regulations that can
restrict or allow business activities.

The entrepreneur should take note of the following legal factors and examples:

 Anti-trust law
 Discrimination law
 Copyright, patents / intellectual property rights
 Consumer protection
 Employment law
 Health and safety law
 Data protection law
7. Ethical factors. These are the factors that will serve as an entrepreneur's guide on how to be ethical in
running the business.
The entrepreneur should take note of the following ethical factors:

 Ethical advertising and sales practices

 Accepted accounting, management, and marketing standards
 Attitude toward counterfeiting and breaking patents
 Attitude toward development and well-being of employees
8. Demographic factors. These are the characteristics of the people in the target market.
The entrepreneur should take note of the following demographic factors:

 Population growth rate

 Age distribution and life expectancy rates
 Gender distribution
 Social classes
 Family size and structure
 Minorities

Activity 1.
What have you learned so far?
1. You identify the micro market factors that an entrepreneur may take into account when spotting
opportunities. Briefly describe each.
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2. Can you identify an opportunity in your community? If there are no opportunities in your own
community, recall if there might be an opportunity in a community you recently visited.
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3. Analyze that opportunity using STEEPLED.
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S2 – Screening the Opportunity
By now you already feel overwhelmed with how vast Si (opportunity seeking) is, but you don't
have to worry that much. This concept has been inculcated to you to see the universe of opportunities an
entrepreneur can derive from the macroenvironmental and microenvironmental sources. The key here is
in the effective choosing or careful diligence. Entrepreneurs should start with the big picture. This is the
best way in ensuring that the entrepreneur has scanned the best potential business to venture into. Once
the compelling opportunities are identified, S2 will be the next crucial step.
Opportunity screening is the process of cautiously selecting the best opportunity. The selection
will depend on the entrepreneur's internal intent, ie., the main objective that the business will accomplish
in the entrepreneur's life, and the external intent, which will address the compelling needs of the target
market. The entrepreneur should apply due diligence and independent judgment in selecting the
opportunities that have a potential and eliminate those that are not within the scope of the entrepreneur's
risk appetite. Risk appetite refers to the entrepreneur's tolerance of business risks.
Time must be considered by the entrepreneur in screening the opportunities at hand, as it is
considered one of the most critical resources of an entrepreneur. Time should only be devoted to
worthwhile opportunities.
Detailed here are the most important elements that are always present in a compelling
opportunity. The entrepreneur should say no to an opportunity if it does not contain any of these business
opportunity elements:
1. Has superior value to customers
2. Solves a compelling problem, issue, a need, or a want
3. Is a potential cash cow
4. Matches with the entrepreneur’s skills, resources, and risk appetite
The Opportunity Attractiveness Test
The opportunity attractiveness test aims to assist entrepreneurs in ensuring that the opportunity that they
will venture into is an attractive and feasible prospect. This is not the “be all” in the road to
entrepreneurial success but a framework to measure how compelling an opportunity is.
Because each venture is unique, some components of this test might not be applicable to all
businesses. It is the job of the entrepreneur to discern which among these components can put an
equitable weight to components that are relevant to the potential venture. The entrepreneur can also
customize this test to better suit the screening requirements of the new venture. In summary, with the four
business opportunity elements and this OAT, the entrepreneur can't go wrong in his or her new venture.
The key is effective diligence.
a. The "concept" and the "strategy." The entrepreneur should think of the reason for the business'
existence. He or she can do this through crafting a brief vision statement. A vision statement is
simply defined as what the business should do in the future. The entrepreneur should also devise
a value creation proposition, i.e., the value that the product or service will offer to the target
customers or the satisfaction of the needs or wants of the target customers.
b. Opportunity metrics. These are considered as the opportunity's critical success factors. These
factors will approximately determine the attractiveness of the new venture depending on the total
scores that it will generate and the risk appetite of the entrepreneur. Table 2,2a-g consists of the
basic metrics necessary in starting up a business.

Assessment of Highest potential Lowest potential Attractiveness score

personal resources description description
1. personal goals and Has clear objectives Goals unclear and
fit and matches with the disconnected to the

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 entrepreneur’s entrepreneur’s
capacity and capacity and
resources resources
2. success or failure Prosperity to succeed Propensity to fail high
high
3. opportunity costs Willing to sacrifice Contented with status
first for a better quo
opportunity
4. desirability Matches with the Ultimate desire is
lifestyle and only big returns
preference of the
entrepreneur
5. risk appetite Calculated risks Undefined and
unknown risks
6. stress management Can live comfortably Inability to manage
with stress stress
Total (weight):

Total Attractiveness Score

At the end of this test, the entrepreneur should first compute for the total score per factor. Then, a
corresponding weight or percentage should be given as to the importance of the factor to the venture’s
overall standing. This weight must be multiplied to the total score accumulated per test. The entrepreneur
should also establish a tiered scale and description on the total attractiveness score.
Sample tiered scale:
4.00 – 5.00 – very attractive
3.00 – 3.99 – attractive
2.00 – 2.99 – tolerable but must take caution and due diligence of the risks
1.00 – 1.99 – not attractive or too risky
S3 – Seizing the opportunity
Opportunity seizing is the last step in opportunity spotting and assessment. This is the “pushing
through” with the chosen opportunity. Entrepreneurs should make the best out of this opportunity, and
they should exert effort and full dedication for the success of the new venture. The entrepreneur’s idea
can be any type of innovation listed here.
Innovation is the process of positively improving an existing product or service. It is a key driver
for economic growth. Innovation is inevitable as the world constantly changes. Therefore, products and
services must also adapt to these changes. There are three types of innovations according to the degree of
distinctiveness.
a. Breakthrough innovation. These innovations, which may also include inventions, occur
infrequently as these establish the platform on which future innovations in an area are developed.
b. Technological innovation. These innovations occur more frequently that breakthrough
innovations. These innovations are technological advancement of an existing product or service.
c. Ordinary innovation. These innovations occur ordinary as the name implies. They are commonly
originating from market analysis and technology pull instead of a technology push. This means
that the market has a strong influence in the implementation of an innovation.
Entrepreneur often encounter a problem in defining a “new” product or service, or identifying its
components or features. Example of these include drastically improving the packaging and not the
product or service. The “newness” is also independent on the eyes of the market and the company.
Processing question:
1. How do you answer the question activity?

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INTEGRATION
Closure/Synthesis

AHA!! I have an idea.

For your able to know what you have learned from this module, take time to answer the following
activities:
I learned
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One question I have is
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This topic talked about
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REFLECTION GUIDE

You learned that the entrepreneurial process begins with opportunity spotting and
assessment. Once an opportunity is Spotted, the entrepreneur will have to come up with a business
plan. A business plan is a comprehensive paper that details the marketing, operations, human
resource, financials, strategic direction, and tactics of the business. The third step is to determine the
amount of capital necessary to establish the business. The last step is to run the business. The last
step entails using all the resources employed by the entrepreneur. It is imperative to have a
monitoring and control system.
An opportunity is an entrepreneur's business idea that can potentially become a commerC1al
product or service in the future. The 35 is an opportunity spotting and assessment framework, which
is composed of the following: seeking the opportunity, screening the opportunity, and seizing the
opportunity. There are several frameworks that may be used by entrepreneurs in order to study and
evaluate opportunities. Some of them are the environmental analysis (micro and macro), STEEPLED
analysis, and opportunity attractiveness test.
The product or service planning and development process is a four-stage process. In the idea
stage, the entrepreneur determines the feasible products and/or services that perfectly suit the
opportunity. The second stage is the concept stage, wherein the developed idea will undergo a
consumer acceptance stage. Using the information gathered during the concept stage, the
entrepreneur will then move forward to the third stage, which is the product development stage. The
last stage is the test marketing stage. This stage validates the work done form the first three stages to
measure success in the commercialization of the product or service.

REFLECTION QUESTION:
1. At this stage in your life (or perhaps even of your own family), think of how the 3S of opportunity
spotting may be useful.

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INTERVENTION
YEY! You are now in the intervention section. Please take time to do this.
Assignment
As a supplement activity, kindly answer the following questions below.
1. Think of a business opportunity in your community that you or your family may consider. It could be a
sari – sari, laundry shop, computer shop, or even an online selling or reselling business. What business is
it and why did you consider it?
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2. Identify the capital needed to start your chosen business.
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Post – Assessment
You read carefully the questions in every item and encircle the letter of the correct answer from
the given choices.
1. This is a mnemonic for sociocultural, technological, economic, environmental, political, legal, ethical,
and demographic factors.
a. Industry b. New discovery or knowledge
c. STEEPLED d. Futuristic opportunities
2. This factor should be given much importance in conducting a business especially when the world has
already suffered severely from human-induced calamities.
a. Environmental or ecological factors b. Economic factors
c. Technological factors d. sociocultural factor
3._______ are government laws and regulations that can restrict or allow business activities.
a. Ethical factors b. Legal factor
c. Political factors d. Demographic factors
4.This is the part where the entrepreneur should use the resources allocated for the new venture.
a. Running the business b. Developing a business plan
c. determining the capital needed d. opportunity spotting and assessment
5. This is exactly the same as brainstorming except that the channel used is to face-to-face, but in writing
or online.
a. Focus group discussion b. Brainstorming
c. Brain writing or internet brainstorming d. Problem inventory analysis

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