Unit 2: The Entrepreneurial Process
companies control and may be
Steps in starting the entrepreneurial
venture
1. Self-assessment
OTHER FACTORS
a. Personal interest
b. Your passion. These are the
things that you love doing
c. Assess your knowledge and
talents
d. Training and work experience-
the aspiring entrepreneur will able
to determine his limitations, thus
will give him the idea what
particular assistance.
2. Opportunity seeking
o After assessing oneself, it is
important to know the business
environment better. The business
environment is dynamic and cannot
be controlled by anyone
The business environment may post
either:
a. Opportunities- situations which
indicates possible advantages that the
entrepreneur can make use of.
b. Threats – situations that may hinder
the attainment of the business
objectives.
The following are the composition of the business
environment where possible opportunities and
threats may come from.
a. Political- The political environment refers to
government actions which affects the
operations of a company or business.
o This actions may be on local, regional,
national, international level.
o The political environment can impact
your business in many ways; it could
add risk factor and lead to a major
loss.
o Among the least predictable element
in the business environment.
o Example: Increase and decrease in tax.
b. Economic. The term economic environment
refers to all the external economic factors that
influence buying habits of consumers and
businesses and therefore affect the
performance of a company.
o These factors are often beyond the
either large scale or small scale.
Macro factors include:
 Employment/ unemployment
 Income
 Inflation
 interest rates
 tax rates
 currency exchange rate
 saving rates
 consumer confidence levels
 recessions.
Micro factors include:
 Size of the valuable market
 Demand for the company’s products or
services
 Competition
 Availability and quality of suppliers
 Reliability of the company’s distribution chain
(i.e., how it gets products to customers)
Companies often can control their economic
environment. They can evaluate economic conditions
before choosing to enter a particular market. Economic
environment can have the major impact on businesses
by affecting patterns of demand and supplies.
The most important factors in economic environment
is the
a. Income of the costumers. This indicates their
ability to spend on the products sold by the
marketer. So, the entrepreneur not only needs
to estimate the income of costumers but he
also has to decipher the products on which the
costumers would be willing to spend his
money.
b. Inflation is important economic indicator in
an economy. Inflation refers to an increase in
prices without a corresponding increase in
wages resulting in lower purchasing power of
consumers. Economy should try to achieve
low rate of inflation.
The best way to achieve low rate of inflation is
to ensure that products and services are
produced efficiently
c. Recessions- is a period of economic activity
when income, production and employment
tend to fall. Demand for products and services
are reduced
 d. Interest rate- If interest rate in an economy is
high, businesses will borrow capital at higher
rate and they will set up new businesses only
when they are convinced that they can earn a
rate higher than the interest rate they are
paying on the capital. Therefore, if the interest
rates are high, new business will not come.
Socio-cultural – Social environment consists of the
customs and traditions of the society in which business
is existing.
 Includes the standard of living, taste,
preferences and education level of the people
living in the society to where business exist.
 Some aspects include quality of life,
importance or place of women in work force,
attitude of customers toward innovation,
lifestyle and education, literacy rates,
consumption habits, population, tradition,
customs and habits of people.
 As society and culture change, businesses
must adapt to stay ahead of their competitors
and stay relevant in the minds of the
consumer.
 A major socio-cultural factor influencing
businesses and business decisions is changing
consumer preferences.
 Different styles and priorities can undermine
long successful products and services.
Example: a clothing company must constantly
be aware of changing preferences when
creating new products or it may be quickly
become out dated.
Changes in demographics is also a significant
factor in the business world. As population age for
example, markets for a popular music and fashion
may shrink while markets for luxury goods and
health products may increase. Additionally,
Changes in the proportion of genders and different
racial religious and ethnic groups within society
may also have impact on the way company does
business
Technological- Technological environment refers to
change taking place in the method of production, use
of new equipment and machineries to improve, the
quality of product.
 Refer to the advancement in the production
and manufacturing process of the different
goods and services.
 This technological change can bring both
opportunities and threats to a business. There
is always the advantage of assessing
technological environment and embracing the
new technology. This can make your product
better. Can also bring down cost and edge out
the competition and also it increases
production capacity but at the same time such
changes if not adapted by the business can
make them obsolete and out of fashion very
quickly.
Legal- Legal environment constitutes the laws and
various legislations passed in the parliament.
 The business legal environment plays an important
role in determining the taxes of any business
around the world. The government taxes that are
being imposed among other regulatory measures
help to promote economic growth and protect
consumers from exploitation and other illegal
factors. Prior to establishing or in the process of
running a business, in the legal environment of a
business, we are looking the key areas particularly
where law changes and how legal aspects affect
businesses. All the legal factors are contained in
the legal environment of a business.
Example: legal factors affecting business
environment is
1. Consumer protection law or consumer act of
the Philippines. Aim is to ensure that the
consumers are protected
2. Trade description act – law ensures that it is
illegal to deliberately give misleading
impressions about products.
Environment (natural) – The natural environment is
defined as the natural, physical surroundings in which
human life takes place.
 Some would call it, nature, our living planet or
life on earth or the geophysical world.
 Includes geographical and ecological factors
such as minerals, oil reserves, water forest
resources, weather and climatic conditions.
 Natural environment is another important
factor of the macro environment. This includes
the natural resources that a company uses as an
inputs that affect their marketing activities.
The concern in this area is increase in
pollution, shortages of raw materials and
increased governmental intervention.
3. Business idea generation
- act of forming ideas. It a s creative process
that encompasses generation, development and
communication of new thoughts and concepts
which become the basis of your innovation.
The process of an improvement always begins
with an idea. According to Grinner, Think of an
idea like money in the bank.
 Ideas is the driving force of a business.
Steps of generating business ideas
A. Create an opportunity statement- refers to a
brief evaluation of a product concept or idea to
determine if the idea is worth pursuing
especially with in the context of many other
ideas and opportunities.
- The business opportunity statement is the
starting point for a project. That statement
is the critical piece of information that you
must align on before you conduct an
enterprise design thinking workshop to
come up with solutions.
B. Gather raw materials - doing research by
asking other people or other sources in order to
support the opportunity that the idea could be
realized
- search for available resources or materials
needed for the business
C. Work on the idea/s - the opportunity or
gathered information will be put together to
generate more ideas using idea generation
techniques
Idea Generation Techniques - process of creating,
developing, and communicating abstract, concrete or
visual concept
- process of finding new solution for practical
problems in all fields of life and work
 5W+H Method - represents basic questions
you need to ask when thinking about a specific
topic:
 Who - target population
 What - raw materials needed
 When -
 Where - location of physical store
 Why - reason for introducing your product
in the market
 How - product distribution or how to
develop your product
 Social Listening - Idea generation doesn’t
mean you have to come up with a great
suggestion single handedly.
- Refers to listening as to what the target
audience has to say about a certain topic
through the use of social networking sites.
- Gives grounds and opportunity to track,
analyze, and respond to conversations thus, it
is a crucial process in audience research.
 Brainstorming - a well-known method that
people all over the world use for decades
already
- no right or wrong so people can contribute
ideas without criticism since the crazier the
idea, the better
 Role playing - walking in someone else s shoes
is everything but easy, but sometimes it’s the
only way to break the barrier and think of a
brilliant idea
- Switch places with your colleague and
embrace their point of view.
 Use online tools - The Internet is filled with
interesting tools that can assist you in
identifying alternative ideas.
 Mind Mapping - another method to get
through the creative drought successfully
- diagram for representing tasks, words,
concepts or items linked to and arranged
around a central concept using non-linear,
graphical layout
 Think In Reverse - thinking how not to
achieve your goal; turning the problem upside
down
 SCAMPER Technique - created by Bob
Eberle; method used for problem-solving and
creative thinking
- holistic way of applying critical thinking to
modify ideas, concepts, or processes that
already exists
- PURPOSE: to make adjustments on some
parts of existing ideas or processes;
composed of 7 actions
- BELIEF: everything new is an alternation of
something already in existence
 Substitute - Substitutions technique refers
to replacing a part of your product,
concept or process with another to achieve
better outcome.
 Combine - explores the possibility to
combine two ideas into a single, more
effective solution
 Adapt - analyses the possibilities to make
the process more flexible and focuses on
other similar incremental improvements to
the idea, process, or concept.
 Modify - Modifying the idea looks at the
problem or opportunity from a bigger
perspective and aims for improving the
overall results, not just the idea.
 Put to another use - This approach
focuses on finding ways to use the idea or
existing solution for another purpose and
analyses the possible benefits if applied to
other parts of the business.
 Eliminate - quite straightforward;
examines the possible outcomes if one or
more parts of the concept were eliminated
 Reverse - focuses on reversing the order
of interchangeable elements of an idea

4. Business idea screening
- Idea screening is the stage in the new product
development process which follows idea (or
concept) generation.
- often involves the use of scoring models,
checklists, or judgments
- attempts to eliminate unsound product or
concepts prior to devoting resources to them
- early process of the development but is a critical
process
- If a poor idea is allowed to pass the screening
stage, then it will be a waste of effort and
money.
5. Business idea selection
- takes place after evaluating all the ideas based on
the criteria
- ranking all ideas
- you generate, select, and implement the idea or
product
BUSINESS MODEL AND BUSINESS MODEL
CANVAS
*Business model - refers to a company’s plan for
making a profit
- identifies the products or services the business
plans to sell, its identified target market, and any
anticipated expenses
● The term business model refers to a company’s plan
for making a profit
● It identifies the products or services the business
plans to sell, its identified target market, and any
anticipated expenses.
1. Identify your specific audience.
● Targeting a wide audience won’t allow your
business to hone in on customers who truly need and
want your product or service.
 When creating business model narrow the
audience down to 2 or 3 detailed buyer
personas. Outline each personas
demographics, common challenges, solutions
company will offer.
 Targeting the right audience ensures your
marketing efforts perform better and lead to
higher sales and conversion.
 Demographic- segmenting audience base on
demographic information including the age,
gender, income level, relationship status.
 Psychographic- segment audience based on
psychological factors like lifestyle, social
status, activities, opinions and interest.
 Geographic- segment focuses on targeting
people based on where they live. Local, state,
region, country.
 Behavioral- creates audiences based on a
user’s interaction with your brand.
2. Establish business processes.
● Before your business can go live, you need to have
an
understanding of the activities required to make your
business model work.
 Identify the core aspects of the business
 Creating a business process can increase
efficiency and quality and accountability in
your work.
EXAMPLE OF BUSINESS PROCESS
A) Product development
B) Promote your product to your target market
C) Start taking orders
D) Introduce the products
E) Distribute
Business Process- set of activities and task that once
completed it will accomplish an organizational goal.
Include inputs and outputs.
3.Record key business resources
 what does the company carry out daily
processes?
 Key Resources- deal with the operational end
of the business spectrum and define what kind
of materials you need. The quality of the key
resources will impact the sustainability and
profitability of your company. Includes
physical, intellectual, financial resource.
4.Develop a strong value proposition
 How your company stand out in a multiple
competition?
 Establishing exactly what your business offers
and why it is better than your competitors is
the beginning of strong value proposition.
 Value Proposition- a concise and compelling
the description of the core benefit that people
can get from doing business with you. It is a
unique value that you will offer.
5.Determine key business partners
 Key partners are the relationship that you
have with other business or governmental or
non-consumer entities that help your business
model work.
 Relationship with suppliers, manufacturers,
business partners.
6. Create a demand generation strategy
 Strategy that builds interest in your business.
 Creates a blueprint of customer’s journey
while documenting the key motivators for
taking action.
  Demand generation is a data driven
marketing strategy that creates awareness of
and interest in companies offering through the
use of Tech Bogie.
7. Leave room for innovation
Business Model Canvas
● an outline of how a company plans to make money
with its product and customer based on a specific
market
● A business model explains four things:
○ What product or service a company will sell.
○ How it intends to market that product or service.
○ What kind of expenses the company will face.
○ How the company expects to turn a profit.
● Business Model is just about income. You also need
to consider production cost and other factors in order
to see the whole picture.
10 components:
1. Value Proposition: a feature that makes your
product attractive to your customer.
2. Target market: this is a specific group of consumer
who would be interested in your product
3. Competitive advantage: a unique feature of your
product or service that can’t be easily copied by
competitors.
4. Cost Structure: list of fixed and variable expenses
your business requires to function and how they affect
pricing.
5. Key Metrics: the ways your company measures
success.
6. Resources: this can be physical, financial and
intellectual assets of your company.
7. Problem and solution: your target customers pin
points and how your company intends to meet them.
8. Revenue model: a framework that identifies viable
income sources to pursue.
9. Revenue streams: multiple ways your company can
generate income.
10. Profit Margin: the amount of revenue exist to
your business costs.
Types of Business Models
1. Subscription Model - can be applied to both
traditional prick and mortar and online businesses
- in which businesses charge subscription fees. Can be
monthly, annually or etc.
- EXAMPLE: NETFLIX - customer pays a recurring
payment on a monthly basis or another specified time
frame for access to a service or product
 Prick & Mortar Business - refers to a traditional
street side business that offers products and services to
its customers face-to-face in an office or store that the
business use
- EXAMPLE: Local grocery store, Corner bank
2. Bundling Model - involves companies selling two
or more products together as a single unit often for a
lower price than they would charge separate products
- allows companies to generate a greater volume of
sales, however profit margin often shrinks since
businesses sell products for less
- EXAMPLE: Adobe Creative Studio, AT&T,
Burger King
3. Freemium Model - gained popularity with the
prevalence of online and software
- BASIC FRAMEWORK: a software company
provides a propriety tool for their users to freely
access however, the company withholds or limits
the use of certain key features that overtime, their
users would like to use more regularly
- users must pay for a subscription
- EXAMPLE: Spotify, LinkedIn, Skype
4. Razor Blades Model - companies offer a cheaper
razor with the understanding that consumers will
continue to purchase more expensive accessories
5. Product to Service Model - companies allow
consumers to purchase a result rather than the
equipment that delivers the result
- EXAMPLE: hiring a barista to make you and
your friends coffee for a specified time instead of
buying the product or coffee machine
6. Leasing Model - a company buys a product from a
seller then allows another company to use the product
they purchased for a periodic fee
- leasing agreements were best with tickets
- EXAMPLE: U-Haul, Enterprise, Rent-a-Center
7. Crowdsourcing Model - involves receiving
opinions or work from many different people using the
Internet or social media
- allows companies to tap in the vast network of talent
without having to hire in-house employees
- EXAMPLE: IMDB, Wikipedia, Indiegogo
8. One-for-One Model - refers to a company donating
one item to a one charitable cost for every item that is
purchased
- appeals to the charitable nature and social
consciousness of customers to encourage them to
purchase a product or service while also allowing the
business and customer to actually engage in
philanthropic efforts
- EXAMPLE: For every cup of coffee you buy, a
free cup is given to someone less fortunate.
9. Franchise Model - A franchise is an established
business blueprint that is simply purchased and
reproduced by the buyer, or franchisee.
- The franchiser, or original owner, works with the
buyer to help them with financing, marketing, and
other business operations to ensure that the business
functions as it should.
- In return, the franchisee pays the owner a percentage
of the profit.
- EXAMPLE: McDonalds, 7/11, Starbucks
10. Distribution Model - A company operating as a
distributor is responsible for taking manufactured
goods to the market.
- EXAMPLE: Hershey’s manufactures and
distributes their product but distributors are agents
that deliver the products in the factory to a retailer.
- to make a profit, distributors buy the product in bulk
and sell it to a retailer at a higher price
11. Manufacturer Model - one of the most traditional
business models
- refers to when a manufacturer converts raw materials
into products
12. Retailer Model - A retailer is the last link in the
supply chain.
- businesses purchase goods from distributors and sell
them to customers for price that will cover both
expenses and turn a profit
The Business Model Canvas
- strategic management and lean start-up template for
developing new or documenting existing business
models
- a visual chart with elements describing a firm’s or
products value proposition, infrastructure, customers,
and finances
- assists firms in aligning their activities by illustrating
potential trade-offs
- composed of 9 building blocks:
 Infrastructure
 Key Activities - included in infrastructure
- most important activity in executing a
company’s value proposition (what makes your
product or service valuable to your customers)
- any activities that your business is engaged for
the primary purpose of making a profit including:
 Operations
 Marketing
 Production
 Problem-solving administration
 Key Resources - resources that are necessary to
create value for the customers
- considered an asset to the company that are
needed to sustain and support the business
- 4 MAIN CATEGORIES:
 Human - staff; more important in companies
in the knowledge, intensive, creative sectors
 Financial - cash, credit
 Physical - raw materials, buildings, vehicles,
transportation, storage facility, machine, and
factory
 Intellectual - brand, patents, copyright, and
customer data bases
 Partner Network - In order to optimize operations
and reduce risks of a business model, organizations
usually cultivate buyer-supplier relationships so they
can focus on their core activity.
- Complementary business alliances also can be
considered through joint ventures or strategic
alliances between competitors or non-competitors.
- key partners are the relationship that you have with
other business that help you succeed in areas that
can be considered inefficient for you to do yourself
- 4 TYPES OF PARTNERSHIP:
 Strategic alliances between non-
competitors - benefits both companies
 Strategic partnership between
competitors - directly competing but works
together to raise awareness in their shared
industry to gain new users
 Joint ventures - used to develop new
businesses where you may join your
company with another to concrete an entirely
new venture
 Buyer-Supplier Relationship
 Offering
 Value Propositions - collection of products and
services a business offers to meet the needs of its
customers
- Osterwalder (2004) states that, “a company’s
value propositions is what distinguishes it from
its competitors.”
 Quantitative - price and efficiency
 Qualitative - overall customer experience
and outcome
- describes the bundle of products and services
that create value to a specific customer
- innovation of service to make a company or
product attractive to customers
 Customers
 Customer Segments - To build an effective
business model, a company must identify which
customers it tries to serve.
 Mass Market - There is no specific
segmentation for a company that follows the
 Mass Market element as the organization
displays a wide view of potential clients
- aims to satisfy a set of broadly similar
needs and problems
 Niche Market - customer segmentation
based on specialized needs and
characteristics of its clients
 Segmented - A company applies additional
segmentation within existing customer
segment. In the segmented situation, the
business may further distinguish its clients
based on gender, age, and/or income.
 Diversify - A business serves multiple
customer segments with different needs and
characteristics.
 Multi-Sided Platform/Market - For a
smooth day-to-day business operation, some
companies will serve mutually dependent
customer segments.
 Channels - A company can deliver its value
proposition to its targeted customers through
different channels. (communication pathway with
consumers)
- FUNCTION:
 Raising awareness among customers
about the company’s product and services.
 Helping customers evaluate
company’s value proposition.
 Allowing consumers to purchase
specific product and services.
 Delivering value proposition to
customers.
 Providing post-purchase customer
support.
- 5 TYPES OF CHANNEL PHASES:
 Awareness - through advertising with
word of mouth, social media, and newspaper
 Evaluation - by means of surveys and
review
 Purchase - using web vs prick and
mortar, online vs physical store, self check-out
 Delivery - using over-the-counter,
delivered, or countered
 After sales/Post purchase - return
policy, customer assistance
 Customer Relationships - To ensure the survival
and success of any businesses, companies must
identify the type of relationship they want to
create with their customer segments.
- 3 CRITICAL STEPS TO ADDRESS:
 How the business will get new
customers
 How the business will keep
customers in purchasing or using its services
 How the business will increase their
revenue from its current
- driven by customer acquisition, customer
retention, and boosting sales
- FORMS OF CUSTOMER RELATIONSHIP:
 Personal assistance - employee-customer
interaction performed during or after sales
 Dedicated personal assistance - most
intimate or hand-on assistance
 Self-service - indirect interaction between
company and client; company provides all
the tools the customer needs for self-service
 Automated services - similar with self-
service but more personalized as it has the
ability to identify individual customers and
their preferences (example: amazon.com)
 Communities - creating a community allows
for a direct interaction between clients and
customers
- allows for problems to be shared and
solved
 Co-creation - personal relationship is
created through a customer’s direct input to
the final outcome of a company’s product or
service
 Finances
a  Cost structure - most important monetary
consequences while operating under different
business models
- describes all the cost and expenses that your
company will incur while operating your business
model
- 2 CLASSES OF COST/BUSINESS
STRUCTURE:
 Value-Driven - focused on creating more
value to the product or service itself
 Cost-Driven - focused on minimizing the
cost of the product or service
- CHARACTERISTICS OF COST
STRUCTURE:
 Fixed costs - unchanged costs across
different applications (Ex: salary, rent)
 Variable costs - varied costs depending on
the amount of production of goods &
services
 Economies of scale - cost decreases as
amount of goods are ordered
 Economies of scope - cost decreases due to
incorporating other business which have a
direct relation to the original product
- producing 2 or more products
simultaneously at a lower cost than
producing them individually
  Revenue Streams - the way a company mix
income from each customer segment several ways
to generate a revenue stream
- A revenue model is the end product to answer
the question: How do I make money?
- strategies to help companies generate cash
 Asset sale - most common type
- selling ownership rights to a physical good
- EXAMPLE: Retail corporations
 Usage fee - money generated from the use of
a particular service
 Subscription fees - revenue generated by the
selling access to a continuous service
- EXAMPLE: Netflix
 Lending/Leasing/Renting - giving
exclusive rights to an asset for a particular
period of time
- EXAMPLE: leasing a car
 Licensing - revenue generated from
charging for the use of a protected
intellectual property
 Brokerage fees - revenue generated from
intermediate service between two parties
 Advertising - revenue generated from
charging products for advertising

Advantages of Business Model Canvas

1. It determines the most essential activities.
2. It is a good basis for brainstorming.
3. It brings your ideas in a clearly, structured form.
4. It shows dependencies or conflicting objectives.
5. Structure for your detailed business plan.