Module 1:

Nature & Type of Entrepreneurial Venture & Market Identification

This module includes the nature and forms of entrepreneurial venture. It will also deal
with market segmentation, targeting and positioning.

This module was designed and written with you in mind. It is here to help you develop
your entrepreneurial characteristics, skills and competencies. The scope of this module permits it
to be used in many different business ventures and lets you explore and even engage in the
entrepreneurial world.

At the end of this module, you will be able to:

a. Determine the nature and type of entrepreneurial venture to be opened;

b. Describe the concept of market segmentation;
c. Discuss market targeting;
d. Determine the importance of market positioning.

Topic 1: Nature and Type of Entrepreneurial Venture

What you already know?

Entrepreneurs engage in various activities, some big, some small and others in between.
Their activities could be merchandising, manufacturing or service business. They are supported
by either the family members or members of the community as employees. Entrepreneurs are
found not only in big cities but in small towns as well, catering to the needs of the people.

Kick-Start

Pick a street in your locality, survey the

number of establishments located on that
particular street and classify them whether they
are, manufacturing, merchandising or service
business.
Share you findings in class.

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 D ISC U SS I ON

FORMS OF ENTREPRENEURIAL VENTURE

The classification of entrepreneurial venture according to form refs to the category of the
business according to the number of owners. The classification of business ventures according to
form are as follows:

1. Sole proprietorship
2. Partnership
3. Corporation

Sole Proprietorship

A sole proprietorship is a business venture owned by one person only. Most of the small
businesses operating in the Philippines are sole proprietorship, which is highly encouraged among
entrepreneurs.

The characteristics of sole proprietorship are as follows:

1. It is easy to form and manage.

2. It is a simple business operation.
3. It has a limited pool of resources.
4. Its growth is limited.
5. The owner has unlimited liability.

The primary advantage of a sole proprietorship is the ease in its formation and
management. However, compared to a partnership and a corporation, a sole proprietorship has
limited capital which usually leads to its limited growth in the industry. Under the concept of
unlimited liability, the creditor may go after the personal properties of the entrepreneur in the
event that the liability or financial obligation of a sole proprietorship is more than the total
resources.

Partnership

A partnership is a business venture that is owned by two or more persons. The owners
are usually called partners. Whatever profit or loss that results from the entrepreneurial operation
is divided between or among the partners. All the partners may contribute money, property, or
industry, and their contributions become a common fund of the partnership.
The partners are held personally liable for the partnership's liabilities in the event that the
partnership does not have the ability to settle its financial obligations. The life of the partnership
is easily dissolved compared to a corporation, particularly for the following reasons:

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 1. Death of one of the partners
2. Admission of a new partner in an existing partnership
3. Personal insolvency of one of the partners
4. Permanent withdrawal of the investment of a partner

Corporation

A corporation is an entrepreneurial venture formed by at least five but not more than
fifteen persons. A corporation can either be stock or non-stock, profit or non-profit, and domestic
or foreign. The persons originally forming the corporation are called incorporators.

A corporation is classified as a stock corporation when it is authorized to issue shares of

to stockholders. A non-stock corporation, on the other hand, is not authorized to issue of stock
to the members. The owners of a stock corporation are called stockholders or shareholders;
while the owners of a non-stock corporation are called members. The certificate of stock is an
evidence of ownership of a corporation. A domestic corporation is organized under the laws of
the Philippines. On the other hand, a foreign corporation is organized under the laws of the
foreign country but has the authority to operate in the Philippines.

Large businesses are usually organized as corporations. Its management is entrusted to

board of directors who are elected by and from its group of stockholders.

K N OW L E D GE S E L F -C HE C K 1. 1
Differentiate sole proprietorship from partnership and corporation?

NATURE OF ENTREPRENEURIAL VENTURE

An entrepreneurial venture may also be classified according to its nature. The term nature
refers to whether the business is simply selling a product, manufacturing a product, or g a service
to customers.

The classifications of entrepreneurial venture according to its nature are as follows:

1. Merchandising
2. Service
3. Manufacturing
4. Agriculture
5. Hybrid business
6. Special corporation

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Merchandising

A merchandising business is engaged in the buying and selling of products or goods. It

does not alter the appearance of the product purchased from the seller. The entrepreneur engaged
in a merchandising venture buys the product in a certain form and sells it in the same form. There
is no alteration made in terms of physical appearance, mechanical parts, and chemical content.
Grocery stores, hardware stores, and dry goods stores are examples of merchandising ventures.

Service

A service business provides services to customers. The primary sources of income are
the different services rendered or provided to customers. Technically, service entrepreneurial
ventures are classified as non-professional service and professional service.

Non-professional service ventures include laundry shops, car repair shops, beauty
parlors, educational institutions, and banking institutions. On the other hand, professional service
ventures include law offices, medical clinics, and auditing and consultancy services.

Manufacturing

A manufacturing venture is a producer of goods or products. It is engaged in buying

raw materials and supplies to be processed into finished products. The salient feature of
manufacturing business is the conversion process that takes place from the time a raw material is
purchased up to the time it is sold as a finished product.

Manpower, method, machine, and materials, or the so-called "four Ms" in production
operations, are applicable to manufacturing ventures such as furniture shops, bakeshops, rattan
factories, flour producers, and beverage companies.

Agriculture

An agricultural entrepreneurial venture is engaged in the production of agricultural goods

and animals. It may sell its products as raw materials or as finished goods.

Entrepreneurial ventures engaged in mushroom production, potted ornamental plants, hog

fattening and dispersal, poultry products, and fishpond ventures are examples of agricultural
business.

Hybrid Business

A hybrid entrepreneurial venture possesses the characteristics and nature of combined

types of business entities. It is inherent in the business to produce and sell goods and at the same
time provide services to customers. Restaurants and fast-food chains are classified as hybrid

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businesses because their very nature is to process and sell food and at the same time to provide
excellent services to customers. Restaurants and fast-food chains have the attributes of a
manufacturing business and a service entity.
Special Corporation

Special types of business may include cooperatives, joint ventures, and non-profit
organizations.

K N OW L E D GE S E L F -C HE C K 1. 2
Describe the different business according to nature.

WHAT BUSINESS TO OPEN

There are no strict entrepreneurial rules in choosing the type and form of business to
open. However, after critically scanning the macro and micro business environments, the
entrepreneur must consider highly the following two important factors: the competency of the
entrepreneur and the competency of the business.

An entrepreneurial venture may either be a sole proprietorship, a partnership, or a

corporation engaged in merchandising, manufacturing, or service. Nevertheless, whatever type
and nature of business venture is opened to exploit different business opportunities, innovation or
creativity defines the distinction between an entrepreneur and an ordinary businessperson.

Thus, the concept of innovation or creativity must, in almost all instances, be introduces
and practiced. An entrepreneur finds ways to introduce innovation from the production process to
the marketing stage, while an ordinary businessperson simply imitates business practices and
procedures.

The concept of innovation or creativity can easily be practiced and highly noticeable in a
manufacturing operation since raw materials are transformed to finished goods through the
production process. Innovation can be introduced from the production phase up to packaging and
delivery.

PRODUCTION SYSTEM

The three important elements in the production system are:

1. the input
2. the transformation or production process, and
3. the output

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Input

The input includes the following:

1. Manpower
2. Materials
3. Machine
4. Design
5. Instructions
6. Production Process

The production process, also referred to as the transformation or conversion process, is

the stage of production where the materials are transformed into the final product with the aid of
manpower and machine.

It involves the following activities:

1. Procurement or acquisition of raw materials and manufacturing supplies

2. Inspection of materials and supplies upon receipt at the receiving section
3. Storage of acquired materials and supplies
4. Issuance of materials and supplies to the production line
5. Inspection of damaged or broken goods and assessment of losses
6. Rework or repair of defective goods
7. Transfer of finished goods to the storeroom

FOUR Ms OF PRODUCTION

The most critical factors in the whole production system are the inputs and the
transformation process. Their quality determines the quality of the output. It is also known as
"garbage in, garbage out" or GIGO in the parlance of computer technology.

The factors involved in the input and the production process are usually referred to as the
four Ms of production, namely manpower, method, machine, and materials.

Manpower

The term manpower simply refers to the human workforce involved in the manufacture
of products. It is considered as the most critical and important factor of production. The
entrepreneur must determine, acquire, and match the most qualified employees with the jobs at
the most appropriate time period.
Some of the manpower criteria that must be highly considered by the entrepreneur are as
follows:

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 1. Educational qualifications and experience required for the job
2. Status of employment, whether permanent or temporary
3. Number of workers required for the job
4. Skills and expertise required for the job
5. Appropriate time the worker is needed
6. Conduct of background checking and issuance of requirements
7. Amount of salary or wages and other mandatory benefits
8. Availability of potential workers in the community

Method

Method or production method refers to the process or technique of converting raw

materials to finished products. The raw material undergoes several stages before it is completed
and becomes ready for delivery to the target consumers.

The selection of the method of production is dependent on some factors, namely,

1. product to produce,
2. mode of production,
3. manufacturing equipment to use, and
4. required skills to do the work.

Product to Produce

The product is the physical output of the whole production process. It should be valuable
and beneficial to the consumers and should satisfy their basic needs and wants. A product can be
heterogeneous or homogeneous. A heterogeneous product has dissimilar characteristics, parts,
and physical appearance. It can be easily identified from other products. Entrepreneurial ventures
that produce heterogeneous products include makers of furniture, bags, and home decors.

On the other hand, a homogenous product has a physical appearance, taste, or chemical
content that can hardly be distinguished from that of the other products. Businesses that produce
homogenous products include makers of soft drinks and medicines. It is hard to distinguish the
difference between a soft drink in a 12-ounce bottle and in an 8-ounce can.

Mode of Production

The mode of production refers to how the product will be produced. The following
product ion system may be used in manufacturing the desired product:

1. Intermittent production system

2. Continuous production system
3. Just-in-time production system

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 The intermittent production system is adopted when the production process is basically
short and the machines are frequently changed. Under this system the entrepreneur may use the
following methods.

1. In a project method, the product is usually substantial in size and is bound by a

specific time to complete it. Cargo vessels, jumbo aircraft, and buildings are
constructed using this method.

2. In a job order method, the production is completed by a single employee or a batch

of employees.

3. In a batch method, the production undergoes several stages and the product is
transferred from one worker to another.

The intermittent production system includes the following features:

a. There is a variety of products to be manufactured.

b. The production flow is not continuous.
c. The production is dependent on the orders of customers.
d. The volume of production is not material.
e. The machines are for general purposes.
f. The sequence of operations is based on product design.

Examples of entrepreneurs who use the intermittent production system are tailors,
goldsmiths, furniture makers, and manufacturers of farm equipment.

The continuous production system is adopted when the demand for the product is
considered constant. The production is not based on the order of customers but for the stocking of
inventories.

1. The features of the continuous production system are as follows:

2. The production process is continuous.
3. The production is not based on the customer's order but on the anticipated demand.
4. The production is considered standardized.
5. The products are usually homogenous.
6. The products are produced in large quantities.

In the just-in-time production system, goods are produced just in time when the market
needs or demands for them. The raw materials will be produced just in time for the actual
production to start and the delivery equipment will be required in the production plant just in time
when the products are about to be completed. This system is designed to eliminate wastage of
resources and to increase productivity.

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Machine

Machine refers to the manufacturing equipment used in the production of goods or

delivery of services.

In the process of selecting the type of equipment to purchase, the entrepreneur may
consider the following important elements:

1. Types of products to be produced

2. Production system to be adopted
3. Cost of the equipment
4. Capacity of the equipment
5. Availability of spare parts in the local market
6. Efficiency of the equipment
7. The skills required in running the equipment

Materials

The term material simply refers to the raw materials needed in the production of a
product. Materials basically form part of the finished product. For example, wood or lumber is a
raw material used to produce a table or a chair. In case the raw materials are of poor quality, the
finished product will be of poor quality as well.

The entrepreneur may consider the following important factors in the selection of raw
materials:

1. Cost
2. Quality
3. Availability
4. Credibility of suppliers
5. Waste that the raw material may-produce

K N OW L E D GE S E L F -C HE C K 1. 3
Explain the four M’s in the production of goods.

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 A P P L I C A T I O N 11

Direction:
Form a group of at least three to five members, preferably those from the same community.

Look for a manufacturing business that can be found in your community. Gather information
about its production system as to input, manufacturing process and output. Follow the format
below in plotting of your findings. Take pictures pertinent to the business for documentation.

Company Name:
Business Address:
Main Product:
Input Manufacturing Process Output

1.

2.

3.

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 Topic 2: Market Segmentation

What you already know?

When the product is produced to exploit business opportunity, it is designed
specifically for the defined market. For example, there are different powder milk products
available in the market. Some are intended for infants, for babies aged one to three yea rs old,
and for children aged four to six years old. Others are intended for young adults and for
senior citizens. Their contents and nutrients differ from one another. This entrepreneurial
approach indicates that the business has clearly identified the sp ecific market for each
milk product.

Market identification is a strategic marketing approach and process that is

intended to define the specific customer of the product. There are three strategic
marketing approaches that will assist the entrepreneur in defining the specific market of
the product.

These are

1. market segmentation,
2. market targeting, and
3. market positioning.

Kick-Start

Recall a product that is being advertised

or promoted in television/online. Does the
product targets all the members of the
population? In what way do you think the
population was divided?

D ISC U SS I ON

MARKET SEGMENTATION

Market segmentation is an entrepreneurial marketing strategy designed primarily to

divide the market into all segments with distinct needs, characteristics, or behavior (Kotler &
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Armstrong, 2014). The entire market is composed of different segments with various
characteristics, behavior, culture traditions, and needs. Since the entire market cannot be readily
served because the customers are heterogeneous, the entrepreneur has to find ways to cater to
homogeneous customers only. This is usually done by market segmentation.

The entrepreneur must divide the total market and focus his/her business strategy to a
smaller market that is considered homogeneous or have similar interests, preferences, needs,
wants, and other related variables. The identified market segment will be the market that can be
served better by the entrepreneurial venture based on its competencies. This entrepreneurial
approach is sometimes called niche entrepreneurial marketing. There are no strict rules as to how
the market will be divided other than the assurance that the smaller segments must be
homogeneous.

The commonly used methods for segmenting the market are

1. geographic segmentation,
2. demographic segmentation,
3. psychological segmentation, and
4. behavioral segmentation.

 GEOGRAPHIC SEGMENTION

In geographic segmentation the total market is divided according to geographical

locations in the Philippines like provincial regions, cities, provinces, municipalities, and even
barangay units. When the entrepreneur divides the total market into a smaller segment using
geographical segmentation, the following variables must be considered:

1. Climate
2. Dominant ethnic group
3. Culture
4. Density (either rural or urban)
5. Classification of the geographical unit (e.g., first class, second class, etc.)

For example, a telephone company is providing unlimited call and text services
throughout Mindanao. The features of these services for consumers in Cotabato may be different
from those for consumers living in Cagayan de Oro. The company must make sure that their
services will fit the needs of respective market segments even though they belong to the same
geographical unit.

 DEMOGRAPHIC SEGMENTATION

In demographic segmentation, the market is divided based on the demographic variables

of the consumers. The common demographic variables are the following:

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 1. Gender
2. Age
3. Income
4. Occupation
5. Education
6. Religion
7. Ethnic group
8. Family size

The most widely used and easiest method for segmenting the market is the demographic
method. Various researches have also determined that there exists a direct relationship between
the demographic variables and the needs and wants of customers. The example about the powder
milk products shows that the contents and nutrients of each milk product differ from one another.
Their makers have segmented the market according to the ages and needs of their users. Most
medicine and vitamins available in the market are individually prepared based on the ages of
their intended users as well. The manufacturers of shampoo and soap products, meanwhile,
usually divide their target market based on gender. Their products for men are different from
those for women.

 PSYCHOLOGICAL SEGMENTATION

In psychological segmentation the market is divided in terms of what the customers think
and believe. It is based on the following variables:

1. Needs and wants

2. Attitude
3. Social class
4. Personality traits
5. Knowledge and awareness
6. Brand concept
7. Lifestyle

Manufacturers of branded pants and shirts usually segment the total market based on
brand concept and only serve the customers who are brand-conscious. They do not serve the
needs and wants of customers in the population who are not conscious about the brands of the
products they use.

Entrepreneurs who own and manage elegant and luxury hotels may have segmented the
market based on social class. These entrepreneurs intend to cater to the needs and wants of the
upper class in the market.

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 BEHAVIORAL SEGMENTATION

In behavioral segmentation the market is divided based on the following variables:

1. Perceptions
2. Knowledge
3. Reactions
4. Benefits
5. Loyalty
6. Responses

Entrepreneurs who have constructed athletic gymnasiums may have divided the market
based on the health benefits that their users will derive from them. Their makers intend to serve
the needs and wants of health-conscious customers. An entrepreneur producing powder detergent
may have segmented the market based on loyalty of the customers, and intend to serve only the
needs and wants of loyal customers.

POINTS TO CONSIDER IN SEGMENTATION

Market segmentation is a strategy that can assist the entrepreneur in identifying the
particular homogeneous segment to serve. After all the consumer population in its entirety
basically has different attitudes, characters, perceptions, inclinations, or responses.
The following important factors must be considered in segmenting the market:

1. Accessibility of the market segment. The market segment must be accessible to the
business.
2. Size of the market segment. The market segment must be large enough to provide
wealth to the entrepreneurial venture.
3. Distinction of the market segment. The market segment must be easily
differentiated from the total market.

K N OW L E D GE S E L F -C HE C K 2. 1
Discuss the concept of market segmentation and how the total market is segmented.

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 A P P L I C A T I O N 12
Direction:
Think of a product with several product lines that you wish to manufacture, for example, furniture
such as tables and chairs. Determine the segmenting approach that you deem appropriate to use.
Follow this format in making your report.

Cosmetics Methods used for segmenting

Lipstick

Face powder

Eyeliner

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 Topic 3: Market Targeting

What you already know?

A company cannot concentrate on all the segments of the market. The company can
satisfy only limited segments. The segments the company wants to serve are called the target
market, and the process of selecting the target market is referred as market targeting. Market
segmentation results into dividing total market into various segments or parts.

Such segments may be on the basis of consumer characteristics or product characteristics

or both. Once the market is divided into various segments, the company has to evaluate various
segments and decide how many and which ones to target. It is simply an act or process of
selecting a target market.

Kick-Start

Think of a product that you wish to sell, divide

the population according to their income. Which
do you think among the income groups will
provide you higher profitability. Share your idea
in class.

D ISC U SS I ON

After the segmentation process, which is the first stage of market identification, the
entrepreneur moves to the second stage called market targeting.

Market targeting is a stage in market identification process that aims to determine the
set of buyers with common needs and characteristics. They are the market segment that the
entrepreneurial venture intends to serve.

In the market targeting phase, the entrepreneur has already divided the total market and is
now in the process of

1. evaluating each market segment and

2. selecting the target market segment or segments to serve.

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MARKET SEGMENT EVALUATION

The entrepreneur, after segmenting the market, does not simply select any market
segment to serve. He / She must instead conduct a proper and critical evaluation of every
segment. While doing so, he/she must consider the following important factors:

1. Size of the segment and its expected growth

2. Existing and probable structure of the segment
3. Capability of the business
4. Size and Growth of the Segment

Size and Growth of the Segment

The size of the segment or its growth are the two frequently asked details every time a
new business is about to be opened. The size and growth of a segment are considered favorable
indicators for doing business in that particular location. Hence, entrepreneurs tend to flock in that
area. However they fail to consider that when there are too many players in a particular segment,
doing business in it becomes too competitive.

Small entrepreneurial ventures in terms of capital base may find such environment
unfavorable even though the size is large enough and the segment is growing. The entrepreneur,
therefore, has to critically evaluate whether it is good to compete in a market segment where
several other businesses already exist.

Structure of the Segment

Another important factor that the entrepreneur must consider in evaluating which
segment to serve are the existing and expected structures of the segment. The entrepreneur may
use Michael Porter's five forces of competition in evaluating the present and future structures of
the segment. He/She must properly address the following questions:

1. What is the level of competition in the market segment? Are there strong and aggressive
competitors?
2. Are there existing and potential substitute products? Are the barriers to substitute
products strong?
3. Who are the present and potential buyers in the segment? Is the bargaining power of the
buyers strong in the segment?
4. How strong is the bargaining power of the suppliers in the segment?

The structure of each segment varies. The entrepreneur must study the different barriers
that will lessen the forces of competition in every segment. Usually a highly competitive segment
limits the profitability and growth of a particular venture. In a similar manner, substitute products

17
with low prices in the market may attract the shifting of customers. The shifting process can
easily be facilitated once the switching cost is minimal.

The strong bargaining power of the buyer can easily bring the prices of the products
down. Similarly suppliers with powerful forces that can control the price of the product is one
particular segment. It will not be good for small entrepreneurs to join a segment like this.

Capability of the Business

Another factor that must be carefully evaluated by the entrepreneur is the internal
environment of the business, including its resource`. Does the business have the required
competency to take advantage of the existing opportunity? The answer must be a resounding yes.
Otherwise the entrepreneurial venture may not be able to succeed in its chosen market segment.

SEGMENTATION MATRIX

The segmentation process is easily facilitated through the use of the segmentation matrix.
The size of the segment is usually expressed in terms of estimated product demand, while the
expected growth may be expressed in terms of potential profitability of the segment.

The forces of competition may be classified as strong, moderate, or weak. The force is
considered strong when the barriers to it are generally weak or low. In contrast the force is
considered weak when the barriers are strong.

In the segmentation matrix that follows, although the size and growth of segment 2 is
lower than that of segment 1, the different forces of competition, however, are weak and the
business is highly capable. Hence segment 2 becomes the priority segment to be served.

Sample Data for Segmentation Matrix

Potential Power Power Capability Priority

Substitute
Segments Size Growth New of the of the of the of the
Products
Entrants Buyer Supplier Business Segment
Segment 1 3.0 M 5% Strong Weak Strong Strong Low No.2
Segment 2 1.0 M 3% Weak Weak Weak Weak High No.1
Segment 3
Segment 4

The evaluation of the segment is quite rigorous since gathering reliable, relevant, and
timely information is not easy or cheap.

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MARKET SEGMENT SELECTION

The number of segments to serve determines the appropriate entrepreneurial marketing

strategy to use. Generally, the entrepreneur can select one segment or all segments of the total
market with different entrepreneurial marketing strategies.

The basic entrepreneurial marketing strategies relative to the selected segment are the
following:
1. Individual or one-on-one marketing
2. Segmentation marketing (differentiated or concentrated) marketing
3. Mass or undifferentiated marketing

One end of the tunnel is the individual or one-on-one marketing strategy, while the other
end is the mass or undifferentiated marketing strategy. Between these two ends is segmentation
marketing.

There are two variations of segmentation marketing. The first is the differentiated
marketing strategy and the second is the concentrated or niche marketing strategy.

Individual or One-on-One Marketing

In the individual or one-on-one marketing strategy, the business provides a product that is
suited or fitted to the particular need of the consumers. It is based on the concept that the
consumers have different needs and wants.

For example, tailoring shops use the one-on-one marketing strategy since they make
clothes for specific people based on their respective requests. Furniture manufacturers also adopt
the one-on-one marketing strategy for clients who order customized furniture.

Differentiated Marketing

Differentiated marketing is a variation of the segmentation marketing strategy. Here the

entrepreneur covers several segments of the total market and designs a particular product for each
segment based on the market segment evaluation and the capability of the business.

The basic concept of differentiated marketing is for the business to exist in almost all
segments but to serve few customers only in each segment. As such several products from the
same maker will be available and compete with each other in the market.

For example, the different toothpaste and milk products in the market are intended for
different segments. Each type of toothpaste and milk product is prepared to serve a different set
of customers from several segments.

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Concentrated Marketing

Concentrated marketing or sometimes called niche marketing is another variation of

segmentation marketing where the business selects only a few segments but intends to serve a
large number of customers in the chosen segments. This set customers is the niche.

Mass or Undifferentiated Marketing

Undifferentiated marketing strategy takes into consideration that the fact that the
customers have common needs and wants. The entrepreneur does not have to differentiate them
according to their needs and wants but rather assumes that his/her product will cater to all types
of customers in general. This type of entrepreneurial marketing strategy is usually applicable
when the product is a simple commodity that can actually be used by all types of customers
regardless of their differences in geographical location, demographic profile, and psychological
and behavioral concerns.

For example, an entrepreneur engaged in the production of refined white sugar does not
necessarily have to segment the whole market but rather mass produce sugar for the whole
market. It is staple commodity that is used by people regardless of gender, age and socio-
economic status.

K N OW L D GE SE L F -C HE C K 3. 1
1. Discuss the concept of market targeting.
2. Enumerate the important factors to be considered in evaluating the segment.

A P P L I C A T I O N 13
Instruction:

Think of a product that you want to produce or sell. Segment the present market to
identify where you will offer it. Determine also the marketing strategy that you will use for your
product. Write your answers in the segmentation matrix below.

Potential Power Power Capability Priority

Substitute
Segments Size Growth New of the of the of the of the
Products
Entrants Buyer Supplier Business Segment

Segment 1

Segment 2

Segment 3

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 Topic 4: Market Positioning

What you already know?

Market positioning plays a significant role in the practice of entrepreneurship. It is even
believed to be the most important aspect of an entrepreneurial venture. The term positioning
simply refers to the act of occupying a certain place. In the field of entrepreneurship, it may either
refer to the act of placing the business in a specific place in the industry or placing the product in
a certain place in the market. There are conceptual differences between business positioning and
product or market positioning.

Kick-Start

Check out some grocery items in your

kitchen. Evaluate the value proposition of
the products and analyze whether the
benefit or the value that each product offers
is easily identifiable in its packaging or
label. Share your findings in class.

D ISC U SS I ON

Business positioning simply refers to the process of determining the place of the business
in the industry. The entrepreneur must conduct industry analysis of the different forces that are
strong in the industry in order to determine the correct position of the proposed venture. On the
other hand, market positioning refers to the process of arranging a product to occupy a clear,
distinct, and desirable place in relation to other competing products in the mindset of target
consumers (Kotler & Armstrong, 2013). It is considered the last stage in the product identification
process after the entrepreneur has conducted market segmentation and has already identified the
particular segment to serve.

DIFFERENTIATING MARKET POSITIONS

Since the foremost objective of market positioning is to have a distinct place in the minds
of the target consumers, the concept of differentiation becomes inherent and directly linked to the
process.
How is the product viewed by the consumers in the market? Is it a superior or inferior
product? Is it reasonably priced or not?
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 The process of determining the market position of the product includes the following
steps:
1. The entrepreneur determines if the market position is distinct from others.
2. The entrepreneur evaluates the advantages or benefits of every possible market
position.
3. The entrepreneur decides on the market position.

The first logical step that the entrepreneur must perform in market positioning is to
determine that the, product is truly differentiated from competitors, primarily in terms of value
and benefits that the customers will gain from it.

There are two major dimensions that will differentiate the product from its competitors in
the market. These are "lower price" and "more benefits" than those being sold at a higher price.

Filipino consumers are generally price-conscious. The first thing that we check when we
go shopping is the price of the product. We prefer to buy products that are reasonably priced.
Thus when the price of the product can hardly be lowered, the entrepreneur must define its
substantial benefits - that the product is more expensive because it offers more value and benefits
to the customers. This must be stated clearly on the packaging and promotional materials of the
product.

Positioning or Perceptual Map

Market positioning is usually done with the help of the positioning or perceptual map.
The positioning or perceptual map shows the position of similar products competing in the market
as perceived by the customers. The different products are represented in the form of circles and
are plotted on the perceptual map as low or high in terms of price and quality. The size of the
circle represents the market share of the product.

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EVALUATING THE BENEFITS OF EVERY MARKET POSITION

Once the target position in terms of price and quality dimensions has been evaluated, the
entrepreneur determines the advantages, benefits, and attributes of the product. There are no
specific rules on how many attributes or benefits the product must have. It is highly suggested,
however, that it must have at least one attribute which is considered distinct from other products.
The entrepreneur must strongly promote the said attribute or benefit to the consumers.

For example, a powder detergent may take pride in the following taglines that describe its
attributes and at the same time can be easily recalled by household consumers: banayad sa kamay,
ang bango-bango, and amoy rosas.

Similarly powder milk products may put emphasis on the muscle-building protein
requirements for the youth and risk reduction of, osteoporosis for adults.

The following criteria may be considered in identifying the attributes or benefits to be

promoted:
1. Identifiable. The benefit or attribute is easily associated with the product. The
customers should be able to easily identify any benefit that can be derived from the
product.
2. Beneficial. The attribute provides valuable benefits to the target consumers.
3. Distinctive advantage. The attribute is distinct to the product and can hardly be
copied by the competitors.
4. Efficient and rewarding. The cost in attaching the attribute or value to the product is
not higher than the expected benefits in terms of profit.

DECIDING ON THE MARKET POSITION

The last phase of market positioning after differentiating the product from the others in
terms of benefit or attribute is to make a decision on where to position the product. There are two
basic dimensions that must be seriously considered in deciding the market position of the product.
These are price and quality.

In addition the entrepreneur may also consider the following guide questions in deciding
the market position of the product:

1. Will the product be sold at a higher price due to its attributes and benefits?
2. Will the product be sold at the same price as the competitor's price in spite of its
benefits?

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 3. Will the product be sold at the same price as the competitor's because they have
similar benefits?
4. Will the product be sold at a lower price because it offers less benefits?
5. Will the product be sold at a higher price ever if it offers less benefits?

Normally, a product sold at a lower price is expected to be of inferior quality and offers
less benefits, while a product sold at a higher price is expected to be of better quality and offers
more benefits.

K N OW L D GE SE L F -C HE C K 4. 1
1. Discuss the entrepreneurial concept of positioning.
2. Enumerate the criteria to be considered in deciding the attributes or benefits that
must be attached to the product.

A P P L I C A T I O N 14

Instruction:

Think of a product that you want to create because of an existing opportunity. It can be a
new product in the market or similar to an existing commodity product. Develop the benefit or
value that your product will offer to your target consumers. Identify the value of your product
which will make it distinct in the minds of your target consumers. Using the positioning or
perceptual map, illustrate the market position of your product and your competitor on a sheet of
paper.

Example of Perceptual Map with Actual Product

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References:
Aduana, NL. (2016). Entrepreneurship in Philippine Setting
Banastao CB. & Frias SA. (2008) Entrepreneurship
https://www.yourarticlelibrary.com/economics/market/market-targeting-introduction-
definition-procedure-and-methods/48609

https://wvc.com.cy/?dt_portfolio=4-evaluate-your-market-position

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