Essp 1 - Prelim

COURSE DETAILS
COURSE NO. Essp 1

COURSE TITLE ENTREPRENUERIAL MIND
COURSE This course aims to provide students with an understanding of the nature of
DESCRIPTION enterprise and entrepreneurship and orientates students towards an
entrepreneurial mindset. It introduces the role of the entrepreneur,
innovation and technology in the entrepreneurial process. Being
entrepreneurial is not necessarily about starting a new venture, but is about
seeking opportunities and taking action to bring those opportunities into
reality. It involves "building something from nothing" and successful
entrepreneurs know how to manage and mitigate uncertainty and risk. The
course content is relevant to those i) individuals thinking about starting a
business or who are already in business - large or small, for profit or social
enterprise; ii) those who are interested in commercialising their own
innovations or of other; iii) entrepreneurial employees interested in
"corporate entrepreneurship" and iv) those who advise entrepreneurs or
engage in policy making in the entrepreneurship area. Developing an
entrepreneurial mindset and enterprising skill set critical for constantly
changing markets or workplaces.
NO. OF UNITS 3 units
PREREQUISITE None
ENTREPRENEURIAL MIND 1
Faye Marie A. Sacalamitao, MBM, MSHM
Instructor
LESSON 1: A PERSPECTIVE ON ENTREPRENEURSHIP
COMPETENCIES:
Compare Entrepreneurship and Innovation.
Discuss importance of Entrepreneurship.
Discuss sources of Economic Development.
DISCUSSIONS:
Entrepreneurship is a very important component of a capitalist economy like the Philippines. It thrives in
economic systems that support innovation and hard work. When entrepreneurs become successful, the nation
is immensely benefited.
What is entrepreneurship and how does it affect the economic well-being of many people? What is the task of
the entrepreneur regarding economic development?
This module attempts to provide answer to concerns like those stated above.
Entrepreneurship and Economic Development
Economic Development is a scheme aimed at improving the living standards of the nation’s citizenry. To achieve
economic development goals, proper management of the following elements is necessary.
1. Human Resources (labor supply, education, discipline, motivation)
2. Natural resources (land, minerals, fuels, climate)
3. Capital Formation (machines, factories, roads)
4. Technology (Science, engineering, management, entrepreneurship)
The effective and efficient utilization of the various resource elements contribute to the economic growth. This
happens when the element of the of entrepreneurship is performed well by the players. The abundance of
natural resources like fertile land, minerals, fuels and good climate are plus factors but are not guarantees for
positive economic development. There is a need for entrepreneurs to perform the function of harnessing the
potentials of any or all of the various elements, determining the right quantity of resources needed, and applying
the elements at the right time.
The performance of the entrepreneur, however, will depend much on the support provided by the government.
Apart from other obstacles, government restrictions limit the effectiveness of entrepreneurs.
What is Entrepreneurship
Entrepreneurship refers to the economic activity of a person who starts, manages and assumes the risk of a
business enterprise. The person who undertakes entrepreneurial activities is called an entrepreneur.
The entrepreneur identifies an economic need, considers offering a business solution, proceeds to proceeds to
assemble the resources required, and assumes the risk of either succeeding or failing. An example of these
activities is properly shown on Table 1.
Table 1. An example of Entrepreneurship Activity
Entrepreneur’s Problem at Hand Entrepreneur’s Action

Concern
Identifying an economic High income families are not Establish a high school
need satisfied with the services education with higher
provided by high schools in standards than the current high
their area. schools are providing.
Assembling resources Resources must be made Acquire funds, hire people,
required available. construct building, and the like.
Assuming risk Venture must be made. Prepare project study, advertise,
maintain good relationship with
employees and customers,
among others.
Instructor
The Entrepreneur’s Task
If all the requirements in a capitalist economy are in place, the entrepreneur can assume his assigned role in
the development of the economy. A review of the contributions of entrepreneurs will reveal that no business,
big or small, started without the hand of the entrepreneur. Even if many of these businesses failed to survive,
still a sizable number developed and proceeded to make the capitalist economy a viable concern. This is made
possible because the surviving enterprises are responsible for providing the following:
1. Products and services for customers and producers;
2. Employment;
3. Taxes
4. Demand for supplier’s products and services.
5. Training facilities for future entrepreneurs.
An inspection of the array of products offered for sale in a typical supermarket reveals a wide choice provided
to the consumer. When a consumer is making a decision on which brand of soap he is going to buy, for instance,
he will be choosing from as many as 10 different brands. Many years ago, his choice was limited to one or two
brands. Much earlier, soap was not even available for sale. The consumer had to produce his own requirement.
What brought the consumer to the situation where he has the luxury of choosing from many options. And this
does not refer to soaps alone but other products as well.
Services which were not previously available are now at the beck and call of the consumer. The fast food canteen
at the corner, parcel delivery, communication through cell phones, cable television, short-term credit through
credit card, money remittance, and the like, are among the many services made possible by entrepreneurs.
A review of the statistical reports prepared by the government shows that business organized by entrepreneurs
employs millions of people.
The taxes paid to the government in the form of licenses, fees, and permits application to the enterprises, as
well as income taxes applicable to the employees and entrepreneurs, easily amount to billions of pesos. The
taxes collected are, in turn, poured into development projects of the government.
The entrepreneurs also make sure that the suppliers will have a ready market for their products and services.
The retailers, for instance, assure the viability of big companies like San Miguel Corporation and Purefoods
Company. Hollow block manufacturers utilized the output of big cement factories. VCD and DVD shops provide
the necessary linkage between consumers and producers of movies and recorded music.
Lastly, business enterprises provide a training ground for fortune entrepreneurs. A number of entrepreneurs
were former employees of enterprising persons. Many of them used their acquired skills in starting new
businesses. Some even improved on the entrepreneurial skills passed on to them.
Figure 1. The Entrepreneur’s Task
In the attempt to make profits, the entrepreneur performs the following specific functions:
1. To supply the necessary capital.
2. To organize production by buying and combining inputs like materials and labor.
3. To decide on the rate of output, in the light of his expectation about demand.
4. To bear the risk inherent to the venture.
Any business enterprise must offer products and services to the buyers whether these buyers are consumers
or procedures. The products or services that will be sold to the buyers must be bought or manufactured. In any
case, there will be a need to hire the services of employees, laborers and managers. Equipment, furniture and
machinery must be acquired. All these will need funds which the entrepreneur must produce, in addition to
whatever fund reserves are required.
The next specific function of the entrepreneur is to assemble a production unit complete with manpower and
equipment, the quality and quantity of which have been predetermined by him.
Instructor
The entrepreneur will also determine and make decisions on the rate of output the firm must produce. This will
have to be tied up with demand.
Finally, whatever risk is involved in the entrepreneurial activity, he must suffer the consequences of losses if
he fails, but he will enjoy the profits as a reward if he succeeds.
Entrepreneurship and Innovation
The freedom of competition afforded by the capitalist economy serves to drive the entrepreneur to innovate and
get ahead of his competitors lest he is driven out of the market. Buyers of commodities have a tendency to
patronize innovative offerings of any kind and if one wants patronage, he must remember the motivation.
Innovation may be defined as the introduction of a new method, procedure, custom, device, among others.
Innovation could be any of the following:
• New product
• New process of production
• Substitution of a cheaper material in an unaltered product
• Reorganization of production, internal function or distribution arrangement leading to increased

efficiency, better support for a given product or lower costs.
• Improvement in instruments or methods of doing innovation. Innovation may also be viewed as the last
stage in an important process consisting of the following:
✓ Invention – which refers to the discovery or devising of new products and processes.
✓ Development – which refers to the process by which the ideas and principles generated from the
stage of invention are embodied in concrete products and techniques.
✓ Innovation – which refers to the actual introduction of a new product or process.
Innovation, if it must be made successful, must provide value to the buyers over and above those offered by
competitors. To achieve this, innovation must reduce costs or improve the quality of quality of products or
services offered for sale.
Examples of Successful Innovations are the following:
1. Cordless Microphone
2. Microwave oven
3. Cellular Phone
4. Kung Fu Fight Scenes developed by Bruce lee in the movies
5. Karaoke Music Appliance
6. Use of Laser in the treatment of eye condition
7. Use of computers by engineers and architects in the design of building.
New Ventures and Long-term Enterprises
A new venture cannot remain as such forever. The entrepreneur must develop it into a small business or make
it grow into a mature and bigger company if he is to recoup the cost of opening a new venture and take advantage
of the opportunities presented by a mature business.
The transition from a new venture to a successful long-term enterprise consists of at least four major stages.
The stages are as follows:
1. Prestart – up stage
2. Start – up Stage
3. Early growth stage
4. Late growth stage
The Prestart-up stage happens when the entrepreneur starts to question the feasibility of an idea, product or
service. He seeks answer to questions regarding potential markets, production and financing. This is a very
important stage that the entrepreneur must consider. If he errs in his evaluation, he will fail before considerable
growth is attended.
Instructor
In the start-up stage, the following activities are undertaken:
1. Formation of the business;
2. Generation of necessary capital;
3. Purchase of facilities and equipment;
4. Constructing prototype products; and
5. Testing the market
No full-scale activity must be undertaken at this stage for the simple reason that feasibility must be established
and verified.
The Early Growth Stage follows after establishing feasibility. Activities will be on a small scale i.e., selling to
limited markets with limited resources. If losses occur, it will naturally be limited also. If the enterprise is
unsuccessful at this stage, the option to move to the next stage can be exercised.
The Late Growth Stage is the final stage before the new venture matures into a stable enterprise. This is when
management is structured, long-term financing is established, and facilities planning are undertaken. This is
also the stage where the skills of the entrepreneur are less needed. Instead, the skilled manager begins to take
over.
Rewards for Successful Entrepreneurship
The use of any of the factors of production deserves to receive some form of compensation. The factors referred
to as “things required for making a commodity” consist of land, labor and capital. To make them work, however,
a fourth factor becomes necessary and this is the entrepreneur.
When land is used in production activities, the owners of land are paid a compensation called rent. The term
“rent” refers specifically to the price paid per unit of time for the services of a durable good, which, most often,
refers to land and building.
For the effort labourers, they are paid wages or salaries. Wages may be determined on a piece-rate basis, while
salary is based on time-rate.
Interest is the compensation paid to owners of invested capital.
When all the factors of production are properly compensated, whether is left as profits are regarded as income
and they accrue to the account of the entrepreneur.
The rates of compensation provided to the factors of production are limited to a large extent by either industry
norms or market forces. Legislation, however, have modified the rates like the minimum wages rates and
mandated interest rates on capital.
The profits accruing to the entrepreneur, on the other hand, are limited only by his skill and industry. He may
reap huge amounts of profits, but he may also lose large amount in the exercise.
As the landowner earns rent for allowing use of his property, the owner of capital earns interest for allowing
use of his capital. The labourer on duty earns wages for his effort, while the entrepreneur earns profits for
deciding how the business shall be run. If he succeeds, he is compensated for his vision, originality and bold
undertaking
Table 2. The Factors of Production and their rewards
Factors of Production Economic Reward Limiting Factor for rewards

received
Land Rent Supply and Demand
Capital Interest Industry rates/government mandated
rates
Labour Wages/Salary Supply demand legislation
Entrepreneur Profits Skill of entrepreneur
The Entrepreneur’s Predicament

In the race for winning the all-important consumers pesos, the business will have to offer products or services
that have certain advantages over the competition’s wares.
In the creation of a new venture, the entrepreneur may be successful in offering innovative products or services.
At this stage, he will reap the profits for being ahead of the competitors. This situation may be temporary
because the competitor may attempt to improve his position by making moves to outpace the entrepreneur in
the race. The competitor may either imitate or offer better innovations. If the competitor is successful, the profits
of the entrepreneur will decline. (table 3)
To be ahead again, the entrepreneur will consider offering newer and better innovations. The cycle continues
until one or both find a reason to stop.
Instructor
Table 3. Innovation and its possible effects on competing firms
Entrepreneur 1 Entrepreneur 2 Entrepreneur 3

Year 1:
Introduce Inactive Inactive
Innovative
Product
Year 2:
Reap Introduce Inactive
Moderate Innovative
Profits Product
Year 3:
Maximize Reap Introduce
Profits Moderate Innovative
Profits Product
Year 4:
Profits Maximize Reap
Decline Profits Moderate
Profits
Year 5:
Introduce Profits Maximize
Innovative Decline Profits
Product
Entrepreneurship and Business Size

To many people, entrepreneurship means running a small business. New business ventures, however, can also
be undertaken on a large scale. Both small and large business are confronted by problems that are
entrepreneurial in nature.
To effectively compete, business of whatever size must adapt innovative approaches to its activities. Examples
of innovations are the following:
• Offering business services during Sundays and holidays.
• Manufacture and scale of new products.
• Selling on a deferred payment scheme.

Small business have the advantage of switching to another business concept whenever necessary. Large
businesses cannot do the same without spending much. To offset the disadvantage, however, large businesses
have started to engage in “entrepreneurship” where a person with entrepreneurial skills and is employed by the
corporation is tasked to launch new products. This person is responsible for creating innovation of any kind in
the organization.
Instructor
ENRICHMENT ACTIVITIES:
Activity 1:
Identify a business in your area which became successful due to innovation. Write about the role played by
innovation in its success.
Activity 2:
Prepare a list of five innovative products or services currently introduced in the market.
Rubrics:
Category 4 3 2 1
Accuracy of Facts All facts reported are Almost all facts are Few facts are reported No facts are reported
accurate. reported accurate. accurate. accurate.
Organization Information is very Information is Information is organized The information
organized with well- organized with well- but paragraphs are not appears to be
constructed paragraphs. constructed well-constructed. disorganized.
paragraph.
COMPREHENSION CHECK:
Directions: Answer the following comprehensively.
1. Why is entrepreneurship an important component economic development?
2. Why is innovation an important entrepreneurship activity?
3. What role does entrepreneur play?
Rubics:
Communication 50%
The knowledge of the students and depth of understanding about the topic.
Content 50%
Students are encourage to develop their own perspective on the issues and presentation of clear, concise arguments to support the point
of view.
REFERENCES:
• Roberto G. Medina. Entrepreneurship and Small Business Management Third Edition, Rex Bookstore. 2014
• Winefreda B. Asor. PhD.. Entrepreneurship in the Philippine Setting, Rex Bookstore. 2009
• Chell, Elizabeth. Entrepreneurship: Globalization, Innovation and Development. Singapore: Thomson

Learning, Asia, 2001
Instructor
LESSON 2: THE PHILIPPINE ECONOMY: HOW DOES AN ECONOMY GROW
COMPETENCIES:
Analyse the status of Philippine Economy.
Discuss factors that greatly affects the business establishments in our country.
DISCUSSIONS:
It is the intent of this lesson to present and orient the readers about the present status of the Philippine
economy, the history behind the development of our economy, and the factors that affect the development and
growth of the economy. This lesson seeks to re-orient the school system to respond more positively to the need
for more entrepreneurs on whom development depends. It aims to inculcate entrepreneurship into the
consciousness of our young people as prestigious, challenging, and possibly more financially rewarding than
law, medicine, engineering, education, the arts and other more conventional professions.
The Philippine Economy; How does an Economy Grow

The Philippine Economy
1. The national economy is composed of business enterprises, household, and the government.
2. There are economic freedoms, like free competition, free choice of investments and the prices, which are
determined by the interaction between demand and supply.
3. In economic development, knowledge, skills, values and the quality of people are the main determinants
of economic growth.
4. There were inhabitants in the Philippines about 250,000 to 300,000 years ago. They arrived from other
countries through the land bridges. They had primitive economic existence. More civilized migrant came
in later years.
5. The Philippines was a slave of three colonial masters.; the United Stated, Japan and Spain. Nevertheless,
the Chinese dominated the retail trade even before the Spanish time. The Spanish rule introduced the
tobacco monopoly and galleon trade for the benefits of top-ranking Spanish citizens. Similarly, the
Americans exploited our agricultural economy. Japan completely ruined our economy.
6. The Philippine government got its political independence in 1946, but not economic independence from
the US. The import control program of President Carlos Garcia gave a breathing space for Filipino
Entrepreneurs. However, this did not last because the US had its own way of dominating the Philippine
economy.
7. Under the Martial rule, the friends of the dictator controlled Philippine business. Democracy was
restored finally upon the assumption of Corazon Aquino as president. Under her administration, the
engine of economic development has been assigned to the private business sector. The Ramos
government has sustained most of the good programs of the Aquino Administration.
8. The national government, in its effort to alleviate poverty, has been promoting the growth of
entrepreneurship. It has several financial and technical assistance programs for the poor who are
interested in putting up their micro businesses. Even some NGO’s are actively involved in
entrepreneurial projects for the poor.
The Role of Entrepreneurship in Economic Development

1. Entrepreneurship offers an economical and faster method of distributing goods and services that
accelerate economic development.
2. Entrepreneurship is capable of generating more jobs, income, goods and services.
3. Entrepreneurship improves the quality of life.
4. Entrepreneurship contributes to more equitable distribution of income and therefore, eases social
unrest.
5. Entrepreneurship utilizes and mobilizes resources to make the country productive.
6. Entrepreneurship brings social benefits through the government.
7. Entrepreneurship has several definitions. Any person who takes the risks and invests his resources to
make something new or better engaged in entrepreneurship. This applies not only to business, but also
to social services.
8. Economic development is a progress, while economic growth is a product of economic development. Both
economic and non-economic factors constitute the determinants of economic development. In less
developed countries, economic development refers to the progressive process of improving human
conditions by reducing or eliminating poverty, disease, injustice, illiteracy and exploitation.
Instructor
9. Development and Growth Theories
a. Laissez-Faire Theory explains that the government should not interfere in economic activities.
b. Keynesian Theory explains that the government should play the key in economic development.
c. Ricardian Theory. This is the theory of David Ricardo focusing on agriculture playing the major
role in economic development.
d. Harrold – Domar Theory conceptualized by Sir Harrold of England and Prof. Domar of the US
claims that more products can be produced through the use of machines.
e. Kaldor Theory, by Nichols Kaldor, maintains that the key factor is technology. This theory
explains that the application of modern technology in the production of goods and services has
been responsible for the economic success of the highly developed countries.
f. Innovation Theory, developed by Joseph Schumpeter, stresses the role of innovators or

entrepreneurs in economic development.
10. The contributors of entrepreneurship are:
a. Development of new markets
b. Discovery of New sources of materials
c. Mobilization of Capital resources
d. Introduction of New technologies
e. Creation of employment
11. There is a need for a Filipino Entrepreneurial economy. This means our productive resources should be
in the hands of Filipinos for their own benefits. A reasonable economic nationalism should dominate
our business culture for our own prosperity as a nation. Schools should stress the value of
entrepreneurship based on just economic nationalism.
12. The government can support entrepreneurs form their various assistance programs on the following:
• Peace and order
• Political Stability
• Price Stability
• Taxes
• Infrastructures
• Education and training
• Public Administration
• Production Technology
• Marketing Assistance
• Financial Assistance
Instructor
Activity 1: Compare the economy of Association of Southeast Asian Nations.
Rubrics:
Category 4 3 2 1
paragraph.
Direction: Answer the following comprehensively.
1. State the economic development during the Pre-Spanish time.
2. How can economic nationalism help our economy?
Rubics:
Communication 50%
The knowledge of the students and depth of understanding about the topic.
Content 50%
Students are encourage to develop their own perspective on the issues and presentation of clear, concise arguments to support the point
of view.
REFERENCES:

Instructor
LESSON 3: THE NATURE OF SMALL BUSINESS
COMPETENCIES:
Analyse the economic importance of small business.
Identify type and character of small business.
Identify advantages and disadvantages of small business.
DISCUSSIONS:
Business size is one factor that does not prevent one from engaging in entrepreneurship. Since only a small
number of people have capital large enough to start a large enterprise, the bigger number of people with minimal
resources are forced to operate on a small-scale basis, if they decide on becoming entrepreneurs. Figure 1 is an
illustration of this relationship.
People and their Financial Number of Persons Possible Engagement in
Capacity Entrepreneurship
Those with large
amount of capital. Few Few
Those with small

amounts of
capital.
Large Many
Figure 1: Financial Capacity and Size of Business
Since most new ventures will be small businesses, it is expected that majority of the efforts of those involved in
the propagation of entrepreneurship will focus on small business management.
The premise is that if small business are managed properly, their chances of becoming large enterprises are
increased. Since it is well-known that large enterprises bring certain benefits to the economy, small business
management is an activity worth pursuing. But if many small businesses will not develop into large businesses,
their contribution is still very significant.
What is a Small Business?

Small business may be defined by using any of the two approaches: market share or total assets.
Under the market share approach, small business may be defined as one which is independently owned and
operated and which is not dominant in its field or operation. The term “independently owned” means ownership
is by a private individual, a partnership, or a corporation. The term “not dominant” indicates that a small
business does not control a sizable share of its market. When the total sales of a business firm is less than one
percent of the total demand for its products, the firm may be considered small business.
A small business may be defined under the total assets approach as one having total assets that fall within a
certain bracket. For example, the Magna Carta for Small Enterprises (RA 69770 indicates that the firm must
have total assets valued at above Php1.5 million to Php15 million to be considered small business. The
government prefers this approach because it simplifies formulation and implementation of policy.
With the assets value bracket assigned to small business, it is inevitable that all enterprises having total assets
valued at Php1.5 million and below will be classified as “microenterprises”.
One of the disadvantages of the total assets approach is that asset values are affected by inflation. After so
many years, inflation alters the nominal value of business assets and what may be previously considered small
business may no longer be classified as such.
From the point of view of business management, the market share approach in defining small business is more
appropriate. This is so because the target market share is an objective more basic than other objectives. Figure
2 Illustrates the kinds of business according to size.
Instructor
Figure 2. Kinds of Business According to Size
Types of Small Business

Small business may be classified into five types:
1. Manufacturing
2. Service
3. Wholesaling
4. Retailing
5. General Construction Firms
Manufacturing
A manufacturing business is one involved in the conversion of raw material into products needed by the society.
Examples of small business engaged in manufacturing are: bakeries, tricycle sidecar assembly shops, bagoong
manufacturers, restaurants and others.
Service
Service businesses are those that provides service in one way or another. They may be further classified into
the following:
1. Business Services – provide service to other business. Examples are accounting firms, janitorial service
firms, security service firms, collection agencies, and the like.
2. Personal Services – provide service to the person. Examples are tutoring services, massage parlour, voice
lesson, among others.
3. Repair Services – Provide repair services to owners of various machinery and appliances. Examples are
auto repair shops, watch repair shops, plumbing serving and others.
4. Entertainment and Creation – includes movie houses, resorts, billiard pool centers and the like.
5. Hotels and Motels
6. Education Services – include Montessori Schools for children, high school, correspondence schools,
among others.
Wholesaling
Wholesaling refers to the activities of persons or establishments which sell to retailers and other merchants,
and/or to industrial, institutional and commercial users, but who do not sell in large amounts to final
consumers. Examples are soft drinks wholesalers in local areas, dealers of supplies and offices equipment,
grains wholesalers, and the like. A big number of these wholesale businesses are owned by small business
operators.
Retailing
Retailing covers all activities involved in the sale of goods and/or services to the final consumer. The bulk of
retailing activities are performed by small businesses. Examples are retail drugstores, fast foods shops,
appliance store and others.
Instructor
General Construction Firms
General Construction Firms are those engaged in the construction of buildings whether for private individuals
or firms, or for the government. Many of them perform subcontracting jobs for the bigger contractors such as
installing electrical facilities and sewerage.
As a whole, general construction firms employ hundreds of thousands of people and they operate mostly in the
countryside.
Characteristics of Small Business

Small businesses have their own distinctive characteristics. They are the following:
1. Independent Management – the owner is also the manager.
2. Small Capital Requirement – small business requires only small capital and this can be supplied by a
single or a few individuals.
3. Mostly local operation – small business usually operates in a certain locality although there are cases
when the market is not confined to a local area.
Economic Importance of Small Business

Small business play an important role in the development of our economy. They assume the following functions.
1. Providers of economic opportunities for entrepreneurs – people who do not feel comfortable as employees
have the option of engaging in small business operation.
2. Providers of products and services to consumers – the production of many products and services is
oftentimes not feasible with big and medium business operation. These limited opportunities are
naturally fitted for small businesses.
3. Suppliers of products and services to other businesses – some businesses require raw materials, semi-
finished parts, finished components or even labor, which they cannot economically produce. The small
businesses perform this task for them.
4. Distributors of products and services of other businesses – some manufacturers do not have the ability
to distribute their products and services. Many small businesses assume this role for them.
5. Supporters of government – small businesses support the government with the taxes they pay, as well
as performing other functions.
6. Providers of employment – a large proportion of the labor force are employed by small businesses.
Advantages of Operating a Small Business

An individual has various options to improve his economic lot. They are the following:
1. Be an employee
2. Be a professional
3. Be a small business operator
An employee enjoys a fixed working schedule like 8:00am to 5:00pm. The pay he receives, however, is limited
and dependent to a large extent on industry norms and the financial capability of the company. In some firms,
the employee’s pay depends on the whims of the owner.
Figure 3: Small Business and its importance to the economy
Instructor
A professional may generate higher income through the effective practice of his profession. A physician, for
example, may set his clinic in a certain area and proceed to treat patients for a free. His income, however, is
limited by the number of patients he attends to every day as he cannot delegate his skills to others. In
addition, although he is useful to the community, his desire to provide employment to more people is severely
limited by the nature of his work. At most, he can employ four persons as assistants.
The first two options, however, can only be considered depending on certain conditions. Finding a job is not an
easy task. The rate of rejection for job applicants, especially in the Philippines, is just too high. In reality, there
are too many people who cannot exercise this option.
Entering a certain profession is also not easy task. First, one must undergo long years of study and second,
one must pass a rigorous entrance requirement like passing the board examination. There are also too many
people who cannot exercise this option.
The last option is small business operation. Although entrance requirements are not as difficult as the first
two options, it does not mean this is easier to put into practice. A small business operator keeps long working
hours and absorbs whatever damages that happen as a result of his faulty decision-making. However, he is
afforded the following reasons.
1. Opportunity to gain control over his own destiny,
2. Opportunity to reach his full potential,
3. Opportunity to reap unlimited profits and
4. Opportunity to make contribution to society and receive recognition for his efforts.
Opportunity to Gain Control over his own destiny
The prospective small business owner can choose from several business opportunities that he would like to
take advantage of. If, after a few years, he thinks that the business is not worth operating anymore, then he
can dissolve it and open a new one. This option is not made available to plain employees and professionals.
Opportunity to reach full potential
The employee will do his work based on prescribed targets which may only require less his full potential. This
is not so with the small business operator. His freedom to act is limited only by his potential and can revise or
amend his targets within short notice.
Opportunity to reap unlimited profits
If the small business succeeds, all profits, big or small, accrue to the owner. If he is not satisfied, he may exert
more efforts to increase his profits. This opportunity is not afforded to the plain employee.
Opportunity to make contribution to society and receive recognition for his efforts
Entrepreneur who make innovative products available to the public are recognized properly by society. Some of
them, like Henry Ford, became billionaires. Others, like Walter Disney, merited listing in books of eminent
personalities.
In the Philippines, a list of the most admired entrepreneurs was published on August 2007 by Entrepreneurs
Magazine (See partial list in Exhibit 1)
Exhibit 1: Most Admired Entrepreneurs in the Philippine.
Instructor
Disadvantages of Operating a Small Business
Although certain advantages accrue to the small business operator, there are certain advantages that must be
considered. These are the following:
1. Uncertainty of income
2. Risk of losing your entire capital investment
3. Complete responsibility
4. Having to serve undesirable customers
5. Paperwork and other chores
6. Long hours and demanding work conditions
Operating a small business does not provide the assurance of an income, unlike getting employment which
offers fixed monthly salaries.
Complete independence in making decisions exposes the small business operator to the consequences of errors
of judgement which in some cases could wipe out his investment. The high rate of small business failures proves
the point.
As the small business operator assembles the needed resources, starts actual production, and makes moves to
attract customers, income and profit are held in abeyance. i.e., if they will ever be realized at all. Until then, the
owner experiences a lower quality of life.
The owner-operator will take full responsibility for whatever happens to the business. If the firm is sued for
selling unsafe products, for instance, the he suffers and carries whatever burden or penalty is imposed by
authorities. He cannot pass the blame to anybody else.
Even of the small business operator has freedom in his actions, he is not completely free. Ha cannot choose his
customers. Even if he dislikes a particular customer, he cannot just send him away or even ignore him. He is
bound to give his customers satisfactory service even if they are rude.
A big company can hire several persons to attend to specific tasks related to paperwork like bookkeeping or
other unpleasant tasks. The small business operator is forced to do theses tasks himself.
It is well-known fact that a small business must maintain long hours of work to keep the business going. If it
cannot acquire sales volume within a short time frame everyday, it must stretch its business hours to
accommodate more customers. The limited volume of production and sales limits the number of activities that
can be economically served by hired personnel. The residual functions, even if they must be done under harsh
working conditions, must be borne by the small business operator.
See comparison of employment and small business operation.
Factor Small Business Operation Employment

Income Uncertain Certain
Capital Investment Risk of Losing None required
Quality of Life Lower until business gets Consistent at a certain level
established
Responsibility Complete/all encompassing Restricted to one’s job
a) Gain control over his a) Present a) Absent
own destiny
b) Reach his full b) Present b) Absent
potential
c) Reap unlimited c) Present c) Absent
profits
d) Make a contribution d) Present d) Limited
to society and receive
recognition for his
effort
Instructor
Prepare a report on small business in your Municipality indicating the following:
1. Number
2. Capitalization
3. General Location
4. Products and Services sold
Rubrics:
Category 4 3 2 1
paragraph.
Direction: Match Column A with Column B.
A B
1.Small Business a. Be a small business operator
2. Market Share Approach b. Opportunity to make a contribution to
society.
3.Manufacturing Business c. Having to serve undesirable costumers.
4.Wholesaling d. for people who do not feel comfortable as
employees.
5.An option to improve a person’s economic e. Small business employees.
lot
6.Benefit of small business operation f. all profits accrue to the owner.
7.Disadvantages of small business operation g. small business is one which is independently
owned.
8.Engaging in small business operation h. most new ventures.
9.A large proportion of the labor force i. bakeries, shops, restaurants, furniture shop
10. If the small business succeeds j. activities of person which sell to retailers and
other merchants
REFERENCES:

Instructor

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COURSE DETAILS

COURSE NO. Essp 1

Entrepreneur’s Problem at Hand Entrepreneur’s Action

Figure 1. The Entrepreneur’s Task

• New process of production

• Substitution of a cheaper material in an unaltered product

• Reorganization of production, internal function or distribution arrangement leading to increased

Factors of Production Economic Reward Limiting Factor for rewards

The Entrepreneur’s Predicament

Entrepreneur 1 Entrepreneur 2 Entrepreneur 3

Entrepreneurship and Business Size

• Offering business services during Sundays and holidays.

• Manufacture and scale of new products.

• Selling on a deferred payment scheme.

• Chell, Elizabeth. Entrepreneurship: Globalization, Innovation and Development. Singapore: Thomson

The Philippine Economy; How does an Economy Grow

The Role of Entrepreneurship in Economic Development

f. Innovation Theory, developed by Joseph Schumpeter, stresses the role of innovators or

• Peace and order

• Education and training

• Chell, Elizabeth. Entrepreneurship: Globalization, Innovation and Development. Singapore: Thomson

Those with small

Figure 1: Financial Capacity and Size of Business

What is a Small Business?

Types of Small Business

Characteristics of Small Business

Economic Importance of Small Business

Advantages of Operating a Small Business

Exhibit 1: Most Admired Entrepreneurs in the Philippine.

Factor Small Business Operation Employment

• Chell, Elizabeth. Entrepreneurship: Globalization, Innovation and Development. Singapore: Thomson

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