PRODUCTS or SERVICES

LOOK INSIDE/OUTSIDE AS THE FUTURE experience), talents and skills, and personal
ENTREPRENEUR interest.

1. Look within you. 2. Customer Requirements

- What are your hobbies, talents, skills and
interests? Study and abide by the customer
requirements.
2. Look at other people’s innate abilities and 3. Viability
knowledge.
- Observe your community. What skills are Consider the feasibility of the product
available in the locality? or service resources available, doable based on
time frame, and practical
3. Look at the market.
4. Profitability
o Demand-supply gap analysis
o Import-export movement Did I financially profit from the sale of
o Forward-backward industry linkages the product or service? Was it cost-effective to
o The bigger market produce the product myself or better if I just
outsource it from a supplier? Was it financially
4. Look for problems. rewarding for my workers to perform the
- Problems could be blessing in disguise for services I offer?
entrepreneurs. If you are able to solve a
Profitability screening: Sales – Expenses = Profits
problem, the solution could be a very good
business idea. 5. Innovation or Differentiation
- Entrepreneurship turns a problem into win-
win situation. Distinguish your product or service
from those already in the market.
5. Look for help.
- Government, private institutions and non- “Walking the extra mile” or giving
government organizations (NGOs) provide your customers some convenience such as
technical, marketing and financial unique selling and value proposition.
assistance to entrepreneurs such as:
Technical Education Skills and
Development Authority (TESDA), SWOTT ANALYSIS
Department of Science and Technology
(DOST), and Bangko Sentral ng Pilipinas  Strengths – advantages of your products or
(BSP) services over similar offerings in the
market.
6. Look for tried-and-tested ideas.  Weaknesses – perceived limitations of your
- Buy ready-made business or secure a products and services.
franchise of a tried and tested business.  Opportunities – things that happen that
outside of your business that can potentially
PERSONAL/CUSTOMER-LEVEL be to the advantage of your products or
SCREENING services.
 Threats – harmful things that may
1. Your Personal Preference potentially negatively affect your products
or services.
Intangible personal investment:
 Trends – market inclinations towards your
knowledge(educational and training
background), experience(personal and work product or services. Upward movement in
market trend in your favor may be an
 opportunity while downward trend could
potentially be a threat.

SPECIALIZED ASSESSMENT TOOLS: FOUR

FUNCTIONAL AREAS OF MANAGEMENT

1. Market Assessment

- This gauges the relationship of the market

demand vs. supply.

2. Technical or Operations / Production

Assessment

- Concerns the technical competence in the

creation and provision of your product and
service. It includes 4M : Manpower,
Method, Machines, Materials.

3. Organizational Assessment

- Involves the human resources that you will

need for your business. It will study your
ability to manage your people handling key
positions as well as those rank-in-files.

4. Financial Assessment

- Explains your current financial situation

using financial analysis tools, such as the
Financial Statements (Balanced Sheet,
Income Statement, and Statement of Cash
Flow) and financial ratios (liquidity,
activity, debt, and profitability)
 THE ORGANIZATIONAL PLAN
- Section of the business plan that identifies
the form of ownership the business venture
will take.
- It provides a background of management
team; describe the organizational structure;
including the management team’s role,
responsibilities, and reporting relationships;
outlines the planning, decision-making,
monitoring, and evaluation processes; and
spells out the role of the board of advisers.
FORMS OF OWNERSHIP
- Smera is implemented with the help of
3 BASIC LEGAL forms of business ownership:
1. sole proprietorship
2. partnership
3. corporation
ORGANIZATION STRUCTURE
- Show the reader of the business plan who
the principal owners of the business are,
who constitutes the management team, and
who provides valuable advice to the
business owners and/or management team.
BUSINESS ADVISERS
Department of Trade and Industry’s SME
Roving Academy (SMERA)
- Ongoing learning program meant to
develop micro, small, and medium
enterprises (MSME) into competitive
players in both domestic and international
markets.
partner institutions from local government
units, industry associations, business
services development providers, training
institutions, and academe.
 COMPETITION PORTER’S FIVE FORCES OF INDUSTRY
COMPETITION
- Rivalry between companies selling similar
products and services with the goal of
achieving revenue, profit, and market share-
growth.

Environmental Scanning – process of collecting

information about the external marketing
environment to identify and interpret potential
needs.

Environmental Management – involves

marketers’ efforts toward achieving
organizational objectives by predicting and
influencing the competitive, political-legal,
economic, technological, and social-cultural 1. Bargaining Power of Suppliers
environments.
The fewer the number of suppliers present;
the more suppliers can dictate the price.

TYPES OF COMPETITION When suppliers decide to increase the

1. Direct Competitors – someone that offers
the same products.
2. Indirect Competitors – offer the same
products but have different goals. They
have different marketing strategies being
done.
3. Replacement Competitors – offer substitute
products (differ from price or quality than
the dominant product in the market).
prices of their commodities, customers are left
no choice but to buy than to sacrifice their
production.
The producers will find ways to earn
profit from their businesses, thus they charge
their finished goods higher to the customers.
2. Threat of New Entry
In case where there are very minimal
requirements in opening a business, anyone who
have what it takes can always join the
competition.

New competitors weaken your market.

3. Bargaining Power of Customers

Customers drive down prices, handful

buyers dictate prices.

4. Rivalry Among Existing Competitors

Something unique to offer, has tremendous

strength.

5. Threat of Substitutes

In an industry where substitution is easy

and inexpensive, competitive power is weak.
MANAGING THE OPERATIONS FUNCTION
CONCEPT OF OPERATIONS MANAGEMENT
Operation Management
- component of management that deals with
planning, implementing and monitoring the
process of producing goods and services.
- The task of an operations manager is to
oversee the resources available to the
enterprise for production enterprise.
- An operations manager plans the structure
of production by identifying the output to
be produced, the resources needed, and the
procedures on how these resources are
mixed t produce a good/service.
In implementing the production plan…
The manager supervises the process of
combining materials together with other inputs
according to the technology utilized to produce
the identified output.
In monitoring the production input…
The manager assesses the performance of
production in terms of effectiveness, efficiency,
quality, timeliness, dependability, flexibility,
cost, and other criteria.
ASSESSING THE PERFORMANCE OF A
BUSINESS ENTERPRISE
Performance Effectiveness
- Effectiveness indicates how the output of
the firm was able to achieve the objectives
set by the business enterprise. The business
firm is considered effective if it is able to
produce the goods and services that is
planned to produce.
Performance Efficiency
- The concept of efficiency denotes how the
output of the firm was realized through the
use of resources. If the objective of the
company is to maximize profit, it has to be
efficient in the use of resources.
FRAMEWORK FOR ANALYSING
OPERATIONS ON AN ENTERPRISE
SYSTEMS APPROACH: INPUT-PROCESS-
OUTPUT(IPO) FRAMEWORK
RESOURCE INPUTS (5M’s)
a. Materials
- semi-processed goods that will be subjected
to further transformation in the production
process. They are also called raw materials
or intermediate inputs.
b. Manpower
- human resource input used in the
production process. Manpower does not
only include labor or muscular power but
also intellectual, creative abilities, and other
qualities of individuals that can contribute
to production.
c. Machinery
- represents all man-made physical capital
used in the production process. Aside from
machines, the tools, durable equipment, and
the physical plant are also.
d. Method
- the process of combining raw materials and
how these are going to be transformed
using other factor of inputs production.
Also called as technology or techniques of
production.
e. Money
- financial resource used to purchase all the
resources needed by the firm for its
operations.
PROCESS
a. Physical Transformation
- occurs when the processing of raw
materials converts them into significantly
altered new product.
b. Locational Transformation
- arises when a product changes its location
through various means of transportation and
communication.
c. Information Transformation
- happens when knowledge and specialized
skills of providers are transmitted to their
customers.
d. Exchange Transformation
- takes place when the commodity is
transmitted to the supplier to its buyer.

e. Extractive Transformation
- happens when a natural resource is taken
out from its habitat.

OUTPUT

a. Outputs from Physical Transformation

- Food grains, canned food, clothes, bread
furniture, gasoline, cars, electronic
gadgets, construction materials, and
other manufactured goods.

b. Outputs from Locational Transformation

- taxi services, bus services, train
services, sea transport, air transport,
postal services, telephone and
telecommunication services.

c. Outputs from Information Transformation

- educational services, health services,
legal services, consultancy services,
auditing and other professional services.

d. Outputs from Exchange Transformation

- retail services of sari-sari store,
groceries, supermarkets and department
stores, and wholesale services of large
distribution outlets.

e. Outputs from Extractive Transformation

- gold and copper ores, sand, seafood,
and other products derived from natural
resources.

VALUE CHAIN APPROACH

 Traces the value of commodity in terms of

how factor inputs are adding value to the
raw materials.
 Value-added is the summation of wages,
interest(cost of capital), rent, royalty(cost of
technology), and profit.
 The value of production is computed as the
value of raw materials and the value-added
by the factor inputs.

PRINCIPLES OF FINANCIAL
MANAGEMENT
Principle 1: An investment project with a higher
return may also have higher risks.
Principle 2: The value of money changes
overtime.
Principle 3: Cash, not profit, is the basis for
creating value.
Principle 4: In creating value, it is important to
consider incremental cash flows.
Principle 5: In a competitive market it very
difficult to reap huge profits.
Principle 6: You cannot outsmart an efficient
capital market.
Principle 7: Creating value for the firm is
tempered by the agency problem.
Principle 8: Taxes may influence business
decision.
Principle 9: Not all risks are created equally.
Principle 10: In creating the value of the firm,
the financial managers must be ethical in their
actions and decisions.
RAISING CAPITAL FOR NEW
VENTURES: SOME CHALLENGES
 Need to convince the lenders and investors
that the firm is a worthy business enterprise.
 In mobilizing funds, a business venture
should recognize the perspectives and
interests of lenders and investors.
 Need to understand alternative venues for
financial intermediation.
Crowdfunding uses social media as
venue for raising funds for the new business
venture, make use of social ties, connections,
and networks in raising funds for an emerging
company like donation, reward-based, and
credit-based.
TYPES OF CAPITAL – DEBT VERSUS
EQUITY
 The usual sources of external financing
firms are creditors and investors.
 Commercial banks deal with extension of
loans to business ventures mainly used as
working capital and the acquisition of
capital equipment.
 Expand business through capital market
like issuance of bonds in the bond market
and equities in the stock market.
ADVANTAGES AND DISADVANTAGES OF
CREDIT FINANCING
ADVANTAGES
1. Huge amount of money that can be
accumulated.
2. Earn substantial savings for not borrowing
and servicing debts.
DISADVANTAGES
1. Complexities of preparing and issuing
bonds, securities, stocks, and other
commercial papers in the capital market.
2. Financial performance of the company
must be reviewed, evaluated, and rated by
independent credit rating agencies.
SOURCES OF CAPITAL FOR
ENTREPRENEURS
 Self-financing
 Borrowing from local credit market
 Borrowing from commercial banks
 Government grants, credit and incentives
 Venture capitalists and business angels
Venture capitalists – uses the funds of a
group of the company.
Business angels – uses his own personal
funds to acquire private equity in the company.
SOCIAL BRICOLAGE
 Refer to the behaviour of social enterprise
that improvise in an environment of meagre
resources.
 Elements of social bricolage: modest
resources, refusal to be restricted,
improvisation, social value, formation,
stakeholder participation, and persuasion
for support from others.