ENTREPRENEURSHIP – 1st QUARTER

LESSON 1: Introduction to Entrepreneurship

Relevance of Entrepreneurship to an Organization
1. Development of Managerial Capabilities - this means that one of the benefits an
entrepreneur gets is to develop his managerial skills.
2. Creation of Organizations - which means that because of entrepreneurship many
organizations will exist.
3. Improving Standard of Living - this means that entrepreneurship can lift up the economic
status of an individual.
4. Means of Economic Development - this means that not only the life of the entrepreneur
is improved but also the society where the business is located.
Concept of Entrepreneurship
The word “entrepreneur” was derived from the French verb enterprendre, which means
“to undertake.” This is pinpointing to those who “undertake” the risk of enterprise. The enterprise
is created by an entrepreneur and the process is called “Entrepreneurship.”
Entrepreneurs are innovators. They are willing to take the risks and generate unique
ideas that can provide profitable solutions to the needs of the market and the society.
Factors Affecting Entrepreneurship
1. Personality Factors which include:
a. Initiative - doing things even before being told.
b. Proactive - which means he can classify opportunities and seize it.
c. Problem Solver - which means he can retain good relations with other people.
d. Perseverance - meaning he will pursue things to get done regardless of challenges.
e. Persuasion - means that he can entice people to buy even if they don’t want to.
f. A Planner - he makes plans before doing things and does not fail to monitor it.
g. Risk-taker - which means that he is willing to gamble but he will calculate it first.
2. Environmental Factors which include political, climate, legal system, economic and social
conditions and market situations.
Common Competencies in Entrepreneurship
1. Decisive - an entrepreneur must be firm in making decisions.
2. Communicator - an entrepreneur must have a convincing power.
3. Leader - an entrepreneur must have the charisma to be obeyed by his employees.
4. Opportunity seeker - an entrepreneur must have the ability to be the first to see business
chances.
5. Proactive – an entrepreneur can control a situation by making things happen or by
preparing for possible future problems.
6. Risk Taker – an entrepreneur has the courage to pursue business ideas.
h. Innovative - the entrepreneur has big business ideas and he does not stop improving
and thinking of new worthwhile ideas for his business.
Core Competencies in Entrepreneurship
1. Economic and Dynamic Activity - Entrepreneurship is an economic activity because it
involves the creation and operation of an enterprise with a view to creating value or
wealth by ensuring optimum utilization of limited resources.
2. Innovative – The entrepreneur constantly looks for new ideas, thus he needs to be
creative.
3. Profit Potential - The entrepreneur can be compensated by his profit coming from the
operation.
4. Risk bearing – The entrepreneur needs to gamble but wise enough to offset the risk.
Types of Entrepreneurs
1. Innovative Entrepreneurs - They are those who always make new things by thinking of
new ideas. They have the ability to think newer, better and more economical ideas.
2. Imitating Entrepreneurs - They are those who don’t create new things but only follow the
ideas of other entrepreneurs.
3. Fabian Entrepreneurs - They are skeptical about changes to be made in the
organization. They don’t initiate but follow only after they are satisfied.
4. Drone Entrepreneurs - They are those who live on the labor of others. They are die-hard
conservatives even ready to suffer the loss of business.
5. Social Entrepreneurs - They are those who initiate changes and drive social innovation
and transformation in the various fields such as education, health, human rights,
environment and enterprise development.
Career Opportunities of Entrepreneurship
1. Business Consultant - with the expertise of in the field of entrepreneurship, he can be a
very good source of advices to other entrepreneurs and would be business men.
2. Teacher - a graduate of an entrepreneurship can use his knowledge in teaching.
3. Researcher - the entrepreneur can be employed as a researcher by an enterprise.
4. Sales - the entrepreneurship graduate can apply as a salesman.
5. Business Reporter - the entrepreneur being expert in the field, can be employed as a
business reporter.
ENTREPRENEURSHIP – 1st QUARTER
LESSON 2: Recognize a Potential Market
Entrepreneurial Ideas
The creation of an entrepreneurial idea leads to the identification of entrepreneurial
opportunities, which in turn results in the opening of an entrepreneurial venture.
The entrepreneurial process of creating a new venture is presented in the diagram below. (Nick
L. Aduana, Etrepreneurship in Philippine Setting for Senior High School, 2017, C&E publishing
page 46, Aduana, 2017).

Identification of
Creation of Opening of
entreprenerial
entrepreneurial ideas entreprenerial venture
opportunities

Figure 1. The Entrepreneurial Process of Creating New Venture

Essentials in Entrepreneur’s Opportunity – Seeking

These are the basic foundation that the entrepreneur must have in seeking opportunities:

 Entrepreneurial mind frame. This allows the entrepreneur to see things in a very positive
and optimistic way in the midst of difficult situation. Being a risk - taker, an entrepreneur
can find solutions when problems arise.
 Entrepreneurial heart flame. Entrepreneurs are driven by passion; they are attracted to
discover satisfaction in the act and process of discovery. Passion is the great desire of
an entrepreneur to achieve his/her goals.
 Entrepreneurial gut game. This refers to the ability of the entrepreneur of being intuitive.
This also known as intuition. The gut game also means confidence in one’s self and the
firm belief that everything you aspire can be reached.
Sources of Opportunities
There are many ways to discover opportunities. Looking at the big picture, some have noticed
the emerging trends and patterns for business opportunities. While others are trying to find out
their target market. The following are some sources of opportunities:
1. Changes in the environment
Entrepreneurial ideas arise when changes happen in the external environment. A person
with an entrepreneurial drive views these changes positively. External environment refers to
the physical environment, societal environment, and industry environment where the
business operates.

 The Physical environment includes

a. Climate – the weather conditions.
 b. Natural resources – such as minerals, forests, water, and fertile land that occur in
nature and can be used for economic gain.
c. Wildlife – includes all mammals, birds, reptiles, fish, etc., that live in the wild.

 The Societal environment includes the various forces like

a. Political forces – includes all the laws, rules, and regulations that govern
business practices as well as the permits, approvals, and licenses necessary to
operate the business.
b. Economic forces – such as income level and employment rate.
c. Sociocultural forces – customs, lifestyles and values that characterize a society.
d. Technological environment – new inventions and technology innovations.

 The Industry environment of the business includes:

a. Competitors
b. Customers
c. Creditors
d. Employees
e. Government
f. Suppliers

For example, one factor in the physical environment that can easily change is the climate.
The temperature is very high during summer but very low during the rainy season. An
individual with entrepreneurial drive can be extremely imaginative and inventive in
identifying opportunities. He/she can venture on a business that responds to the needs of
the people during summer and rainy season.

2. Technological discovery and advancement

A person with entrepreneurial interest sees possibility of business opportunities in any new
discovery or because of the use of latest technology.

For example, an individual with knowledge in repair and installation of a machine engine
discovers additional engine parts that considerably reduce fuel consumption.

3. Government’s thrust, programs, and policies

The priorities, projects, programs, and policies of the government are also good sources of
ideas.

For example, the use of firecrackers to celebrate New Year’s Eve is strictly prohibited.
People without entrepreneurial interest will view the ordinance as a plain restriction.
However, for an entrepreneur, it is a business opportunity to come up with a new product
that will serve as a substitute for firecrackers.

4. People’s interest
The interest, hobbies, and preferences of people are rich sources of entrepreneurial ideas,
like the increasing number of Internet Cafés at present could lead to the strong attachment
of young people to computers.
5. Past experiences
The expertise and skills developed by a person who has worked in a particular field may
lead to the opening of a related business enterprise.

For example, an accountant who has learned the appropriate accounting and management
skills and techniques in a prominent accounting firm can start his/her business venture by
opening his/her own accounting firm.

Forces of Competition Model

It is also known as the “five forces of competition”. An industry environment is a competitive
environment. Regardless of what product or services you have, competition is always present.

Competition – it is the act or process of trying to get or win something.

For example, the prices are lower when there is a competition among the stores.
These are the five forces competing within the industry:
 Buyers
 Potential new entrants
 Rivalry among existing firms
 Substitute products
 Supplier

1. Buyers
The buyers are the ones that pay cash in exchange for your goods and services. One
example is the influence of the price or in the bargaining strategy. The buyer has a strong
and magnified bargaining power. The threat of its bargaining power will be less if the
following factors are noticed:
a. There are several suppliers available in the market.
b. The buyer has the potential for backward integration.
c. The cost of switching the supplier cost is minimal.
d. The product represents a high percentage of the buyer’s cost.
e. The buyer purchases large portions of the seller’s product or services.

2. Potential New Entrants

A new entrant is defined as companies or businesses that have the ability to penetrate or
enter into a particular industry. For example, in the level of capital requirements, if the
business requires huge capital, new entrants should decline to join the business. This gives a
threat to the business. This can be noticed if there is the presence of the following factors:
a. Substantial capital requirement
b. Strict government policy
c. Difficulty in accessing distribution channels
d. Economies of scale
e. High cost of product differentiation
f. High switching cost

3. Rivalry among Existing Firms

Rivalry is a state or situation wherein business organizations are competing with each other
in a particular market. For example, it depends on the marketing strategy of your competitor,
 like giving freebies and special offers. The intensity of rivalry among existing firms is
characterized to the following factors:
a. Diversity of rivals
b. Number of competing firms
c. Characteristics of the products or services
d. Increased capacity
e. Amount of fixed costs
f. Rate of industry growth

4. Substitute Products
Substitute is one that serves the same purpose as another product in the market. For
example, the consumers decide to use margarine as a substitute for butter. In case the price
of butter increases, preferably the consumer will gradually switch to margarine. A substitute
product can give a big threat in the industry environment if the following factors are noticed:
a. Switching cost is low
b. Preferences and tastes of the customers easily change
c. Product differentiation is highly noticeable
d. The quality of substitute products dramatically improves
e. The price of substitute product is substantially lower

5. Suppliers
The Suppliers are the one that provide something that is needed in business operations such
as office supplies and equipment. In an example where supplies and services being offered
is unstable the intensity of the threat is strong in this kind of the competitive force in the
industry. This can be noticed if there is the presence of the following factors:
a. The supplier has the ability for forward integration
b. Suppliers in the industry are few, but the sales volume is high
c. Substitute products are not readily available in the market
d. The switching cost is very high
e. The product or service is unique
ENTREPRENEURSHIP – 1st QUARTER
LESSON 3: Recognize and Understand the Market
There are three processes in creating a new venture, Entrepreneurial mind frame,
Entrepreneurial heart flame, and Entrepreneurial gut game. In opening a new venture or
business, you need to determine the Unique Selling Proposition (USP) and Value Proposition
(VP) of your product as well as your target market.

Value Proposition (VP) - is a business or marketing statement that summarizes why a

consumer should buy a company's product or use its service. This statement is often used to
convince a customer to purchase a particular product or service to add a form of value to their
lives. In creating Value Proposition, entrepreneurs will consider the basic elements:

 Target Customer
 Needs/opportunity
 Name of the product
 Name of the enterprise/company
There are many competitors in the market who establish superiority over other entrepreneurs.
Entrepreneurs should think of other alternatives to make their products better. An important
aspect in Value Proposition is that it must be truthful and that it should establish credibility to the
consumers.
Example: Potential value proposition is most common in small businesses of your locality.
Aling Charing Sari-Sari Store opens only from 6:00 am to 6:00 pm, but Aling Charing noticed
that there are customers who go to a nearby town to look for a convenience store at around
10:00 pm to 6:00 am. She believes that this is a great opportunity for her store to operate 24/7.
In this example, the proposed value proposition is: “Charing sari-sari Store, open 24/7”.
The business describes a sari-sari store – a basic retail store. The assurance from this value
proposition is because of the phrase “open 24/7”, Aling Charing’s sari-sari store opens 24/7,
which makes it different from other competitors.

Unique Selling Proposition (USP) – refers to how you sell your product or services to your
customer. You will address the wants and desires of your customers.
As an entrepreneur, you should think of marketing concepts that persuade your target
customers. You may ask the following questions in doing this: What do the customers want?
What brand does well? What does your competitor sell well?
Some tips for the entrepreneur on how to create an effective unique selling proposition to the
target customers are:

 Identify and rank the uniqueness of the product or services character

 Be very Specific
 Keep it Short and Simple (KISS)
As an entrepreneur, present the best feature of your product or service that is different from
other competitors. Identifying the unique selling proposition requires marketing research that
you will learn from the other modules. In promoting your products or services, make sure that it
is very specific and put details that emphasize the differentiator against the competitors. Keep it
short and simple and think of a tagline that is easy to remember. Right now, the proposed
unique selling proposition is: “Charing sari-sari store, open 24/7”
Readers get confused between value proposition and unique selling proposition. The two
propositions are used to differentiate the products from competitors. For example, Jollibee is
known to have a Filipino taste burger. This brand has a unique selling point because of its
tagline “Langhap Sarap”
Unique Selling Proposition and Value Proposition are two of the most famous tools used to
explain why prospect customers buy each product and service.

Target Market
Market Targeting is a sage in market identification process that aims to determine the buyers
with common needs and characteristics. Prospect customers are a market segment that an
entrepreneurial venture intends to serve.
In targeting a specific market, it will exclude people if it will not fit your criteria. Rather, target
marketing allows you to focus your marketing money and brand message on a specific market
that is more likely to buy from you than other markets. Choose a product that is more affordable,
efficient, and effective to reach potential clients and generate business.
Commonly used methods for segmenting the markets are follows.:
1. Geographic segmentation – the total market is divided according to geographical location.

 Variables to consider
a. Climate
b. Dominant ethnic group
c. Culture
d. Density (either rural or urban)
2. Demographic Segmentation – divided based on consumers

 Variables to consider
a. Gender
b. Age
c. Income
d. Occupation
e. Education
f. Religion
g. Ethnic group
h. Family size
3. Psychological Segmentation – divided in terms of how customers think and believe
  Variables to consider
a. Needs and wants
b. Attitudes
c. Social class
d. Personality traits
e. Knowledge and awareness
f. Brand concept
g. Lifestyle
4. Behavioral Segmentation – divided according to customers’ behavior pattern as they interact
with a company.

 Variables to consider
a. Perceptions
b. Knowledge
c. Reaction
d. Benefits
e. Loyalty
f. Responses

Customer Requirements
Customer requirements are the specific characteristics that the customers need from a product
or a service.
There can be two types of customer requirements:
1. 1.Service Requirement
2. 2.Output Requirement
Service Requirement: An intangible thing or product that cannot be touched but the customer
can feel the fulfillment. There are elements in service requirement like on-time delivery, service
with a smile, easy-payment etc. It includes all aspects of how a customer expects to be treated
while purchasing a product and how easy the buying process goes.
Output Requirements: Tangible thing or things that can be seen. Characteristic specifications
that a consumer expects to be fulfilled in the product. Costumers will avail services as a product,
then various service requirements can take the form of output requirements. For example, if the
consumer hires a multi cab, then on-time arrival becomes an output requirement. Customer
buys gadgets (phone speaker) the specification like the loudness and clarity are the output
requirements.

Market Size
The entrepreneur’s most critical task is to calculate the market size, and the potential value that
market has for their start-up business. Market research will determine the entrepreneurs’
possible customers in one locality.
Market size is like a size of the arena where the entrepreneurs will play their business. It is the
approximate number of sellers and buyers in a particular market. Companies are interested in
knowing the market size before launching a new product or service in the area. In determining
the market size, the entrepreneur will conduct a strategic marketing research from reliable
sources using the following method. The first step is to estimate the potential market –
approximate number of customers that will buy the product or avail your services. The second
step is to estimate the customers who probably dislike to buy your product or avail the services.
The third step is for the entrepreneur to estimate the market share, that means plotting and
calculating of the competitor’s market share to determine the portion of the new venture. Market
size becomes the most important factor if you ever need to raise funding for your business.

ENTREPRENEURSHIP – 1st QUARTER

LESSON 4: Market Research
Market Research or Marketing Research Process can be defined as the process of gathering,
analyzing and interpreting the information about the products or the services to be offered for
sale to the potential consumers in the market.
DATA COLLECTION is the most valuable tool in any type of research study. Inaccurate data
collection may cause mistakes and ultimately lead to invalid results. (Edralin, 2016, p. 80)
TIPS in COLLECTING DATA

 Organize collected data as soon as it is available

 Know what message you want to get across and then collect data that is relevant to the
message
 Collect more data
 Create more data
 Take note of interesting or significant data
Data Collection Techniques
SURVEYS are the most common way to gather primary research with the use of questionnaires
or interview schedule. These can be done via direct mail, over the phone, internet (e.g. Google)
or email, face-to-face or on the Web (e.g. Skype or Viber).
When designing or constructing your own research questionnaire, remember the following
guidelines. (Edralin, 2016)

 Keep it as simple as possible

 Make sure it is clearly appealing and easy to read
 Cluster or block related questions
 Move from complex questions to more specific questions
 Make sure questions are concise and easily understood
 Avoid questions that are difficult to answer\
 Make sure response scales used are consistent with categories that are mutually
exclusive
INTERVIEW is one of the most reliable and credible ways of getting relevant information from
target customers. It is typically done in person between the researcher/entrepreneur and a
respondent where the researcher asks pertinent questions that will give significant pieces of
information about the problem that he will solve. The interview is also helpful even when the
business has already started because the customers' feedback provides the entrepreneur a
glimpse of what the customers think about the business.
Interviews normally last from 15 to 40 minutes, but they can last longer, depending on the
participants' interest in the topic.
In a structured interview, the researcher asks a standard set of questions and nothing more.
Personal interviews are the traditional method of conducting an interview. It allows the
researcher to establish relationship with potential participants and therefore gain their
cooperation. It generates highest response rates in survey research. They also allow the
researcher to clarify indefinite answers and when necessary, seek follow-up information.
Telephone interviews are less expensive and less time-consuming, but the disadvantages are
that the response rate is not as high as the face-to-face interview, but considerably higher than
the mailed questionnaire.
FOCUS GROUP DISCUSSION (FGD) is an excellent method for generating and screening
ideas and concepts. It can be moderated group interviews and brainstorming sessions that
provide information on user's needs and behaviors.
The following are considerations in the use of focus group discussions in market research:

 The length of the session is between 90 and 120 minutes.

 Conduct focus groups discussion with 8 to 10 participants per group.
 Assign an expert moderator/ facilitator who can manage group dynamics.
 Use a semi-structured or open-format discussion
 Strive for consistency in the group's composition (for example, it may not be advisable to
have business customers and retail customers in the same focus group, their needs are
very different)
ENTREPRENEURSHIP – 1st QUARTER
LESSON 5: 7 P’s of Marketing and Branding
The 7 P’s of Marketing Mix
There are several important frameworks which you can utilize for the purpose of marketing your
product and services. A very crucial structure among these is the “7 P’s of Marketing. The
framework of “7 Ps of marketing” includes product, place, price, promotion people, packaging
and positioning. Realizing these P’s in the most ideal manner can turn out to be very profitable,
however, you should totally see each description of the 7 P’s first.
PRODUCT
The first P in the Marketing Mix is the Product. Marketing strategy typically starts with the
product. Marketers can’t plan a distribution system or set a price if they don’t know exactly what
the product will be offered to the market.
Product refers to any goods or services that is produced to meet the consumers’ wants, tastes
and preferences. Examples of goods include tires, MP3 players, clothing and etc. Goods can be
categorized into business goods or consumer goods. A buyer of consumer goods may not have
thorough knowledge of the goods he buys and uses. Examples of services include hair salons
and accounting firms. Services can be divided into consumer services, such as hair styling or
professional services, such as engineering and accounting.
There are 2 types of goods. Consumer Goods and Business Goods. The table below shows the
comparison between the 2 types of goods.

Consumer Goods Business Goods

The demand for consumer goods is a 'direct The demand for business goods is a 'derived
demand'. demand'. It is derived from the demand for
consumer goods, which are made using the
business goods.
The number of buyers is great. Business goods have only limited number of
buyers.
The buyers are found scattered in different The buyers are found to be concentrating in
parts of the country / world. certain regions only.
Each purchase will generally be of small Each purchase involves a very high amount
value. (in money terms).
Buying is much influenced by emotions. Buying cannot be influenced by emotions.
After-sale service is important in the case of After-sale service is of paramount importance
consumer durables. in the case of all business goods.
There are a number of middlemen in the The manufacturers of industrial goods supply
market. directly to their customers.
A buyer of consumer goods may not have A buyer of industrial goods must have
thorough knowledge of the goods he buys complete knowledge of the goods he buys
and uses. and uses.
The reputation of the seller or manufacturer The reputation of the manufacturer is always
may not always be given importance in important in buying industrial goods.
buying consumer goods.
Inducements to the buyers in the form of Such inducements may not be common in
cash discounts, free gifts, etc. are made the marketing of industrial goods.
 always by those marketing consumer goods.
The market for consumer goods is affected The market for industrial goods is affected by
by fashion and style changes. technological changes.

PLACE
Place is the second P in the Marketing Mix. Place represents the location where the buyer and
seller exchange goods or services. It is also called as the distribution channel. It can include any
physical store as well as virtual stores or online shops on the Internet. It is one thing having a
great product, sold at an attractive price. But what if:

 Customers are not near a retailer that is selling the product?

 A competing product is stocked by a much wider range of outlets?
 A competitor is winning because it has a team of trained distributors or sales agents who
are out there meeting customers and closing the sale?
Place matters for a business of any size. It is a crucial part of the marketing mix. The main
function of a distribution channel is to provide a link between production and consumption.

Channel 1 contains two stages between producer and consumer - a wholesaler and a retailer. A
wholesaler typically buys and stores large quantities of several producers' goods and then
breaks into bulk deliveries to supply retailers with smaller quantities. For small retailers with
limited order quantities, the use of wholesalers makes economic sense.
Channel 2 contains one intermediary. In consumer markets, this is typically a retailer. A retailer
is a company that buys products from a manufacturer or wholesaler and sells them to end users
or customers. In a sense, a retailer is an intermediary or middleman that customers use to get
products from the manufacturers.
Channel 3 is called a "direct-marketing" channel, since it has no intermediary levels. In this case
the manufacturer sells directly to customers.
PRICE
The third P in the Marketing Mix is price. The price is a serious component of the marketing mix.
Price is the value of money in exchange for a product or service. Generally speaking, the price
is the amount or value that a customer gives up to enjoy the benefits of having or using a
product or service. Thus, customers exchange a certain value for having or using the product –
a value we call price. In commerce, price is determined by what (1) a buyer is willing to pay, (2)
a seller is willing to accept, and (3) the competition is allowing to be charged. With product,
promotion, and place of marketing mix, it is one of the business variables over which
organizations can exercise some degree of control. One example of a pricing strategy is the
penetration pricing. It is when the price charged for products and services is set artificially low in
order to gain market share. Once this is attained, the price can be higher than before. For
example, if you are going to open a Beauty Salon, you need to set your prices lower than those
of your competitors so that you can penetrate the market. If you already have a good number of
market share then you can slowly increase your price.
There are several factors that affect a small business’ revenue potential. One of the most
important is the pricing strategy utilized by you as the owner of the business. A right pricing
strategy helps you define the particular price at which you can maximize profits on sales of your
product or service. You need to consider a wide range of factors when setting prices of your
offerings.
The Different Pricing Strategies and Its Definition

 Penetration Pricing - The price charged for products and services is set artificially low in
order to gain market share. Once this is achieved, the price is increased.
 Skimming Pricing - A company charges a higher price then slowly lowers the price to
make the product available to a wider market because it has a considerable competitive
advantage. However, the advantage tends not to be sustainable. The high price attracts
new competitors into the market, and the price inevitably falls due to increased supply
 Competition Pricing - A pricing method in which a seller uses prices of competing
products as a benchmark instead of considering own costs or the customer demand. In
reality a firm has three options and these are to price lower, price the same or price
higher than competitors.
 Product Line Pricing - The practice of reviewing and setting prices for multiple products
that a company offers in coordination with one another. Rather than looking at each
product separately and setting its price, product-line pricing strategies aim to maximize
the sales of different products by creating more complementary, rather than competitive,
products. If you offer more than one product or service, consider the impact that one
product's or service's price will have on the others.
 Bundle Pricing - The act of placing several products or services together in a single
package and selling for a lower price than would be charged if the items were sold
separately.
 Premium Pricing - Setting the price of a product higher than similar products. The goal is
to create the perception that the products must have a higher value than competing
products because the prices are higher.
 Psychological Pricing - The practice of setting prices slightly lower than rounded
numbers, in the belief that customers do not round up these prices, and so will treat
them as lower prices than they really are. This practice is based on the belief that
 customers tend to process a price from the left-most digit to the right, and so will tend to
ignore the last few digits of a price.
 Optional Pricing - The company earns more through cross-selling products along with a
basic core product. The main product does not have many features (and is priced low)
which can be enhanced through optional or accessory products which are sold at
premium by the same company.
 Cost Plus Pricing - It involves adding a markup to the cost of goods and services to
arrive at a selling price. Under this approach, you add together the direct material cost,
direct labor cost, and overhead costs for a product, and add to it a markup percentage in
order to derive the price of the product.
 Cost Based Pricing - A pricing method in which a fixed sum or a percentage of the total
cost is added (as income or profit) to the cost of the product to arrive at its selling price.
 Value Based Pricing - A price-setting strategy where prices are set primarily on
consumers' perceived value of the product or service.

PROMOTION
Promotion is the fourth P in the Marketing Mix. Promotion refers to the complete set of activities,
which communicate the product, brand or service to the user. The idea is to create an
awareness, attract and induce the consumers to buy the product, in preference over others. The
following are the most common medium in promoting a product and this is called promotional
mix.
PROMOTIONAL MIX
1. ADVERTISING
• Radio - Advertising by means of radio gives the advantage of selecting the territory
and audience to which the message is to be directed. It is also cheaper than TV
advertising.
• Television - This is the latest and the fast-developing medium of advertising and is
getting increased popularity these days. It is more effective as compared to radio as
it has the advantages of sound and sight. On account of pictorial presentation, it is
more effective and impressive and leaves a lasting impression on the mind of the
viewer.
• Print - The print media carry their messages entirely through the visual mode. These
media consist of newspapers, magazines and direct mail.
• Electronic - You can also advertise electronically through your company website and
provide important and pertinent information to clients and customers. You can
protect some parts of your website through passwords and give access to member
customers. You can also send advertisements via direct e-mail as part of your
promotional strategy.
• Word of Mouth - Word-of-mouth advertising is important for every business, as each
happy customer can steer dozens of new ones your way. And it's one of the most
credible forms of advertising because a person puts their reputation on the line
every time they make a recommendation and that person has nothing to gain but the
appreciation of those who are listening.
 • Generic - The promotion of a particular commodity is without reference to a specific
producer, brand name or manufacturer. Producers join together to expand total
demand for the commodity, thereby helping their own sales. These activities are
often self-funded through assessments on marketing called check-off programs.

2. PUBLIC RELATIONS OR PR
In public relations, the article that features your company is not paid for. The reporter,
whether broadcast or print, writes about or films your company as a result of information
he or she received and researched. Many people use the term PR and advertising
interchangeably, PR involves sharing information with the public using platforms that do
not require a payment, such as social media or through press releases shared with
magazines and newspapers. PR professionals package information and disseminate it in
the hopes that it will be organically shared. The goal of public relations is to shape public
perception of a business, presenting a positive image through various strategies to its
various constituents.

3. PERSONAL SELLING
Personal selling occurs when an individual salesperson sells a product, service or
solution to a client. Salespeople match the benefits of their offering to the specific needs
of a client. Today, personal selling involves the development of longstanding client
relationships.

Personal selling involves a selling process that is summarized in the following Five
Stage Personal Selling Process. The five stages are:
• Prospecting
• Making first contact
• The sales call
• Objection handling
• Closing the sale

4. SALES PROMOTIONS
Sales promotion is any initiative undertaken by an organization to promote an increase
in sales, usage or trial of a product or service (i.e., initiatives that are not covered by the
other elements of the marketing communications or promotions mix).

Sales Promotion Technique

• Free Gifts - There are many ways to utilize this particular sales promotion technique.
A newly opened store, for example, may offer the first 10 customers free items worth
100 pesos.
• Free Samples - Providing free samples is a technique used to introduce new
products to the marketplace. Samples give the consumer a chance to see how well
they like a product or try something they otherwise would not normally buy.
• Free Trial - A free trial is a way for a consumer to try a new product while eliminating
risk. It may be used when a product is unique to the marketplace.
• Customer Contests - Contests offer the customer a chance to win prizes like cash or
store merchandise.
 • Special Pricing - Special pricing is used to offer consumers a lower price for a period
of time or to purchase in multiple quantities. For example, a retailer may offer a
product that normally costs 35 pesos at a price of 3-for-100-pesos during the
promotional period.

5. DIRECT MARKETING
Direct marketing is a promotional method that involves presenting information about your
company, product, or service to your target customer without the use of an advertising
middleman. It is a targeted form of marketing that presents information of potential
interest to a consumer that has been determined to be a likely buyer.

Forms of Direct Marketing

o Brochure
o Catalogs
o Fliers
o Newsletters
o Post cards
o Coupons
o Email
o Phone calls
o Text messages

PEOPLE
The fifth P in the Marketing mix is People. Your team, the staff that makes it happen for you,
your audience, and your advertisers are the people in marketing. This consist of each person
who is involved in the product or service whether directly or indirectly.

People are the ultimate marketing strategy. They sell and push the product. People are one of
the most important elements of the marketing mix today. This is because of the remarkable rise
of the services industry. Products are being sold through retail channels today. If the retail
channels are not handled with the right people, the product will not be sold. Services must be
first class nowadays. The people rendering the service must be competent and skilled enough
so that that the clients will patronize your service. The marketing efforts of people are to create
customer awareness, to arouse customer interest, to educate customers, to close the sale and
to deliver the product. Therefore, the right people are essential in marketing mix in the current
marketing scenario.

PACKAGING
Packaging is the sixth P in the Marketing Mix. Packaging is a silent hero in the marketing world.
Packaging refers to the outside appearance of a product and how it is presented to the
customers. The best packaging should be attractive enough and cost efficient for the customers.
Packaging is highly functional. It is for protection, containment, information, utility of use and
promotion.

Five Basic Functions of Packaging

1) Protection:
 One of the major functions of packaging is to provide for the effects of time and
environment for the natural and manufactured products. The protection function can be
divided into some classes.
A. Natural deterioration: It is caused by the interaction of products with water, gases
and fumes, microbiologic organisms like bacteria, yeasts and molds, heat, cold,
dryness, contaminants and insects and rodents.
B. Physical protection: The packaging is also used for physical protection, which
include improving shock protection, internal product protection and reducing shock
damage caused from vibration, snagging, friction and impact.
C. Safety: A special kind of protective packaging is required for products that are
deemed harmful to those who transport them or use them. These products include
extremely inflammable gas and liquid, radioactive elements, toxic materials etc. The
packaging should also be done so that children could not easily use or dispose
them.
D. Waste reduction: Packaging also serves to reduce the amount of waste especially in
case of food distribution.

2) Containment:
This involves merging of unit loads for shipping. It starts with spots of adhesives on the
individual shippers that stick them together, straps of steel and plastic, entire coverings
of shrinkable or stretchable plastic films and paper or corrugated wraps that surround an
entire pallet of product.

There are some special bulk boxes or pallet bins made from unusually strong corrugated
board or fabricated form plastics or metal, the method of which depends on the type and
weight of product and its protective needs. The cargo containers made of aluminum
used to hold many pallet loads of goods can be transferred to or from ships, trains and
flatbed trucks by giant cranes.

3) Information:
The packaging conveys necessary information to the consumers. The common
information that packaging provides include general features of the product, ingredients,
net weight of the contents, name and address of the manufacturers, maximum retail
price (MRP).

Packaging of medicine and some food products is required to provide information on

methods of preparations, recipes and serving ideas, nutritional benefits, and date of
manufacturing, date of expiry, warning messages and cautionary information.
Sometimes, the color of the packaging itself provides some information.

4) Utility of use:
The convenience packaging has been devised for foods, household chemicals, drugs,
adhesives, paints, cosmetics, paper goods and a host of other products. This type of
packaging includes dispensing devices, prepackaged hot metals, and disposable
medical packaging.

5) Promotion:
 Companies use attractive colors, logos, symbols and captions to promote the product
that can influence customer purchase decision.

Packaging Decisions:
i. Packaging concept: This defines what the package should be or do for the
particular product in terms of size, shape, materials, color, text, and brand mark
and tamperproof ability
ii. Engineering tests: This will ensure that the package stands up under normal
conditions
iii. Visual tests: This is to ensure that the script is legible and colors are harmonious
iv. Dealer tests: This is to ensure that the dealers find the packages attractive and
easy to handle
v. Consumer tests: This is to ensure favorable consumer response

POSITIONING
Finally, the seventh P in the Marketing Mix is Positioning. When a company presents a product
or service in a way that is different from the competitors, they are said to be “positioning” it.
Positioning refers to a process used by marketers to create an image in the minds of a target
market.
Solid positioning will allow a single product to attract different customers for not the same
reasons. For example, two people are interested in buying a phone; one wants a phone that is
cheaper in price and fashionable while the other buyer is looking for a phone that is durable and
has longer battery life and yet they buy the same exact phone.
There are three basic concepts for positioning. These are Functional Positions, Symbolic
Positions and Experiential Positions. Functional Positions deal with solving a problem, providing
benefits and getting a favorable perception from investors, stockholders and consumers.
Symbolic Positions deal with self-image enhancement, ego identification, belongingness, social
meaningfulness and affective fulfilment and Experiential Positions deal with providing sensory or
cognitive stimulation.

Steps of the Positioning Process

Step 1: Confirm Your Understanding of Market Dynamics

At the start of the positioning process, you need a firm understanding of your target
market and answers to the following questions: In which product, service, or market category
(also called the “frame of reference”) do you plan to use this positioning? Which target segment
is your focus for the positioning you are developing? What factors do these buyers evaluate
when they make a purchasing decision? How do these buyers view your competitors in the
category?
If you don’t have answers to these questions, you should consider conducting formal or
informal marketing research to reach a better understanding of your target market and the
market dynamics around it.
Step 2: Identify Your Competitive Advantages
A competitive advantage is some trait, quality, or capability that allows you to outperform
the competition. It gives your product, service, or brand an advantage over others in purchasing
decisions. Competitive advantage may come from and or all of the following:
Price: Something in your production process or supply chain may make it possible for
you to provide comparable value at a lower cost than competitors.
Features: You may provide tangible or intangible features that your competitors do not:
for example, more colors, better taste, a more elegant design, quicker delivery,
personalized service, etc.
Benefits: You may provide unique benefits to customers that your competitors cannot
match. Benefits are intangible strengths or outcomes your customer gets when they
use your offering. For example, time savings, convenience, increased control,
enjoyment, relaxation, more choices, feeling better about oneself, being more
attractive, etc.
Create a list of the things that make you different from competitors in positive ways.
Then identify which of these factors are also competitive advantages: the influential factors that
help you perform better in the marketplace and cause customers to choose your product,
service, or brand over other options.

Step 3: Choose Competitive Advantages That Define Your Niche

Your list of competitive advantages represents a set of possible positioning strategies
you could pursue for your product, service, or brand. The next step is to examine how these
factors fit into customer perceptions of your broader competitive set. Your goal is to pick a
positioning approach that gives you a unique and valued position in the market that competitors
are not addressing.

How to Create an Effective Market Positioning Strategy?

Create a positioning statement that will serve to identify your business and how you want the
brand to be perceived by consumers.
1) Determine company uniqueness by comparing to competitors - Compare and contrast
differences between your company and competitors to identify opportunities. Focus on
your strengths and how it can exploit these opportunities.
2) Identify current market position - Identify your existing market position and how the new
positioning will be beneficial in setting you apart from competitors.
3) Competitor positioning analysis - Identify the conditions of the marketplace and the
amount of influence each competitor can place on each other.
4) Develop a positioning strategy - Through the preceding steps, you should achieve an
understanding of what your company is, how your company is different from competitors,
 the conditions of the marketplace, opportunities in the marketplace, and how your
company can position itself.

Developing a Brand Name

What comes to your mind when you hear the word “coffee”? How about “milk”? When you are
asked to name a “toothpaste” or a “soft drinks, what will you think and say first?
Now as a future entrepreneur, how do you describe the sales of your product being displayed
on the shelves of various malls and groceries beside the product with a brand name? Do you
think the consumers will notice or remember it? Branding will ultimately reside(s) in the mind of
every consumers, thus, it plays a significant role in every business.
Brand Name is a name, symbol, or other feature that distinguishes a seller's goods or services
in the marketplace. Your brand is one of your greatest assets because your brand is your
customers' over-all experience of your business. Brand strategy is a long-term design for the
development of a popular brand in order to achieve the goals and objectives. A well-defined
brand strategy shakes all parts of a business and is directly linked to customer needs, wants,
emotions, and competitive surroundings.
Experts believe that a good brand can result in better loyalty for its customers, a better
corporate image and a more relevant identity. As more customers continue to differentiate
between emotional and experienced companies, a brand may be the first step forward in your
competition instead of price points and product features. The question is, can you build a brand
which truly talks to your audience?
Branding is a powerful and sustainable high-level marketing strategy used to create or influence
a brand. Branding as a strategy to distinguish products and companies and to build economic
value to both customers and to brand owners, is described by Pickton and Broderick in 2001.
Commonly Used Branding Strategies
1) Purpose - "Every brand makes a promise. But in a market in which customer confidence
is little and budgetary observance is great, it’s not just making a promise that separates
one brand from another, but having a significant purpose," (Allen Adamson). How can
you define your business purpose? According to Business Strategy Insider, purpose can
be viewed in two ways:
a. Functional. This way focuses on the assessments of success in terms of fast and
profitable reasons. For example, the purpose of the business is to make money.
b. Intentional. This way focuses on fulfillment as it relates to the capability to
generate money and do well in the world.

2) Consistency - The significance of consistency is to avoid things that don’t relate to or

improve your brand. Consistency aids to brand recognition, which fuels customer loyalty.

3) Emotion - There should be an emotional voice, whispering "Buy me". This means you
allow the customers to have the chance to feel that they are part of your brand. You
should find ways to connect more deeply and emotionally with your customers. Make
 them feel part of the family and use emotion to build relationships and promote brand
loyalty.

4) Flexibility - Marketers should remain flexible too in this rapidly changing world.
Consistency targets at setting the standard for your brand, flexibility allows you to adjust
and differentiate your approach from your competition. According to Kevin Budelmann,
"Effective identity programs require sufficient consistency to be identifiable, but sufficient
variation to keep things fresh and human," so if your old tactics don't work anymore,
don't be afraid to change. It doesn’t mean it worked in the past it may still work now.

5) Employee Involvement - It is equally important for your employees to be well versed in

how they communicate with customers and represent the brand of your product.

6) Loyalty - An important part of brand strategy. At the end of the day, the emphasis on a
positive relationship between you and your existing customers sets the tone for what
potential customers can expect from doing business with you.\

7) Competitive Awareness - Do not be frightened of competition. Take it as a challenge to

improve your branding strategy and craft a better value in your brand
ENTREPRENEURSHIP – 1st QUARTER/2nd QUARTER
LESSON 6: 4 M’s of Production and Business Model
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 ventures is opened to exploit different business opportunities, innovation or
creativity defines the distinction between an entrepreneur and an ordinary business person.
Thus, the concept of innovation or creativity must, in almost all instances, be introduced and
practiced. An entrepreneur finds way 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.
The Three Important Elements in the Production System
I. The Input includes the following:
1. Manpower
2. Materials
3. Machine
4. Design
5. Instructions

II. 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.

III. The Output represents the final product from the production process and distributed to
the customers.

4 M’s of Production
The most serious issues in the whole production system are the inputs and the transformation
process. Their quality determines the quality of the output. The factors involved in the input and
the production process are usually referred to as the Four M’s of production, namely Manpower,
Method, Machine, and Materials.
Manpower talks about human labor force involved in the manufacture of products. It is
measured as the most serious and main factor of production. The entrepreneur must determine,
attain and match the most competent and skilled employees with the jobs at the most
appropriate time period. Educational qualifications and experience, status of employment,
number of workers required, skills and expertise required for the job are some of the manpower
criteria that must be highly considered by the entrepreneur.

Materials simply refers to the raw materials necessary in the production of a product. Materials
mainly form part of the finished product. Just in case the resources are below standard, the
finished product will unsatisfactory as well. The entrepreneur may consider cost, quality,
availability, credibility of suppliers and waste that the raw materials may produce.

Machine is about 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 types of products to be produced, production system to be adopted, cost of the
equipment, capacity of the equipment, availability of spare parts in the local market, efficiency of
the equipment and the skills required in running the equipment.

Method or production method is the process or way of transforming raw materials to finished
products. The resources undergo some stages before it is finalized and become set for delivery
to the target buyers. The selection of the method of production is dependent on product to
produce, mode of production, manufacturing equipment to use and required skills to do the
work.

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 homogeneous product has a physical appearance, taste, or chemical
content that can hardly be distinguished from that of the other products. Businesses that
produce homogeneous products include makers of soft drinks, and medicines.
After knowing the production process and system, and how the product is being processed, not
it is important to know about product description, wherein product description promotes and
explains what a product is and why it’s worth buying. The purpose of a product description is to
provide customers with details around the features and benefits of the product so they’re
obliged to buy.
Know who your target market is, focus on the product benefits, tell the full story, use natural
language and tone, use power words that sell, and use good images. These are guidelines for
you to have a good product description; since some customers are very particular with it since
they consider the welfare of their family, if it is safe to use.
Prototype is created before the massive production of such product; an entrepreneur must
consider prototyping. One of the important early steps in the inventing process is making a
prototype. A prototype is a duplication of a product as it will be produced, which may contain
such details as color, graphics, packaging and directions. Benefits are the reasons why
customers will decide to buy the products such as affordability, efficiency or ease of use. The
features of the product or service merely provide a descriptive fact about the product or service.
Most importantly, it is better to test your product prototype to meet customers’ needs and
expectations; and for your product to be known and saleable. Pretesting of the product or
service is similar to a sample of the product or service given to the consumer free of cost in
order that he/she may try the product before committing to a purchase.
The entrepreneur’s main concern is the satisfaction of a customer, for they are the life blood of
the business. Without them, all the efforts, will be wasted as well as the chance to venture into a
new business.
In a manufacturing venture, the supplier plays a vital role. They are your business partners,
without them your business will not live. You need them as much as you need your customers
to be satisfied. But as an entrepreneur you have to choose a potential supplier who has loyalty
and values your partnership: a supplier who would lead you to the fulfillment of your business
objectives, mission and vision.
This entity is part of a supply chain of a business, which may offer the main part of the value
contained within its products. Certain suppliers may even involve in drop shipping, where they
ship goods directly to the customers of the buyer.
How do supply chain management systems coordinate planning, production, and logistics with
suppliers?
Supply chain management systems automate the flow of information among members of the
supply chain so that they can use it to make better decisions about when and how much to
purchase, produce, or ship.
Value chain is a method or activities by which a company adds value to an item, with
production, marketing, and the provision of after-sales service. The main goal and benefit of a
value chain, and therefore value chain analysis, is to make or support a competitive benefit.
A supply chain is a structure of organizations, people, activities, data, and resources involved in
moving a product or service from supplier to customer. The main objective of supply chain
management includes management of a varied range of components and procedures, for
instance, storing of raw materials, handling the inventory, warehousing, and movement of
finished product from the point of processing to the point of consumption.
When value chain management is implemented effectively, the flow of products and materials is
improved through the accurate forecasting of sales and demand as well as improved inventory
management. Delays are also minimized and products are visible and traceable throughout the
supply chain.
Supply chain management decreases purchasing cost. Retailors depend on supply chains to
quickly distribute costly products to avoid sitting on expensive inventories. Any delay in
production can cost a company, tens of thousands of pesos. This factor makes supply chain
management ever more important.
Value chains help increase a business's efficiency so the business can deliver the most value
for the least possible cost. The end goal of a value chain is to create a competitive advantage
for a company by increasing productivity while keeping costs reasonable.

BUSINESS MODEL describes the factors of how an organization creates, delivers, and
captures value in economic, social, cultural or other contexts. The development of business
model construction and variation is also called business model innovation and forms part of a
business plan.
It is a company's plan on how it will make revenues and make a profit. It describes what
products or services the business plans to manufacture and market, and how it plans to do so,
as well as what expenses it will incur.
There are important phases in developing your business model, namely: identifying the specific
audience; establishing business process; recording business resources; developing strong
value proposition; determining key business partners; and creating demand for today’s
generation strategy and being open for innovations.
After developing a business model, we will proceed in developing a business plan. To be able to
successfully complete this module, you need to prepare a business plan and operate your plan
and finally keep records of your business transactions.

BUSINESS PLAN
Entrepreneurs who plan to enter any business endeavor must have a business plan on hand to
guide them throughout the process. Different business plans are prepared for different
purposes. There are business plans written prior to setting up an enterprise, which are similar to
a prefeasibility study and a feasibility study. Many new enterprises need to convince prospective
business investors about the soundness and potential of their business.
There are business plans that are written during the first few years of the enterprise in order to
guide the entrepreneur on which strategies would be most beneficial for the enterprise to take.
And there are business plans that are focused on bringing the enterprise to a higher level of
growth, a period where the enterprise has already reached its peak and would want to enter into
another endeavor by creating and re-establishing itself.
Clearly, a business plan serves many masters. First, it serves the entrepreneur who must set a
navigational course. Second, it serves investors and cautious financiers. And third, it serves the
managers and staff of the organization so that they will know the strategies and programs of the
enterprise.
Read the different scenarios below to fully understand the importance of having a business
plan.
Scenario 1: “Jessie is the eldest of the five children of Mr. & Mrs. Natividad. The family is having
difficulty to support their everyday needs. Because of this, Jessie tried selling banana cue and
with his dream to make his business grow, he put up many stalls in the community without
considering the advises of his friends to make a business plan before implementing his
decision. After a few months his stalls shutdown.”
Scenario 2: “Mercy is the youngest in the family. She found out that she loves to cut hair and
apply make up on her friends. Until such time that her friends introduced her to their friends too
for haircut and make up when there are occasions. A few months after, Mercy was told by her
friends to put up a beauty parlor in their place. So she asks her mother who is also a
businesswoman to teach her how to make a business plan and eventually ended with a
successful business.”
Scenario 3: “Monna is a diligent student: because of her knowledge gained from school about
business plan she was able to enhance her skills in business and finally found herself into her
laundry shop business.”
Each scenario taught us that a business is not just about how much income or profit you can
get, but it’s about the life of your business. And in having a business, you also have to consider
Technological forces, Social forces, Political forces, Cultural forces, Economic forces and Legal
forces.

The following are the components found in a Business Plan.

 Introduction - this part discusses what is the business plan all about.
 Executive Summary - is part of the business plan which is the first to be presented but
the last to be made.
 Management Section - shows how you will manage your business and the people you
need to help you in your operations.
 Marketing Section - shows the design of your product/service; pricing, where you will sell
and how you will introduce your product/service to your market.
 Financial Section - shows the money needed for the business, how much you will take in
and how much you will pay out.
 Production Section - shows the area, equipment and materials needed for the business.
 Competitive Analysis - is the strategy where you identify major competitors and research
their products, sales and marketing strategies.
 Market – refers to the persons who will buy the product or services
 Organizational chart - is the diagram showing graphically the relation of one official to
another, or others of a company.
ENTREPRENEURSHIP – 1st QUARTER/2nd QUARTER
LESSON 7: Forecasting Revenues and Costs Department
Making informed estimates requires careful considerations on several factors that might affect
the outcome of your travel such as, distance from home to school, the means of transportation
you will be taking, the number of passengers and etc. Traveling from home to school on a
regular basis had helped you arrive with an estimate that was very close to the actual time of
arrival.
Considering these factors is essential in making informed estimates by the entrepreneur. Since
the business he/she is venturing hasn’t started yet, it is important that these factors affecting
forecasting will be determined to better help him/her in making the best decisions for the
business.
For the entrepreneur, after realizing the potential for profit of his/her business concept, the next
step is to estimate how much the revenue is on a daily, monthly and annual basis. Before going
to forecasting and projecting the revenues of the business, let us determine first what revenue
is.
Revenue is a result when sales exceed the cost to produce goods or render the services.
Revenue is recognized when earned, whether paid in cash or charged to the account of the
customer. Other terms related to revenue include Sales and Service Income. Sales is used
especially when the nature of business is merchandising or retailing, while Service Income is
used to record revenues earned by rendering services.
FACTORS TO CONSIDER IN FORECASTING REVENUES
The entrepreneur would want his/her forecasting for his/her small business as credible and as
accurate as possible to avoid complications in the future. In estimating potential revenue for the
business, factors such as external and internal factors that can affect the business must be
considered. These factors should serve as basis in forecasting revenues of the business. These
factors are:
1. The economic condition of the country. When the economy grows, its growth is
experienced by the consumers. Consumers are more likely to buy products and
services. The entrepreneur must be able to identify the overall health of the economy in
order to make informed estimates. A healthy economy makes good business.
2. The competing businesses or competitors. Observe how your competitors are doing
business. Since you share the same market with them, information about the number of
products sold daily or the number of items they are carrying will give you idea as to how
 much your competitors are selling. This will give you a benchmark on how much
products you need to stock your business in order to cope with the customer demand.
This will also give you a better estimate as to how much market share is available for
you to exploit.
3. Changes happening in the community. Changes happening in the environment such as
customer demographic, lifestyle and buying behavior give the entrepreneur a better
perspective about the market. The entrepreneur should always be keen in adapting to
these changes in order to sustain the business. For example, teens usually follow
popular celebrities especially in their fashion trend. Being able to anticipate these
changes allows the entrepreneur to maximize sales potential.
4. The internal aspect of the business. Another factor that affects forecasting revenues in
the business itself. Plant capacity often plays a very important role in forecasting. For
example, a “Puto” maker can only make 250 pieces of puto every day; therefore, he can
only sell as much as 250 pieces of puto every day. The number of products
manufactured and made depends on the capacity of the plant, availability of raw
materials and labour and also the number of salespersons determine the amount of
revenues earned by an entrepreneur. Now that all factors affecting forecasting revenues
are identified, you can now calculate and project potential revenues of your chosen
business. The table below shows an example of revenues forecasted in a Ready to
Wear Online Selling Business.

Example: Ms. Fashion Nista recently opened her dream business and named it Fit Mo’to
Ready to Wear Online Selling Business, an online selling business which specializes in
ready to wear clothes for teens and young adults. Based on her initial interview among
several online selling businesses, the average number of t-shirts sold every day is 10
and the average pair of fashion jeans sold every day is 6. From the information
gathered, Ms. Nista projected the revenue of her Fit Mo’to Ready to Wear Online Selling
Business.

She gets her supplies at a local RTW dealer in the city. The cost per piece of t-shirt is 90
pesos, while a pair of fashion jeans costs 230 pesos per piece. She then adds a 50
percent mark up to every piece of RTW sold.
Mark up refers to the amount added to the cost to come up with the selling price. The formula
for getting the mark up price is as follows:

 Mark Up Price = ( Cost x Desired Mark Up Percentage)

 Mark Up for T-shirt = ( 90.00 x .50)
 Mark Up for T-shirt = 45.00
In calculating for the selling price, the formula is as follows:

 Selling Price = Cost + Mark Up

 Selling Price = 90.00 + 45.00
 Selling Price for T-shirt = 135.00
Table 1 shows the projected daily revenue of Ms. Nista’s online selling business. Computations
regarding the projected revenue is presented in letters in upper case A, B, C, D, and E.
Table 2 shows the projected monthly and yearly revenue of Ms. Nista’s online selling business.
Computations about the monthly revenue is calculated by multipying daily revenues by 30 days
( 1 month).
For example, in Table 1 the daily revenue is 3,420.00. To get the monthly projected revenue it is
multiplied by 30 days. Therefore,

 Projected Monthly Revenue = Projected Daily Revenue x 30 days

 Projected Monthly Revenue = 3,420.00 x 30
 Projected Monthly Revenue = 102,600.00
On the other hand, the projected yearly revenue is computed by multiplying the monthly
revenue by 12 months. The calculation for projected yearly revenue is as follows.

 Projected Yearly Revenue = Projected Daily Revenue x 365 days

 Projected Yearly Revenue = 3,420.00 x 365
 Projected Yearly Revenue = 1,248,300.00
Table 3 shows the projected monthly revenues covering one year of operation. The table shows
an average increase of revenue every month by 5 percent except June, July to October and
December. While the month of June has twice the increase from the previous month by 10
percent, let us consider that months covering July to October are considered to be Off-Peak
months, therefore sales from July to October are expected to decrease. It is assumed that there
is no increase in revenue from July to August, while from August to October the decrease in
revenues is 5 percent from previous month. Since revenues from sales of RTW’s are
considered to be seasonal, it assumed that there is a 10 percent increase in revenue from
November to December.

Computation for assumed increase of reveneue on specific months is as follows:

 Projected Monthly Revenue (Increase) = Revenue (January) x 5 % Increase
 Projected Monthly Revenue (Increase) = 102,600.00 x .05
 Projected Monthly Revenue (Increase) = 5,130.00
 Projected Revenue for February = Revenue (January) + Amount of Increase
 Projected Revenue for February = 102,600.00 + 5,130.00
 Projected Revenue for February = 107,730.00
On the other hand, decrease in revenue is computed as follows:

 Projected Monthly Revenue (Decrease) = Revenue (August) x 5 % Increase

 Projected Monthly Revenue (Increase) = 144,041.14 x .05
 Projected Monthly Revenue (Increase) = 7,202.06
 Projected Revenue for September = Revenue (August) - Amount ofDecrease
 Projected Revenue for September = 144,041.14 – 7,202.06
 Projected Revenue for September = 136,839.08
Important Assumptions:
February to May Increase of 5% from previous revenue
June Increase of 10% from previous revenue
July to August The same Revenue
September to October Loss of 5% from previous revenue
November Increase of 5% from previous revenue
December Increase of 10% from previous revenue
The numbers in the last table are very attractive, having revenues that are increasing in
numbers is a good sign that a business is growing. However, an entrepreneur should not be
overwhelmed by these revenues, as these are just gross revenue, this is not the final amount of
profit or income an entrepreneur will get at the end of every period. Take note that the amount
of net revenue is still subjected to the expenses incurred in the operation of business.

Forecasting the Cost to be Incurred

 Cost of Goods Sold / Cost of Sales refer to the amount of merchandise or goods sold by
the business for a given period of time. This is computed by adding the beginning
inventory to the Net Amount of Purchases to arrive with Cost of Goods available for sale
from which the Merchandise Inventory, end is subtracted.
 Merchandise Inventory, beginning refers to goods and merchandise at the beginning of
operation of business or accounting period.
 Purchases refer to the merchandise or goods purchased. Example: Cost to buy each
pair of Jeans or t-shirt from a supplier.
 Merchandise Inventory, end refers to goods and merchandise left at the end of operation
or accounting period.
 Freight-in refers to amount paid to transport goods or merchandise purchased from the
supplier to the buyer. In this case, it is the buyer who shoulders these cost.
In a merchandising business such as Fit Mo’to Ready to Wear Online Selling Business,
the formula to compute for costs of goods sold is as follows:
Merchandise Inventory, beginning P XX.XX
Add: Net Cost of Purchases XX.XX
Freight-in XX.XX
Cost of Goods Available for Sale P XX.XX
Less: Merchandise Inventory, end XX.XX
Cost of Goods Sold P XX.XX

Let us calculate the cost of goods sold by Ms. Fashion Nista’s online selling business for
the month of January.

Table 4 shows the costs incurred during the first month of operation of Fit Mo’to Ready
to Wear Online Selling Business. Since Ms. Nista gets her stocks from an online
supplier, there is no need to order ahead and stock more items.
Therefore, there is no Merchandise Inventory, beginning as well as Merchandise
Inventory, end. Ready to wear items purchased online from the supplier are then sold as
soon as they arrived.

Cost of goods is calculated by simply multiplying the number of items sold every month
(300 t-shirts and 180 pairs of jeans) to its corresponding cost per unit (90.00 pesos for
every t-shirt and 230.00 pesos for every pair of jeans). A cost in transporting the goods
from the supplier to the seller (Ms. Nista) or Freightin is then added to Net Cost of
Purchases.

Table 5 shows how freight-in is calculated.

It is assumed that at an average, Ms. Nista pays at least 250.00 pesos for every 12
items delivered successfully by her supplier through a courier service. Since her average
order is 480 pieces every month, she pays:

480 pcs. / 12 pcs. x 250.00

40 x 250.00 = 10,000.00
Let us now substitute the values from Table 4 and Table 5. Since there is no
Merchandise Inventory, beginning and end, let us add Cost of Purchases and Freight-in
to get the Cost of Goods Sold.

Merchandise Inventory, beginning P 00.00

Add: Net Cost of Purchases 68,400.00
Freight-in 10,000.00
Cost of Goods Available for Sale P 78,400.00
Less: Merchandise Inventory, end 00.00_____
Cost of Goods Sold P 78,400.00

Now that the cost of goods sold is now calculated, let us now identify expenses that the
business incurs in its operation. Operating expenses such as Internet connection, and
Utilities like electricity and miscellaneous expense are important to keep the business
running. These expenses are part of the total costs incurred by the business in its day-
to-day operation and are paid every end of the month. The operating expenses and
assumed amounts are presented below:

Operating Expenses
Add: Internet Connection P 1,299.00
Utilities (Electricity) 800.00
Miscellaneous expense P 300.00____
Total Operating Expense P 2,399.00
To calculate the total costs incurred by the business, cost of goods sold and total
operating expenses are then added. The calculation for the costs incurred for the month
of January is presented below:

Cost of Goods Sold P 78,400.00

Total Operating Expense P 2,399.00___
Cost P 80,799.00
Important Assumptions
February-May Increase 5% from Previous Costs Peak Months
June Increase 10% from Previous Costs Peak Month
July-August Same Costs Non-Peak Months
September Loss 5% of Previous Costs Non-Peak Month
October Loss 5% of Previous Costs Non-Peak Month
November Increase 5% from Previous Costs Peak Month
December Increase 10% from Previous Costs Peak Month

The projected monthly costs covering the first of operation of Ms. Nista’s Fit Mo’to RTW
Online Selling Business is presented in Table 6.
ENTREPRENEURSHIP – 1st QUARTER/2nd QUARTER
LESSON 8: Computation of Gross Profit

The profitability ratios are a group of financial statements that primarily determine the
profitability of the business operation.

The gross profit rate on a product is computed as:

Net Sales xxxxxxx
Less: Cost of Sales xxxxxxx_
Gross Profit xxxxxxx

By using the formula, the gross of XYZ Trading in the year 2017 is as follows:
Net Sales P 734, 000.00
Less: Cost of Sales 577, 000.00__
Gross Profit P 157,000.00

Profit is the gross income. The amount of gross profit provides information to the entrepreneur
about revenue earned from sales.

The term cost refers to the purchase price of the product including the total outlay required in
producing it.

The gross profit margin is computed as follows:

Gross Profit Rate = Gross Profit

Net Sales
The gross profit rate measures the percentage of gross profit to sales, indicating the profit that
the business realizes from the sale of the product.

The gross profit rate of XYZ Trading for the year 2017 is computed as follows:

gross profit rate = 46,900.00

734,000.00
= 21.39%

The gross profit rate may signal to the entrepreneur that the amount of margin on sales
is 21.39%. This rate will be used to determine whether the amount of gross profit can
cover the operating of the business. Since the gross profit rate of XYZ Trading is
21.39%, the cost ratio to sales will be 78.61%. This information will help the
entrepreneur in assessing whether the cost is too high or too low. Any product with a
very high cost will not become competitive in the market.

The gross profit rate will also help the entrepreneur set the selling price.

Operating Profit Margin Rate

The operating profit margin is the excess of gross profit from operating expenses.
 Gross Profit xxxxx
Less: Operating Expenses xxxxx
Operating Profit Margin xxxxx

The operating profit margin is the second level of revenue in the income statement. At this
stage, not only is the cost of buying or making the product that has been deducted is included
but also the operating expenses. These are expenses incurred during a particular period only,
and are not expected to provide benefits to any future period. The operating expenses are also
period costs.

In case there are no financing charges like interest, expenses, and income tax, the amount of
the operating profit margin is equal to the net income.

Gross Profit P 157,000.00

Less: Operating Expenses 90,000.00
Operating Profit Margin P 67,000.00

This information states that the business realized an income of P 67,000.00 during the year
after deducting the cost and operating expenses from the sales made.

Operating Profit Margin Rate = Operating Profit Margin

Net Sales
By applying…
Operating Profit Margin Rate = 67,000.00
734,000.00
Operating Profit Margin Rate = 9.13%

The operating profit margin of the business measures the percentage of profit available after
deducting the cost of sales and operating expenses of the business. A higher operating profit
margin is favorable to the business.

Net Profit Margin Rate

Operating Profit Margin xxxxxxx
Add: Interest Income xxxxxxx
Total
Less: Interest Expense xxxxxx
Income Tax xxxxxx xxxxxx
Net Profit margin xxxxxx

The income statement is the net profit margin and the third level in the revenue. The business
is only given consideration like interest expense and income tax.

Operating Profit Margin P67,000.00

Less: Income tax 20,000.00_
Net Profit Margin P46,900.00
The income statement of XYZ Trading does not reflect any data on interest expense. Only
income tax has been deducted from the operating profit margin.

Net profit margin rate = Net Profit

Net Sales
By applying the formula, the profit margin of XYZ

Net profit margin rate = 46,900.00

734,000.00
Net profit margin rate = 6.39%

XYZ Trading appears to have earned 6.39% of its total sales of P734,000 during the year. This
profits rate must be compared with those of other similar businesses within the industry.

Analyzing the Liquidity Status of the Business

Liquidity Ratios

Current Ratio = Current assets / Current Liabilities

Quick Ratio = (Current Assets – Inventories) / Current Liabilities
Current liabilities= (Cash and Equivalents + Marketable Securities + Accounts Receivable)

The quick ratio measures its short-term obligations with its most liquid assets and therefore
excludes inventories from its current assets.

Financial statements are important in a company management as a means of communicating

past successes as well as future expectations. The financial statement records all the operating
results such as sales, expenses and profits or losses.

Return of Investment (ROI)

The Return of investment (ROI) measures the amount of net income per peso invested to the
business.

The formula to compute ROI is as follows:

Return of Investment = Net Income_______
Average Total Assets

The average total asset is calculated by dividing the sum of the total assets at the beginning and
end of the period.
 Yearly increase in revenue is assumed at 5%
Yearly increase in cost is assumed at 5%
As a future entrepreneur, one should always remember that nothing is permanent in the field of
entrepreneurship. What is applicable to one entrepreneur may not be applicable to another.
Certain things may happen to one entrepreneur but may not happen to another.

Entrepreneurship should be practiced not as a science but as an art. Creativity should always
be applied by an entrepreneur through regularly evaluating the market and the environment and
responding to the changes in them.

The owner of an ordinary small business has the freedom to manage and operate. Ideally,
he/she prefers business activities which are done easily. However, the entrepreneur has to
perform the entrepreneurial activities correctly regardless of whether they are undertaken easily
or not. The importance in entrepreneurship is that the business activities are performed
correctly.
ENTREPRENEURSHIP – 2nd QUARTER
LESSON 9: Business Implementation
Guidelines for Successful Business Plan Implementation:
1. Objectives – the entrepreneur should have a clear idea on what is his purpose of putting
up his enterprise.
2. Tasks – this means that the entrepreneur must know what are the tasks he has to
perform in order to realize his objectives.
3. Time allocation – This means that the entrepreneur should have a time table or a
schedule to follow for every task so that the tasks will be accomplished timely and he
can realize his objectives.
4. Progress – This means the entrepreneur should monitor the development of the tasks
and the accomplishment of the objectives.
In operating a business, the entrepreneur should first consult professionals for advices, like
accountants or consultants from small enterprises. In your case, you can consult your teacher in
Entrepreneurship or anyone you think who could help you.
The following are the basic requirements to start a business in the Philippines:

 Securities and Exchange Commission (SEC) Registration - for partnership or

Corporation
 Department of Trade and Industry (DTI) Registration - for your business tradename
 Mayor’s Business Permit - for getting the license to operate in the city or municipality
and payment of your local business taxes
 Bureau of Internal Revenue (BIR) Registration - for getting TIN, official receipts and
invoices, registering your books of accounts and paying your national Internal revenue
taxes
 SSS, PhilHealth, and Pag-Ibig Fund registration - for registering yourself or your
company as an employer and for remitting your employees’ contribution together with
your employer’s share.
Other steps to follow before operating a business are as follows:
1. Set up an accounting system or hire an accountant. Knowing how the business is doing
financially is important for planning and survival.
2. Advertise the business. No one will buy the products or services if customers do not
know that the company exists. You can make use of the social media.
3. Secure insurance for the business. Liability insurance protects the business in the event
of litigation. Consider life and disability insurance, health insurance and fire insurance
when you are leasing an office or storefront.
Keeping Business Records
Good record keeping can help protect the business, measure the performance and maximize
profit.
Records are the source documents, both physical and electronic, that specify transaction dates
and amounts, legal agreements and private customer and business details.
Developing a system to log, store and dispose of records can benefit the business. A systematic
recording allows you to:

A. plan and work more efficiently;

B. meet legal and tax requirements;
C. measure profit and performance;
D. protect your rights; and
E. manage potential risks.
ENTREPRENEURSHIP – 2nd QUARTER
LESSON 10: Bookkeeping
Performing Key Bookkeeping Tasks