CHAPTER1:THE ENTREPRENEURIAL MINDSET
In this light, we identify the factors that
Some people make a big deal out of the fact that there are many
successful businesses founded by entrepreneurs who do not have a
college degree. Often cited are Apple founder Steve Jobs, Microsoft
founder Bill Gates, Facebook co-founder Mark Zuckerberg, and
Uber co-founder Travis Kalanick. In the Philippines, we have
Philippine Airlines and Asia Brewery owner Lucio Tan, National
Bookstore owner Socorro Ramos, Zest-0 Corporation President
Alfredo Yao, and Mang Inasal founder Edgar Sia II. Some of these
individuals actually went to college, but decided to drop out after
spotting a business Opportunity. The others came from poor
families, and could not afford a college education, but succeeded in
growing their businesses nevertheless.
However, we must not lose sight of the fact that other equally
successful businesses were founded by individuals who earned their
college degrees. Examples are Jollibee founder Tony Tan Caktiong,
Lamoiyan Corporation founder Cecilio Pedro, and ECHOstore co-
founder Pacita Juan. Clearly, educational background, while
important, is not the defining element for entrepreneurial success.
There are other factors that come into play.
In this chapter, we identify the different types of entrepreneurs. We
also describe the various stages that entrepreneurs undergo in
implementing their business plans, which usually start as mental
constructs or intentions.
influence entrepreneurial intentions. After this, we discuss how
entrepreneurs formulate their decisions based on three types of
mental processes. Finally, we examine the role of cognitive
adaptability in managing risks brought about by an uncertain and
dynamic business environment.
The term "entrepreneur" comes from the French word
entreprendre which means "to undertake." It is a reference to
individuals who have initiated the establishment of a business
enterprise. In his classic work The Theory of Economic
Development, Joseph Schumpeter emphasized the role of
entrepreneurs in the process of economic transformation. Through
their business ventures, entrepreneurs introduce to the market,
innovations in the form of new products, new processes, new
markets, and new organizations.
The entrepreneurs described by Schumpeter, however, are
individuals who have generated substantial value and profits from
innovations in a very short period of time. These individuals are also
willing to absorb huge risks of using enormous amounts of capital
in their business ventures (Quickmba.com). We call these people
megaentrepreneurs. Because of the speed by which they create a
big amount of value-added'. these entrepreneurs were cited by
Schumpeter as having contributed much to the economic progress
of the developed countries in the West. In addition, the enormous
profits they have gained have attracted competitors and imitators,
and brought dynamism to the industries they operate in and
ultimately prosperity to the entire economy.
However, another type of entrepreneur can be found in developing
countries. Although they also initiate business enterprises, the
'value-added' and profits they make are limited. Some introduce
innovations in the form of changes in their production and
distribution processes, but their contributions are minimal and
attract few competitors and imitators. Because they are short in
funds and inadequate in skills, they cannot undertake projects that
involve huge capital, sophisticated technology, and extensive risks.
We call them microentrepreneurs. Unlike megaentrepreneurs,
they engage in micro and small businesses as an alternative to
formal employment. Although they are not crucial in bringing rapid
economic prosperity to a country, they nevertheless contribute to
inclusive growth.
While there are distinct differences between megaentrepreneurs and
microentrepreneurs, they have something in common. They both
start businesses from opportunities facing them. Given this, Peter
Drucker (1985) in his book Innovation and Entrepreneurship,
emphasized the "discipline" in the process of starting and managing
a business. Even if the contributions of entrepreneurship can vary
(i.e., being an agent of rapid economic progress or being an avenue
for inclusive growth), what is important is the system entrepreneurs
follow to achieve their goals, In seizing. opportunities and
converting them into business ventures, there are several steps to
follow.
Although Drucker acknowledged how personal traits and elements
of the external environment could influence the outcomes of an
enterprise, what he emphasized is the importance of how these
personal traits and external factors are managed to achieve the goals
of the enterprise. Thus, it is important to formulate a strategy, which
should include an articulation of a plan and how this is going to be
implemented. This entrepreneurial discipline is often referred to as
the entrepreneurial process, which involves several stages from
the awareness of an opportunity to the realization of a business idea.
The steps include the following: (a) discovery, (b) development of
concept, (c) organizing resources, (d) implementation, and (e)
reaping the returns.
Discovery refers to the recognition of a business idea or the
detection of opportunities that could make money for the
entrepreneur. Megaentrepreneurs draw their ideas from current
inventions and other technological developments that can bring
about huge profits for them. For example, the developers of a social
network like Facebook used the developments in information and
communication technology (ICT) to connect people across the
globe instantly. Similarly, those who introduced smart phones saw
the market value of combining the capabilities of a telephone,
camera, television, computer, and the other applications of
electronic gadgets. On the other hand, microentrepreneurs typically
get their business ideas from the limitations of existing products as
well as from simple businesses where markets are easy to enter. For
example, the popularity of lechon baboy among Filipinos
encouraged other local entrepreneurs to introduce lechon manok in
the market.
The business idea is then transformed into a business concept. The
development of a business concept gives more details on how the
general business idea can be realized. It suggests the preparation of
a business plan, which must spell out the various activities that must
be done from production to the distribution of the product or service.
The business plan must also describe how the enterprise is going to
be organized and managed, and how the business is going to be
financed, among others.
Organizing resources, on the other hand, describes the process of
identifying, sourcing, and financing human, nonhuman, and other
resources needed for the conduct of business. Megaentrepreneurs
usually require highly educated, technologically savvy, and creative
employees, who are sourced from the best universities and training
institutions nationally or globally. Since they are engaged in
sophisticated business activities that entail huge capital, they source
their funds from the capital market or from venture capitalists. In
contrast, microentrepreneurs draw their resources, including labor,
from what is available in their locality. This may include family
members, neighbors, and other workers, who might not necessarily
have the desired skills. Aside from being readily available, these
resources are relatively inexpensive. Funds for their business
operations are usually sourced from family savings, loans from
informal lenders, and remittances of relatives working abroad.
Implementation is the process of carrying out the business plan. It
covers a number of activities, including the management of human,
physical, technological, and financial resources of the business.
Implementation also includes mechanisms for confronting actual
and potential rivals as well as for responding to the various
opportunities, challenges, and developments being posed by
external environments. Measures on responding to competitors and
the bargaining powers of suppliers and buyers can define the
competitive edge of a business enterprise. In addition, major
changes in the local economy and the global market present both
opportunities for growth and threats to the survival a business in an
industry.
Finally, reaping the returns pertains to strategies related to the
expansion of the business firm. It also covers mechanisms for
addressing conditions in the business environment that may affect
the future of the firm. Entrepreneurial ventures, after all, are very
dynamic. They usually start as small ventures and eventually
transform over time in terms of the quantity and quality of products
they produce as well as the resources they require in the production
process. As these small enterprises change, their governance
structures and financing mechanisms may also change.
While the entrepreneurial process is important in the success of
business ventures, many entrepreneurship scholars have argued and
presented evidence that entrepreneurial traits are likewise important
in the performance of a business venture. In this section, we present
the effects of these personality characteristics on entrepreneurial
performance based on two criteria. The first pertains to how
personal traits connect with the way entrepreneurs create 'value-
added' and the second involves the link between these personal
qualities and the formation of entrepreneurial intentions.
The characteristics of an entrepreneur will vary depending on
whether they are in the developed countries pursuing
Schumpeterian entrepreneurship or in developing countries
operating small enterprises. The level of education, employment
status, wealth, and risk appetite of entrepreneurs differ depending
on the amount of value added or profit created by their enterprises.
As discussed previously, there are differences between
megaentrepreneurs and microentrepreneurs.
Level of education. Studies have shown that entrepreneurs need
some formal education to be able to seize the opportunities
presented by inventions, innovations, and other technological
developments. This may, be true for megaentrepreneurs since they
need some degree of technological know-how to understand the
commercial potentials of modern inventions and innovations. In
developed countries, like the United States, some of the more
successful entrepreneurs are engineers who are able to recognize
business opportunities being offered by the latest developments in
ICT. Many of these billionaires amassed their wealth from ICT
innovations. Business ventures that came about from modern
technological innovations are usually initiated by educated
megaentrepreneurs.
On the other hand, since entrepreneurship in developing countries
is more often being used as an alternative to formal employment,
many microentrepreneurs usually have limited educational
qualifications. In addition, engaging in small enterprises does not
require high level of schooling. These small enterprises use simple
technology, and do not require technical sophistication from
workers. For example, one does not need a college, degree or a high
school diploma to introduce binalot na adobong manok to be sold
in "Jolyjeeps" in Makati.
Thus, the degree of human resource qualifications will depend on
the type of business ventures that are being established by
entrepreneurs. For microenterprises, which are meant for
employment and economic survival, formal schooling is probably
not required. For bigger and more sophisticated businesses,
however, more education and training is required from the
entrepreneur. Although, we know that some successful
entrepreneurs like Bill Gates and Steve Jobs are college dropouts,
they nevertheless have formal schooling and have sophisticated ICT
technical know-how.
Employment status. Individuals who become entrepreneurs in
developed countries are usually former employees of companies in
the formal sector. The choice of pursuing entrepreneurship can be
viewed as a step in the entrepreneur's professional development.
These entrepreneurs usually get their business ideas and concepts
from the operations of companies they formerly worked for.
Knowing the ins and outs of a company's operations, including
flaws and weaknesses, they become aware of business opportunities.
This is the reason why many fresh college graduates seek
employment first in established companies before starting their own
business. Once they discover business opportunities, they convert
their business ideas into business ventures. In addition, experience
in business is important to the success of megaentrepreneurs, who
are also exposed to various management practices.
On the other hand, microentrepreneurs are usually drawn from the
pool of unemployed or underemployed. They see their small
business ventures as an option for making a living. In fact, many
microentrepreneurs in developing countries are involved in several
activities at the same time. For example, someone who is manning
the store is also doing carpentry or doing repairs of consumer
durables. These entrepreneurs have to do this because the 'value-
added' created in these micro and small enterprises are very limited:
Thus, to augment their income, they engage in other income-
generating enterprises.
Entrepreneur's wealth. The wealth of the entrepreneur is also an
important factor. Usually megaentrepreneurs source their funds
from their own wealth and from their families. Some generate
capital for their business from the wealth they have accumulated
from their past employment. They can also borrow money from
their wealthy parents. Since they have existing wealth at their
disposal, they can use some of these assets as collaterals in securing
credit from banks. This is not the case for microentrepreneurs, who
have very limited funds. Many of them are too poor to have
substantial savings to finance a big business venture. In addition,
because of their limited human and nonhuman resources they
cannot avail of credit from financial institutions.
Risk appetite. Risk is also an important factor in undertaking any
business venture. Risks are- associated with uncertainties in
business operation. These uncertainties can threaten the survival
and stability of a business enterprise. Usually, entrepreneurs are
risk-takers. Otherwise they will not engage in business and will just
be comfortable with the certainties of being formally employed.
Conceivably, megaentrepreneurs are more willing to take risks
compared to microentrepreneurs. Their educational qualifications,
as well as their work experience, give them an edge in preparing for,
and managing these risks. In addition, their wealth can provide
some security to absorb losses in case the business does not do too
well. Because of these insurances that serve as potential shields for
risks, megaentrepreneurs can pursue business ventures that are
riskier but that can generate higher returns.
On the other hand, microentrepreneurs take risks by default if they
want to survive and escape the consequences of unemployment. But
their appetite for risk is not as much. Since microentrepreneurs have
limited wealth and have difficulties in getting credit, they have weak
defenses against the impact of uncertainties. As a result, they
engage in ventures that are relatively safe but with limited returns.
Every individual who sets up a business venture started out by
intending to do so. Thus, we examine entrepreneurial intentions,
which are planned actions formulated in the mind of individuals
which are geared toward the objective of establishing a business
venture from potential business opportunities. The question is "how
are these intentions formulated?" Based on studies, there are two
broad set of factors that may influence the formation of
entrepreneurial intentions: internal and external factors.
Internal factors include mainly the qualities of individuals such as
demographics, personal traits, psychological characteristics,
individual skills, prior knowledge, and social ties.
Demographics refer to gender, marital status, age, and employment
status of individuals who are likely to form entrepreneurial
intentions. For example, entrepreneurial activities generally
increase with age, but decrease beyond a certain age level. Also,
married individuals are more likely to entertain entrepreneurial
intentions than single individuals.
For personal traits, there are theoretical bases for the contributions
of self-confidence, determination, and enthusiasm and other
positive human qualities in influencing entrepreneurial intentions.
However, studies have shown that these personal traits are weak
predictors of entrepreneurial 'intentions.
Psychological traits include a host of qualities, including need for
achievement, risk appetite, acceptance for vagueness, self-efficacy,
and goal setting. There are also theoretical bases for these
psychological traits in influencing entrepreneurial intentions, but
only appetite for risk and self-efficacy or belief in one's strength
have been empirically verified.
As discussed earlier, knowledge and skills learned from prior
employment are 'valuable in setting up a business. Thus, vocational
know-how, supervisory and managerial skills acquired from work
experience can also predict entrepreneurial intentions and behavior.
Since a business enterprise is a socioeconomic institution, its
operation will require the entrepreneur to deal with a lot of people.
Thus, having social ties might be an important consideration for
setting up a business or not. These social connections are also
important in building networks that can complement the
productivity of human and nonhuman resources of business. Aside
from influencing entrepreneurial intentions, these dimensions of
social capital can also contribute to enhancing entrepreneurial
performance.
Besides the effects of the previously mentioned internal factors in
the formation of intentions, external factors are also significant
determinants. Among the external factors are environmental
support and environmental influence.
For environmental support, many studies have affirmed the positive
effects of government, financial institutions, and training
institutions in setting up businesses. An individual will be inclined
to pursue entrepreneurship if support from various government
agencies are forthcoming.
For example, the availability of credit provided by financial
institutions can encourage individuals to pursue business. Potential
entrepreneurs might also be motivated to pursue their intent if
technically adept workers and other human resources produced by
schools and other training institutions are readily available.
Environmental influence, on the other hand, includes regulatory
structure, patents, protection of property rights, and competitive
environment. Government regulations are important particularly in
promoting public interest like addressing information asymmetry
(labelling and proper disclosure), limiting negative externalities
(taxing business enterprises polluting the environment), and others.
However, overregulation and heavy taxation from the government
can discourage potential entrepreneurs. In addition, protection of
intellectual property rights, respect for contracts, promotion of rule
of law, and presence of an even playing field can create a positive
competitive environment, which can also influence entrepreneurial
intentions.
For example, the availability of credit provided by financial
institutions can encourage individuals to pursue business. Potential
entrepreneurs might also be motivated to pursue their intent if
technically adept workers and other human resources produced by
schools and other training institutions are readily available.
Environmental influence, on the other hand, includes regulatory
structure, patents, protection of property rights, and competitive
environment. Government regulations are important particularly in
promoting public interest like addressing information asymmetry
(labelling and proper disclosure), limiting negative externalities
(taxing business enterprises polluting the environment), and others.
However, overregulation and heavy taxation from the government
can discourage potential entrepreneurs. In addition, protection of
intellectual property rights, respect for contracts, promotion of rule
of law, and presence of an even playing field can create a positive
competitive environment, which can also influence entrepreneurial
intentions.
Following the discussion on entrepreneurial traits identified in
many studies across the globe, this section will enumerate the key
characteristics of Filipino entrepreneurs. We will draw these
features from the 2014 Entrepreneurship Report of the
Philippines. The report is part of the Global Entrepreneurship
Monitor (GEM), which covers the intentions, perceptions, activities,
and aspirations of entrepreneurs all over the globe.
Like other entrepreneurs in developing countries, a number of
Filipinos go into entrepreneurship because they see it as an
opportunity for income creation and employment. Likewise, they
get into business enterprises because of their apparent capabilities
to undertake entrepreneurial activities, the prestige associated with
entrepreneurship, and the positive exposure given by various forms
of media to successful entrepreneurs. However, this attitude is
tempered by a fear of business failure.
It is interesting to note that there are more females than males that
are engaged in the early stage entrepreneurial activities in the
Philippines. However, in the more advanced stages of
entrepreneurial activity, the gender proportion of entrepreneurs and
managers become more even. This implies that males tend to be
more resilient in staying in business, as females withdraw at the
intermediate stage.
In terms of age, entrepreneurship in the country attracts more young
individuals. Given the extent of youth unemployment in the country,
entrepreneurship becomes a viable employment option for the
young. This result is consistent with the conclusion of
entrepreneurship in other developing countries.
In terms of educational attainment, almost half of entrepreneurs in
the early stage development have finished secondary schools.
However, entrepreneurs that own firms at the mature stage of
entrepreneurship have higher levels of education. This is aligned
with empirical results in other countries showing that mature firms
and those that create higher 'value-added' have more educated
managers and entrepreneurs.
Majority of those engaged in early stage entrepreneurial activities
in the Philippines are in consumer services including retail, food,
personal beauty care, appliance and electronic repair, cleaning
services, and laundry services. According to the report, many of
these establishments are operated within the households, implying
a limited scale of operation. A number of Filipino entrepreneurs are
also engaged in manufacturing, extractive enterprises, and business
services. Business services include advertising, architecture,
consultancy, microfinance, and others.
As mentioned earlier Filipino entrepreneurs are fearful of business
failure. This is a legitimate concern since a number of enterprises
close down at various stages in the life of an enterprise. The report
has enumerated a number of reasons for business failure including
unprofitable business, personal reasons (e.g., illnesses, death in the
family, maternal responsibilities), financing problems, and shift to
formal employment.
In previous sections, we discussed how some individuals are more
inclined to set up businesses. But entrepreneurship is not only
confined with the forming of intentions and the crafting of business
plans. The core of entrepreneurship is aimed at the actualization of
intentions and is directed toward the implementation of business
plans. As intentions are translated into actions and as plans are
implemented, the entrepreneur has to make decisions. These
decisions are influenced and produced by mental processes referred
to as thinking.
In this section, we will discuss the various types of thinking that
influence entrepreneurial decision-making. The types of mental
processes that we will cover include critical thinking, creative
thinking, and strategic thinking.
Critical thinking refers to the systematic and rational way of
providing an answer to a question. It is systematic since it follows
steps in responding to an inquiry. Just like a scientific inquiry, an
answer to a question is preceded by an understanding of the problem,
providing possible answers, and reflecting on the validity of these
tentative answers. It is rational because it. adheres to the rules of
logic in connecting the relationships of variables and in making
conclusions.
Aside from providing an answer, critical thinking also explains
what is going on. In businesses, critical thinking is useful in
explaining how a firm can survive and remain stable. Many tools in
business analysis make use of analytical thinking. For example,
SWOT (strengths, weaknesses, opportunities, threats) analysis
may be used to show how businesses can use their strengths to take
advantage of opportunities, how they can improve on their
weaknesses, and how they can guard themselves against threats.
Similarly, an analysis of Porter's competitive forces uses critical
thinking in determining the impacts of various forms of competition
brought about by bargaining power of buyers, suppliers, existing
competitors, potential rivals, and new products. In the same light,
environmental scanning is another systematic analysis of effects of
various environments on the viability of a firm.
Creative thinking, on the other hand, refers to thought processes
that bring about discovery of new ideas. Unlike critical thinking, it
does not follow a systematic or analytical process since it looks at
things from different perspectives. Sometimes, creative ideas start
from a dream, an insight, or from mere observation. The intent of
creative thinking is not to provide an answer but to ask questions
that can lead to discovery and change. Since creative thinking
stresses growth, it encourages discontinuity rather than stability.
Thus, it is useful in developing new products and new systems in
business operations.
The Blue Ocean Strategy by W. Chan Kim and Renee
Maubourgne, for example, provides examples of enterprises that
use creative thinking. They cited companies that utilized creative
mechanisms to eliminate competition by differentiating their
products and by substantially reducing costs. For example, new
products can arise from a creative complementation of products and
services (e.g., Cirque du Soleil, which combined circus and opera).
Similarly new products and services can surface from
differentiating a buyer from a user or by looking for functional and
emotional appeal among buyers.
Strategic thinking involves thought processes that assess current
situation that can be useful in the formulation of plans for the future.
It is similar to critical thinking since it uses an orderly and logical
system in its assessment. But it also resembles creative thinking in
its growth and future orientation. Porter's five forces of competition,
trend analysis, and scenario building, for example, are utilized to
provide an intelligent forecast of future events that can assist the
entrepreneur in formulating strategic plans that can enhance the
growth of an enterprise.
In the process of implementing a business plan, an entrepreneur will
be faced with numerous situations, challenges, and opportunities
that will require flexibility in decision-making. One of these
challenges is managing risks.
Risks can be described as uncertain situations and developments
that can increase the probability of loss or business failure. Since
these hazards can originate from a variety of sources, business risks
can be generally categorized into those emanating from internal and
external factors. Internal risks pertain to dangers coming from the
management of resources of a business enterprise that may imperil
its operations. For example, liquidity and financial risks (borrowing
at high interest rate or excessive credit exposure), failure to hire the
best talents (compensation package is unattractive), damage to
reputation (roaches in coffee or worms in food served in restaurants),
and failure to innovate (using the business models of twentieth
century vintage) can be considered as internal risks.
On the other hand external risks are threats coming from various
environments outside the business firm. These can endanger the
operations and profitability of a firm. Some examples of external
risks are a lethargic economy (slowdown in economic growth),
increased competition (introduction of better products or substitute
goods), commodity price risks (decline in the price of exportable
goods), regulatory risks (environmental requirements to address
climate change); business interruptions (natural calamities, power
outages), and political risks (wars and civil disturbances).
The process of identifying, assessing, and responding to these risks
is called risk management. For internal risks, the company may
adopt controls on the use of physical and financial resources to
ensure efficient resource utilization. It can also install mechanisms
to maintain the quality of its products and services. It can prepare a
long-term plan on human resource development pertaining to
recruitment and retaining best talents. It can also devote resources
for research and development that can support the innovation
projects of the company.
For external risks the company can hold periodic reviews of their
strategic plans in preparation for the impacts of global and national
socioeconomic and political developments on the company. It can
also prepare for contingency plans in case of emergencies, natural
calamities, and other events that can interrupt the business
operations.
Entrepreneurs must respond to these various risks. In this light, they
need to develop what we call cognitive adaptability. Cognitive
adaptability refers to the ability of individuals to be involved in the
process of producing several ways of decision-making based on the
identification and management of changes in their environment. It
requires qualities of flexibility, dynamism, and self-control on the
part of the entrepreneur.
Although we discuss cognitive adaptability in the context of
managing risks, it should not only be confined to risk management.
It can be applied by an entrepreneur to various decision-making
processes in all aspects of business operations. Cognitive
adaptability demands that an entrepreneur be flexible and open to
various decision processes. With this flexibility, the entrepreneur
can shift from using critical thinking to creative thinking (or from
strategic thinking to short-term thinking) in making decisions,
depending on the objective being pursued. In solving problems,
critical thinking may be helpful. If the concern is the development
of a new product or service to respond to potential rivals, creative
thinking may be effective. If the entrepreneur is mapping the future
of the company, strategic thinking will be needed.
Besides flexibility in shifting to various processes of thinking,
cognitive adaptability requires that an entrepreneur to be dynamic.
The dynamism of an entrepreneur is needed in the light of the
variety of changes, situations, problems, and issues that he has to
confront. This implies that there is no uniform response to these
developments. A dynamic entrepreneur should be aware of what is
going on outside his company and should be receptive in providing
appropriate responses to the changes in the environment.
Dynamism may require him to combine various processes of
thinking for the needed decision-making.
Cognitive adaptability also expects that an entrepreneur should have
self-control in making decisions. Although decisions should be
made to respond to the changes in the environment, these should not
be made in undue haste. The decision of an entrepreneur should be
formulated after careful analysis, deep reflection, or even intuitive
thought.
Lesson 2: GENERATING IDEAS: HARNESSING LOGIC
AND CREATIVITY
A plan to pursue a business usually comes from a noble idea
Problem-solving. This business idea in turn is a product of various
thinking processes including critical thinking and creative thinking.
Non-systemic, discontinuous, and literal thinking collectively
known as CREATIVE THINKING can also inspire individuals to
introduce new products and services to the market aside from
generating ideas, creativity can also be used in creative problem
solving.
SOURCES OF IDEAS FOR INTRAPRENEURIAL
VENTURES
A number of practicing entrepreneurs and business coaches have
identified a host of resources, from which we can find business
ideas.
These can be categorized into four major sources:
 From the Product
Entrepreneurs can source their business ideas from existing
products or service.
Differentiate a product by changing its shape, size, color, and
contents.
 From the Process
Business ideas can likewise erase from the process of production
and distribution.
Packaging goods into sachet and small quantities expanded that
market for shampoos in even processed cheese.
 From the Person
When business ideas are sourced from the person, the individual
examine his or her interest, hobbies, skills, dreams, and even his
travels.
Skills learned from prior employment can also be a source of
business.
 From the Relation
Many Filipino Chinese individuals source their intrapreneur aldeas
from families in relatives.
Some start their business partnership in school projects and
eventually decide to put up their business after graduation.
Generating business ideas through logical thinking
Logical thinking refers to the systematic and rational way of
providing an answer to a question.
It is rational because it adheres to the rules of logic in connecting
the relationship of variables and in making conclusions.
Some of the methods that use systematic are the following:
 Statistical Analysis
A systematic analysis of data generated from a survey of
individuals.
Describe the trend in the demand for a particular product as well as
shown which key of socio-economic variables can significantly
influence the change in the demand for a product.
 Market Analysis
Undertaken to know the various factors that affect the demand.
 SWOT (strengths, weakness, opportunities, threats)
Analysis is usually undertaken to describe the state of competition.
 Delphi Technique
Select group of individual using various rounds of consultations.
Select group of individual using various rounds of consultations.
New business ideas can also be generated to various methods
of exploring our creativity.
creativity refers to process that do not follow systematic or analytic
procedures but looks at things from different perspectives.
The following are some methods that uses creative thinking.
 Brainstorming
Refers to an unstructured discussion of a group to elicit ideas. — It can be described as the capacity of individuals to originate new
 Problem Solving Analysis ideas from ideas that has been previously exposed.
Similar to brainstorming. Used to group discussion method to elicit —The birth of a new idea is done by connecting an idea with other
ideas from participant. ideas and transforming you this connections.
 Free association method Factors that influence creativity
Is used in discovering business ideas  Problem solving factors
 Checklist Method creative person is someone who was to provide an answer to a
Obtaining business ideas from target participants by listing all problem.
possibilities that ideas can b connected to, reprocessed, and  Situational factors
associated with. creative individual is manifested when they are confronted with
Generating Business Ideas through Trends in Business concrete situations.
Environment  Motivational factors
It is another way of generating business ideas with focus on the creative individual is usually a highly motivated person.
business environment.  Organizational factors
based on the trends bargaining powers of its. a creative person thrives in an environment that is nurturing and not
changes in government regulations can also provide impetus for threatening.
new products or services. Some of the methodologies used include Creative Problem Solving
porter's five forces of competition, SWOT analysis, environmental Sidney J. Parnes
scanning. It is a procedure of answering a problem with mechanism and
CREATIVITY: A NEW WAY OF LOOKING AT THINGS techniques incorporating creativity.
What is Creativity? Alex Osborn
The two important is stages in CPS that extensively used
DIVERGENT and CONVERGENT thinking process are problem
identification and selection of solution.
1. Setting the objectives
this involves the identification of an object that an individual wishes
to achieve.
2. Revisiting the objectives
This stage involves the search for studies, reports, analysis, and
papers related to the objectives set.
3. Identifying the problem
This process may involves divergent thinking process in seeking the
possible issues, challenges, problems that may emerges from the
objectives set.
4. Looking for a solution
Once the problem has been identified, there is a need to guarantee
various options on how to reverse the consequence.
5. Selecting a solution
once enough option are given from the divergent process, a
convergent evaluation and process of weighing the significant,
relevance, and evaluation feasibility of this option is undertaken.
6. Accepting the solution
In our chosen problem, we have selected a solution. The option was
chosen as a solution because it provide a legitimate employment
opportunities to the poor.
Lesson 3: Recognizing, assessing, and exploiting opportunities
What is opportunity?
According to Cambridge Dictionary opportunity is a situation or
occasion that makes it possible to something you want to do.
There are three simple definition of opportunity;
a) you want to do something,
b) condition for the realization of the objective and;
c) you must take decision or take action on these condition to
realize your objective
Opportunity recognition
Entails phases that potentials entrepreneurs take before introducing
a product or service to the market.
According to Hills, Shrader, and Lumpkin (n.d.) there are five
stages of opportunity recognition are summarized as follows.
1) Precondition
2) Conception
3) Visioning
 4) Assessment
5) Realization
Five stages of opportunity recognition
Precondition
a preparatory stage, during which the individuals assesses
his knowledge of the market, shaped by his educational
background, from formal training, personal experience and
have valuable information on the market that he wants to
enter.
Conception
this is the gestation phase, during which entrepreneurial
intentions and ideas are generated, using logic creative
thinking or both. Creativity is the capacity of the mind to
reprocess and recreate new ideas by connecting idea from
existing products or services.
Visioning
provides the individual a hunch that can serve as an
opportunity for business. This comes about as ideas become
clearer and how the logic of connections leads the
individual to a new idea.
Assessment
this stages involves the evaluation on whether the idea can
be realized or not. Aside from the resources needed and
technology to be used, the paramount questions to the
individual is whether the idea can be actualized.
Realization
the last phase suggests the production of the prototype. This
stage when the mental construct or idea is now felt in its
tangible or physical form.
Factors in opportunity recognition
A framework on recognizing opportunities crafted by Hisrich,
Peters, and Sheperd(2010), provide some of the key factors in
opportunity recognition.
According to them a successful recognition of business
opportunities is influence by three major factors:
 market awareness
 entrepreneurial readiness,
 connections.
Three major factors of opportunity recognition
Market awareness (prior knowledge of the market)
refers to personal exposure to the market and its components including feasible to implement. Refers to the process of evaluating the likelihood
customers and supplier. Information on the market, in turn, can be that the opportunity can be realized. Elements in opportunity assessment
acquired from formal training. Tools on market analysis are usually are the following;
learned from business training program and business education.
 Product or service
beyond formal training, experience can be major sources of  Market opportunity
understanding the market. Your dissatisfaction with a particular product  Costing and pricing
can be part of your personal experience that can push you to improve on  Profitability
the product, your own work experience and knowledge about the market  Resource requirement
and its prospects.  Risks and entrepreneurial commitment
Entrepreneurial readiness (entrepreneurial alertness) Elements in opportunity assessment are the following;

refers to a variety of features of an individual to a start a business Product or service

venture. It covers all types of resources that the individual possesses a business opportunity is primarily the potential of introducing new
including financial, physical and human resources. product or service to the market. This new product or service can be

Connections (networks) result of various creative ways of differentiating an existing product or

service.
business opportunity recognition is heightened when the individual has
a diversity of networks. Families and friends as well as business Market opportunity

associates can bring about the opportunities that we can pursue. this element in the assessment process refers the appraisal of the
Opportunity assessment characteristics of the market included in the assessment process is the
Once the idea has been generated and an opportunity has been competitive environment in the market.
recognized from it, there is need to assess whether this opportunity is Costing and pricing
a product which may be considered valuable by consumers may not be
affordable. Thus, the cost of production as well as the unit price of the
commodity is very important in the assessment phase.
Profitability
is based on how the market will receive your product and the cost of
producing it. There are business ventures that are very profitable but
will require huge capital and long gestation period.
Resource requirement
in any business venture you will need inputs in the production process.
The intermediate inputs and the factors inputs.
Intermediate inputs
are also called raw materials that need further processing. Aside from
that the availability, accessibility and reliability of raw materials.
Factors inputs
are also called the processing inputs which includes labor, capital and
technology. The main major concern of factor inputs are on their
productivity and cost.
Risks
any business enterprise will dace risks in the course of its operations.
Risk are uncertain situation that can increase the probability of loss or
failure of a business venture. Risks comes from internal and external
risks.
Internal Risks
which emanate from the management of resources can be prepared or
controlled.
External Risks
which arise from various environments affecting business, can be
managed.
Entrepreneurial commitment
the last element in the process of entrepreneurial assessment relates to
the commitment of the individual to pursue the realization of its
business idea. Commitment may include the motivations of the
individual, his skills, experience , resource and the mount of time he can
devote in the operation of the business. The seriousness of the individual
can define his commitment and can proceed with the introduction of
product or service.
 Opportunity pathways
Once the opportunity has been identified, the individual can subject it
to an assessment as described above, proceed with its implementation,
or put the business idea on hold. If the decision is to proceed, the
individual two options to follow or pathways in transforming the
opportunity into a business venture
The two opportunity pathways are the following;
 Rational Approach (Traditional)
it uses systematic procedures in proceeding of the implementation of a
business opportunity. Usually applicable for business ideas that require
substantial initial investments or those that are undertaken by what we
refer to as Schumpeterian entrepreneurs. Rational and systematic it
implies that entrepreneurship can be learned.
 Intuitive Approach
it starts with there cognition of an opportunity and proceed directly
to the grabbing of the opportunity after sensing that it can be done.
rather than using systematic process, this alternative approach relies
primarily on the intuition of the individual , which is informed by
his prior knowledge and previous work and life experience. The
individual has an immediate hunch or feel that an opportunity can
be realized.
Product planning and development
This section summarizes the development process of the product
from its inception, introduction in the market, and final decline.
Hisrich, Peters and Sheperd (2010). Identified the various stages
that a product or service undergo in its product life.
It takes two phases.
 The precommercialization phase
 The commercialization phase
The precommercialization phase
 Idea stage this refers to the formation of business ideas. It
starts with an entrepreneurial intent and proceeds with the
development of a business idea using of a logic and
creativity.
 Concept stage the refinement of ideas and visualization of
the idea that can serve as business opportunity is called the
concept stage. The initial customer evaluation also happens
during this stage. Feasibility study or market study is used
to determine if there is a demand for the product and
service.
  Product development stage after the visualization of the
idea the business idea is concretized with the production of
a prototype.
 Test marketing stage at this phase the product or service
is introduced in the market after a series of evaluation and
feedback from potential customers.
The commercialization phase
According to the Vernon, product life cycle hypothesis, any product
has life and similar to any organism it has its birth and its
consequent death.
The various stage of product life cycle are summarized as
follows:
 Introduction
 Growth
 Maturity
 Decline
Introduction with a positive feedback after a series of market
testing, the product is formally introduced in the market. At this
stage, the entrepreneur has to devote resources and time for
marketing of the product.
Growth with a successful marketing campaign the product is
recognized by the market . This market recognition is translated into
a decision to purchase a product. There is a growth if there are repeat
purchases or sustained demand from the initial and subsequent
buyers
Maturity at this stage the product is widely accepted with the
emergence of brand loyalty and patronage from its target market.
The product is considered the leading brand in a particular market
with the considerable market share. To stay on top, the entrepreneur
must engage in innovative activities to improve and further
differentiate the product.
Decline once the market for the product has been saturated and
innovation possibilities for it have been fully explored, the product
may start to lose its market power. The decline becomes real when
competitive products with newer innovations and creative
differentiations are introduced and get accepted by the market.
Lesson 4: Business Plan
Business Plan
A document that describes the various external and internal in
starting a business or in expanding an existing venture.
It integrates the different functional plans such as marketing,  Character,
manufacturing, finance, and human resource management, taking  Cash flow,
into consideration the overall strategy of the business.  Collateral , and
WHY BUSINESS PLAN IS IMPORTANT?  Equity Contribution .
 Importance of a Business Plan Investor
 It helps to determine wether a proposed or existing business  allows the investor to gauge whether projected returns are
venture is viable given its target market, acceptable, and
 it guides the entrepreneur in mobilizing the resources provide information about the character of the entrepreneur and
needed by the business, and about the capability of the textures management team.

 it serves as a tool in helping a financing for the business. Venture Capitalists

IMPORTANCE OF BUSINESS PLAN IN SELECTED USER  A private equity investor that provides capital to companies

Entrepreneur with high growth potential in exchange for an equity stake.

 serves as a roadmap for managing the business Top 5 Venture Capital Firms in the Philippines
identifies the resources needed to operate and grow the business  Foxmont Capital Partners

allows the entrepreneur to anticipate potential business risks  Manila Angel Investors Network

Lender  ICCP Venture Partners

 allows the lender to assess whether the entrepreneur will be  JG Digital Equity Ventures

able to meet debt and interest payments, and  Ayala Corporation

provides information about collateral or tangible assets that can be INFORMATION NEEDS FOR MAJOR SECTION OF
secured for the loan. BUSINESS PLAN
Lender Market Information Needs

4Cs of Credit  General environment trends

 Specific industry trends
  Local market conditions Names and addresses of business owners/ entrepreneur
 Market potential Nature of the business
 Demographic and/ or psychographic profile of target Statement of financing needed
market Statement of confidentiality of the report
Information About Operations  Executive summary
 Location Highlights of the business plan summarized in two or three pages.
 Manufacturing or service operations  Environmental and industry analysis
 Equipment and/ or furniture required Conditions of the general environment (Politico legal conditions,
 Space requirements Economic, Sociocultural, and Technological market)
Information About Operations Conditions of the specific environment (supply and demand
 Labor requirements conditions, competition)
 Raw materials needed and potential suppliers  Description of the business
 Utilities Products and/ or services
Financial InformationNeeds Size of the business
 Rental rates Mission statement and core values
 Cost of equipment Location of the business and its major physical assets
 Cost of utilities Background of the business owner/ entrepreneurs
 Personnel costs  Production plan
 Cost of insurance Manufacturing process
 Registration and license fees Physical plant
MAJOR SECTIONS OF A BUSINESS PLAN Machinery and equipment
 Introductory page Suppliers of raw materials
Business name and address Future capital equipment needs
  Operation plan Strategies for preventing or minimizing risks
Decription of the company's operations Response to risks should they occur
Flow of orders for gods and service  Timetable/ Milestones
Marketing plan Formal registration of the business
Pricing Completion of product or service design
Distribution Completion of prototypes
Promotion Hiring of initial personnel
Sales forecasts Reaching agreements with suppliers and distributors
 Organizational plan Actual production
Form of ownership Initial orders, sales, and deliveries
Principal shareholders or partners  Appendices
Organizational chart/ lines of authority Market research data
Background of the management team Detailed financial pojections
Roles and responsiblitics of management teams Curriculum vitae of the range managament team
 Financial plan Price lists from suppliers
Assumptions Profile of competitor
Pro Forma balance sheet WHY DO SOME BUSINESS PLAN FAIL?
Pro forma income statement  Document is sloppy and looks unprofessional
Cash flow projections  Executive summary is not coherent and it is too long
Sources and users of funds  Unclear on why people would buy the product or service
Breakeven analysis  Unclear on whether the product can be readily produced
 Assessment for risk  Sales and financial projections are unreasonably optimistic
Potential risks- internal or external
  Inadequate description of the qualifications and experience WHAT IS COMPETITOR ANALYSIS?
of the management team Also referred to as a Competitive Analysis, is the process of
 Inadequate assessment of the potential threats to the identifying competitors in the industry and researching their
business different marketing strategies.
Business Plan Presentation Pricing Strategies
 Tell compelling story  Must consider the purchasing power of the customers as well as
 Exhibit confidence and professionalism the price level of similar products available in the market.
 Cover the basics Distribution Strategies
 Adopt a cooperative when answering questions  Must consider the transportation costs are the costs of operating
 Always ready to deliver an elevator pitch a retail outlet.
Lesson 5: THE MARKETING PLAN 4PS OF MARKETING
 A marketing plan is a document containing the marketing  PRODUCT
objectives, marketing strategies, and the activities that will  PRICE
be undertaken to execute these strategies.  PLACE (DISTRIBUTION)
 A marketing plan is the advertising strategy that a business  PROMOTION (MARKETING MIX)
will implement to sell its product or service. ENTREPRENEUR CAN GET HOLD OF THE RELEVANT
THE PLAN MUST CONSIDER ... INFORMATION BY:
The overall goals of the enterprise  Visiting the competitors website,
 Based on valid assumptions about: Financial resources,  Getting hold of company catalog, flyers and brochures,
Physical resources, and Human resources.  Reading newspapers and magazines articles; and
 Marketing plan must have a specific and measurable  Interviewing customers, suppliers, and distributors.
objectives that will allow the intrapreneur to monitor Dr. Ned Roberto
performances and control business activities.
  MADI questions' provides a useful way of identifying
unmet or unsatisfied customers needs and expectations.
 M - What is MISSING "(Kulang)"?
 A- What is ANNOYING "(Nakakabuwisit)"?
 D - What is DISAPPOINTING "(Nakakabuwisit)"?
 I - What is IRRITATING "(Nakakainis)"?
WHAT ARE THE STEPS IN PREPARING THE MARKETING
PLAN?
 Preparing the marketing plan involves the following steps
 Assessing the business situation;
 Defining the target market;
 Setting the marketing goals and objectives;
 Developing marketing strategy and action programs; and
 Preparing the budget for the action plan.
Assessing the business situation
If the marketing plan is being written after the business has
already started, it should describe present market conditions, and
how the company's goods and services fare against those of its
competitors.
DEFINING THE TARGET MARKET
Henry Ford
 Gone are the days when a businessman offer a single
product to everyone
 Early in the twentieth century, Henry Ford succeeded in
selling the Model T (one style one color, one size)
 Ford is famous for his quip:
 "any customer can have a car painted any color that he
wants so long as it is black"
Enrique María Barretto de Ycaza y Esteban
 Businessman now recognize the value of focusing on a
particular segment of the market, given that people have
different needs wants preferences and expectations.
 By focusing only on a particular segment, the entrepreneur
can develop product or service that is responsive to the
needs of this specific group.
STEPS IN IDENTIFYING THE CUSTOMER OR TARGET
MARKET
 Decide what general market or industry you wish to enter
 Divided the market into smaller groups based on customers
characteristic
a. Demographic— age, gender, educational attainment,
occupation, and income level
b. Psychographic— personality, lifestyle
c. Geographic— barangay, city/municipality, province,
region
 Select segment or segments to target.
  Prepare a marketing plan integrating product, price,  Must also be a description of other important components
distribution, and promotion. such as: brand name, Image, packaging delivery time, after
Setting the Marketing goals and objectives sales service, and warranty.
 Must know where he intends to bring the business. PRICE
 Marketing goals can be expressed in terms of the following: — is an important consideration for many buyers.
market share, market penetration, revenue by territory, new — the most critical are cost, competition, and perceived value.
product launch, number of distributor, customer service  Cost-based Pricing -Variable Costs are those incurred or each
responsiveness, sale promotion and advertising unit that is produced such as direct labor, raw materials,
expenditure. commission given to a salesperson, or the cost of packaging .
 S - Specific  Fixed (Overhead) Costs —refers to the cost of things such as
 M - Measurable facilities and equipment that do not change what the number of
 A - Attainable units that are produced.
 R - Realistic  Competition-based Pricing
 T - Time bound — Entrepreneur must consider the prices of the existing product or
DEVELOPING MARKETING STRATEGY AND ACTION service in the market.
PROGRAMS — offering an affordable price even for an innovative product
 Once the marketing goal in objectives has been set, the would encourage customer to switch from more established
intrepreneur can proceed with developing his marketing products to the new product.
strategy and a company action plan.  Value-based Pricing
Product — entrepreneurs must be aware of the value attached by customers
 Must include a description of the product or service that to product or service
will be offered by the business. PLACE
  "What's the best way of getting the product to the  Evidently, the entrepreneur has to make many decisions
consumer?" concerning the marketing of a product or service.
 when deciding on a channel of distributing once product the  It must be reiterated that a decision on one element of the
intrepreneur must consider the following interrelated marketing mix must be link to decision on the other element
factors: MARKETING MIX DECISION
 The channel's directness
 The customer's convenience
 Cost-effectiveness
AREAS FOR DECISION
PROMOTION MARKETING
MAKING
 It is essential for the intrapreneur to make his product MIX

known to his potential consumer..

 We can do this by utilizing traditional media such as prints,
Product features, styles options,
radio, and television, or by tapping new media such as the
brand name, quality of material or
Internet.
Product components product bundling,
PREPARING THE BUDGET FOR THE ACTION PLAN
packaging, sizing after-sales service
The budget needed to execute the marketing strategies and
and warranties
activities can be included in the Marketing Plan when prepared
as a stand alone document. However, it is just chapter of a business
plan, then the budget should be included in financial projections, as Quality image, list price, quantity,
Price
discussed in chapter 7. discounts, allowances for quick
What must be consider in developing marketing strategy and
action plan?
 payment, credit terns, and payment
period

Setting up of own distribution outlet,

use of wholesalers and /or retailers,
Place number of distributors, number of
(Distribution) channels, geographic coverage,
inventory, transport, and use of
electronic channel

Media alternatives, message,

advertising budget, sales promotion,
Promotion use of social networking ,website
design and interface and publicity
efforts