Module 2: The Ethical and Social Responsibilities and Personality of an Entrepreneur

Lesson 2.1: Business Ethics

What is Business Ethics?
 Ethics is said to be the study of moral obligation which involves the distinction between right or wrong, good or
evil. As a result, it opens the way for the adaption of the general rules conduct in a society.
 Business ethics, on the other hand are the rules that govern entrepreneurs on how to behave in their business
dealings.

Factors Influencing Ethical Behavior

1. situation;
2. reward system;
3. individual differences;
4. other factors.

How Ethical Behavior is Encouraged?

The following are ways to encourage practicing ethical behavior:
1. adaption of the code of ethics;
2. establishment of rewards and punishments concerning ethical behavior;
3. adaption of internal programs for resolving conflicts;
4. creation of ethics review committee;
5. send employees to training on ethics;
6. top management support.

Code of Ethics
A code of ethics is simply a guide of principles designed to help professionals in conducting business honestly and with
utmost integrity. A code of ethics document such as business ethics, is based or anchored on the mission and values of
the business or organization. This is crafted to help professionals in dealing and solving problems. In same way, business
ethics would help an organization gain public approval.

Rewards and Punishment Concerning Ethical Behavior

Rewards can be monetary, promotion or citation while punishment can be in a form of a reprimand, suspension
and worse is dismissal from the firm.

Ethics Review Committee

This committee handles disputes and conflicts within the organization. The ethics review committee is composed
of a company representative, outsider who is trained about ethics, and representative from the employees’ union or
group.
The ethics review committee tackles especially sensitive ethical issues in the organization.

Provision of Training in Ethics for Employees

Employee who are occupying sensitive positions in purchasing, quality control particularly in smoke emission and
waste water monitoring, human resources, research and development, sales and manufacturing need ethics training.
This training would help them carry out their duties and responsibilities attached to their positions without utmost
integrity.
Top Management Support
Like any other program, without the support of the management would not really become successful. For
example, an employee is caught stealing stainless metal but was never punished for the immoral activity committed that
would lead to more violators in the future.

What are Ethical Issues that Entrepreneurs are Facing?

As an entrepreneur in the daily business operations, entrepreneurs may face ethical issues which may spring
from any of the following relationships:
• between company and customers;
• between company and its personnel and employees;
• between and its business associates; and
• between the company, its investors and financial community.

Relationship with Customers

In any business, the huge number of transactions is between the company and the customers. There are
anomalous transactions such as charges that the customers do not know about, and sending unsolicited messages to
customers via cellphone.
Entrepreneurs are expected to treat their customers fairly, they should provide support for consumers rights as
follows:
1. the right to be safe;
2. the right to be informed;
3. the right to choose; and
4. the right to be heard.
Relationship to Personnel and Employees.
It is a good ethical practice of companies to have a good relationship to its personnel and employees adhering to
responsibilities as follows:
1. safe workplace;
2. quality of life;
3. avoiding discrimination; and
4. preventing sexual harassment

Relations with Business Associates

There are entrepreneurs who deviate from what is normal, fair and just to all players in the business, such as, the
suppliers, agents, various middlemen. It is undeniably true, that bribery comes into the scene when something
anomalous is about to happen.
Relations with Investors and the Financial Community
An honest and well protected investment is a highly desirable practice to firms and entrepreneurs.

Lesson 2.2: The Entrepreneurial Personality

According to Mr. Sujan Patel, an entrepreneur, marketer and co-founder of Web Profits in his article and I quote,
“Success isn’t defined by how well you did in school or how many degrees you have. It isn’t based on where you
grew up or who your parents are. It comes down to your personality, your mindset and your outlook on life. “

Entrepreneurship is not all the time a successful business endeavor. Some entrepreneurs end up successfully but some
needs another chance to try again. What determine failure and success?
There are two complementary factors that help entrepreneur in its business activities’ success and failure as
follows:
1. environmental factor;
2. personality of the entrepreneur.
Environmental Factor
Environmental factors are classified according to the degree of support that it gives to the entrepreneur as follows:
1. fully supportive;
2. moderately supportive;
3. not supportive.
A fully supportive environment would make it easy for entrepreneurs to succeed. A moderately supportive environment
tends to be not so easy on the part of the entrepreneur to succeed. On the contrary, without the support of the
environment, it is expected that entrepreneurship will have a hard time to succeed.

Patel (2017) in his article identified 5 personality traits that all entrepreneurs must possess. However, according to the
study conducted by CPP the top two personality traits an entrepreneur must possess are perception and intuition. What
are these two personality traits?

According to the Business Dictionary, perception and intuition are defined as follows:
Perception is the process by which people translate sensory impressions into a coherent and unified view of the
world around them. Though necessarily based on incomplete and unverified (or unreliable) information, perception is
equated with reality for most practical purposes and guides human behavior in general.

Intuition is the unconscious thought process that produces rapid, uninterred knowledge or solution. Though it is
not analytic in the sense that it does not deliberately look for cause-and-effect (causal) relationships, intuition is not
mere guesswork. Instead, it draws on previously acquired experiences and information and directly apprehends a
totality. Intuition can be visionary or delusionary, uncannily correct or horrendously wrong in its conclusions.

Aside from the two personalities, Patel (2017) has identified 5 other personality traits as follows:
 Passion. The true benefit of an entrepreneur to do business is doing what they love, though money is an added
bonus. Building a business takes a lot of time and effort. It means putting in longer hours and doing extra work.
If you don’t love what you do, you’ll have a hard time achieving success.
 Motivation. The entrepreneurs’ drive comes from within and allows them to motivate others in turn. They do
not need anybody to push them to achieve success. Entrepreneurs are dedicated to their work.
 Optimism. Entrepreneurs always see the good side of every situation. They are optimistic about the future and
are always looking ahead to attain success in the business.
 Creativity. Entrepreneurs don’t think the same way as everyone else. They see the world differently and think
outside the box. Businesses are built on big ideas, and those big ideas need to come from a place of creativity,
from a way of thinking that differs from everyone else’s thinking.
 Risk-Taking. Risk taking is par for the course when you’re starting a new business. But taking risks shouldn’t
scare you. It’s necessary to achieve your goals, and successful entrepreneurs understand this.

According to Action Coach, an Australian leading business coach franchise, there are a dozen characteristics necessary to
become a successful entrepreneur. We will tackle them one by one for us to fully understand what does it take to
become a successful entrepreneur.
1. Confident 7. Dedicated
2. Feels Sense of Ownership 8. Grateful
3. Able to Communicate 9. Optimistic
4. Passionate about Learning 10. Sociable
5. Team Player 11. A Leader by Example
6. System-Oriented 12. Risk Takers
How Does an Entrepreneur Differ from Managers?

Module 3: Planning your Business

Lesson 3.1: The Search for a Sound Business Ideas
How can you improve a product or a service?
The product or service offering may be improved in terms of:
1. Performance – like the chair that can carry more weight;
2. Maintenance cost – like the car battery that requires less servicing than competing brands;
3. Acquisition cost – like the latest low priced model of a certain brand of cell phone compared to competition;
4. Salvage value – like the steel filing cabinet that has a higher salvage value; and
5. Uses – like the flypaper that can also be used as mousetrap.
What is a Sound Business Idea?
A sound business idea may be defined as the economic opportunity which is within the reach of the
entrepreneur and which will provide him with a desirable value. An entrepreneur who is well grounded in the concept of
sound business idea will be able to save time, effort, and money in pursuing his goals. When an inspiring entrepreneur is
confronted with business idea, it is to his best interest to determine its soundness.

Procedure in determining the best business idea

Methods of Searching for Ideas

There are two (2) general methods of generating business ideas. They are as follows;
1. unanticipated means- When the entrepreneur finds business ideas without serious effort, the method is
referred to as unanticipated means. Included in this means are the following:
1. the person’s work
2. the person’s hobbies
3. the person’s acquaintances
4. a chance event encountered by the person
2. deliberate search
1. using search questions
2. idea prompting

Methods of Searching for ideas

Business ideas may be screened with the use of the following criteria:
1. market feasibility
2. technical feasibility
3. financing feasibility
4. financial feasibility

Final Selection
The purpose of screening is to eliminate from the list the general business ideas that did not pass the adapted
criteria. After screening, the list may appear to be any of the following:
1. status quo listing – means all business ideas listed passed the adapted criteria.
2. short list – means some of the ideas generated were eliminated.
3. zero listing –means all business ideas generated and listed were eliminated.
Final selection is applied to the status quo list, or the shorter list, whichever is produced by the screening stage. A new
set of criteria is adapted so the best among those listed can be determined.

Lesson 3.2 Strategic Planning

Strategic planning
Strategic planning refers to the process of determining the primary objectives of the entrepreneurship and then adopting
courses of action and allocating resources to achieve those objectives.
The definition involves three (3) distinct steps:
(1) determination of objectives,
(2) adoption of course of action, and
(3) allocation of resources.
Strategic planning provides the entrepreneur with a systematic approach to the achievement of the firm’s
objectives.

The Determination of Objectives

The objectives of the firm are important components of the firm’s strategic planning activities but before these
are determined, the firm’s mission statement must first be developed.
The Mission Statement. This term refers to the basic description of the fundamental nature, rationale, and
direction of the firm. It consists of three (3) concerns:
1. how the entrepreneur intends to use his resources
2. how the entrepreneur expects to relate to the ever-changing environment; and
3. the kinds of values the entrepreneur intends to offer to his customers.

Strategic Objectives. This term refers to specific performance targets that the entrepreneurship hopes to accomplish.
The objectives define, in specific terms, how the firm’s mission will be realized.
Examples of strategic objectives are the following:
1. expand production capacity by fifty percent within two years;
2. increase sales by fifty percent by the year 2012;
3. increase market share by ten percent every two years; and
4. increase the number of outlets by three within three years.

Adoption of Course of Action

After the primary (or strategic) objectives are established, the entrepreneur must develop a strategy which is alternately
called course of action. A strategy is a carefully designed plan for achieving the firm’s objectives. A strategy indicates
how the entrepreneur will attempt to accomplish the goals with the resources available.
Examples of strategies are the following:
1. establish branches in strategic locations;
2. design a system that will attract persons with high potentials to work with the company;
3. engage in the recruitment of retailers from nearby provinces; and
4. engage in building up the company’s image as a reliable supplier of quality poultry products.
In developing realistic strategies, the entrepreneur can make use of the most popular tools. These are the following:
1. SWOT analysis; and
2. forecasts of future sales performance.

SWOT Analysis is an organized method of assessing a firm’s strengths and weaknesses and the opportunities and threats
in the external environment that confront or will confront the firm. The purpose of SWOT analysis is to match the firm’s
strengths and weaknesses with external opportunities and the threats to determine what strategy to adopt.

The firm’s strength refers to a skill, a competence, a valuable organizational resource or competitive capability,
or an achievement that gives the firm a market advantage.
Examples of strengths are as follows:
1. a recording firm’s unique line-up of contract singers;
2. a company’s ownership of the land that is the source of high grade material required for producing its products;
3. the strategic location of the firm’s sales offices; and
4. the firm’s exclusive supply contract with a reliable manufacturer.

The firm’s weakness refers to something a company lacks or does poorly (compared with others) or a condition
that puts it at a disadvantage. It must be noted, however, that depending on the competitive situation, a weakness may
or may not make a company vulnerable to the competition.
Examples of weaknesses are as follows:
1. lack of qualified managers;
2. poor design of the firm’s products;
3. low employee morale; and
4. poor location of the firm’s sales offices.

Opportunity refers to the chance offered by the external environment to improve the firm’s situation
significantly.
Examples of opportunities are the following:
1. For a motorcycle trading firm - the escalating cost of fuel is an opportunity;
2. For a small restaurant - the withdrawal from business of a major competitor;
3. For a tailor residing in provincial city - the absence of a reliable tailoring shop; and
4. For a newspaper dealer - an exclusive supply contact for the entire province offered by a major national publisher.

Threats refer to a challenge posed by an unfavorable trend or development in the external environment that
would lead to, in the absence of purposeful entrepreneurial action, the erosion of the entrepreneurship’s position.
Examples of threats are the following:
1. To the grocery store – the proposed opening of a mall in the vicinity;
2. To the restaurant located along the highway – the proposed construction of a diversion road bypassing the highway
and the restaurant;
3. To the local dealer of skin-whitening soap and cream – the proposed dissolution of the company supplying the
product;
4. To the local operator of twenty (20) units of public utility tricycles – the proposed city ordinance banning tricycles
from plying the major streets of the city.
 Forecasts of Future Sales Performance. Forecasts are supplementary tools for SWOT analysis. It is an estimate or
prediction of the future sales or income of the firm. Forecasts may be short-term (one year or less), medium-term (one
to five years), long-term (over five years).
Sales forecasts are often determined through a combination of statistical and intuitive forecasts tempered by the
experience of the entrepreneur.

Implementing Strategic Plans

Strategies are useless unless they are implemented. To put strategies into action, the following activities are
required:
1. identifying the specific methods to be used; and
2. deploying the resources needed to implement the intended plans.

Identifying Specific Methods.

Strategies determine the best way to use resources. There is a need, however, to develop tactics which will be
used to implement the strategies. Tactics are more detailed and they are used to determine how the specific task can be
best accomplished on time with available resources.

Deploying the Resources.

The specific aim of planning is to be able to deploy the right quality and quantity of resources in the various
activities required to achieve the objectives. The resources would be indicated in terms of human and nonhuman
elements.

Fundamental Strategies for Small Business

1. flexibility strategy – small business ventures are not usually afforded the advantage enjoyed by large business. It is
very difficult for small business to effect changes in its environment because its resources are usually limited.
2. strategy of effectiveness as a higher priority – effectiveness is sometimes sacrificed for the sake of efficiency.
Although efficiency is a desirable goal, it is often times disastrous for small business to neglect effectiveness.
3. strategy of starting simple – the general idea for small business venture is to start simple and absorb slowly the more
complicated tasks as it grows.

Lesson 3.3 The Business Plan

What is a Business Plan?
The business plan is a document that helps the small business owner determine what resources are needed to
achieve the objectives of the firm, and provides a standard against which to evaluate results.
The business plan is a sort of a business blueprint and it keeps the entrepreneur on the right track. It gives a
sense of purpose to the business. It also provides guidance, influence, and leadership, as well as communicating ideas
about goals and the means of achieving them to partners, associates, employees, and others.

Purposes of a Business Plan

A business plan is written for two main purposes. They are the following:
1. to serve as management’s guide during the lifetime of the business; and
2. to fulfil the requirement for securing lenders and investors.

Parts of the Business Plan

The contents of the business plan will depend upon the purpose. Usually, however, they contain the following:
1.title page and contents – the business plan must be easily identifiable through a cover page with a listing of the
following:
 a) the name of the business;
b) the name/s of the proponents;
c) address;
d) telephone number;
e) e-mail and website address;
f) the date; and
g) the name of the person who prepared the business plan.
2. executive summary – a portion of the business plan that summarizes the plan and states the objectives of the
business. This is usually prepared after the business plan is written.

3. description of the business – this particular portion of the business plan is very useful to the small business operator
(SBO), as well as prospective investors and lenders. Statements about the following will be useful in describing the
business:
a) the industry sector where the business falls into (retail, manufacturing, education, entertainment, and others);
b) whether the business is new or established;
c) the ownership status of the business (sole proprietorship, partnership, or corporation);
d) information on who the customer are;
e) information on the size of the market; and
f) information on how the product or service is distributed.

4. description of the product or service – the product or service must be described clearly in the plan. To achieve this,
the following must be presented:
a) The important features of the product or service, such as the maintenance-free feature of the product, or the
home delivery service for products ordered through the phone.
b) A detailed description of how the product is used.
c) What makes the product or service different from others available in the market.
Examples are the availability of the product or service 24 hours a day, or the water-based feature of the
product insect or repellent.

5. market strategies – refer to what the SBO plans to do to achieve the market objectives of the firm. These strategies
are formulated after undertaking market research. Market strategies consist of the following:
a) definition of the market;
b) determination of the market share;
c) positioning strategy;
d) pricing strategy
e) distribution strategy; and
f) promotion strategy.

6. analysis of the competition - the small business operator or the entrepreneur will find it difficult to compete if his
competitors are unknown to him. This makes it necessary to make an analysis of the competitors. In competitive analysis,
the following must be determined:
a) strengths and weaknesses of the firm’s competitors;
b) strategies that will give the firm a competitive advantage;
c) barriers that can be developed to prevent competitors or would-be competitors from exploiting the firm’s
market; and
d) any opportunity that can be exploited.

7. Operations and Management - how the firm will be operated on a continuing basis is an important component of
the business plan. As such, the plan must contain the following:
 a) organizational structure – a well-defined and realistic organizational structure is an important element of the
business plan. Investors and lending institutions will be interested to look at this particular aspect. Generally,
they will be concerned how the firm is organized along the following concerns such as marketing, production,
research and development, management, and human resources.
b) operating expenses – projections of operating expenses are important aspects in the preparation of a business
plan. This is a prerequisite in projecting financial statements. Lenders and investors are especially interested in
scrutinizing such statements. In determining operating expenses, labor and overhead must be considered. The
organizational structure is useful in providing information in the determination of labor expenses. Overhead,
which may be fixed or variable, includes rent, advertising and sales promotion, supplies, utilities, packaging and
shipping, and the like.
c) capital requirements – are necessary items in operating businesses. The business plan will not be complete
unless a listing of capital equipment needed to be purchased is drawn up. Equipment needs vary from business
to business. Manufacturing firms will need more elaborate types of equipment. Service businesses usually
require less equipment. A firm engaged in transporting elementary and high school students, for example, will
need buses or jeepneys only.

d) cost of goods sold – business which carry inventories like those engaged in manufacturing and trading must
provide a list showing cost of goods. The cost of goods of trading firms consist of products purchased for resale,
while the cost of goods of manufacturing firms refer to total expenses incurred in manufacturing the products
that are intended to be sold. These expenses include the material, labor, and overhead. In both type of business,
all merchandise sold are indicated as cost of goods, and those that are not sold are categorized as inventory.

8. financial data – finances are most interested in the financial aspects of the business plan. To satisfy this
requirement, the following statements must be presented in the business plan;

a) income statement – shows the income, expenses, and profits of a firm over a period of time. It is also
alternatively called “statement of earnings.”

b) balance sheet – is a type of financial statement that shows the financial condition of the business as of a
given date. The information provided by this statement is useful not only to the entrepreneur but also to the
prospective creditors.

c) cash flow statement – a very useful tool for business planners. It projects what the business plan means
in terms of pesos. It is used for operational planning and estimates the amount of cash inflows and outflows of
the business during a specified period of time. A proper balance between the cash inflows and outflows
will result to profits.

9. Supporting documents – the business plan would be more meaningful if supporting documents are included.
The documents usually consist of the owner’s resume, contracts with suppliers, contracts with customers or clients,
letters of reference, letters of intent, a copy of the firm’s lease, a copy of copyright or patent acquired, and tax
returns for the past three years.