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Entrepreneurship (Reviewer

Economic development is a scheme aimed at
improving the living standards of the nation’s
To achieve economic development goals, proper
management of the following elements is
C. Innovation – refers to the actual introduction of a
new products
4 stages of a new venture
1. human resources (labor, education, discipline,
2. natural resources (land, minerals, fuel, climate)
3. capital formation (machines, factories, roads)
4. technology (science, engineering, management,
Entrepreneurship- refers to the economic activity of
a person who starts, manages, and assumes the risk
of a business enterprise
Entrepreneur- the person who undertakes
entrepreneurial activities.
An entrepreneur identifies an economic need,
considers offering a business solution, proceed to
assemble the resources required, and assumes the
risk of either succeeding or failing.
Innovation- may be defined as the introduction of
new method, procedure, custom, device among
Innovation could be any of the following:
1. A new product
2. New process of production
3. The substitution of a cheaper material
4. The reorganization of production, internal
function or distribution arrangement leading to
increased efficiency, lower support for a given
product or lower costs
5. An improvement in instrument or methods of
doing innovation. Innovation may also be viewed
as the last stage in an important process consisting
of the following:
A. Invention – refers to the discovery or devising of
new products
B. Development – refers to the process by which the
ideas and principles generated from the stage of
pre start-up stage- Happens when the
entrepreneur starts to question the feasibility
of an idea, product or service
start up stage
1. formation of the business
2. generation of necessary capital
3. purchase of facilities and
4. Constructing prototype products
5. testing the market
early growth stage
 Follows after establishing feasibility
 Activities will be on small scale
(selling to limited markets with limited
 If the enterprise is successful at this
stage, the option to move to the
next stage can be exercised.
late growth stage This is the final stage before the new
venture matures into a stable
 This is when the management is
structured, long term financing is
established and facilities planning
are undertaken
 The stage where the skills of the
entrepreneur are less needed
Factors of production
Entrepreneur’s task
products and services for customers and
demand for suppliers products and services;
training facilities for future entrepreneurs.
Entrepreneur’s functions
to supply the necessary capital
to organize production by buying and
combining inputs like materials and labor
to decide on the rate of output, in the light
of his expectation about demand and
to bear the risk inherent to the venture.
LESSON 2: The Nature of Small Business
Small Business- It can be defined by using any of
the two approaches such as market share or total
According to market share approach independently owned and operated and which is
not dominant in its field of operation independently
– means ownership is by a private individual, a
partnership or a corporation not dominant –
indicates that a small business does not control a
sizable share of its market.
When the total sales of a business firm is less than
one percent of the total demand for its product the
firm considered small business.
Small business classification
1. manufacturing- involved in the conversion of raw
materials into products needed by society
2. service- those who provide service in one way or
3. wholesaling- refers to activities of persons or
establishments which sell to retailers and other
merchants and or to industrial, institutional and
commercial users but who do not sell in large
amounts to final
4. retailing- refers to activities of persons or
establishments which sell to retailers and other
merchants and or to industrial, institutional and
commercial users but who do not sell in large
amounts to final
Funds to the government in the form of
Employment to the labor force
Supplier of products and services to other
Advantages of operating small business
opportunity to gain control over his own
opportunity to reach full potential
opportunity to reap unlimited profits
opportunity to make a contribution to
society and receive recognition for his
Disadvantages of operating small business
uncertainty of income
risk of losing your entire capital investment
lower quality of life until the business gets
complete responsibility
having to serve undesirable customers
paperwork and other chores
long hours and demanding work
LESSON 3: Entrepreneurial Personality
Two complementary factors that determine success
or failure of entrepreneurship
1. environment
2. personality of the entrepreneur
Personality- refers to the pattern of characteristics
that distinguishes one person from another. (traits,
values, motives, genetic blueprints, attitudes,
emotional reactivity, abilities, self image,
intelligence and visible behaviour pattern)
5. general construction firmsconstruction of buildings whether for private
individuals or forms or for the government
Independent management
small capital requirement
mostly local
Economic importance of small business
Provider of:
Economic opportunities for entrepreneur
Products and services to consumers
Characteristics of Entrepreneur
thinking ability
human relations ability
ability to communicate
technical knowledge
reasonable risk taker
Self confident
goal seater
What motivates people to become entrepreneurs
the desire to be one’s own boss
the desire for financial rewards
the desire to create one’s own job security
the desire to improve one’s quality of life
LESSON 4: The Search for a Sound Business Idea
What is a Sound Business Idea- 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
Procedure in determining the best business idea
1. Preparation of the list of business ideas
2. Screening of the listed idea
3. Final selection
1. Methods of Searching for ideas
unanticipated means
 The person’s work
 The person’s hobbies
 The person’s acquaintances
 A chance event encountered by the person
deliberate search
 Using search questions
 Idea prompting
2. Screening Generated Ideas
market feasibility –
 Stable and sufficient demand
 Potential competitive strength of the firm
technical feasibility
 Ex of production difficulties – unstable supply
of materials, unreliable or fluctuating power
supply and others
Financing feasibility
Possible sources of financing
 The proposed owner’s savings
 Relatives and friends
 Financing institutions
Financial feasibility
4.1The preparation of projected financial
Income statement
Balance sheet statement
Cash flow statement
4.2 The determination and analysis of financial
ratios derived from the projected statements.
3. Final Screening
- The purpose of screening is to eliminate from the
list the generated business ideas that did not pass
the adapted criteria.
WEEK 3 Lesson 1 : Creating a Business Plan
Business Plan- A document that outline the basic
concept underlying a business and describes how
that concept will be realized.
It is an entrepreneur’s game plan, it
crystallizes the dreams and hopes that
motivate an entrepreneur to take the start
up plunge.
It is a lay out of your basic idea for the
venture and include descriptions of where
you are now, where you want to go and
how you intend to get there
It is a document that convincingly
demonstrates that your business can sell
enough of its product or service to make a
satisfactory profits and to be attractive to
potential backers.
Basic objectives:
to identify the nature and the context of the
business opportunity- that is , why does such
an opportunity exist.
to outline the approach, the entrepreneur
plans to use to exploit the opportunity
to recognize factors that will determine
whether the venture will be successful.
Kinds of business plan
1. The dehydrated plan – short form of a business
plan, presenting only the most important issues and
projections for the business- focusing heavily on
market issues such as pricing, competition, and
distribution channels
2. The comprehensive plan – a full business plan
that provides an in – depth analysis of the critical
factors that will determine a firms success or failuredescribing new opportunity, facing significant
change in the business or the external environment
or explaining a complex business situation
The cost of planning
1. the entrepreneurs must sit still long enough to do
it. 2. takes time, money and energy
3. psychological strain of admitting everything that
can go wrong
4. the fear, real or imagined of prematurely closing
off the new venture’s strategic direction
The key factors for success
1. the opportunity – the potential and the
attractiveness of the market and industry
2. resources – human and unhuman assets
3. entrepreneurial team – must possess integrity and
breadth and depth of experience
4. financing structure – how firm is financed
WEEK 3 Lesson 2 Project Summary (Chapter 1)
Preliminaries of a Project Feasibility
Study (Before Chapter 1)
Title Page – it represent the title of the project
feasibility study and the submission requirements
which includes the school, the degree being
completed, the full name of the writer, and the
year in which the degree is to be granted
Approval Sheet – it provides spaces for the
signature of the adviser, panel of oral examiners
and the dean indicating their acceptance of the
Abstract – it presents a brief descriptive summary of
the project feasibility study
Dedication – it presents a brief statement of
devotion of the author to a person or persons,
organizations or institutions.
Acknowledgement – the writer expresses gratitude
and appreciation to important people for the
courtesy, help and assistance extended to
him/them (dean/director, adviser, panelist,
librarian, respondents and other organization
involve in the study.
One may also consider his vision and mission
in developing this portion
Table Of Contents- It presents the content of the
outline of the Project Feasibility Study including the
pages numbers
Long range Objectives- These are the set of actions
needed to be accomplish within the 5 year
operation of the business
List of tables- These are data that are shown in a
tabulated from in order for a reader to understand
the test easily
Short Range Objectives- These are the set of actions
needed to be accomplished within the period of
one year
List of Illustrations/figures/schedule- It includes
maps, charts, graphs. Layouts, schedules and etc.
Computations required to support the data in the
financial statements are shown in a schedule
Business Model
Highlights/Summary of the Study
Name of the Proponents/owner
Form and type of ownership
Business address or the location (includes
reasons of choosing the location)
Objective of the study (set objective for long
term/ and for short term for 6 months to 12
Total project cost –the needed capital for
financial funds to operate the propose
Industry Profile
This answers what the business wants to
accomplish in five to ten years of existence
in the industry
It includes the accurate year ad
measurable action or image that the
business needs to establish
The vision can be a guide as a tool in
reaching their objectives
This answers how the business will
accomplish the vision set within five to ten
years of operation
It enumerates the ways and means the
business must consider to accomplish their
It should not limited to one but must not be
more than five, so that is will be more
It enumerates why enterprise will be
It provides specific direction both for the
reader and the entrepreneur in term of
what the business will accomplish
Describe the venue or the place where the
enterprise will be operate
It will enumerate the advantages in
choosing the location
Factors to determine location:
 Climate
 Site and terrain
 Transportation and facilities
 Fiscal and legal regulations
 Proximity to raw materials,
development and utilities plans of the
local government, national programs,
centers an institutions.
Plant size & factory
Objective of the study
This provides information in the existing
practices of an industry or business which
sells similar product.
It define and describe the industry in which
they operate
The following can be included:
 The company size
 Growth rate
 Outlook of the industry
It describes how the business will generate
revenue and support financial projections
Help in describing the importance of the
business in gaining profit and sales
The place where products are produced or
The people working here are either directly
involved in the operation or in the
manufacturing process.
Some of them are technical persons who
are in charge with the machineries and
equipment inside the plant
It involves the actual measurement of the
factory and site.
Shares of ownership
Type of ownership
Brief history of the firm
Short explanation on why the student chose
the proposed product for feasibility study
Stated the background on how the
proponents come up with the idea
Discuss; where, how and when the business
proposal originates
Description of the Business
It designates the activities of those engaged
in the purchase or sale of commodities or in
related financial transactions
Describes the type and nature of business
It identifies how the business will take part in
satisfying the needs and want of the society
in terms of product selling
Types of business
1. Service
2. Merchandising
3. Manufacturing
Week 5- Technical Study
Describe the business through words, letters,
symbols or icons that will fully identify the
Must explain the logo and its meaning
including the color, size, shapes and its
general appearance
Product tagline
Describe the business through song with
dance steps or something that fully describe
the product
Preliminary Conclusions
This helps the reader determine how feasible
the proposed study
Based on the findings found after a series of
research and study it should be based on
the following:
 Market study
The description of the product or services
offered by the company
The production process
Its machinery and equipment
Recommendations in coming up with an
economical plan lay out and identification
of suitable plan location
How the products are to be produced
The process and the technology involved (
specifying the step, must be shown in
process flow chart)
How much it will cost to produce
Plant size and the manpower complement
The environmental concerns of the
enterprise and its solutions
Production cost calculation
The Product or Services
Hybrid are sometimes the combination of the three
types of business
Logo of the business
Technical study
Management and organization study
Financial study
Socio economic study
The description of the product or services to
be produced and sold should be clearly
Includes the physical, (weight, size, etc),
chemical properties for manufactures
products including principal use and
The general specifications of the product
contain the basic information that will
provide the client, the physical outlook of
the product, its use and operating
Manufacturing Process
The process on how the product or services
are produced should be fully described in a
way that can be clearly understood and
executed by the workers
A process flow chart should be included
Plant Size and Production Schedule
The plant size and production schedule
should be determined based on the
forecasted demand
The most common and simplest method of
forecasting are collective opinion, moving
average, regression line by method of leas
squares, time series analysis and other
approached aided by a computer
 The calculated demand is adjusted in
consideration of the following: defective
output, efficiency, learning curves and
break even analysis after which the rated
and plant capacity is determined.
 The size of the plant is normally determined
based on the projected annual volume for
the next five years.
Machinery and Equipment
Detailed specifications including its function
should be prepared for each type including
the number of units required.
The determination of the equipment size
should be closely coordinated with the
manufacturer or suppliers to consider the
economical size of the equipment
The origin of the machine should be known
The availability of after sales service and
spare parts should be clarified with the
The delivery schedule, terms of payment
and other arrangement, e.g. electrical,
water, gas, and other utilities connections
should be stated in quotation
Plant Location
The following should be taken into consideration:
Availability of raw materials
Proximity to potential customers
Accessibility of transportation
Availability of utilities (water, electricity, gas)
Cost of land
Waste disposal
Building, zoning and environmental
Tax incentives
Community culture and traditions
Plant Layout
The total lay out consists of all the
manufacturing facilities including office
buildings and storage for both raw materials
and finished products
A good plant lay out can be characterized
with the most economical materials
handling cost.
The receiving area for the raw materials
should be as close as possible to the first
production activities.
A distance between machines and or other
structure established by the applicable
codes and standards should be followed for
ease if traffic for the operators, equipment
and materials.
Building and Facilities
The number and type of building is
determined after the complete lay outs of
the machine, equipment, offices, including
all others facilities are finalized
The provisions of the codes such building,
mechanical, electrical, sanitation and
safety should be strictly followed.
All necessary permits should be secured
from authorities.
The cost involved in the designs,
construction and installation of machinery
and equipment, including air conditioning
Also, the cost of land development,
improvement, road construction, fences,
drainage and sewerage system, water
facilities and installation of power line,
communication and internet infrastructure
Raw Materials and Supplies
The list of materials as well as all indirect or
consumable materials including detailed
specifications, quantity needed and when
these are needed should be clearly
The specifications should be state the
physical, mechanical and chemical
properties- the laws, the rules and
regulations on importation should be
The reliability of the supplier to meet the
required quality, quantity and delivery
schedule must be assured
The alternative raw materials should be
always be taken into consideration and
single source of material should be avoided.
Proper costing of the raw materials and
consumable items should be done
The cost is not just the purchase cost of the
material itself, it should be include in other
cost such as ordering and carrying cost.
Electricity, water and fuel – the quantity or
amount required for the operations should
be determined, and the sources and
reliability of supply should be assured
Waste Disposal
The enterprise regardless of its size and type
of the operations are mandated to properly
dispose or provide waste treatment facility
to protect the environment.
The amount of waste and quality of waste
generated by the operation if not properly
handled and disposed will affect the
surrounding and entire community
The type and amount or volume of waste
that the operations is expected to produce
should be determined and treated within
the allowable level prescribed by the
authorities like: Department of Environment
and Natural Resourced (DENR) ,
Department of Health (DOH) Local
Government Units, (LGU) and other
regulatory bodies.
Production Cost
Two components of production cost
Direct cost – expenses directly attributable
to the production of the goods or services
such as materials, labor cost and machine
charges, cost that is directly proportional to
the volume or number of product or services
Overhead cost- indirect cost, which is a
portion is the administrative expense paid to
the management and support staff
rendering services to the company. This is
the fixed cost.
Product Mark up
This is sometimes called as profit, is the
amount added to the production cost to
come up with the desired selling price.
The amount is varies based on what position
or positioning the company wanted to
The 3 common approaches:
 Cost oriented method – the easiest
approach, predetermined mark up
coming form top management based
on the desired profit
 Competition oriented method – takes
the industry pricing
 Demand oriented method – based on
the amount what the customer can
willing to pay