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Introduction to Entrepreneurship
Senior High School (Pontifical and Royal University of Santo Tomas, The Catholic
University of the Philippines)
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ENTREP
EXAM REVIEWER
INTRODUCTON TO ENTREPRENEURSHIP
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A dynamic, social process
individuals, alone or in collaboration,
identify opportunities for innovation and
act upon
both art and science
science – lies in the proven process of
planning and managing business
art – lies in the innovative thought,
implementation and growth of business
art of observing correct practices in
managing and operating self-owned
wealth-creating business enterprise
the product or service itself may or may
not be new or unique but the
entrepreneur must somehow infuse value
by securing and allocating the necessary
skills and resources
SALIENT FEATURES
4. Entails opening and managing the selfowned enterprise
 Important elements:
o Concept of self-owned enterprise
o Concept of managing it
 Owner = manager
 Business that is not managed by the
owner is not within entrepreneurship
o Owner not entrepreneur
o Owner just ordinary business
person
 Person managing but not owner is just
manager
5. Risk-taking venture
 Risk – inherent in entrepreneurial venture
 Comes simultaneously with the venture
 Business risk
THEORIES OF ENTRPRENEURSHIP
Innovation Theory
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1. Is an art of correct practices
 There is constant change which denotes
movement and innovation
 Not static or stagnant
 Dynamic – movement of economic
activity changes = political, social,
entrepreneurship will change
 Closely related to creativity
 Constant change or evolution that
contributes towards the enhancement of
the enterprise
2. Entrepreneurship is a wealth creating
venue
 Operating within the concept of wealth
creation rather than profit generation
 Concept of profit – more applicable in the
area of accounting as a way of measuring
the operating performance of business
 Wealth – when benefits derived by the
owner in providing goods and services to
the customer are abundant enough
 cover the cost incurred by the business at
the same time,
 provides personal benefits to the owner,
which in turn improve their life
3. Provide valuable goods and services
 Convinces the consumers that they gain
more benefits than what they pay for the
goods and services
 Defines value from the perspective from
the buyers and not only from their own
 Value = subjective
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Joseph Schumpeter
Regards economic development as the
product
of
structural
change
or
innovation
Chance of economic development take
would be slim unless revolutionary
changes in the circular flow of economy
would happen
Innovation – force that will propel
revolutionary change
Unless innovation takes place, economic
equilibrium or status quo will remain
Primary role of the entrepreneur to
introduce innovation in any following
forms:
o new product
o new production method
o new market
o new supplier
o new industry structure
Keynesian Theory
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John Maynard Keynes
put emphasis on the role of government
int the entrepreneurial and economic
development
suggest that entrepreneurial activities
may not be favorable in the future unless
that short-term problem of economic
disequilibrium is finally resolved through
the
active
participation
of
the
government
Alfred Marshal Theory
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Alfred Marshall
There are four factors in production
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Land
Labor
Capital
Organization
–
coordinating
element
Without
active
participation
of
organization, the other factors of
production will remain inactive in their
role for economic development
o
o
o
o
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Industry Environment
o Governemnt
o Competitors
o Suppliers
o Creditors
o Employees
Bearing Theory
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Frank Hyneman Knight
Entrepreneurs as agent of production
process
where
they
connect
the
producers and the consumers
Risk-taking as an important dimension
that will differentiate and entrepreneur
from a worker
Uncertainty an important factor in the
production of goods and services
Must anticipate possible random events
to happen while shouldering the risk at
the same time
Entrepreneur
would
be
eventually
rewarded with high profits
The Flow of Entrepreneurial Ventures
Technological Discovery and Advancement
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Use of technology are another good
source of entrepreneurial ideas and
opportunities
Person with entrepreneurial interest looks
at
the
possibility
of
business
opportunities in any new discover or
advancement in technology
Government’s Thrust, Programs, and Policies
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SOURCES OF ENTREPRENEURIAL IDEAS
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Changes in the Environment
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Ideas arise when changes that happen in
the external environment
Physical Environment
o Climate
o Natural Resources
o Wildlife
Societal Environment
o Political Forces
o Economic Forces
o Sociocultural Forces
o Technological Environment
o Legal Environment
o Economic Forces
The programs and agenda of the
Philippine government intuitively address
the needs of the Filipino people
Whenever there are changes in the
policies and programs of the government,
new entrepreneurial ideas are likely born
People’s Interests
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Your business venture should be adaptive
to the interests and hobbies of the people
to protective and sustain your business
Keep evaluating the interest of your
target
Past Experience
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Good source of entrepreneurial ideas
Expertise and skills developed by a
person who has worked in a particular
field may lead to the opening of a related
business enterprise
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INTRODUCTION TO BUSINESS PLANNING
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Document that describes the various
external and internal elements involved
in starting/expanding a business
Allows to anticipate potential to weigh the
options when deciding where to pour
resources into the business
Helps determine whether a proposed or
existing business venture is viable given
its target
Guides the entrepreneur in mobilizing the
resources needed by the business
Serves as a tool that helps business get
its financing
May be read by different people
Users
of
Business Plan
Entrepreneur
Lender
Investor
Relevance to business
plan
 Serves as a roadmap
for managing
business
 Identifies the
resources needed to
operate and grow
the business
 Allows the
entrepreneur
 Allows the lender to
assess whether the
entrepreneur will be
able to meet debt
and interest
payment
 Provides information
about collateral or
tangible assets that
can be secured for
the loan
 Allows the investor
to gauge whether
projected returns are
acceptable
 Provides information
about the character
of the entrepreneur
and about the
capability of the
venture’s
management team
Four C’s of Credit
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Character
Cash Flow
Collateral
Contribution (Equity Contribution)
Market Information Need
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General environment trends
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Specific industry trends
Local Market Conditions
Market potential
Demographic and/or psychographic
profile of target market
Operations Information Needs
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Location
Manufacturing or service operations
Equipment and/or furniture required
Space requirements
Labor requirements
Raw material needed
Potential supplier
Utilities
Financial Information Needs
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Rental rates
Cost of equipment
Cost of utilities
Personnel costs
Distribution costs
Cost of insurance
Registration and license fees
Steps in creating business plan
1. Define your business concept
o Start your idea and develop it to a
clear business concept
o Business concept should include
 Mission and vision
 Why are you are
putting this
business?
 Target market
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Who will buy your
products or service?
 What problems or
pain points of your
target customers
you want to
address?
 Product
 What will you offer
as a solution to your
target market’s
problems?
 Value proposition
 What are your
unique selling
points?
 Why should buy
from you instead of
the competitor?
 Branding
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What is the
expertise or
specialization of
your business?
 How do you want to
position it in your
industry?
2. Research your market and industry
o Research must cover these areas:
 Market research through
surveys, personal
interviews, and focus group
discussions that gather
insights from target
customers, suppliers, and
industry competitors
 Data about your
competitors
 Industry trends and growth
potential based on
published studies and
research
3. Create a business plan outline
o DTI’s Business plan format has
five sections:
 Executive summary
 Marketing Plan
 Production Plan
 Organization and
Management Plan
 Financial
4. Develop the main sections of your
business plan
o Executive Summary
 Open with a brief overview
of your business, its nature,
and its competitive edge.
 Qualification and
competencies, as well as a
short discussion of how the
loan will help your business
grow
o Marketing Plan
 Product/service offerings
 Market demographics
 Competitor analysis and
marketing strategies
 Loan provider needs to
know how much you’ll need
to market and distribute
your products
o Production Plan
 Convince the bank that you
have the operational
capacity to meet your sales
forecasts by explaining all
aspects of your production
process,
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Organization and Management
Plan
 Bank needs assurance that
you can manage your
business well
 Present details on how
you’ll run the business and
back it up with you
qualifications and
experience
o Financial Plan
 Comprehensive as possible
 will shot potential financial
strength of your business
 include details
 cash flow statement
 break-even analysis
 return on
investment
 sales and profits
forecasts in the next
3 years
 loan purpose
 loan repayment
time frame and your
plan if your unable
to pay off the loan
5. Add supporting information
o Backing up your business plan
with as many supplementary
documents as possible
o Add in the appendix section:
 Documents that support
your financial plan such as
contracts, copies of leases
 Market research findings
 Bank statements
 Licenses
 Permits
 Receipts
 Resumes of key employees
6. Review and proofread
o
SWOT ANALYSIS
“A technique that enables a group or individual
to move from everyday problems and traditional
strategies to a fresh prospective. SWOT analysis
looks at your strengths and weaknesses, and the
opportunities and threats your business faces.”
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Planning tool
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Used as a framework from organizing and
using data and information gained from a
situation analysis of internal and external
environment
INTERNAL FACTOR
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Controllable factors within the entity
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATHS
EXTERNAL FACTORS
Non-controllable factors within the entity
Strengths
Characteristics that gives advantage over
other industry
 Positive
tangible
and
intangible
attributes, internal to an organization
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Examples:
o Abundant Financial Resources
o Well-known brand name
o Economies of scale
o Lower costs
o Superior management talent
o Better managing skills
o Good distribution skills
o Committed employees
Weaknesses
 Place a disadvantage relative to others
 Detract the organization from its ability to
attain the core goal and influence its
growth
 Do not meet the standards we feel should
meet
 Controllable – minimized and eliminated
 Examples:
o Limited financial resources
o Weak spendings R&D
o Very narrow product line
o Limited distribution
o Higher costs
o Out-of-date products
o Weak market image
o Poor marketing skills
o Limited management skills
o Undertrained employees
Opportunities
 External attractive factors that represent
the reason for an organization to exist &
develop
 Arise when an organization can take
benefit of conditions in its environment to
plan and execute strategies that enable it
to become more profitable
 Organization should be careful and
recognize the opportunities and grasp
them whenever they arise
 Examples:
o Rapid market growth
o Rival firms are complacent
o Changing customer needs/taste
o New uses for product discover
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Economic boom
Government deregulation
Sales decline
Sales decline for a substitute
product
Threats
 External factors beyond an organization’s
control that causes trouble
 Arise when conditions in external
environment jeopardize the reliability and
profitability of the organization’s business
 Examples:
o Entry of foreign competitors
o Introduction of new substitute
products
o Product life cycle in decline
o Changing customer needs/tastes
o Rival firms adopt new strategies
o Increased government regulation
o Economic downturn
Aim of SWOT
 Help decisions makers share and
compare ideas
 To bring a clearer common purposes and
understanding of factors for success
 Organize important factors linked to
success
 Provide linearity to the decisions making
process allowing complex ideas to be
presented systematically
Who needs SWOT?
 Company
o When revenue, cost & expense
targets are not being achieved
Market share is declining
Industry
conditions
are
unfavorable
o Launching a new business
venture
Also required during:
o Workshop Sessions
o Brainstorming meetings
o Strategic Planning
o Product Evaluation
o Competitor Evaluation
o Personal Development Planning
o Decision Making
o Product Launch
o Changing Jobs
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Perform SWOT Analysis & Document
1. Establish the objectives
o purpose of conducting a SWOT
may be wide/narrow,
general/specific
2. Select contributors
o expert opinion may be required for
SWOT
3. Allocate research & information gathering
tasks
o Background preparation can be
carried out in two stages
 Exploratory
 Detailed
o Information on Strength and
Weakness should focus on internal
factors
4. Create a workshop environment
o Encourage an atmosphere
conducive to the free flow of
information
5. Lists Strengths, weaknesses,
opportunities, & threats
6. Evaluated listed ideas against objectives
o With the lists compiled, sort and
group facts and ideas in relation to
the objectives
7. Carry your findings forward
o Make sure that the SWOT analysis
is used in subsequent planning
o Revisit your findings at suitable
time intervals
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