ENTREPRENEURSHIP

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Grade 11
ABM Strand
Subject Title: Entrepreneurship

Course Description: This course deals with the concepts, underlying principles, processes and
implementation of a business plan. The preliminaries of this course include the following: 1) discussion
on the relevance of the course; 2) explanation of key concepts of common competencies; 3)
explanation of core competencies relative to the course; and 4) exploration of career opportunities

Module 1 Business Opportunity Seeking, Screening, and Seizing

Objective
• Describe an entrepreneur as an opportunity seeker
• Determine the different sources of opportunities

Let us know first the

VS
It is a common assumption that businessman and entrepreneur are the same, but both words refer to
a different individual possessing a distinct approach to business. In other words, a businessman follows
a set path engraved by some other person with an unoriginal idea, whereas an entrepreneur thinks
and believes in making his own path with new ideas.
In the future, an entrepreneur can become a businessman. However, between businessman and
entrepreneur, there is a thin line difference businessman is a market player, whereas, the entrepreneur
is a market leader. In the below article, we will help you understand the differences between
businessman and entrepreneur.

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Who is a Businessman?

A businessman is an individual who operates or starts a business with the same old business idea. The
businessman chooses to do business that is high in demand or give him maximum profits in return. The
firm faces stiff competition because many companies already exist in the market having the same
business ideas. However, the risk factor is very less as the concept has been tried and tested by other
existing companies, so the chance of failure is low.

Who is an Entrepreneur?

An entrepreneur is an individual who has an exclusive idea to initiate and establish a new venture and
bring a change in the world. An entrepreneur is highly creative and innovative, takes a risk and endures
the unpredictability of business. The business started by entrepreneurs with a new concept for the first
time is known as Start-up. The entrepreneur is an integral part of the operation, who builds and deploys
the other functions of the operations i.e. labour, land, and capital. Later in the future, the entrepreneur
becomes a businessman.

The first step for any start-up venture is to have an idea as to the kind of
business opportunity that will be taken by any budding entrepreneur. When
seeking for opportunities, always remember that present problems are the
ones that offer the best opportunities that consequently require solutions. In
this industry, if you want to be a successful entrepreneur, you need to be able
to recognize a problem or a gap and gear up with an innovative solution.
Entrepreneurs are innovative opportunity seekers. They have endless curiosity
to discover new or different ideas and see whether these ideas will work in
the marketplace. This is what separates entrepreneur from the ordinary businessman whose
main objective is simply to earn profits from producing, buying and selling goods.
Entrepreneurs create value by introducing new product or services or finding better ways of
making them. These may include innovation in terms of product design or addition to new
product feature to existing ones. They may also tinker on improving their operational capability
by employing new technologies that will bring them greater efficiency, better economies, and
even enable them to reach unparalleled superiority. They may also consider expanding their
reach by creating new markets or maximizing existing business paradigm by rendering it
obsolete through the introduction of disruptive technologies, processes and system.

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Lesson 1: What is Opportunity Seeking?

Learning Objective:

▪ An endless curiosity
▪ About discovery
▪ Finding better ways

How to be a Seeker?
Essential to an entrepreneur’s opportunity seeking are the following;

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 Sources of Opportunities
1. Macro Environmental (SPEET)
2. Industry
3. Market
4. Product Chain vs. Value Added Chain
5. Other Sources
1. Macro Environmental Sources of Opportunities
The macro-environment refers to the “big or macro forces” that affect the area, the industry, and
the market, which the enterprise belongs to. They influence how business should be conducted, how
consumers will behave, how supply and demand will move, how different competitors would position
themselves, and how the cost of doing business will proceed.
The macro-environment forces can be divided into five categories composed of the Social,
Political, Economic, Ecological, and Technological dimensions or SPEET. The macro-environment forces
create their own opportunities for the enterprise to exploit, and their own threats for the enterprise to
counteract.

Sources Definition How can these sources help you?

1. Socio-cultural Includes the demographics and cultural
dimensions that govern the relevant
entrepreneurial endeavor and assess the
trend and dynamics of the bigger consumer
population, beliefs, tastes, customs &
traditions
2. Political Defines the governance system, it includes
the laws rules and regulations that govern the
business practices as well as permits,
approvals and licenses to operate
3. Ecological Includes all natural resources and the
ecosystem
4. Economics Supply and demand forces mainly drive the
macro economic environment, the income
levels and the purchasing power of its people
as well as the competitiveness of its industries
and enterprise.
5. Technological New scientific and technological discoveries
which often lead to the launch and
commercialization of new products with
superior
attributes
• Nearby residents are mostly from
the 15-50 age group
• Residents are mostly Filipinos
• A number of the nearby residents
are employed in either the private
or public sector
• A huge percentage of the area
population us attributed to
teenagers
• Individuals from the 15-18 age
group prefer drinking milk tea over
coffee
• Registration with the DTI is needed
• A business permit from the city has
to be obtained prior to the
operation of the business The city
where they belong doesn’t allow
the use of plastic bag
• The city where they belong doesn’t
allow the use of plastic bag
• Nearby residents are mostly
employed
• The average monthly household
income is Php. 40,000-50,000
• Shops near the area re tied up with
various online delivery services to
serve more customers Most shops
are equipped with an online
ordering platform to ease long
queues

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The table shows examples of opportunities and threats that are present within the macro
environment of a fast-growing fast-food chain offering chicken meals and other Filipino
favorites.

Examples of Relevant Opportunities and Threats to a Fast Food Chain

2. Industry Sources of Opportunities

After the macro environment, the next biggest sources of opportunities are the industry and
the market. One of the most difficult aspects about industry analysis is defining what constitutes
an industry in the first place. The proper classification of what industry the enterprise is
competing in is important if the entrepreneur’s intention is to define who are the relevant

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customers, who are the direct and indirect competitors, and what are the critical
characteristics of the market as to the quality of products or services to be delivered.

Participants in an industry include:

1. Rivals or competitors in a particular type of business (e.g., Jollibee vs. McDonald’s, Coca-Cola
vs. Pepsi, Samsung Galaxy vs. Apple’s iPhone, etc.). True rivals or competitors are those
competing for the same or similar markets.
2. Suppliers of input (e.g., fuel, electricity, raw materials) to rivals as well as suppliers of machinery
and equipment, suppliers of manpower and expertise, and supplies of merchandise.
3. Consumer market segments being served by rivals or competitors.
4. Substitute products or services, which customers shift or turn to.
5. All other support and enabling industries.

After identifying the participants, it would help the entrepreneur to determine the logic of the industry.
How do these participants in the industry make or lose money? What critical factors drive the industry’s
success? What critical factors lead to failures?

A thorough analysis of industry structure and dynamics yields opportunities for the clever entrepreneur.
Situating his or her enterprise within the realm of an industry provides many profitable opportunities for
the entrepreneur.

There are several ways of defining an industry. The most common way of defining an industry is
according to product types or according to the functions of the product or service.

Classic examples of these industries include the computer industry (Microsoft vs. Apple), beer industry
(San Miguel Beer vs. Beer na Beer), fast food industry (McDonald’s vs. Jollibee), and cola industry
(Coca-Cola vs. Pepsi Cola).

Another way of defining an industry is by tracing the industry from its most basic raw material down to
its various consumer applications, otherwise known as product or value-added chain. The difference
between the product and value-added chain is the focus of the analysis. Product chain focuses on
the volume produced or converted at each link of the chain. On the other hand, the value-added
chain focuses on the economic rather than the volume aspect of the chain.

To illustrate the tracing of a product chain, a good example would be the coconut industry. The
coconut tree, regarded as the ‘tree of life,’ is useful for different purposes. Its trunk, shell, meat, husk,
and leaves find their way to all types of products such as oils, soap, handicraft, oleochemicals, furniture,
wallboards, coir, etc. Looking at this value chain alone presents many potential opportunities for the
entrepreneur.

However, defining an industry with a narrower scope presents a threat because of its limiting effect.
For example, to simply classify all those using coconuts in their production process as being in the
coconut industry per se might not be too useful. The reason is that most of the coconuts harvested are
processed into coconut oil, which is just one of the many substitutes in the fats and vegetable oils
industry traded worldwide.

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 3. Market Sources of Opportunities

The entrepreneur must also be able to measure the actual demand and supply as well as the potential
demand and supply of the industry that the enterprise belongs to. Equally important is the monitoring
of the prevalence of product substitutes and their market impact on the existing players in the industry.
Market trend analysis is also conducted by determining the critical variables, which would most likely
affect the future directions of the industry. Lastly, market traits, characteristics, and behavior are
identified in order to match these customer traits with the product offerings of the enterprise.

Market sources of opportunities can be discovered from increased or decreased demand as well as
higher or lower supply. An example of this is the battle of the value/ combo meals, otherwise known as
“more-for-less” strategy in the fast food restaurant industry. The demand for more affordable but filling
meal is continuously growing particularly for the working population. This, in

turn, creates an increased demand in the items that come with the value/combo meal such as rice,
chicken, pasta, sidings (e.g., mashed potato, buttered corn, french fries, etc.) and beverage drink.
Although smaller in portions, the volume served is more, particularly during peak hours (lunch and
dinner). It also opens up the opportunity of offering breakfast items and strengthening this time-of-the-
day segment.

More and more consumers are resorting to having their breakfast near their workplaces or along the
way to work in order to avoid getting stuck in the rush hour traffic. However, the threat of price war
remains strong such that the industry players are compelled to strengthen their supply chain for better
leverage.

4. Product Chain vs. Value Added Chain

The value-added chain follows the product chain but concentrates on the ‘value’ added from
one stage of the product to the other—a value that is given by the market price differential between
stages of production. The differential would include the additional costs of processing the product from
one stage to the next and the profit margins added on each stage by the processor (or distributor). A
good example of the value-added chain would be a cup of designer coffee. At farm gate prices, one
would get a few pesos out of a bag of freshly picked coffee beans. The coffee beans will then get
processed and packaged by the coffee manufacturer. Cost and profit margins are added before
selling the product to distributors. Once it gets in the hands of the distributors, the latter will have to
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market and sell the finished product to coffee shops for a few more pesos added to cover for the
logistical and transportation costs incurred. The coffee shops will then proceed to concoct their own
versions of designer coffees. The fancier the coffee gets, the more expensive a cup of designer coffee
becomes. The figure shows the relationship between product and value-added chain.

The entrepreneur may discover weak links in the chain that need strengthening or gaps in the
whole chain that need filling. Sometimes, the opportunity lies not in finding gaps and weaknesses but
in assailing the strongest links where there may be a concentration of bargaining power. In this case,
the entrepreneur should determine which players produce the most volume of goods, which ones
control the flow of those goods, which ones make the most profits, and which ones push the most
volume through the market channels all the way to the final customers. These processes may uncover
strategic opportunities for industry intervention.

The entrepreneur should always be alert in detecting windows of opportunities emanating from
shifts in the industry power equation or changes in the industry rules of the game.

5. Other Sources of Opportunities

As an opportunity seeker, the entrepreneur will surely discover other sources of opportunities. Unexpected
successes (or failures) can lead to good opportunities.

Another potential source of opportunity is the entrepreneur’s own set of skills or expertise, or hobby. New
knowledge as well as new technology can be the source of highly innovative opportunities.

1. Customer preferences change over time.

Example: The prevalence of sugar-free products is now becoming the new normal, particularly to products that
used to be sugar-full like soft drinks and desserts. Cola manufacturers have long introduced their respective sugar-
free cola drinks as healthier alternatives to their regular cola drinks. This caters to the health-conscious consumers
who have shifted due to fear of obesity and diabetes.

2. People's tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and even careers have evolved over
the years.

Example: The 1980s could be best described as the era that gave birth to music television or MTV. This era was all
about image that went with the popular artists at that time such as Michael Jackson and Madonna. These artists
had become iconic because of their talent, fashion styles, and persona, which defined the 80s decade. Hip hop,
new wave, and hair metal were the musical genre that emerged.

3. What piques customers is a great source of opportunities.

Example: Government-related services are now made more available to the public because they have opened
up satellite offices in major malls. Before, people had no choice but to go to the main office, line up for hours, to
apply or renew their licenses, clearances, passports, etc. Now, with these satellite services closer to the public,
more people are encouraged to transact with these government agencies because it has become more
convenient.

4. Before the customer is won over, there is first a battle for the mind.

Next, there is a battle for the heart. Finally, there is a battle for the wallet. Example: When the new smartphones
came out, customers were being convinced by the different competitors on what was the best choice to make.
This is the battle for the mind. When customers got attracted to the features and brand image of one competitor,
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it had won the battle of the heart. Finally, when customers lined up to buy their preferred smartphone, the
competitor had won the battle for the wallet.

5. The longer the customer wants to use the product, the greater the chances of creating lasting loyalty.

Example: Among Filipinos, there is this old adage of “nakasanayan no” (got used to it) especially when it comes
to loyalty to certain products. This is true in the case of Jollibee, which has captured the hearts of the Filipinos.
Jollibee has been so successful due to the “Filipino taste” of their products such as its spaghetti, which is a little
sweeter than many of its Italian counterpart. Kids got used to the taste of Jollibee spaghetti and became repeat
customers over and over again.

6. Opportunities abound in shaping consumer perceptions or occupying spaces in their minds or places in their hearts
that have not yet been filled.

Example: A television commercial of a supplementary drink for diabetics instills ‘fear of death’ in the minds and
hearts of its potential consumers. The product is meant to aid in controlling the blood sugar level of diabetics,
together with the proper diet and a healthy lifestyle. The commercial ad instills fear that shapes the consumer’s
perception about what is good or bad to drink.

7. New inventions, new systems and work processes, new insights about the human psyche, new applications for old
knowledge, new revelations about how the physical world works, new interpretations, new combinations based on the
convergence of previous technologies, new outlooks about how life should be led, and a host of other new things are
tremendous sources of opportunities.

Example: Due to the advancement of technology applied to the medical field, open surgery has become a
thing of the past when removing smaller cysts or tumors. This was made possible by the invention of laparoscopy,
one of the technological breakthroughs in medicine. Laparoscopy is a type of surgical procedure that allows
surgeons to access the inside of the abdomen and pelvis without having to make large incisions on the skin. This
is a go-to procedure for people who want to avoid the surgeon’s knife.

8. Determining personal preferences and competencies lay the foundation for a new business venture.

Example: The mushrooming of culinary schools indicates the booming interest of students in pursuing their love
for cooking and/or baking. One of the career tracks offered by these culinary schools is enabling the student to
put up his or her own restaurant or pastry shop. Several weekend markets and food bazaars have also opened
up to showcase the talents of these young culinary students.

9. Unexpected occurrences in both the external and internal environment of the enterprise indicate that significant
changes are happening and opportunities are sprouting.

Example: Who would have thought that videos taken by closed-circuit televisions (CCTV) would make waves in
the news headlines as one of the best evidences in a crime? Installed practically everywhere, the use of CCTVs
has created a tremendous opportunity for entrepreneurs, particularly those already engaged in the safety and
security industry. In fact, there are cities and municipalities that have already issued ordinances requiring the
installation of CCTVs before renewing or issuing business permits.

Lesson 2: Opportunity Screening

At the end of this course, the learners will demonstrate

• Know the basic questions that an entrepreneur needs to know in starting the business
• Identify the opportunity of the screening matrix
• Appreciate the importance of making prefeasibility

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 In this phase, the entrepreneur will lay down a list of several opportunities, which
he will evaluate prior to transforming his business idea into a reality. Because of
the many opportunities for the entrepreneur, it is important to come up with a
short list of few promising opportunities, which can be scrutinized in detail.

What is Opportunity Screening?

It is the process of making both qualitative and quantitative assessment of a

business ideas capability of producing sales growth and promising financial performance

The opportunities chosen may be evaluated by the following:

1. The Personal Screen

2. The 12 R’s of Opportunity Screening

3. The Pre-Feasibility Study

The Personal Screen

In screening opportunities, the entrepreneur first has to consider his or her preferences and
capabilities by asking three basic questions:

1. Do I have the drive to pursue this business opportunity to the end?

2. Will I spend all my time effort and money to make the business opportunity work?

3. Will I sacrifice my existing lifestyle, endure emotional hardship and forego my usual comforts to
succeed in this business opportunity?

The 12 R’s of Opportunity Screening

The 12 R’s Basis

1. Relevance The opportunity must be aligned with what you have as your
personal vision, mission and objective for the enterprise you want
to set up
2. Resonance The opportunity must match the values and desired virtues that
you have or wish to impart
3. Reinforcement to The opportunity resonate with the entrepreneur personal interest,
Entrepreneurial talents and skills
Interest
4. Revenue It is important to determine the sales potential of the product or
services you want to offer. Is there a big enough market out there
to grab
5. Responsiveness If the opportunity that you want to pursue addresses the unfulfilled
or underserved needs and wants of customers then you have a
better chances of succeeding

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 6. Reach Opportunities that have a good chances of expanding through
branches, distributors or franchise outlets in order to attain rapid
growth
7. Range The opportunity can potentially lead to a wide range of possible
product or service offerings
8. Revolutionary If you think that the opportunity will most likely be the “next big
Product thing” or even a “game-changer” that will revolutionize the
industry
9. Returns It is a fact that the products with low cost of production and
operations are sold at higher prices will definitely yield higher
returns or profit
10. Relative Ease of Will the opportunity be relatively easy to implement or there will
Implementation be a lot of obstacles and competition
11. Resources Opportunities requiring fewer resources from the entrepreneur
Required maybe more favored that those requiring more resources
12. Risk Some opportunities carry more risk

The Pre-Feasibility Study

To narrow down the many opportunities into one or two attractive ones. The next step is to conduct pre-
feasibility study to ascertain the viability of the opportunity. The idea is to focus on the few key items that could
make or break the business concept. This time the entrepreneur must go down to the details and take time to
consider the following factors:

• Market Potentials and Prospects

• Segmenting the Market
• Assessing Competition
• Estimating Market Share and Sales
• Technology Assessment and Operations Viability
• Investment Requirements and Production/Servicing Cost

Market Potential and Prospects

Market potential is based on the estimated possible customers who might avail of the product or
service. It would help you to narrow down your estimation to the relevant population or target customers in the
area where you want to operate your business.

Customers make the final choice on what to buy according to several factors:
a. Purchasing Power or Disposable Income
b. Accessibility to Goods and Services
c. Individual Preference
d. Age Group
e. Social and Cultural Group
f. Gender
g. Seasons of the Year
h. Educational Attainment
i. Lifestyle
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Segmenting Market
Using a set of demographics (e. g, gender, age, place of residence, income class, etc.) will be the most
basic approach in determining the target segment.

Assessing Competition
The number of establishments supplying and serving your target customers also affects market potential.
This process would determine how saturated the market is in the given are of coverage. The more suppliers and
competitors there are within the area, the greater the level of saturation. In order to assess one’s strength and
weakness, there must be comparison made with the closest competitors.

Estimating Market and Sales

Conservatively, the entrepreneur can go for a small market share unless the entrepreneur has a very
superior product or service that can immediately command a large market share. The most important part is to
quantify the market potential in a systematic way. The first thing that the entrepreneur must do is to define the
market coverage or reach he or she wants to serve. The area could be as big as a country and as small as
neighborhood. The area would define the total population being targeted.

In the assessment of market potential, the entrepreneur should evaluate the relative strength of the
various suppliers or competitors in the marketplace by asking the following questions:

• Who has dominance?

• Who has greater bargaining power?

• Which segments of the total market are saturated and over served and which ones are relatively
underserved?

Technology Assessment and Operations Viability

By going through this process, the entrepreneur would be able to determine whether the product or
service offering will meet customer demand or not. There are at least four target customer expectations
affecting the scale and complexity of an enterprise’s operations:

1. Quantities Demanded – This would determine the needed capacity of operations

2. Quality Specifications Demanded – This would dictate the following (a) quality of input or raw materials
(b) quality assurance process in transforming input into output (c) quality outcomes for the customers

3. Delivery Expectation – Knowing how much, how frequent and when to deliver to customers

4. Price Expectations – The selling price of the product or service would be evaluated by the customers
according to the value they would receive.

Investment Requirements and Production/Servicing Cost

1. Pre-Operating Cost – these are cost related to the preparation for the launch of the business

2. Production/Service Facilities Investment – refers to the long-term investment for the business such as
land, buildings and machineries

3. Working Capital Investment – investment needed for the daily operation of the business that includes
cash, accounts receivable and inventories.

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Operating expenses includes the following;
a. Employees’ salaries, wages and benefits f. Fees and Licenses
b. Rent g. Commissions
c. Utilities h. Office Supplies
d. Insurance i. Others……
e. Transportation

Example /Illustration

The table is showing the opportunity matrix of the company by scoring itself for the enterprise’s prediction on how
the customers shall react upon seeing the product. By being a relevant and responsive company can affect
consumer’s loyalty to the company’s product and to the company itself.
The enterprise ensures to do all things to keep the good relationship of the company to loyal
customers by keeping these qualities lived within all times. As good entrepreneurs, the company and the
manpower make sure to reinforce entrepreneurial interest in a very high level.

Definition of Terms
1. Bargaining Power – refers to pressure consumer/sellers can exert on business
2. Competition – rivalry between companies selling similar products
3. Competitor – business or individual selling similar or substitute products
4. Cost – the price or an amount has to be paid or spent
5. Distributor – an individual or business who supplies goods to stores and other businesses
6. Dominance – power and influence over others
7. Feasibility Study – an assessment of the practicality of a proposed plan or method
8. Franchise – a type of licenses that a party acquires to allow them to have access to business trademark
9. Investment – the act of allocating resources, usually money with the expectation of generating income
10. Market – as the sum total of all the buyers and sellers within the area; the place where exchanging of goods takes
place
11. Market Share – the portion of a market controlled by a particular company or product
12. Production – the action of making or manufacturing or producing from raw materials
13. Profit – a financial gain, especially the difference between the amount earned and the amount spent
14. Purchasing Power – is the amount of goods and services that can be purchased with a unit of currency
15. Sales - refers to the operating revenues earned by a company by selling their product or services

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Lesson 3 Opportunity Seizing
The final stage, after the Opportunity Seeking and
Screening, the entrepreneur is ready for Opportunity Seizing. By
now, the entrepreneur has an idea as to where he/she will locate
the business and how he/she will market the product/services. At
this stage, the entrepreneur must be able to determine the critical
success factors that enable other players in the same industry to
succeed, while at the same time, be vigilant about those factors
that cause other business to fail.
Four (4) stages:
1. Idea stage - in this stage, the entrepreneur determines what are the feasible products and/or
services that will perfectly suit the opportunity.
• Market evaluation
• Assessment of the value of new products/services
• Elimination of unappealing products/services

2. Concept stage - the developed idea will undergo a consumer acceptance test. This test
includes getting the initial reactions of the primary target market and the distribution channel.
• Conversational interviews

3. Product development stage - in this stage, the entrepreneur leverages on the information
generated from the prospective customers via the concept stage.
• Determine actual reactions from prospective customers
• Conduct consumer panel

4. Test marketing stage - this stage validates the work done from the first three stages to measure
success in the commercialization of the product or service.
• Actual sales results

Innovation:
➢ Is the process of positively improving an existing product or service
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 ➢ It is a key driver for economic growth

Three (3) types of Innovations according to the degree of distinctiveness:

1. Breakthrough innovation
may also include inventions, occur infrequently as these establish the platform on which future
•
innovations in an area are developed.
• must be protected by patent, a trade secret, or a copyright.
Examples: Internet, computer, or airplane

2. Technological innovation
• occur more frequently than breakthrough innovations.
• are technological advancements of an existing product or service. These innovations need to
be protected too.
Examples: wireless fidelity or Wi-Fi, laptop, and jet airplane.

3. Ordinary innovations
• occur ordinarily as the name implies.
• are commonly originating from market analysis and technology pull instead of a technology
push.
• This means that the market has a strong influence in the implementation of an innovation.
Examples: unlimited Internet plans of telecommunications companies, a wireless mouse, and airbus for
economical travelers.

Module 2 Getting to Know the Market (Market Need Analysis)

Lesson 1 : Market Research

Objectives:
• To analyze the market need
• To introduce students to market research and gain a good understanding
• To develop skills in basic market research
• Learn the different methodologies in market research

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Entrepreneur, know thy market well! This simple reminder must keep the entrepreneur alert all the time.
He/she should exert all the efforts to know the market he/she wants to exploit. The more the
entrepreneur know about the market, the better he/she will be able to determine customer needs and
wants. It will be easy for the entrepreneur to reach them wherever they are by conducting a good
market research.

Have you ever wondered why some start up business become very successful
immediately and some fail suddenly.

How can we prevent business failures particularly when we are starting a new
one?

Let’s learn it!

MARKET RESEARCH
Market research refers to the design, collection, and analysis of relevant data, arranged in a
systematic way, aimed at providing a solution to a specific marketing problem. It is a vital step
in business planning. A well-crafted market research will significantly help the attainment of
business success.

Market research is the process of determining the viability of a new service or product through
research conducted directly with potential customers. Market research allows a company to
discover the target market and get opinions and other feedback from consumers about their
interest in the product or service.

Research findings and results also give an overview of the prevailing economic conditions in the
field. They serve as a basis for determining whether to push through with the production or
launch of the product or service. It can also give insight if there is a need for it to be rescheduled
at a later time when the demand for it arises. Moreover, it can suggest the total change of the
product and come up with a new one that fits the current conditions and demand.

Importance or the need for Market Research

1. Marketing research provides an understanding of consumers’ needs
Well-Crafted market research will give the entrepreneur an excellent overview of the related
products’ prevailing prices, most effective packaging, as well as advertising/ marketing
campaigns/ materials that gained popularity and attention from potential buyers or clients.
2. Marketing research minimizes the risk of business failure
Part of the market research is to dwell on the risk levels that the proposed product or service
may encounter once it becomes available in the market. It can never guarantee a fail-safe

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 forecast or a sure success, but the provision of possible risks on the product or business failure
will be enough to caution the entrepreneur on the kind of business he wants to venture.
3. Marketing research gives a forecast of the trends
Market research findings were not only known as a reference for the current market
demands. It has also been widely used for acquiring information on future demands or
customer needs. This will help the entrepreneur plan for the development and improvement
of the product or service in meeting and maintaining customers’ needs and continued
interest.

Basic Question in Market Research

Why Purpose and objective for conducting the market research

What Determine the scope and limitations of the market research to be
conducted
Which Determine which segment of the market must be studied; this must be the
market segment that the entrepreneur is eyeing
Who Identifies who among the members of the selected market segment will
participate in the market research
When Determine the time and timing of the research. This is critical for
entrepreneurs
Where Pinpoints the relevant location of the market research
How Determines the methodology to be used for the market research (e.g.)
survey, focus group discussion, observation.

Example:

Questions
Why conduct market research
What will be the market research?
Which part of the market will be
researched?
Who among the members of the
identified market will be
researched?
When will be the right time to
conduct the planned market
research?
Where will the market research be
conducted?
How will the market research be
carried out?
Answer
To explore what type of snacks can be best sold to students in
the school.
The research will identify what type of foods and drinks during
recess will be most profitable to sell to the students.
Senior High School students
Senior High School students who go to the school canteen
during recess.
During recess, after the students bought their snacks and
foods.
School hallways and near the entrance of the canteen.
By observation technique

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 Types of Market Research

Different techniques in conducting market research are available in a variety of forms. This
lesson will tackle some of the most utilized forms that could help future entrepreneurs decide
which is most fitted for the product they have chosen. Table 1 below shows the different types
of marketing research and its description.

Types of Description
Marketing
Research
Advertising This type of marketing research aims to predict or trace the effectiveness of an
Research existing or related product or service advertisement. The related product is
assessed in terms of its ability to catch the attention of potential buyers,
maintain the brand image at excellent levels, and push the potential buyers to
make a purchase.
Commercial Eye- This type of marketing research focuses on the examination and evaluation of
Tracking an existing or related product or service’s advertising or marketing collaterals,
package design, colors, and themes, as well as website layout and scheme.
These factors will be used for analyzing visual behavior and trends among its
target consumers.
Customer This type of market research requires quantitative and qualitative data or
Satisfaction interview that came from the feedback of customers who already purchased
Research the product, or a related one, to gauge his satisfaction. The satisfaction
feedback will give the entrepreneur valuable information
on what to improve or innovate further so meet the total satisfaction of the
buyers.
Distribution Auditing or assessing the distributor or retailers’ purchase ordering pattern and
Channel Audit levels of a product or a related one can be used in gauging how the product
is received by the buying public or its target market.
Internet Strategic This emerging type of market research provides the entrepreneur a no holds
Intelligence bar type of feedback and assessment of the product or service. Using the
Internet in the form of chats, forums, blogs, etc, the product under review is
given an honest experience review, for these channels are usually considered
venues wherein someone can freely express himself and his feelings, thus
becoming strong opinion formers.
Test Marketing A lot of business enterprises are using the test marketing type of market research
wherein a small, controlled quantity of the product is being released to gauge
the level of acceptance of the buying public or target market. Only upon
successful assessment will the business enterprise launch it on a wider market.

Lesson 2: Market Research Methodologies

Tips in choosing the right market research methodology:

• Pick a method that complements well with the business’ objectives.
• Assess the information that is already available.
• Compare the various market research methodologies.
• Calculate the total time for collecting and organizing research data.

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 Qualitative Research Methods

Qualitative research is an important approach towards understanding the reasons behind the
purchasing behavior and decisions of the consumers. This type of data-gathering research
method is performed through observation techniques and unstructured questioning. It gives
answers to the why’s and how’s of the decision-making processes of various consumers.

A. Interviews
Interviews are conducted in order to give entrepreneurs or businessmen the chance to deeply
evaluate the areas of interest of the individuals they want to target. This method aims to give
the precise characteristics of the audience that entrepreneurs want to understand, which will
consequently help them in the development phase of their products and/or services.

Example:
Basic Customer Interview Questions

An entrepreneur is planning to provide a ride-hailing service in a province through the use of a

mobile application. The target market of this project consists of students, employees,
professionals, and other individuals seeking a convenient mode of transportation. The following
questions were asked to the respondents through interviews:

Questions
How do you feel about the current
transportation situation in your
province?
What mode of transportation do you
take to and from school or your
workplace?
How much do you spend on
transportation monthly?
Distribution Channel Audit
What changes or improvements would
you like to see in your province in the
aspect of transportation?
Objectives
This question aims to understand the actual
feelings of the respondent towards the
transportation situation in his or her area.
This question aims to know the type of
transportation that is primarily used in the
province.
This question aims to know the estimated cost that
an individual would likely pay for his transportation.
Auditing or assessing the distributor or retailers’
purchase ordering pattern and levels of a product
or a related one can be used in gauging how the
product is received by the buying public or its
target market.
This question will help the entrepreneur in
addressing the demands and needs of his target
market.

B. Focus Group Discussion (FGD)

Focus groups are usually conducted personally by entrepreneurs or market researchers. This
type of methodology is meant to bring about a comfortable environment while discussing with
the consumers their feelings towards a specific product or service. Focus groups are helpful in
product testing and evaluation, advertorial and imagery assessments, and business
conceptualizations.

FGD can be used to address substantive issues such as:

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 • Understanding consumer perceptions, preferences and behavior
• Obtaining impressions on new product concepts
• Generating new ideas about older products
• Securing price impression
• Developing creative concepts and materials for promotion and advertisement

C. Observation Technique
Observation technique is probably one of the best ways of gathering data about customers
in their natural setting without having to interact or talk to them. One has to simply observe
people as they go about their usual activity such buying and using product and services and
assess how they behave. Recording the event as it happens may be the means to capture
information. However, the researcher must be discreet so as not to attract the attention of
the one being observed. In the absence of the video recording, jotting down observations
will do.

Prior to doing observation, it is important for the researcher to ensure that the following
conditions are met:
1. The needed information must be observable or inferable from the behavior that can be
observed.
Ex. If a fast moving consumer goods company wants to know the first thing that a person
does upon entering a bathroom after waking up in the morning then observation is not
the most appropriate research methodology. The person probably does not want
anyone watching him or her in the morning.
2. The subject matter contains some sensitivity that needs detached observation
Ex. During Philippine Elections, vote buying is rampant. However, when a research group
conducted a nationwide Voter’s Behavior Survey, nearly 3% admitted to selling their
votes. Next time, it might be better for the research group to just observe what happens
outside voting precincts.
3. The behavior of interest must be repetitive, frequent or predictable in some manner.
Ex. If a local manufacturer wants to know customers’ buying behavior of canned goods
then observation technique is highly recommended. The canned goods section of any
supermarket is often visited by shoppers and this category of products always ends up in
the grocery cart of shopper.
4. The behavior of interest must be of a relatively short duration.
Ex. A popular fast food chain wants to know the customers buying behavior in their outlets
(e.g. do they look at the menu board and decide or do immediately know what to
order?). In this case, an observation research would yield the answers because the whole
process would probably take no more than 10 minutes.

2 different type’s observation technique

1. Human Observation – human observe the events as they happen
2. Mechanical Observation – devices are used to record events for later analysis

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Quantitative Research Methods
Quantitative research obtains the information that can be easily and quickly counted and
statistically analyzed. This method enables the entrepreneur or the market researcher to test
and validate the best course of action to be taken. The methodologies provided under this
classification aim to ask the consumers for their opinions or feelings in a structured way.

A. Survey research

Surveys are a very popular method in gathering primary data. This type of market research
methodology enables the entrepreneur to formulate questions that cover a variety of topics.
Surveys are usually composed of open-ended and closed-ended questions depending on the
needs of the project. It is highly recommended to use open-ended questions sparingly so as not
to cause a lot of inconvenience to the respondents. Too many open-ended questions would
give out invalid results because of the minimal responses taken from the respondents.

• It is the most preferred instrument for in-depth quantitative research

• The respondents are asked with a variety of questions which are often about their
personal information, motivation and behavior
• It can be conducted via telephone, personal (face to face) and mail (either printed or
electronic mail)

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 A. Experiments or Field Trials
This market research approach involves a scientific approach that includes the testing of specific
variables. Tests can be performed in controlled environments or under natural settings.

Ex. A businessman is making two distinct packaging options for the consumers. In order to find out which
of the two would bring about greater sales revenue, the businessman will deliver each product to
selected test market stores where the individual sales performance will be accurately measured. Another
example is the Taste Test that means to sample a food or drink in order to check its flavor or by blind taste
packaged supermarket goods to determine which brands reign to supreme.

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Definition of Terms
1. Analysis - detailed examination of the elements or structure
2. Audit - an official inspection of an individual’s or organization accounts
3. Controlled Environment - is an enclosed area with specific parameters regulated
4. Consumer Needs - is a consumer’s desire for a products or services’ specific benefit
5. Economic Conditions - refers to the present state of the economy in a country
6. Forecast - a statement of what is judge likely to happen in the future
7. Manufacturer - a person or company that makes a goods for sale
8. Marketing Campaign - promote products through different types of media such as
television, radio, online platforms
9. Packaging - the wrapping material around a consumer item that serves to
contain, identify, describe, protect, display and promote the
product.
10. Parameter - a numerical or other measurable factor forming one of a set that
defines a system or sets the conditions of its operation
11. Trends - a general direction in which something is developing or changing
12. Variables - an element, feature or factor that is liable to vary or change

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