Republic of the Philippines

CATANDUANES STATE UNIVERSITY

College of Business and Accountancy
Virac, Catanduanes

GEC E6 – THE ENTREPRENEURIAL MIND DANNAH LYN G.

ALCANTARA
TF/5:30-7:00 INSTRUCTOR

Chapter 4
IDEAS, OPPORTUNITIES AND INNOVATIONS

At the end of the Chapter, learners can:

1. Differentiate ideas, opportunities, innovation and invention.
2. Analyze the market need.
3. Propose solutions in terms of products and services that will meet the need using techniques
on seeking, screening and seizing opportunities.

In particular, there is confusion about the difference between creativity, innovation and
invention. Let us start with some definitions:

Creativity is the capability or act of conceiving something original or unusual. It is the ability
to develop new ideas and to discover new ways of looking at problems and opportunities.
Opportunity is an idea for a new product or service with a market that is willing to pay that
product or service so that it can form the basis of a profitable business.

Innovation is the implementation of something new. It is the ability to apply creative
solutions to those problems and opportunities in order to enhance people's lives or to enrich society.

Invention is the creation of something that has never been made before and is recognized as
the product of some unique insight.

Scanning the Marketing Environment

This is the starting point of any venture that involves understanding and knowing the
intricacies (complexities) of the whole environment.
Marketing Environment is the combination of external and internal factors and forces which
affect the company’s ability to establish a relationship and serve its customers.
The marketing environment of a business consists of an internal and an external environment.
The internal environment is company-specific and includes owners, workers, machines, materials etc.
The external environment is further divided into two components: micro & macro. The micro or the
task environment is also specific to the business but external. It consists of factors engaged in
producing, distributing, and promoting the offering. The macro or the broad environment includes
larger societal forces which affect society as a whole. The broad environment is made up of six
components: demographic, economic, physical, technological, political-legal, and social-cultural
environment.
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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

“A company’s marketing environment consists of the actors and forces outside of marketing
that affect marketing management ability to build and maintain successful relationships with target
customers”. – Philip Kotler

Components of Marketing Environment

The marketing environment is made up of the internal and external environment of the
business. While the internal environment can be controlled, the business has very less or no control
over the external environment.

Internal Environment
The internal environment of the business includes all the forces and factors inside the
organization which affect its marketing operations. These components can be grouped under the Five
Ms of the business, which are:

 Men
 Money
 Machinery
 Materials
 Markets

The internal environment is under the control of the marketer and can be changed with the
changing external environment. Nevertheless, the internal marketing environment is as important for
the business as the external marketing environment. This environment includes the sales department,
marketing department, the manufacturing unit, the human resource department, etc.
External Environment
The external environment constitutes factors and forces which are external to the business and
on which the marketer has little or no control. The external environment is of two types:

Micro Environment
The micro-component of the external environment is also known as the task environment. It
comprises of external forces and factors that are directly related to the business. These include
suppliers, market intermediaries, customers, partners, competitors and the public

 Suppliers include all the parties which provide resources needed by the organization.
 Market intermediaries include parties involved in distributing the product or service of the
organization.
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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

 Partners are all the separate entities like advertising agencies, market research organizations,
banking and insurance companies, transportation companies, brokers, etc. which conduct business
with the organization.
 Customers comprise of the target group of the organization.
 Competitors are the players in the same market who targets similar customers as that of the
organization.
 Public is made up of any other group that has an actual or potential interest or affects the
company’s ability to serve its customers.

Macro Environment
The macro component of the marketing environment is also known as the broad environment.
It constitutes the external factors and forces which affect the industry as a whole but don’t have a
direct effect on the business. The macro-environment can be divided into 6 parts.

Demographic Environment
The demographic environment is made up of the people who constitute the market. It is
characterized as the factual investigation and segregation of the population according to their size,
density, location, age, gender, race, and occupation.

Economic Environment
The economic environment constitutes factors which influence customers’ purchasing power
and spending patterns. These factors include the GDP, GNP, interest rates, inflation, income
distribution, government funding and subsidies, and other major economic variables.

Physical Environment
The physical environment includes the natural environment in which the business operates.
This includes the climatic conditions, environmental change, accessibility to water and raw materials,
natural disasters, pollution etc.

Technological Environment
The technological environment constitutes innovation, research and development in
technology, technological alternatives, innovation inducements also technological barriers to smooth
operation. Technology is one of the biggest sources of threats and opportunities for the organization
and it is very dynamic.

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

Political-Legal Environment
The political & legal environment includes laws and government’s policies prevailing in the
country. It also includes other pressure groups and agencies which influence or limit the working of
the industry and/or the business in the society.

Social-Cultural Environment
The social-cultural aspect of the macro-environment is made up of the lifestyle, values, culture,
prejudice and beliefs of the people. This differs in different regions.

Importance of Marketing Environment

Every business, no matter how big or small, operates within the marketing environment. Its
present and future existence, profits, image, and positioning depend on its internal and external
environment. The business environment is one of the most dynamic aspects of the business. In order to
operate and stay in the market for long, one has to understand and analyze the marketing environment
and its components properly.

Essential for planning

An understanding of the external and internal environment is essential for planning for the
future. A marketer needs to be fully aware of the current scenario, dynamism, and future predictions of
the marketing environment if he wants his plans to succeed.

Understanding Customers
Thorough knowledge of the marketing environment helps marketers acknowledge and predict
what the customer actually wants. In-depth analysis of the marketing environment reduces (and even
removes) the noise between the marketer and customers and helps the marketer to
understand consumer behavior better.

Tapping Trends
Breaking into new markets and capitalizing on new trends requires a lot of insight about the
marketing environment. The marketer needs to research about every aspect of the environment to
create a foolproof plan.

Threats and Opportunities

Sound knowledge of the market environment often gives a first-mover advantage to the
marketer as he makes sure that his business is safe from future threats and taps the future
opportunities.
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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

Understanding the Competitors

Every niche has different players fighting for the same spot. A better understanding of the
marketing environment allows the marketer to understand more about the competitions and about what
advantages do the competitors have over his business and vice versa.

GENERAL RULE:
Find the opportunity first before coming up with a new product or service in the future”

3S of Opportunity Spotting
*This is the framework that most of the promising entrepreneurs use to finally come with the
ultimate product or service suited for the specific opportunity.
* It is the entrepreneur’s business idea that can potentially become a commercial product or
service in the future.

S1 Seeking the Opportunity

Opportunity is the first step and is the most difficult process of all due to the number of
options that the entrepreneurs will have to choose from. It involves the development of new ideas from
various sources as follows:

1. Changes in the environment

*external/Macro-environment
*internal/micro-environment
2. Technological discovery and advancement
3. Government thrust, programs, and policies
4. People’s interests
5. Past experiences

A. External/Macro-environment
*involves the larger societal forces that influence the micro-environment
a. PESTEL – political, economic, socio-cultural, technological, ecological, legal
a.1Political factors are usually induced by government policies and
administrations, which can have a strong effect in the entrepreneur’s business.
a.2Economic factors are factors which are primarily caused by changes or
movements in the Phil. Economy that have direct or indirect effects on the entrepreneurial
business.
a.3Socio-cultural factors represents the general view of the locality’s
traditions, customs, beliefs, norms, and perceptions.
a.4Technological factors basically refer to the trends and developments in
computer and information technology that have an impact on the business.
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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

a.5Environmental/Ecological factors should be given much importance

especially when the world has severely suffered from human induced calamities.
a.6Legal factors are the elements and bodies that are directly involved in the
legislation and interpretation of laws and ordinances directly affecting the business.

b. Industry environment – government, suppliers, customers, competitors, employees,

creditors
b.1Government refers to system or institution that handles the affairs of the country.
*Types/Classification of Government
*Democracy
*Autocracy
*Republic
*Monarchy
*Dictatorship
b.2Suppliers refer to individual persons or companies that provide the required
materials, parts or services of the business.
*Criteria of Selecting Suppliers
1. quality of goods and services
2. terms of payment
3. stability
4. ability to respond to urgent need
5. proximity of the location
b.3Customers are the buyers of goods and services produced or tendered by the
business. It must constantly evaluate and study the behavior, tastes, preferences,
inclinations and even future activities of the customers.
b.4Competitors are the forces existing in the industry environment that produce, sell or
render products or services which are similar to those of the business.
*Direct competitors – produce or sell similar products or services
*Indirect competitors – produce and sell substitute products
b.5Employees are the workers of the business who highly responsible for the
production of goods and services to the customers. They help ensure the quality and
quantity of the products or services provided to customers. They are the backbone of the
business.
b.6Creditors refer to banks, financial institutions and financial intermediaries engaged
in the lending of money to the borrower usually for a fee or charge in the form of interest.

B. Internal / Microenvironment refers to the environment within the business.

a. Business Resources are assets or properties owned or controlled by the business. It can
either be:
1.Tangible Resources are assets of the business that have physical appearance and
form.

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

*Current Resources are used, applied, or consumed within a short period or one
year.
*Noncurrent or fixed Resources – are properties whose usefulness or benefits
extend beyond one year.

2. Intangible Resources are assets of the business that do not have physical
appearance of form. A business without resources cannot exist and a business with
insufficient resources cannot sustain the operation.

b. Business Culture is a collection of values, beliefs, principles, and expectations

learned and shared by employees, founders, stakeholders, and members of the
management.
* reflects the overall image of the business to the community.
*reflects the identity of the employees but not dependent on the culture of dominant
employees in the business.

• Types of Cultures operating in the Internal Environment:

 Culture of the Business or Organization
 Individual Culture of the Employees

• The entrepreneur has the primary responsibility to handle the level of cultural
acceptance and cultural integration among Filipino workers in the business.

Cultural Acceptance refers to the degree by which the employees accept the culture
of the unit or business.

Cultural Integration refers to the degree by which all units across the business
accept and share a common culture.

C. Business Structure refers to the formal organizational arrangement of the

business in terms of hierarchy of positions, flow of communication, relationship of functional
areas, and production and marketing processes. It also refers to the complexity of the business
structure depends on the type of business, nature of operation, capital base requirement,
leadership style, and scope of operation.

METHODS OF GENERATING IDEAS

1. Focused-Group Discussion (FGD) is conducted by an entrepreneur with the assistance of a

moderator to gather the views of selected consumers on certain issues related to their buying
behavior.

2. Brainstorming is an activity similar to an FGD that allows the participants to share creative
ideas using the following rules: (a) no destructive criticism or judgment is allowed; (b) wider
ideas are accepted; (c) more ideas are preferred; and (d) improvement of others’ ideas is
allowed. In short, brainstorming is a fun discussion with lenient rules.

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

3. Brainwriting or Internet brainstorming is exactly the same as brainstorming except that the
channel used is not face-to-face, but in writing or online.

4. Problem inventory analysis is similar to the FGD except that the participants are already given
an inventory of product or service problems. Participants will just identify from the list given the
compelling problem(s) of a potential product or service instead of generating the ideas from them.

S2: SCREENING THE OPPORTUNITY

Opportunity Screening is the process of cautiously selecting the best opportunity. The
selection will depend on the entrepreneur’s internal intent and the external intent which will address
the compelling needs of the target market.

Risk Appetite refers to the entrepreneur’s tolerance of business risks. The crafting of a
business plan starts only when entrepreneurs already said no to many opportunities and said yes to one
forceful opportunity, to which they will devote their time and resources.

The entrepreneur should say no to an opportunity if it does not contain any of these business
opportunity elements:
 Has superior value to customers
 Solves a compelling problem, issue, a need, or a want
 Is a potential cash cow
 Matches with the entrepreneur’s skills, resources, and risk appetite

Opportunity Screening Matrix (OSM) aims to assist entrepreneur concretize the evidence that the
chosen opportunity (or opportunities) is well worth pursuing.
The 12 Rs of Opportunity Screening
 Relevance to vision, mission, and objectives of the entrepreneur.
 Resonance to values.
 Reinforcement of Entrepreneurial Interests
 Revenues – determine the sales potential of the products or services you want to offer.
 Responsiveness to customer needs and wants.
 Reach – attainment of rapid growth
 Range – potentially lead to a wide range of possible product or service offerings
 Revolutionary Impact – “next big thing” or a game-changer that will revolutionize the
industry
 Returns – high returns on investment
 Relative Ease of Implementation – easy to implement
 Resources Required – fewer resources is better than those requiring more resources
 Risks

S3: SEIZING THE OPPORTUNITY

Opportunity Seizing is the last step in opportunity spotting and assessment. It is the “pushing
through” with the chosen opportunity.

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

Innovation is s the process of positively improving an existing product or service. 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. It must be protected by
patent, a trade secret, or a copyright. Examples: Internet, computer, or airplane

2. Technological innovations occur more frequently than breakthrough innovations. They 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. They 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.

The last process, called the seizing process, involves refining and developing this
opportunity. The refining process is called product or service planning and development
process.

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/service
 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

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

Once the 3S of opportunity spotting and assessment have been diligently done, the
entrepreneur should now be ready to prepare a comprehensive business plan that covers
marketing, operations, and financial plan.

INNOVATION

Innovation is the implementation of new ideas at the individual, group or organizational level.
A process of intentional change made to create value by meeting opportunity and seeking advantage.

• Process: Innovation is a process (implying, among other things, that it can be learned and managed).
• Intentional: That process is carried out on purpose.
• Change: It results in some kind of change.
• Value: The whole point of the change is to create value in our economy, society and/or individual
lives.
• Opportunity: Entrepreneurial individuals enable tomorrow's value creation by exploring for it
today: having ideas, turning ideas into marketable insights and seeking ways to meet opportunities.
• Advantage: At the same time, they also create value by exploiting the opportunities they have at
hand.

TYPES OF INNOVATIONS

Four distinct types of innovation:

1. Invention - described as the creation of a new product, service or process. Something that has
not been tried before.
2. Extension - The expansion of an existing product, service or process. This would mean that the
entrepreneur takes an existing idea and applies it differently.
3. Duplication - Copying (replicating) an existing product or service and then adding the
entrepreneurs own creative touch. In order to improve it.
4. Synthesis - A combination of more than one existing products or services into a new product or
service. This means that several different ideas are combined in to one new product or service.

THE INNOVATION PROCESS

1. Analytical planning – Carefully identifying the product or service features, design as well as the
resources that will be needed.
2. Resource organization – Obtaining the required resources, materials, technology, human or capital
resources.
3. Implementation – Applying the resources in order to accomplish the plans
4. Commercial application – The provision of value to customers, reward employees, and satisfy the
stake holders.

CREATIVITY, INNOVATION AND ENTREPRENEURS

Creativity is thinking new things, and innovation is doing new things. Creativity is the ability
to develop new ideas and to discover new ways of looking at problems and opportunities.

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 Republic of the Philippines
CATANDUANES STATE UNIVERSITY
College of Business and Accountancy
Virac, Catanduanes

Innovation is the ability to apply creative solutions to those problems and opportunities in
order to enhance people’s lives or to enrich society.

Entrepreneurship = creativity + innovation.

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