Entrepreneurship

● THE NATURE AND DESCRIPTION OF THE SUBJECT

This course deals with the concepts, underlying principles, process and implementation of a business plan. The preliminaries of this course
include the following: 1) discussion in 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.

● THE SCOPE OF THE SUBJECT

For this subject, the following are the expected learning contents that we are going to learn for the 2nd semester:

3rd Grading Period:

● Foundations of Entrepreneurship

4th Grading Period:

● Developing the Business Plan

● Implementing a Simple Business
 ● EXPECTED OUTPUTS

As we are coursing through the online and/or modular mode of learning for this school year, we have already provided you Weekly Learning
Packets (WLP) as we discuss our lessons for this subject. For online mode of learning, you will be accessing your WLP through the Aralinks
platform. The activities and assessments will also be provided in each learning packet in which you will need to accomplish within a required
period. For the offline mode of learning, you will be provided with printed WLP, which your parents/guardians will be getting here in our
campus.

The Weekly Learning Packet (WLP) will still consist of five (5) parts. These are: Encounter, Explore, Engage, Enrich, and, Evaluate. Each
part will take you step by step as we go deeper in the discussion of the lesson. In each part, there are corresponding activities that you need
to accomplish that will help you deepen your understanding of the lesson, and at the same serves as your assessment/s for each part of the
lesson. In every WLP, performance tasks will be provided, and before the end of the semester, you will be required to submit a business plan
consisting of your Weekly Learning Packets (WLP) and all the performance tasks and parts of the business plan that were required from you
to be submitted within the semester. The form of your output will be submitted according your mode of learning. For online mode of learning,
you may submit your portfolio through the E-portfolio in the Aralinks platform before the end of each quarter.

For Entrepreneurship, we are going to follow the grading system based from the DepEd K to 12 Grading System:

25 % - Written Work

45 % - Performance Task

30 % - Quarterly Assessment
Entrepreneur and Entrepreneurship
The term “entrepreneur” originates from the French word entreprendre which means “to undertake.” It
connotes a business paradigm which signifies the start of a new business undertaking. On the other hand,
the term “entrepreneurship” comes from the word entrepreneurship. It refers to a particular field of practice or
process, as compared to an entrepreneur which is a person practicing entrepreneurship. Comparatively, the
relationship is like that of a manager and the management in which a manager is a person who practices
correctly the concept of management.

According to the American Heritage Desk Dictionary defines an entrepreneur as a person who organizes,
operates, and assumes the risk of business ventures. In the book that we are referring, an entrepreneur is
defined as a person who strongly advocates and correctly practices the concepts and principles of
entrepreneurship in operating and managing the self-owned business venture. This venture is also called
enterprise.

In the book that we are referring entrepreneurship is operationally defined as the art of observing correct
practices in managing and operating a self-owned wealth-creating business enterprise by providing goods and
services that are valuable to the customers.
Small Business and Ordinary Small Business

A small business is different from an ordinary small business.

Small business refers to a business or enterprise that correctly adopts and practices the
principles of entrepreneurship. It is owned by one (1) person with a limited workforce of not
more than twenty (20) persons. The term also includes the small and medium enterprises
(SMEs) that have been strongly promoted by both government and non-government
organization (NGOs) in their desire to improve the lives of the Filipino people through
entrepreneurship.

Ordinary small business pertains to a business enterprise managed and operated by an

owner who is not an advocate of and does not practice the concepts and principles of
entrepreneurship.
 3.2 - 3.3
Understanding Entrepreneurship
Salient Features of Entrepreneurship
From its operational definitions, entrepreneurship consists of five (5) salient features.

1. It is an art of correct practices.

2. It is a wealth-creating venture.
3. It provides valuable goods and services.
4. It entails opening and managing the self-owned enterprise.
5. It is a risk-taking venture.

The salient features of entrepreneurship provide better understanding of the whole

concept. They also act as the point of reference in determining whether a particular
business endeavor is operating within the realm of entrepreneurship.

To help you understand better the salient features of Entrepreneurship, kindly read
further in our textbook entitled “Entrepreneurship in Philippine Setting” by Nick L.
Aduana, pages 9 – 17.
Theories on Entrepreneurship

A theory is a generalization that explains a set of facts or phenomena. It is not an absolute truth. It can be
supported by another observation or proven to be otherwise.

In the process of evaluating the soundness and logic of various entrepreneurship theories, remember that the
scholars who developed or contributed them mostly anchored their concepts on the economic events which were
happening at that time.

These are several theories on entrepreneurship.

1. Innovation Theory

The innovation theory of Joseph Schumpeter considers innovation as the primary factor affecting development.
This theory emphasizes that the primary role of the entrepreneur is to introduce innovation in any of the following
forms:

1. new product
2. new production method
3. new market
4. new supplier
5. new industry structure
2. Keynesian Theory

The Keynesian theory of John Maynard Keynes put so much emphasis on the role of government in entrepreneurial and economic
development, most especially when the economy was experiencing depression. It suggests that entrepreneurial may not be favorable in the
future unless the short-term problem of economic disequilibrium if finally resolved through the active participation of the government.

3. Alfred Marshall Theory

This theory of Alfred Marshall generalizes that the organization plays the most significant role among the different factors of production. He
strongly asserted that there are four (4) factors in the production of goods and services in the economy: land, labor, capital, and organization.
He considered “organization” as the coordinating element. He also regarded the “entrepreneurs” as the prime movers in the organization.

4. Risk and Uncertainty-bearing Theory

This theory is conceptualized by Frank Hyneman Knight. Knight viewed an entrepreneur as an agent of the production process where he/she
connects the producers and the consumers. This theory also states that an entrepreneur faces the risk of uncertainty in the process of
connecting the supplier and the buyer.

There are other theories on entrepreneurship. This does not mean, however, that they are previously to the previously listed theories. Other
theories listed in our textbook are the following:

1. Weber’s sociological theory

2. Kaldor’s technological theory
3. Leibenstein’s gap-filling theory
4. Kirzner’s learning-alertness theory
Entrepreneur and Ordinary Business Activity
Entrepreneur and Ordinary Business Activity

Entrepreneurship and the activities of ordinary small businesses differ in the

following areas:

1. Motive in opening a business

2. Perception of risk in the business
3. Reactions to changes in the environment
4. View on competition
5. Vision for development and growth
6. Horizon of business operation
7. Sources of business funds
 AREA ENTREPRENEURSHIP
1. Motive in Opening - An entrepreneur starts a business
a Business venture based on entrepreneurial
concepts and principles.
- with the aspiration to become
successful.
- perceived as a wealth-creating venture
that will ultimately improve the life of the
entrepreneur.
2. Perception of Risk - An entrepreneur takes and faces the
in the business business risk squarely.
- considers risk as inherent in the
business venture, prepares the business
for it, and finds ways to minimize its
effects.
ORDINARY SMALL BUSINESS
- The owner of an ordinary business' primary
goal is making it his/her source of livelihood.
- becomes a major provider of the family for
their financial requirements. The table below shows the difference betw
Entrepreneurship and Ordinary Small busin
- basic motive is earning profit.
- The owner of an ordinary small business
believes that the business risk is a deterrent
to the operation of the business and MUST be
avoided.
 AREA ENTREPRENEURSHIP ORDINARY SMALL BUSINESS

1. Motive in Opening - An entrepreneur starts a business - The owner of an ordinary business' primary
a Business venture based on entrepreneurial goal is making it his/her source of livelihood.
concepts and principles.
- becomes a major provider of the family for
- with the aspiration to become their financial requirements.
successful.
- basic motive is earning profit.
- perceived as a wealth-creating venture
that will ultimately improve the life of the
entrepreneur.

2. Perception of Risk - An entrepreneur takes and faces the - The owner of an ordinary small business
in the business business risk squarely. believes that the business risk is a deterrent
to the operation of the business and MUST be
- considers risk as inherent in the avoided.
business venture, prepares the business
for it, and finds ways to minimize its
effects.

3. Reactions to - The entrepreneur reacts POSITIVELY - The owner of an ordinary small business
changes in the to the changes in the environment. remains passive and static to changes in the
environment environment.
- changes in the business environment
Misconceptions on Entrepreneurship

Entrepreneurship has its fair share of misconceptions, the basic of which is equating it
with the activities of ordinary small businesses. Listed below are some common
misconceptions on entrepreneurship. Knowing them will enable you to understand the
concept of entrepreneurship and differentiate it from the activities of ordinary small
businesses.

1. Entrepreneurship applies only to manufacturing businesses.

2. Entrepreneurship applies only to small businesses.
3. Entrepreneurship applies mostly to persons with good educational background in
business courses.
4. Entrepreneurship applies only to a good economy.
5. Entrepreneurship is simply opening a small business.
Importance to the Filipino People

1. It provides guidelines in their

wealth-creating ventures.
2. It helps improve their financial and
social life.
3. It helps broaden their creativity.
4. It helps make their lives happy, fruitful,
and successful.
Importance to the Local Community

1. It provides employment in the community.

2. It creates new demand in the market.
3. It makes substantial contribution to the raising and collection of taxes.
4. It facilitates the movement of the factors of production.
5. It creates new business opportunities.
6. It promotes a peaceful and loving community.
7. It increases constructive competition.

Importance to the Philippine Economy

1. It encourages competitiveness and thereby challenges entrepreneurs to keep improving their

products and services.
2. It helps find an entrepreneurial niche in the world market.
3. It helps hasten the economic recovery process of the Philippines during financial turmoil or
crackdown.
4. It facilitates the smooth flow of money in the local market.
5. It assists the national government in its desire to have favorable economic ratings in the
world market.
Sources of Entrepreneurial Ideas
Sources of Entrepreneurial Ideas

After knowing the importance of entrepreneurship to the Filipino people, the local community, and the Philippine
economy, let us now identify the possible sources of entrepreneurial ideas. The creation of an entrepreneurial idea
leads to the identification of entrepreneurial opportunities, which in turn results in the opening of an entrepreneurial
venture.

The entrepreneurial process of creating a new venture is shown in the diagram below.
Sources of Entrepreneurial ideas are as follows:

1. Changes in the Environment

2. Technological discovery and advancement
3. Government's thrust, programs, and policies
4. People's Interests
5. Past Experiences

To further discuss the sources of entrepreneurial ideas kindly refer to our textbook in Entrepreneurship, pages 46 – 50.
CHARACTER TRAITS COMMON TO SUCCESSFUL ENTREPRENEURS

Entrepreneurial Character Traits

The term character trait in this lesson refers to the mark or attribute that distinguishes an
entrepreneur from the owner of an ordinary small business. The list provided in this lesson is not
inclusive. Neither is there a complete list that will assure the success of an entrepreneur.
Nonetheless, among the factors that largely influence success are the character traits and
competencies of the entrepreneur.

Based on studies conducted by the Small Enterprise Research and Development Foundation
(SERDF) of the Department of Trade and Industry (DTI), there are ten entrepreneurial
characteristics grouped into three (3) major clusters:

1. Achievement cluster
2. Planning Cluster
3. Power Cluster
Achievement Cluster

The achievement cluster consists of entrepreneurial character traits that are directly related to the
entrepreneur’s desire to be an achiever in the field of entrepreneurship. The entrepreneur ordinarily
does not settle for mediocrity but instead aspires for quality. Entrepreneurs are achievers by nature
and they strive to achieve. They feel guilty if they achieve less or nothing at all.

Successful entrepreneurs constantly set the things to be achieved and repeatedly find ways to
achieve them. The entrepreneur who belongs to the achievement cluster is:

1. an opportunity-seeker,
2. committed,
3. persistent,
4. a risk-taker, and
5. efficient and quality-oriented

To further discuss the character traits in the Achievement Cluster mentioned above, kindly refer to
our textbook on pages 55-60.
Planning Cluster

The planning cluster is a set of characteristics of successful entrepreneurs that

basically supports the character traits in the achievement cluster. This does not
mean, however, that there is hierarchy in the cluster of entrepreneurial character
traits.

The concept of planning is inherent in the entrepreneur, being both the owner and
manager of the business. He/She often begins that day with a specific plan and
ends it with a review of the progress or status of the plan. The plan serves as the
blueprint of the actions to be undertaken by the entrepreneur.

The entrepreneur who belongs to the planning cluster is:

1. a goal-setter,
2. an information-seeker, and
3. systematic in planning and monitoring.
To further discuss the character traits in the Planning Cluster mentioned above, kindly refer to our textbook on pages 60-63.
Power Cluster

The power cluster includes a set of character traits that reflect the degree of the interpersonal relations
maintained by successful entrepreneurs in the community. It establishes the relationships of the
entrepreneurs with the suppliers of raw materials, financial institutions, customers, competitors, the
government, employees, and all other stakeholders. The power cluster also defines how the entrepreneurs
project themselves in the business community. It indicates the type and level of their linkages with the
groups they are involved with.

The term power in this discussion does not connote autocratic control of the situation or having that
bossy type of personality in entrepreneurial activities. It simply refers to the ability of the entrepreneur to
maintain the highest degree of interrelationship in the business community and influence others over to
his/her line of reasoning.

In simple terms, the power cluster refers to the relationship and image of the entrepreneur in the
community. An entrepreneur in the power cluster is:

1. a persuasive and positive networker, and

2. self-confident.

To further discuss the character traits in the Power Cluster mentioned above, kindly refer to our textbook on
pages 64-65.
Skills and Core Competencies in Entrepreneurship

Entrepreneurial Skills

Skills are considered as the personal abilities to do things well. They come from the totality
of the knowledge, practice or experience, and aptitude of a person.

Skills are acquired and developed by a person through constant and correct practice. They
connote dexterity, excellence, and expertise in the performance of particular tasks. They are clear
manifestations of the abilities of a person to carry out complex tasks.

What kind of skills should be acquired and developed in a deliberate and systematic fashion by a
person who has an intense desire of becoming a successful entrepreneur?

The answer is simple - entrepreneurial skills. These refer to the set of cognitive, technical, and
interpersonal skills required in the practice of entrepreneurship.
COGNITIVE SKILLS

Cognitive skills refer to the mental ability of the

entrepreneur to learn new things, generate new ideas, and
express knowledge in both oral and written forms.

The cognitive skills of an entrepreneur include of the following:

1. Ability to understand written materials

2. Ability to learn and apply new information
3. Ability to solve problems systematically
4. Ability to create new ideas
5. Ability to innovate new products and procedures or methods
PROBLEM-SOLVING SKILLS

Problems are common in the life of an entrepreneur as he/she manages the day-to-day
operations of the business venture. These problems can be big or small, ordinary or unusual, and
repetitive or non-repetitive.

Whatever the nature, type, or size of the business problem, the entrepreneur must face it,
solve it, and make a decision. In making a business decision, the entrepreneur adopts the
scientific approach instead of making an intuitive decision.

The scientific approach in solving business problems involves:

1. Defining the real problem

2. Gathering information about the problem
3. Formulating the alternative solutions
4. Evaluating alternative solutions
5. Selecting and implementing the optimal solution, and
6. Evaluating decisions

To further discuss the Problem-solving skill mentioned above, kindly refer to our textbook on pages
71-73.
TECHNICAL SKILLS (for entrepreneurs)

Technical skills relate to the knowledge and proficiency in a specialized field like computer technology, accounting, marketing, operation
research, engineering, medical fields, or other related technical fields. It focuses mainly on the mechanical or practical aspect of a
person rather than his/her abstract or theoretical thinking. It also serves as external replica of a person's cognitive skills.

The technical skills of an entrepreneur include proficiency and ability, among others, in the following areas:

1. Information Technology
2. Feasibility Study and business plan preparation
3. Technical writing skills
4. Marketing
5. Management and finance

In similar manner, entrepreneurs must develop their technical writing skills to be able to:

1. respond immediately to the problems of customers,

2. negotiate easily with suppliers,
3. make the necessary financial arrangement with creditors, and
4. attract prospective consumers without difficulty.

To further discuss the Technical skills mentioned above, kindly refer to our textbook on pages 74-75.
INTERPERSONAL SKILLS

Interpersonal skills are basically about the relationship and interaction of the entrepreneur with
the workers, suppliers, creditors, prospective customers, and other members of the business
community.

Interpersonal skills of an entrepreneur may include:

1. Skills in verbal communication

2. Skill in non-verbal communication
3. Skills in listening
4. Skills in leading
5. Skills in negotiating

They must be developed and enhanced to equip the entrepreneur in:

1. saying what he/she wants to say and how he/she says it;
2. working with his/her workers and employees;
3. relating, negotiating, and dealing with his/her customers, suppliers, and creditors; and
4. communicating his/her ideas, beliefs, values and opinions to the people he/she works with.
ENTREPRENEURIAL CORE COMPETENCY

Entrepreneurial Core Competency is a combination of entrepreneurial concepts and principles,

entrepreneurial character traits, and entrepreneurial skills that provide and become the ultimate source of
competitive advantage of the entrepreneur.
 The Entrepreneurial Competency
Competitive Advantage refers to the strategic position and condition of the
entrepreneurial venture that:
1. provides the necessary attributes to outperform competitors,
2. distinguishes the venture from competitors,
3. achieves superior performance in the industry, and
4. produces a product or develops production methods that can hardly
be copied by competitors.
Preliminary Activities of
Entrepreneurial Venture
Creation
3.5
Learning Packet Concept Map
THE ENVIRONMENT OF THE ENTREPRENEURIAL VENTURE

An entrepreneurial venture is created out of the business opportunities which the

entrepreneur should seek to exploit. These business opportunities emerge from
the entrepreneurial ideas that arise from the changes in the environment,
government policy, or technological advancements.

The entrepreneur needs to possess the necessary entrepreneurial

character traits, skills, and competencies before exploiting the business
opportunities. Remember that the business does not operate in a test tube or a
cylinder but in an environment that consists of three (3) layers:

1. Physical environment
2. Societal environment
3. Industry environment
Physical Environment

The first layer of the environment is the physical or natural environment. It is composed of the
natural elements that are inherent in the Earth. It is divided into climate, physical resources, and
wildlife. These three natural elements of the physical environment have significant contributions and
effects to the business venture. Prospective entrepreneurs should critically evaluate them before
opening their business.

To further discuss the parts of the Physical environment mentioned above, kindly refer to our textbook on pages 86-87.
Societal Environment

The societal environment is generally composed of social, political, cultural, economic, legal, and
technological forces. Studies reveal that there is a positive relationship between the evaluation of the
societal environmental and the favorable operating performance of the entrepreneurial venture. That is why,
it is highly advised that the entrepreneur should critically evaluate the effects of changes in all the forces of
the societal environment, the critical evaluation and thorough study of the environment where the business
operates is technically called environmental scanning.
 The Societal Environment Surrounding the Business

Social Forces are elements in society resulting from human interactions that can influence the thoughts, behavior, attitude, actions, and even
the beliefs and customs of the people. Social forces include the following: 1. values; 2. traditions; 3. literacy level; and 4. consumer
psychology.

Political Forces are the various elements usually comprising the of the political parties, political systems, and other related political
groups that substantially influence the political stability of a country. In the Philippines, the political forces of the macro-environment have
major and essential influence on business. Even foreign investors are very watchful of the political atmosphere in the country and the
moves of the Philippine government.

Cultural Forces basically refers to the integrated characteristics of a group of people or ethnic group in a particular society.
Cultural forces include the following: 1. Religion; 2. Language; 3. Beliefs; 4. Customs; and 5. Education.

Economic Forces are factors which are primarily caused by changes or movements in the Philippine economy that have direct or
indirect effects on the entrepreneurial venture. Economic forces include the following: 1. Interest rates; 2. Inflation rates; 3. Fiscal
policies; 4. Monetary policies; 5. Income; 6. Exchange rates; 7. Employment; and 8. Consumer confidence.

Legal Forces are the elements and bodies that are directly involved in the legislation and interpretation of laws and ordinances
directly affecting the business.

Technological forces basically refer to the trends and developments in computer and information technology that have impact on
business. These occur almost every day.

To further discuss the different forces of the Societal Environment and Environmental Scanning mentioned above, kindly refer to our
textbook on pages 90-96.
Industry Environment

The industry environment is the external environment layer where the trends and changes are easily and immediately felt by the
business. The industry environment is considered the immediate environment of the business where it conducts its various operational
activities. Industry forces include the following: 1. Government; 2. Suppliers; 3. Customers; 4. Competitors; 5. Employees; 6. Creditors.

The Industry Environment and Its Forces

To further discuss the different forces in the Industry

Environment mentioned above including the Industry
Analysis Scanning Tools, kindly refer to our textbook on
pages 100-107.
NATURE AND TYPE OF ENTREPRENEURIAL VENTURE

Forms of Entrepreneurial Venture

The classification of entrepreneurial venture according to form refers to the category of the business according to the number of
owners. The classification of business ventures according to form are as follows:

1. Sole proprietorship
2. Partnership
3. Corporation

A sole proprietorship is a business venture owned by one person only. Most of the small businesses operating in the Philippines
are sole proprietorship, which is highly encouraged among entrepreneurs.

The characteristics of sole proprietorship are as follows:

1. It is easy to form and manage.

2. It is a simple business operation.
3. It has a limited pool of resources.
4. Its growth is limited.
5. The owner has unlimited liability.
A partnership is a business venture that is owned by two or more persons. The
owners are usually called partners. Whatever profit or loss that results from the
entrepreneurial operation is divided between or among the partners. All the partners
may contribute money, property, or industry, their contributions become a common fund
of the partnership.

A corporation is an entrepreneurial venture formed by at least five (5) but not

more than fifteen (15) persons. A corporation can either be stock or non-stock, profit or
non-profit, and domestic or foreign. The persons originally forming the corporation are
called incorporators.
Nature of Entrepreneurial Venture
The classification of entrepreneurial venture according to its nature are as follows:

1. Merchandising – engaged in the buying and selling of products or goods.

2. Service – provide services to customers.
3. Manufacturing – engaged in producing goods or products.
4. Agriculture – engaged in the production of agricultural goods and animals.
5. Hybrid business – possesses the characteristics and nature of combined types of
business entities.
6. Special corporation – may include cooperatives, joint ventures, and non-profit
organizations.

To further discuss the Nature and Types of Entrepreneurial Venture mentioned above, kindly
refer to our textbook on pages 122-131.
MARKET IDENTIFICATION

Market identification is a strategic marketing approach and process that is intended to define the
specific customer of the product. There are three (3) strategic marketing approaches that will
assist the entrepreneur in defining the specific market of the product. These are:

1. Market segmentation
2. Market targeting
3. Market positioning

Market segmentation is an entrepreneurial marketing strategy designed primarily to

divide the market into small segments with distinct needs, characteristics, or behavior. The
commonly used methods for segmenting the market are: 1. Geographic segmentation; 2.
Demographic segmentation; 3. Psychological segmentation; and 4. Behavioral segmentation.

To further discuss Market Segmentation and its different methods mentioned above, kindly refer to our
textbook on pages 141-144.
Market targeting is a stage in market identification process that aims to determine the set
of buyers with common needs and characteristics. They are the market segment that the
entrepreneurial venture intends to serve. In this phase, the entrepreneur has already divided
the total market and is now in the process of: 1. Evaluating each market segment, and 2.
Selecting the target market segment or segments to serve.
Market Positioning refers to the process of arranging a product to occupy a clear,
distinct, and desirable place in relation to other competing products in the mindset of target
customers. It is considered the last stage in the product identification process after the
entrepreneur has conducted market segmentation and has already identified the particular
segment to serve.

The process of determining the market position of the product includes the following
steps:

1. The entrepreneur determines if the market position is distinct from others.

2. The entrepreneur evaluates the advantages or benefits of every possible market
position.
3. The entrepreneur decides on the market position.

To further discuss Market Positioning, kindly refer to our textbook on pages 156-159.
CONSUMER MARKETING STRATEGIES

Consumer Buying Behavior

The term behavior refers to the reaction of the consumers to changes happening in the environment that
influence their buying decision. The consumer buying behavior is simply the reaction of the consumers to various
events or forces that are happening in the business community which contribute to the decision process.

Determining the buying behavior of the consumers is not easy. It may take several wild guesses to predict
their reactions and responses to the stimuli. Some relevant questions on consumer buying behavior are as
follows:

1. What are the taste and preferences of the consumers?

2. What makes the consumers buy or not buy the product?
3. What factors influence the consumer buying behavior?
4. How does the consumer decide in buying the product?

Various studies have determined some degree of relationship between the environmental factors and the
buying behavior of the consumers. The most common of these are the environmental factors, buying decision
process, and marketing mix. In addition, the buying decision process may also contribute in determining the
buying behavior of the consumers.

To further discuss Consumer Buying Behavior, kindly refer to our textbook on pages 164-169.
Entrepreneurial Research on Consumer Buying Behavior

Types of Entrepreneurial Research

There are several dichotomies in the classification of the types of research endeavor. They can be
classified as exploratory, descriptive, and casual research.

Exploratory research is considered the preliminary research work conducted by an entrepreneur that
is primarily designed to gather baseline information to be used in solving a problem or forming a hypothesis.

Descriptive research is conducted by the entrepreneur when the foremost objective is to describe the
present buying behavior of the consumers in terms of environmental factors, buying decision process, and
marketing mix.

Casual research or correlational study is conducted by an entrepreneur when the objective is to

determine whether the buying behavior of the consumer is caused by some environmental factors. In this study
the entrepreneur must test whether the hypothesis is true or not by determining the relationships between the
buying behavior and other variables of the study. In casual or correlational study, there is a cause-and-effect
relationship between or among the variables.
Research Data

Research data refers to the kind of the necessary information to be gathered in answering the objective of
the research work. They can be classified either as quantitative or qualitative data and primary or secondary
data.

Quantitative data can be counted and mathematically computed. They are expressed in numerical
values. Examples are as follows:

1. Income of the consumers

2. Sales volume of the product
3. Age of consumers
4. Number of units produced

Qualitative data are generally descriptive data and hence most cannot be counted. Some examples
of qualitative data are the following:

1. Ethnic or tribal group of where the consumers belong

2. Perception of the consumers
3. Gender of the consumer
4. Dominant culture of the segment market
Primary data are research data sourced by the entrepreneur directly from the consumers belonging in
the market segment. The subject being studied by the entrepreneur is the consumers and their buying
behavior. Hence the date that come directly from the subject are considered primary data. Commonly
used research methods of gathering primary data are survey, experimentation, and observation.

Secondary data are data previously gathered by another researcher for other purposes and now
exist on other sources. Examples include the following:

1. Data gathered by marketing associations and included in their publications

2. Data collected from the survey conducted by the National Statistics Office (NSO) and published in its
website
3. Data gathered by the Bangko Sentral ng Pilipinas (BSP) and included in the BSP annual report.
Research Instrument

The entrepreneur does not simply gather data based on his/her whims and
caprices but through the so-called research instrument. Commonly used
research instruments to collect data are the survey questionnaire, personal
interview, and focus group discussion.

Types of Buying Behavior

The buying behavior of Filipino consumers may differ significantly from that
of foreign consumers. This is largely due to the different ethnic or racial groups with
different cultures, traditions, beliefs, religions, and customs. The buying behavior of
Filipino consumers may be classified as follows: 1. Complex; 2. Simple; 3.
Brand-sensitive; and 4. Price-sensitive.
THE MARKETING MIX The 7Ps in Marketing
The marketing mix refers to a mode,
means, or tool used by the entrepreneur to position
the product in the target market segment to
efficiently and effectively deliver it to the consumers
and to convince them about the benefits that they
will derive from buying the product. It is also
known as the “Ps” in marketing.

The marketing mix basically addresses the

following questions:

1. How can the target consumers be influenced

to buy the product or service?
2. What marketing survey must be adopted to
convince the consumers that the product or
service being offered satisfies their needs?

To further discuss the 7Ps in Marketing, kindly refer to our textbook on pages 185-195.
 THE CONCEPT OF NEEDS, WANTS AND BRANDING

Needs and Wants

The term needs refer to the things that a person must have in order to survive. These include food, clothing,
and shelter among others. On the other hand, the term wants refer to the things that a person must have in order to
be happy, comfortable, and satisfied. Therefore, as an entrepreneur, you must produce and sell a product that will
satisfy both the needs and wants of the consumers.

Branding

Brand names play a significant role in the positioning of the product. Brand refers to the name, design, color,
symbol, quality, features, or a combination of these elements that make the product separate and distinct from similar
products of the competitors.

Branding has been considered by experts in the field of marketing and entrepreneurship to be another
marketing strategy of product positioning. The brand carries the attributes, benefits, and even values of the product. It
communicates to the consumers the relevant information about the product. It provides the specific perspective of the
product to the consumers. Because of the significant role of brand name in the minds and buying behavior of the
consumers, companies are printing their brand names, logos, and colors on their products.
WLP 4.2
INTRODUCTION TO BUSINESS PLAN PREPARATION
The business plan is prepared using a scientific approach in determining possible business situations considering the different
perspectives of people who are interested in the business. Though the perspective of the entrepreneur has the major influence on the
business plan, he/she nonetheless must still consider the views of the customers, creditors, and even the employees and staff. He / She
must gather sufficient and relevant information to support any perception or conclusion.

The business plan is actually the roadmap of the new business. It is the roadmap of the entrepreneur. It is only the single written
document that must be prepared before opening a new business or expanding an existing business. It provides a clear direction to any
uncertain business endeavor.

In general, two major tests are conducted every time a new business idea is created, namely, the test of possibility and the test of
feasibility. The test of possibility on the new business should have positive results, so that the next test, which is the test of feasibility or
viability, can be conducted. The primary objective of the feasibility study is to determine whether the proposed business is feasible or not
in all areas. If the outcome of the feasibility study is positive, then the entrepreneur prepares the business plan.

Business plan, is defined as a detailed and integrated written document that describes the various activities involved in opening
and operating a new entrepreneurial venture.
Major Parts of the Business Plan
Though there are no universally accepted standard forms or structure of the business plan, the
textbook that we are referring, Entrepreneurship in Philippine Setting, adopts the following format for
the major parts of the business plan:

1. Introduction
2. Executive summary
3. Environmental analysis
4. Business description
5. Organizational plan
6. Production plan
7. Operation plan
8. Marketing plan
9. Financial plan
10. Appendix
Introduction

The introduction presents the general perspective of the business. It may

consist of one to two pages. It includes, among others, the following
sections:

1. Proposed name of the business

2. Address of the business
3. Name of the owner or owners
4. Description of the business
5. Location of the business
6. Funding requirement and source

To further discuss the sections of the Introduction mentioned above, kindly

refer to our textbook on pages 213-214.
Executive Summary
The executive summary is the next major part of the business plan after the introduction.
It points out the overall highlights of the business plan as well as a bird’s-eye view of its
sections. However, the executive summary must not, in any manner, provide a summary of the
different major sections of the business plan. It must be written in simple language that can be
easily understood and at the same time attract the attention and influence the decision of the
reader.

This chapter must include the following sections:

1. Vision, mission, goals, and objectives of the business

2. Business model
3. Business and product position
4. Wealth improvement approaches
5. Parties supporting the business

To further discuss the different sections in the Executive Summary mentioned above, kindly refer to our textbook on pages 222-223.
Environmental Analysis
The next major part or section of the business plan after the executive summary is the
environmental analysis. It is a strategic tool that helps determine the external and internal
factors affective the performance of the business. These factors may be political,
economic, social, or technological in nature. The environmental analysis may consist of at
least 20 pages including the graphical representations, tables, and computations. This
section is considered as the heart of the business plan.

In today’s competitive business environment, an environmental analysis is already a

necessity. It is perceived as the basic element for business survival. It may consist of
global analysis, societal analysis, and industry analysis.

To further discuss Global analysis, Societal analysis, and Industry analysis mentioned above, kindly refer to our textbook on pages
224-227.
Business Description
The business description sections present the nature and form of the business to be
undertaken, and may cover two to three pages. As to nature, the business may be a
merchandising, services, manufacturing, or a hybrid. The description must include the innovative
features of the business. As to form, it may either be a sole proprietorship, a partnership, or
corporation. The reason/s for the selection of the form must be indicated.

In case the study is about an already existing business, the present status of the business
must be provided, including the intended innovation.

In addition, the business description also includes the following information:

1. Product or service that it plans to produce or serve

2. Various plant and office equipment
3. Size of the proposed business
4. Future parties with whom contract may be necessary
5. Personnel requirement
6. Administrative operation
Organization Plan

The organization plan provides a detailed description of the business in terms

of the following:

1. Form of the business organization

2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements

To further discuss the sections of the Organization Plan mentioned above,

kindly refer to our textbook on pages 234-235.
Production Plan
The production plan presents or describes activities related to the production of goods. This
section is the result of the industry analysis, particularly the study of supply and demand and consumer
behavior.

The production plan usually includes the following:

1. Production schedule
2. Production process
3. Processing plant and equipment
4. Sources of materials
5. Production cost

This section basically applies to manufacturing entities. For service entities, this section must be
modified and labeled as Service Provision Plan.

To further discuss the sections in the Production Plan mentioned above, kindly refer to our textbook on
pages 236-237.
Operation Plan

The operation plan is a major section of the business plan that outlines the various activities,
from the acquisition of raw materials to the delivery of the products to that target consumers.

The operation plan commonly covers the following areas:

1. Evaluation of suppliers
2. Materials requisition and receiving procedures
3. Storage and inventory control system
4. Shipment system and control
5. Functions of support services

To further discuss the sections in the Operation Plan mentioned above, kindly refer to our textbook on pages
238-239.
Marketing Plan
The marketing plan details how the proposed business will sell its product to the target
consumers. It may consist of some or all of the following important sections:

1. Product
2. Place
3. Price
4. Promotion
5. People
6. Packaging
7. Positioning

Basically, the business plan describes the factors of the marketing mix in its various
sections, such as product and people in the business description section, place or location in
the introduction, and positioning in the environmental analysis section.
Financial Plan
The last major section of the business plan is the financial plan. It accumulates and describes all
the date expressed in monetary units from the other sections of the business plan. For example, the
amount of salaries that appears in the projected statement of comprehensive income comes from that
organization plan, and the cost of machineries and equipment that appears in the noncurrent asset section
of the projected statement of financial position comes from the production plan.

The financial plan simply collates and describes the various sets of information derived from the
other sections of the business plan. It is composed of the following important areas:

1. Major assumptions
2. Projected statement of comprehensive income
3. Projected statement of cash flows
4. Projected statement of changes in equity
5. Projected statement of financial position
6. Financial statement analysis

To further discuss important areas of Financial Plan, kindly refer to our textbook on pages 246-247.
4.3
What is a Financial Plan?

The financial plan includes the financial projections of the new venture. First, it must provide a summary of
the projected sales, the cost of goods sold, and general and administrative expenses of the business, at least for
the first year, and typically for the three years. Second, it must anticipate the amount and timing of expected cash
inflows and outflows over a period of several years so as to ensure that the business will have sufficient working
capital to sustain operations. Third, it must provide a summary of the assets the business will own, its projected
liabilities, and the potential retained earnings.

Simple Bookkeeping

The business performs various activities every day starting from the day it is created until it ceases
operation. The volume of transactions of the business depends entirely on its size, complexity, and scope. This
lesson introduces the simple bookkeeping procedures that will help future entrepreneurs to record the different
business transactions of their small proposed entrepreneurial ventures. Complicated business transactions
involving investment, derivatives, mergers, or consolidations of businesses are discussed in higher accounting
subjects.
Bookkeeping refers to the recording of business transactions in the books of the business. It is based on the premise that
business transactions must be properly recorded. However, only those business transactions that are considered quantifiable
are given accounting recognition. A transaction is considered quantifiable when it affects the elements of accounting, namely,
assets, liabilities, capital, income, and expense. In addition, a transaction is given accounting recognition when its effect can be
expressed in peso.

Bookkeeping involves the chronological writing or recording of business transactions and events in the books of accounts
for the first time. Chronological recording implies that the business transactions are written in the book according to the order of
their occurrence; hence the first transaction will be recorded first.

The term transaction in this context refers to events where there are exchanges of values that are measurable in one
common denominator. In this case, the Philippine peso. All business transactions are recorded in the books of accounts and
not in an ordinary bond paper or yellow pad. The two (2) books of accounts are the journal and the ledger. The journal is the
book of original entry, while the ledger is the book of the final entry. As such, all business transactions recorded first in the
journal and later transferred to the ledger.

To further discuss the guidelines in using the journal, kindly refer to our textbook on pages 255-256.
 Two-Column General Journal

Account Titles

The recording of business transactions involves the use of account titles. The account title provides the description of the type and nature of
the business transactions. The account titles are grouped into five (5) categories technically referred to as the accounting elements. The five
categories of accounts or elements of accounting are as follows:

1. Assets – refer to everything that the business owns that can be used to create value. Assets are further classified as Current and Fixed
Assets.
2. Liabilities - represent everything that the business owes to banks and other creditors. Those that must be paid within the year are
current liabilities, while those that must be paid beyond one (1) year can be considered long-term liabilities.
3. Capital – refers to the wealth in the form of money or other assets owned by a person or organization or available or contributed for a
particular purpose such as starting a company or investing. Other terms for capital are Owner’s equity or Shareholder’s equity which
also refers to as the excess of all assets over all liabilities or also known as the net worth of the business.
4. Income – refers to the money the business earns from selling a product or service, or from interest and dividends on marketable
securities.
5. Expenses – are expenditures that allow a company to operate; it reduces the net assets of the company.
Asset Account Titles

The following are the typical asset account titles that are normally used to record business transactions of small business:

1. Cash – describes money, either in paper or in coins.

2. Accounts receivable – describes collectibles from customers who make sales transactions on credit.
3. Notes receivable - describes collectibles that are supported with promissory noted.
4. Supplies on hand – describes unused office or store supplies.
5. Unused factory supplies – describe unutilized manufacturing supplies.
6. Inventory – describes unsold goods that are intended for sale. The types of inventories for manufacturing business are
Raw materials inventory, Work-in-process inventory, and Finished goods.
7. Equipment – describes tools and equipment like calculators, computers, or any equipment directly related to the
production of goods.
8. Furniture and fixtures – describe assets like chairs, tables, and display cases.

Liability Account Titles

1. Accounts payable – describes the financial obligations arising from goods purchased or services
received.
2. Notes payable – describes the financial obligations supported with notes.
3. Utilities payable – describes the unpaid obligations on light and water consumptions.
4. Salaries payable – describes the unpaid salaries of the workers.
Capital Account Titles

1. Capital – describes the original and additional investment of the owner.

2. Drawing – describes the temporary withdrawal of capital by the owner.

Income Account Titles

1. Service income – describes general services rendered.

2. Rental income – describes the income arising from lease or rent of property.
3. Sales – describe the sale of goods or products to the customers.

Expense Account Titles

1. Salaries and wages – describe the expenses on payments or salaries.

2. Store supplies expense – describes the expenses on store supplies.
3. Taxes and licenses – describe the expense on taxes, permits, fees, and licenses.
4. Utilities expense – describes the expenses on light and water.
5. Travelling expense – describes the expenses on transportation or fare of personnel.
Business Documents

The business transactions that are recorded in the two-column general journal are based on business documents, which
basically support the existence of transactions. All entries appearing in the general journal are fully supported with business
documents. Before any recording process takes place, all the supporting documents must be arranged chronologically.

The most common types of business documents that support transactions and events are as follows:

1. Purchase order is an official business document issued by the buyer to the seller of goods.
2. Invoice is a commercial business document issued by the seller to the buyer.
3. Official receipt is a commercial document that indicates payment or receipt of cash.
4. Delivery receipt is a document that serves an evidence that the goods or services are received.
5. Receiving report is a document used within the business upon receipt of the goods shipped by the courier or forwarder.
6. Check is a document that orders a payment of money from the current account maintained in the bank.
7. Voucher is an internal business document that authorizes the incurrence or payment of obligations.

In the process of bookkeeping, remember the following fundamental concepts:

1. Support all transactions with business documents.

2. Record the transactions using the two-column journal.
3. Use the proper account title.
4. Observe the guidelines when using the two-column journal.
Below is an illustration in journalizing entries as the start of simple bookkeeping:

December 1 Jenny Toledo opened her small laundry shop with a legal trade name approved by DTI as Modern Laundry Center. The business
has been registered as a non-VAT taxpayer. Jenny rented a space for the business at Rizal street, Pigcawayan, Cotabato. The rental fee is
₱3,000.00 per month.

She made the following initial investment:

Cash ₱ 20,000.00

3 units of washing machine 45,000.00

5 units of electric iron 3,000.00

The entry in the journal will appear as follows:

It can be observed that the value

received has been debited and the
value parted with has been credited. In
other words, the debit in all instances
shall be equal to the credit. Hence, the
basic accounting equation that applies
to all types of transactions will be
represented as follows:
Value received (debit) = Value parted with (credit)
Basic accounting equation: Assets = Liabilities + Capital

The values of the washing machines and electric irons are usually evidenced by the official receipts issued by
the seller.

The journal entry appears to have two debit values, while credit has only one value. This type of journal
entry is called a compound entry. In case there is only one debit and one credit, the entry is called a simple
journal entry.

In writing the credit, the account title is indented. For the debit value, the account title is written almost
touching the line separating the date and the Particulars column.

To show more illustrations in journalizing entries, kindly refer to our textbook on pages 259-265.
Classifying

Classifying refers to the grouping of similar business transactions and events. It is the second mechanical phase of the
whole accounting process. In this process, the same information found in the journal will be transferred to the ledger. The
process of transferring the same information from the journal to the ledger is technically called posting.

The ledger is another book of accounts used to record business transactions and events. It is considered as the book
of the final entry. The ledger basically acts as an accounting tool that accumulates all the necessary information prior to the
preparation of the financial statements.

The ledger appears like a capital letter T. It has two (2) sides, namely the debit side and the credit side. Both sides,
however, consist of the same columns which are as follows:
The Ledger
1. Date
The account title of the ledger is written at the center. On the right most side is the
2. Particulars
page number of the ledger. Each account title must have a separate ledger.
3. Folio or post reference
4. Amount
Trial Balance

After all the accounts in the ledger have been

added and the balances have been computed, the
next bookkeeping procedure is to prepare the trial
balance. Trial balance is the listing of the debit or
credit balances of accounts from the general ledger
with following purposes:

1. To prove the equality of debit and credit.

2. To determine the nominal accounts to be
closed.
3. To serve as a basis for making draft financial
statements.
4.

Trial Balance for Modern Laundry Center

Preparing Projected Financial Statements

Financial statements are the summary of all transactions that

are carefully recorded and transformed into meaningful
information. It also shows the permanent and temporary
accounts.

In preparing the financial projections, the

entrepreneur must make reasonable about revenues, costs,
and expenses. Therefore, he/she must prepare, among
others, a sales forecast and an operating budget, which will
feed into the projected income statement.

Below shows a sample of how sales is being

forecasted of a hypothetical shoe retailer named Pinoy
Corporation. For illustration purposes, we assumed that
each pair of shoes sells for ₱1,000.00. The reality is
that a retailer will sell different types of shoes at different
prices. Therefore, the sales forecast must consider the
product line and the varying price levels.
Sales forecast of Pinoy Corporation, First Year
by Month
In the second table, we can see the Pinoy Corporation’s proposed operating budget. This budget assumes that the company will have
five (5) employees who will each be paid ₱15,000 per month. It also assumes that the business will incur the following expenses: monthly
rental of ₱30,000 for office and store space, electricity and water bills amounting to ₱4,000 per month, a fixed sales expense of ₱15,000
per month for promotional activities, insurance expense of ₱2,000 per month, and depreciation expense of ₱5,000 per month.

Operating Budget of Pinoy Corporation for the First Three Months

Projected Income Statement

The sales forecast and operating budget illustrated above will then be transferred to the projected income statement, which summarizes the profit
(or loss) the company expects to generate within the year. This income statement also includes an estimate of the cost of goods of sold, which,
as shown in the next table, is assumed to be 40% of total sales per month.

Pinoy Corporation, Projected Income Statement, First Year by Month

In addition to the monthly projections, the entrepreneur must also prepare a three-year projection of income. The total for Year 1 were already
computed in the table above, and are simply transferred to the appropriate column in table shown below. Year 2 and Year 3 figures were
determined, using a separate set of assumptions. In the sample below, most of the items under operating expenses are assumed to remain
constant in the next 2 years. However, salary expense will increase on the second year because an additional employee is expected to be
hired; and will increase again on the third year because of the anticipated 5% salary increase. Sales expense is also expected to increase by
10% on the second year.

Pinoy Corporation, Projected Income Statement, First Three Years (in thousand pesos)
Cash Flow Projections

After projecting the income, the entrepreneur

should also anticipate the cash inflows and outflows. It
must be noted that profit and cash flow are not the same
thing. That is because there are transactions that do not
necessarily result into actual payments.

Calculating cash flow is actually straightforward,

as shown in the sample calculation below. For
the first year, this can be done on a monthly basis
so that the entrepreneur will be able to anticipate
his cash needs.

Sample Calculation of Net Cash Flow

Projected Balance Sheet

The entrepreneur must also be able to project the condition of his business by the end of the first year. This can be done by preparing a projected
balance sheet, which summarizes the assets, liabilities, and net worth of the business.

Below is a sample of a hypothetical corporation’s projected balance sheet:

FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis is used by the management for monitoring performance and for identifying strategies to further improve the
company’s operations.

Breakeven Analysis

Breakeven refers to the volume of sales at which the business neither makes a profit nor incurs a loss. The breakeven sales point
indicates how many units of the product the business must sell to cover both variable and fixed costs and expenses. Whenever sales exceed this
point, the business earns profit, as long as the selling price remains above the costs of producing each unit (variable cost). The breakeven
formula is shown below:

When calculating the break-even, the entrepreneur must use his judgment in determining which of the costs are variable, and which are
fixed. This will depend on the nature of the business. The following can be classified as fixed costs: salaries, rent, utilities, sales expense,
insurance, and depreciation. Variable costs, which typically include direct labor and materials, are captured in cost of goods sold.

Other financial statement ratio analysis also includes the following:

1. Profitability ratios - Profitability ratios include: Gross profit rate, Operating profit margin rate, Net profit margin rate, and Return on
investment.

2. Liquidity ratios - Liquidity ratios include the following: Current ratio, Acid test ratio, Receivable turnover, Average collection period, Inventory
turnover, and Average sales period.
Business Plan Making
4.4 - 4.5
Finalization of the Business Plan

In this learning packet, you will now be finalizing your business proposal or business plan which contains all of
the necessary sections and details that were discussed in our previous discussions. Your final business plan
can be prepared by a Sole Proprietor (YOU as the sole owner of your business) or by PARTNERS (there can be
2 to 3 owners of your business).

In making the final copy of your business plan kindly follow this format:

Paper Size: Long bond paper

Margins: Left – 1.5”, Top, Bottom and Right – 1”

Font Size: 12

Font Style: Times New Roman

Line Spacing: 1.5

 1st Page: Cover Page contains the following:

1. School Name as your heading

2. Complete Address of the School
3. Senior High School Department
4. School Year 2020-2021
5. Logo of the proposed business (must it original)
6. Business Name
7. Address of the proposed business
8. Proposed by: (Student Name/s) and section below the name/s
9. Proposed to: Teacher’s name below

2nd Page: includes the following: 1. Table of Contents, 2. List of tables, and/or List of Figures

The rest of the pages: All the sections of the business plan