ENTREPRENEURSHIP

SECOND SEMESTER - ACADEMIC YEAR 2022-2023

2.5 FINANCIAL MANAGEMENT, PRODUCTION, AND MARKETING FOR YOUR

BUSINESS ENTERPRISE

2.5.1 Financial Management for Your Business Enterprise

Financial capital or funds are essential resources to an entrepreneur. This is the lifeblood
of the business enterprise. As an entrepreneur, you need money to start your business.
You also need money for the development and expansion of your business. In most
cases, small entrepreneurs have inadequate financial capital. Thus, it is important that
you identify possible funding sources.

Far more important, however, is your ability to manage your funds. Since you have scarce
financial resources, there is a need to plan well and control your finances. Without this
ability, your business enterprise will most likely fail. Take note that many business
enterprises have failed simply because their owners lack the competence in managing
and aligning financial resources with their business objectives. While they may have the
money, they do not have the knowledge to efficiently utilize and control.

Financial management therefore refers to activities that are concerned with securing
funding and using it wisely. The entrepreneur as financial manager must determine the
best ways to raise money. Equally important, the entrepreneur should be able to efficiently
use money to realize the goals of the enterprise. Clearly, good financial management
requires planning. It starts with the identification of the financial needs of the business.

Finance, in essence, is the art and science of managing financial resources. In other
words, it involves both individual skills and methods of acquiring and using financial
resources. To be an effective financial manager, it is essential that you have a good
knowledge of economics. Theories of economics like the law of diminishing marginal
physical returns, theory of production and cost, price theory, profit maximization, and the
law of supply and demand provide the necessary knowledge for financial analyses and
decision-making. This is because economics is principally concerned with the proper
allocation and efficient utilization of scarce resources in the production of goods that
would satisfy human needs and wants.

2.5.2 Production of Goods and Services

The creation of goods and services appear to favor big businesses. They have adequate
funds, machines, materials, modern technology, and management specialists to produce
goods and services at lower costs. However, there are some market situations where a
small or even microenterprise has comparative advantages in producing goods and
services.

Production is simply the creation of goods and services. Goods and services are
produced to satisfy human needs and wants. Production can also be defined as the
process of converting economic resources into goods and services. In this process of
transforming resources into products, the principal actor is the entrepreneur. They decide
on the proper combination of resources, such as the application of labor or use of
machinery. The entrepreneur decides to:

1. what to produce?;
2. how to produce it?;
3. and to whom the products are to be sold?

Obviously, though, the ultimate consideration of the entrepreneur is profit and this is only
attainable if consumers are satisfied with the product sold in the market.

Producing a product or service which is new in the market begins with an idea. This idea
is then developed into a product or service by the entrepreneur. This is part of the
entrepreneur's role as an innovator and creator.

Take note that for every production produced, there is a corresponding cost incurred by
the business enterprise. This is referred to as the cost of production, which represents
the payments for the use of the factors of production. The cost incurred affects the ability
and willingness of entrepreneurs to produce more. Take note also that when production
costs is high, the price of the goods sold will also be high. The higher the price of the
goods produced, the lower the demand for such a product will be, since a higher price
means lower purchasing power. Ultimately, a higher price will result to lower sales.

In order to lower the cost of production, entrepreneurs must choose resources that are
abundant because these are generally cheaper than resources that are scare Cheaper
inputs mean lower production costs. Relative to profits, the lower production costs is
favorable to entrepreneurs. It is therefore important to remember the principle of acquiring
minimum costs when producing goods or services while attaining maximum production.

In the production of goods and services, an entrepreneur should bear in mind the quality
of the products created. Quality control is essential to every business enterprise. Quality
control refers to the process of insuring that goods and services are produced in
accordance with their designs and specifications. In other words, the products should
always meet, or even exceed, set standards. Enterprises which have established their
reputations for offering high-quality products and services are very strict on quality control.
Quality has become the central point of their business. In this age of stiff competition,
quality is often the name of the game.

2.5.3 Marketing for Your Business Enterprise

Marketing refers to the set of activities directed at facilitating and accomplishing exchange
between sellers and consumers of goods and services. Take note that marketing is not
simply about selling, although selling is one aspect of it. Marketing is a broader concept
that includes the integration of various functions such as market research, product
development, advertising, customer service, distribution, and selling.

The marketing concept first determines the needs of the customers. Then, a product or
service is developed, which intends to satisfy such a need or want of customers. In short,
marketing is consumer oriented.
It is always important for business enterprises to have a marketing plan. This is an outline
of actions designed to achieve a specific set of goals. A marketing plan must enterprise
be compatible with marketing resources and the external environment of the business.