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Entrepreneurship
Lesson 2:
Entrepreneurship
 It comes from the pioneering work of
Joseph Schumpeter which eventually
resulted to the concept of creative
destruction.
 The ability to be able to know what
product and service are needed by
people, and to be able to provide
these things at the right time, at the
right place and to the right people,
and at the right price.
 According to Dr. Ralph Sorensen
who premised that it is an art of
creating, launching and growing new
venture business
Entrepreneur
 Is a reference to individual who have
initiated the establishment of
business enterprise
 If you own a business, you are called
business man or woman. If you
manage a business you are called
professional manager. If you bought
a franchise, you are a franchisee.
Entrepreneur’s personality characteristics
and traits:
1. passion for business
 This treat refers to the eagerness to
be involved in commercial activities.
 Without passion you don’t have
energy. Without energy, you have
nothing. - Warren Buffet (owner and
founder, Berkshire Hathaway
Securities).
2. Confidence
 Is a must have trait for entrepreneurs,
who should possess that belief in
themselves and their capabilities to
see things through and get things
done.
3. Self-determination
 Is the belief that one’s fate or destiny
lies really in one’s self his beliefs,
effort and action.
4. Management of Risk
 Entrepreneurs know how to take
risks but these risk are calculated risk
that are well thought out and
considered.
5. Initiative and need for achievement
 Entrepreneurs usually have a great
need to achieve things and to have
accomplishments.
6. Creative
 Entrepreneurs have often been aid to
be creative because that are not just
copying or doing the same routine or
churning out the same product.
7. Seeing the big picture
 Entrepreneurs are able to assess how
particular decisions about operations
or human resources can be affect the
other aspect of the business.
 They realize that specific decisions
in certain areas can affect other
areas, as well as the business as a
whole.
Three basic sources of business risk
1. Demand risk
 Which was explained as the risk that
the product will not be accepted by
the market or the market is much
smaller hat what was originally
estimated to be.
2. Competitive risk
 Which was stipulated as the risk that
may be able to replicate the business
model and capture the market ahead
of the proponent.
3. Capability risk
 Which is related to the capability of
the firm, this considers the
possibility that the product or
services of the firm would fail to
deliver the value proposition that the
customers are willing to pay for.
Top 5 reasons why Filipinos don’t go into
business
1. Money – magiipon muna kao kulang
ang pera ko. (I don’t have enough
cash).
2. Time – madami pa akong inaasikaso
(im so busy with a lot of things)
3. Skills – hindi ako marunong mag-
business, baka malugi lang ako. (I
don’t know how so im afraid I might
fail).
4. Opportunity – hindi yan para sakin.
(that business is not for me).
5. Connection – wala akong kakilala
masyado (I don’t know a lot of
people).
Business plan
 It serves as a learning experience and
forces the entrepreneur to organize
her or his thoughts, experience and
plans
 Like a road map, It directs the
entrepreneur to his desired
destination. It answers the following
questions: Where am I going? Where
I am now? How will I get there?

Reasons for creating a plan
1. Vision
2. Opportunity assessment
3. Financing
4. Market assessment
5. Implementing the plan
6. Outside failure .
Business failure
1. Poor cash flow control
2. Lack of managerial experience,
training, skills
3. Undercapitalization
4. Inventory control problems
5. Trade area competition
6. Poor site location (retail)
7. Unified target market
8. Pricing strategy
9. Inadequate long term- plan
10. Inadequate financial control
Basic components of business plan can be
organized as follows:
1. Providing a description
2. Choosing the best marketing strategy
3. Identifying the management plan,
and;
4. Analyzing the finances needed to
start the business and make sure it
successful.
Elements to determine market potential
1. Market size
 The first and most important factor
to consider while determining
potential is the market size of your
product. Market size is the potential
of all companies put together.
2. Market growth rate
 You have to forecast based on the
differences between product line
extension and a completely new
concept in the market. Samsung has
the Samsung galaxy series which is a
pioneer series of Samsung.
3. Profitability
 To understand the market potential.
If the business is going to give low
profitability, then the volumes need
to be high
Calculation of profitability to determine
market potential can use four main elements
 ROI- Return on investment
 ROS – Return sales
 RONA – Return on net assets
 ROCE – return on capital employed
You can use any of the calculations
mentioned above to calculate the likelihood
of profitability and to determine how
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profitable the industry or product is going to
be.
4. Competition
 You need to know and understand
the competition in an industry to
determine the market potential for
the product you are going to launch.
If the industry has high competition,
the entry barriers are going to be
high and at the same time.
Establishing yourself will require
deep pockets.
5. Product and Consumer type
 Is your product a repeat buying
product or one time sale only? In the
above examples, Sopa and shampoo
is a repeat buying product. But once
you buy a refrigerator, I doubt you
will need another for the next 10
years. So in you whole life time, you
will buy 8-10 refrigerators at the
max.
 But in a year, you are likely to buy
40-50 soaps daily individually.
That’s 300-400 soaps per individual
in their livelihood. Multiply that by a
billion and you can understand the
market potential of the soap industry.
 (ex – fmcg products) or if the
business is going to give low
volumes, then the profit needs to be
higher ( ex – industrial goods)
Parts of Business Plan
1. Executive Summary
 The first section should be concise
overview of your business plan. It
should be short, and must be well
written. Your goal is to draw readers
in so they want to learn more about
your company.
The executive summary for business plan
should include:
 Your business name and location
 Products and/or services offered
 Mission and vision
 The specific purpose of the plan (to
secure investors, set strategies, etc)
Company description
 This high-level view of your
business should explain who you
are, how you operate and what your
goals are
 The company description
should feature:
 The legal structure of your
business (corporation, sole
proprietorship, etc)

 A brief history of the nature
of your business and the
needs or demand you plan to
supply
 An overview of your
product/services, customers,
and suppliers
 A summary of company
growth, including financial
or market highlights
 A summary of you short and
long term – business goals,
and how you make plan to
make a profit.
3. Product and Service
 Clearly describe what you are
selling, with a focus on customer’s
benefits
 Include details about
suppliers, product or service
costs, and the net revenue
expected from the sale of
those products or services.
Consider adding pictures or
diagrams.
In general, in this section should include:
 A detailed description of your
product/service that emphasizes
customers benefits
 An explanation of the market role of
your product/ service and advantages
it has over competitor
 Information about the product/
services life cycle
 Relevant copy right patents, or trade
secret data
 Research and development activities
that may lead to new products and
services
4. Market Analysis
 Show your industry knowledge, and
present conclusion based on thorogh
market research
 Placed detailed findings of any
studies in an appendix.
 Your market analysis should include
 A sketch of targeted customer
serments, including the size and
demographics of each group
 An industry description an
outlook, including statistics
 Historical, current and projected
marketing data for your
product/services
 A detailed ecaluation of yyour
competitors, highlighting their
strengths and weaknesses
5. Strategy and Implementation:
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 Summarize your sales and marketing
strategy, and how you'll implement
them with an operating plan.
This section should include:
 An explanation of how you'll
promote your business to customers
and enter the market
 Details about costs, pricing,
promotions, and distribution/logistics
 An explanation of how the company
will function, including the
operations cycle (from acquisition of
supplies through production to
delivery)
 Information on sources of labor and
number of employees
 Data on operating hours and facilities
6. Organization and Management Team
 Outline your company's
organizational structure. Identify the
owners, management team and board
of directors.
Include the following:
 An organizational chart with
descriptions of departments and key
employees
 Information about owners, including
their names, percentage of
ownership, extent of involvement
within the company and a biography
listing their background an skills
 Profiles of your management team,
including their names, positions,
main responsibilities and past
experience
 List of any advisors, such as board
members, accountants, and attorneys
7. Financial plan and projections:
 This last section of your business
plan should be developed with a
professional accountant after you've
completed a market analysis and set
goals for your company.
Some of the important financial statements
that should be part of your plan include:
 Historical financial data (if you own
an established business), including
income statements, balance sheets
and cash flow statements for the past
three to five years
 Realistic prospective financial
information, including forecasted
income statements, balance sheets,
cash flow statements and capital
expenditure budgets for the next five
years.

 A brief analysis of your financial
data, featuring a ratio and trend
analysis for all financial statements
SUMMARY:
 Entrepreneurship is the ability to be
able to know what products and
services are needed by people, and to
be able to provide these things at the
right time, at the right place and to
the right people, and at the right
price
 Entrepreneurs are individuals who
have initiated the establishment of a
business enterprise.
 Entrepreneurs should have passion
for business, confidence, self-
determination, risk management,
initiative, creativity, and the view to
see the big picture.
 The three basic risks are demand
risk, competitive risk, and capability
risk.
 Because of Money, Time, Skills,
Opportunities, and Connection
Filipino's don't chose to start a
business.
 The element to determine a potential
market are market size, market
growth rate, profitability competition
and product and consumer type.
 A business plan directs the
entrepreneur to his desired
destination.
Unique Selling Proposition (USP)
 it is the key to effective selling and
advertising.
 A unique selling proposition (USP,
also seen as unique selling point) is a
factor that differentiates a product
from its competitors, such as the
lowest cost, the highest quality or the
first-ever product of its kind.
 A UCP could be thought of as "what
you have that competitors don't."
 For example: Charles Revson,
founder of Revlon, always used to
say he sold hope, not makeup.
 Some airlines sell friendly service,
while others sell on-time service.
 Neiman Marcus sells luxury, while
Wal-Mart sells bargains.
Here are five steps to determine your USP.
1. List the features and benefits that are
unique about your product or service.
 Do a Google search and compare
your features and benefits with your
direct competitors. Identify the
benefits what sets you apart.
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2. Decide what emotional need is being
specifically met by your product or
service.
 Think about this from your
customer's perspective and add it to
your list.
3. Identify aspects of your product or
service that your competitors cannot
imitate.
 Put a star beside anything that cannot
be easily duplicated, reproduced, or
copied.
4. Create phrases about your unique
product or service that are short,
clear, and concise.
 Use the words from steps 1-3 that
you singled out. Be sure they can be
easily communicated to and
understood by your customers.
5. Answering your customer's primary
question: "What's in it for me?"
 Make it to the point and state it as a
benefit to the customer. Such as:
 Domino's Pizza: "You get fresh, hot
pizza delivered to your door in 30
minutes or less...or it's free."
 Target: "Expect more. Pay less."
 U.S. Peace Corp: "The toughest job
you'll ever love."
 M&M's: "Melts in your mouth, not
in your hand."
 FedEx: "When your package
absolutely, positively has to get there
overnight."
Target Market
 are those who are most likely to buy
from you
 Requirements of Target Market:
 Are your target customers male or
female?
 How old are they?
 Where do they live? Is geography a
limiting factor for any reason?
 What do they do for a living?
 How much money do they make?
Validate customer related concerns:
Customer interviews
 are a common mechanism for
gathering the voice of the customer.
Customer interviews are usually
conducted one-on-one with an
individual customer or with a small
number of people from the same
business or family unit. They provide
an opportunity to get in-depth
information from a single customer,"
writes Kenneth Crow of DRM
Associates.

Focus Groups
 involve a "small number of people
(usually between 4 and 15, but
typically brought together with a
moderator to focus on a specific
product or topic.
 Focus groups aim at a discussion
instead of on individual responses to
formal questions, and produce
qualitative data (preferences and
beliefs) that may or may not be
representative of the general
population.
7 P's of Marketing
1. Product
 What should be done with the
product so that it will be more
attractive than the competitors'
products?
2.Promotion
 What promotional activity should
be done in order to compete with
the promotions of the current
suppliers?
3.Pricing
 What terms of sale will increase the
selling value of the products-n/30,
2/10, n/30?
 What pricing technique can be used
In determining the selling price of
the products?
4. Place or the Channel of Distribution
Pricing Techniques:
a. Cost - Plus Method –
 it is the simplest method. The cost
of the product is figured out and
tacked on a little something for
profit.
b. Market-Oriented Method
 this is not based on cost, but on the
interaction of demand and supply.
c. "Loss" Leader Strategy
 Some products may be sold at
losing preposition to attract
customers.
 to go to their stores. The mark-up is
taken from other products.
d. Psychological Pricing
 Stating the price on a lower scale.
For example: P2.95 instead of
P3.00.
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e. Value for Money Pricing
 this pricing approach is not aimed
at maximizing profit per single
purchase but in bulk of
quantity/frequent sale. This sales
tactic is an ideal mechanism in
tapping potential sales through
more purchases, thus clearing
inventory gluts and crating an
image of fresh supply. This pricing
concept targets either or both the
diet and price conscious consumers.
f. Pricing Factor Segmentation
 the "seller" subdivides the market
into groups responsive to price and
price deals, product quality, etc.
 Ex. No left-over, No sharing buffets
- 50% Discount per pack 50%
Discounts on all products a t
8:45p.m. everyday
g. Marked Down Pricing
 in cases where demand is - limited
and competition is intense, the
usual mark-up pricing approach is
temporarily suspended in favor of a
markdown to capture a segment of
the market. The concept behind the
markdown pricing is the "thought"
that the lower you can make your
price, the more you sell, and you
generate revenues sufficient to
cover costs and provide a profit.
h. Bonus-Pack Pricing
for the end-users, this is commonly
used so that they will buy more
than the required quantity. A good
example is the :
"Buy 34 at the price of 30"
 This describes how one will reach
his customers. He. may use the
services of the middlemen, if his
location is far from his customers. If
this is so, include also in the budget
the compensation which is given to
the middlemen. The compensation
could be in the form of commissions,
fringe benefits, promotional
assistance or other forms.
5. People
 this refers to the salesmen who will
be selling and promoting the
products, Do they know the product?
Are they committed to the company?
Are they motivated and satisfied?
6. Packaging
 a product for market is something
that needs to be anticipated. Don't
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wait until your product is ready to be

shipped to realize that you don't have
the proper packaging for sending it
safely and at a reasonable cost.
Packaging can also influence the
product itself (shape, weight,
solidity)
The 4 rules of product packaging:
 low cost
 protective
 attractive: your packaging is your
first impression. You don't want to
miss it.
 regulations compliant
7. Product Positioning
 is an important element of a
marketing plan. It is the process of
marketers use to determine how to
best communicate their products'
attributes to their target customers
based on customer needs,
competitive pressures, available
communication channels and
carefully crafted key messages.
Brand Name
 is a name applied by a manufacturer or
organization to a particular product or
service.
 Brand names are usually capitalized.
In recent years capitalized name (such
as eBay and iPod) have become
popular. It may be used and protected
as a trademark.
SUMMARY:
 Unique Selling Proposition (USP) is
the key to effective selling and
advertising.
 Target Market is the customer you
want to satisfy.
 The 7 P's of Marketing are product,
promotion, pricing, place, people,
packaging, and product positioning.
 There are various Pricing techniques.
 Brand Name is a name applied by a
manufacturer or organization to a
particular product or service.