Entrepreneurship

3 r d Quarter – Reviewer

Core Concepts
Entrepreneur – originates from the French word “entreprendre” which means “to undertake”
Entrepreneurship – comes from the word entrepreneur which refers to a particular field of practice
or process.
Small Business- a business or enterprise that correctly adopts and practices the principles of
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

Salient Features

AN ART OF CORRECT PRACTICES

 Entrepreneurship is an art and not a science.
 It is not governed by fixed and absolute rules unlike science.
 There is a constant change that denotes movement and innovation.
 Entrepreneurship is not static or stagnant.
A WEALTH-CREATING VENTURE
 Entrepreneurship is operating within the concept of wealth creation rather than profit
generation.
 The concept of profit is more applicable in the area of accounting.
 Wealth is defined as the abundance of money, property or possession (Random House
Webster’s Dictionary)

PROVIDES VALUABLE GOODS AND SERVICES

 Entrepreneurship creates economic wealth by providing goods and services to the
consumers. These goods and services must have a value in order to create wealth.
 Valuable goods and services highly satisfy the target buyers in terms of quality and price.

ENTAILS OPENING AND MANAGING THE SELF-OWNED ENTERPRISE

 The entrepreneur open his/her own business under the principle of entrepreneurship.
 Businesses that are being managed by others for the benefit of the owners do not fall within
the sphere of entrepreneurship.
 Entrepreneurship is not about the size of the business but rather about its sole ownership.

A RISK-TAKING VENTURE
 All businesses, whether big or small, are operating within the concept of risk-taking
because of uncertainty.
 Business risks cannot be eliminated. They are inherent in the venture. The risk in
entrepreneurship is called a business risk.
 Entrepreneurs, face the business risks instead of avoiding them.

Theories
Theory – is a generalization that explains a set of facts or phenomena.

INNOVATION THEORY

 Contributed by Joseph Schumpeter, an Austrian economist and political scientist.

 regards economic development as the product of structural change or innovation.
 the force that will propel the revolutionary change.
KEYNESIAN THEORY

 Developed by John Maynard Keynes, a British economist.

 suggests that entrepreneurial activities may not be favorable in the future unless the short-
term problem of economic disequilibrium is finally resolved through the active participation
of the government.
ALFRED MARSHALL THEORY

 Marshall regarded the entrepreneurs as the prime mover in the organization. They are
expected to create new commodities or improve the existing ones.
 He strongly asserted that there are four factors in the production (land, labor, capital, and
organization) of good and services in the economy.
RISK AND UNCERTAINTY BEARING THEORY
 Frank Hyneman Knight, an American economist, conceptualized the risk and uncertainty-
bearing theory of entrepreneurship in his book, Uncertainty and Profit.
 Knight viewed an entrepreneur as an agent of the production process where he/she
connects the producers and the consumers.
WEBER’S SOCIOLOGICAL THEORY
 The entrepreneur is expected to perform the role of a good constituent by executing his/her
entrepreneurial activities in line with good customs and traditions, religious beliefs and
morals.
KALDOR’S TECHNOLOGICAL THEORY
 Developed by Nicholas Kaldor who considered modern technology as an essential factor in
production.
  The entrepreneur is expected to keep abreast with modern technology and find ways to
apply the same in the entrepreneurial endeavour.
LEIBENSTEIN’S GAP FILLING THEORY

 Henry Leibenstein proposed that the primary role of entrepreneurship in any economic
activity is to fill the existing gap.

 Entrepreneurship is responsible for recognizing trends in the market.

 The entrepreneur is expected to possess abilities that will connect the different markets.
KIRZNER’S LEARNING ALERTNESS THEORY
 Israel Kirzner, main proponent of the theory, pointed out spontaneous learning and
alertness as the two major attributes of entrepreneurship in any given economy.
 The entrepreneur must be alert in recognizing entrepreneurial opportunities and the
ignorance of consumers as well.

Misconceptions
COMMON MISCONCEPTIONS
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.
4. Entrepreneurship applies only to a good economy.
5. Entrepreneurship is simply opening a small business.

Misconception: Entrepreneurship is only applicable to manufacturing but not to merchandising and

service.
Truth: Merchandising and providing services are also business ventures.
 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.

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 creates constructive competition.

TO THE PHILIPPINE ECONOMY:

1. It encourages competitiveness and 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
1. Changes in the Environment
 External Environment – refers to the physical environment, societal environment and
industry environment where the business operates.
2. Technological discovery and advancement
 A person with entrepreneurial interest looks at the possibility of business opportunities in
any new discovery or advancement in technology.
3. Government’s thrust, programs, and policies
 The programs and agenda of the Philippine government intuitively address the needs of the
Filipino people.
4. People’s interests
 The interest, hobbies and preferences of people are a rich source of entrepreneurial ideas.
 The rise of amusement parks and nature farms could be a response to the need of people
for fun and relaxation.
5. Past experiences
 The expertise and skills developed by a person who has worked in a particular field may
lead to the opening of a related business enterprise.

Environmental Scanning: Industry Analysis

Government – refers to the system or institution that handles the affairs of a particular country.
Classifications: democratic, autocratic, republican, monarchial or dictatorship type.
The Philippine government is both presidential republican and democratic that promotes
entrepreneurial ventures through its thrusts, programs and priorities.
Suppliers – refer to individual persons or companies that provide the required materials, parts, or
services to the business.
- Have crucial role in the production of goods or services.
Customers – are buyers of goods and services produced or rendered by the business.
Competitors – are the forces that produce, sell or render products or services which are similar to
those of the business.
 - They can be direct or indirect competitors.
Employees – are the workers of the business who are highly responsible for the production of
goods or delivery of services to the consumers.
Creditors – 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.

FIVE FORCES OF COMPETITION

Nature and Type of Entrepreneurial Venture

 Classification of business ventures according to form (number of owners):
1. Sole Proprietorship
A business venture owned by one person only.
2. Partnership
A business venture that is owned by two or more persons. The owners are called partners.
3. Corporation
A business venture formed by at least five but not more than 15 persons.

 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 – provides services to customers
3. Manufacturing – produce goods or products. The “four Ms” in production operations are
manpower, method, machine and materials.
4. Agriculture – engaged in the production of agricultural goods and animals.
5. Hybrid Business – possesses the characteristics and nature of combined types entities.
6. Special Corporation- include cooperatives, joint ventures and non-profit organizations.

Market Segmentation
It is an entrepreneurial marketing strategy designed primarily to divide the market into small
segments with distinct needs, characteristics, or behavior.
Common Methods for Segmenting the Market:
1. Geographic Segmentation
The total market is divided according to geographical locations in the Philippines like provincial
regions, cities, provinces, municipalities, and barangay units.
2. Demographic Segmentation
The market is divided based on the demographic variables of the consumers.
3. Psychological Segmentation
The market is divided in terms of what the customers think and believe.
4. Behavioral Segmentation
The market is divided based on the following variables:
1. Perceptions
2. Knowledge
3. Reactions
4. Benefits
5. Loyalty
6. Responses

Market Targeting

It is a stage in market identification process that aims to determine the set of buyers with common
needs and characteristics.
Factors to consider in the evaluation of market segment:
1. Size of the segment and its expected growth.
2. Existing and probable structures of the segment.
3. Capability of the business.

ENTREPRENEURIAL MARKETING STRATEGY TO USE

Basic Entrepreneurial Marketing Strategies:
 Individual or One-on-One Marketing
 Segmentation Marketing
 Differentiated Marketing
 Concentrated or Niche Marketing
 Mass or Undifferentiated Marketing

Market Positioning
Positioning – simply refers to the act of occupying a certain place.
- refers to the act of placing the business in a specific place in the industry or placing the product in
a certain place in the market.
Business Positioning – refers to the process of determining the place of the business in the
industry.
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 consumers (Kotler &
Armstrong 2013).

 Criteria in identifying the attributes or benefits to be promoted:

o 1. Identifiable. The benefit or attribute is easily associated with the product.
o 2. Beneficial. The attribute provides valuable benefits to the target consumers.
o 3. Distinctive Advantage. The attribute is distinct to the product and can hardly be
copied by the competitors.
o 4. Efficient and Rewarding. The cost in attaching the attribute or value to the
product is not higher than the expected benefits in terms of profit.

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