LESSON 4

ENTREPRENEURSHIP AND ORDINARY SMALL BUSINESS

NATURE AND CONCEPT

• Entrepreneurship is different from the activities of ordinary

small businesses.
• This does not mean, however, that entrepreneurship does not
connote small business, It does because entrepreneurship
covers small- and medium scale business.
• The distinction lies in the descriptive word “ ordinary”

Entrepreneurship and the activities of ordinary small business

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

MOTIVE IN OPENING A BUSINESS

• Motive for starting a business is so important in getting

the business to launch and grow.
• However, wanting to be independent of others, and making
ones own way is so important to us as human beings that it is
not surprising that it is the main reason to starting a business.

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PERCEPTION OF RISK IN THE BUSINESS

• Perception of the risk of starting up business and personal

attitude to risk.
• Decisions taken by people are burdened with the risk of failure.
• Therefore, making a decision on creating them is inherently
risky
• One of the factors influencing the perception of this risk is the
decision-maker's attitude to this process

REACTIONS TO CHANGES IN THE ENVIRONMENT

• Entrepreneurs are the people who offer new products, services

and technologies.
• They are the individuals who have the ideas and are willing to
take the risks necessary to get THE firm off the ground
• They have the opportunity to challenge existing enterprises
and AT the same time contribute TO healthy competition in the
society.

VIEW ON COMPETITION

• Companies that offer the same or similar products as you do

may be competitors.
• If their geographical market areas overlap with yours and their
price points also resemble yours, it's almost a certainty
they're competitors.

VISION FOR DEVELOPMENT AND GROWTH

The business vision

• The vision is basically the dream, the goal, the target of

an entrepreneur for his/her company.

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 • Vision is basically a goal which an entrepreneur aspires to
achieve and at the same time, it is what differentiates it from
others.
• He/she makes sure that the vision and mission of his/her
business is clear.

HORIZON OF BUSINESS OPERATION

• An entrepreneur thinks globally but acts totally.

• He/she is always focused on the stars above, while his/her feet
are firmly anchored on the ground.
• he/ she is primarily concerned with the major economic events
not only in the local environment but also in the global business
market.

You must always remember the three horizon of business

operation.

horizon 1: Master the Fundamentals

Horizon 2: Invest TowardS Sustainability

Horizon 3: Scale the Business

SOURCES OF BUSINESS FUNDS

• Sources of finance for business are equity, debt, debentures,

retained earnings, term loans, working capital loans, letter of
credit, euro issue, venture funding etc
• These sources of funds are used in different situations.
• They are classified based on time period, ownership and
control, and their source of generation
• It is ideal to evaluate each source of capital before opting for it.
• Sources of capital are the most exportable area especially for
the entrepreneurs who are about to start a new business.
• It is perhaps the toughest part of all the efforts.

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There are various capital sources, we can classify on the basis of
different parameters.

1. Long-Term Sources of Finance

2. Medium Term Sources of Finance
3. Short Term Sources of Finance
4. Owned Capital
5. Borrowed Capital
6. Internal Sources
7. External Sources

LESSON 5

MISCONCEPTIONS ON ENTREPRENEURSHIP

NATURE AND CONCEPT

• 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

Enable To Understand The Difference And Concept Of

Entrepreneurship

 Entrepreneurship applies only to manufacturing businesses.

 Entrepreneurship applies only to small businesses
 Entrepreneurship applies mostly to persons with good
educational background in business courses.
 Entrepreneurship applies only to a good economy.
 Entrepreneurship is simply opening a small business.

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Entrepreneurship Applies Only To Manufacturing Businesses

• It is a misconception that entrepreneurship is only applicable to

manufacturing but not to merchandising and service.
• It should be remembered that merchandising and providing
services are also business ventures.
• There are exchanges of values in these businesses but there
are also risks.

Entrepreneurship Applies Only To Small Businesses

• Entrepreneurial concepts and principles do not make any

distinction as to the size of the business venture.
• The amount of the business capital does not serve as a
reckoning ground for classifying whether the venture is
operating within the concept of entrepreneurship or ordinary
small business.
• Entrepreneurship principles in their strict sense, apply to small,
medium, and big businesses.

Entrepreneurship Applies Mostly To Persons With Good

Educational Background In Business Courses

• Nobody is born an entrepreneur.

• To become a successful entrepreneur, you must know the
basic concepts and principles of entrepreneurship and apply
them properly to your chosen business.
• The environment in which your business operates also
contributes to its success.
• That entrepreneurship applies mostly to persons with sound
academic background in business courses is a misconception.

Entrepreneurship Applies Only To A Good Economy

• entrepreneur finds business opportunities in both flourishing

and distressed economies.
• Entrepreneurship can exist in both good and bad economies.

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 • during a financial crackdown, new ideas can be created and
new business opportunities can be identified.
• The bad economy does not completely serve as a constraint to
the continuation of entrepreneurial ventures and even the
creation of new ones.

Entrepreneurship Is Simply Opening A Small Business

• Entrepreneurship does not merely mean opening a small

business.
• This is simply the first step in actualizing the entrepreneurial
venture.
• Prior to this, the business must have already passed through
the preliminary stages of scanning the environment and
preparation of the feasibility study and business plan.
• Entrepreneurship does not start and end with opening a small
business. It is a long, continuing process.

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 LESSON 6

IMPORTANCE OF ENTREPRENUERSHIP

Compounded Benefits Of Entrepreneurship

The significance of entrepreneurship in our lives cannot be

undermined. Take a look at the small businesses, whether ordinary or
not, that are operating in your community.

These can be small restaurant or eateries, photocopying centers,

convenience stores, and school supplies stores. Assess their
importance and contributions to your life and to other people.

Your daily experiences with these small businesses and the benefits
that you derive from them are clear testimonies to the important role
that they play in our lives.

The Flow Of Enrepreneurial Benefits

In the given diagram, the first party to receive the benefits of

entrepreneurship is the Filipino people.

The term Filipino people in the case may include the entrepreneur
himself/ herself and other people who have direct dealings with the
entrepreneur in the community.

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The benefits received by the Filipino people are transferred to or
shared with the local community where the concept of
entrepreneurship is practiced.

Then these are either transferred to the Philippine economy or flowed

back to the Filipino people. The contributions or benefits of
entrepreneurship that went to the Philippine economy are then flowed
back to the local community and to the Filipino people.

IMPORTANCE TO THE FILIPINO PEOPLE

Entrepreneurship makes the following contributions to the lives of

the Filipinos:

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 makes their lives happy, fruitful and successful

IMPORTANCE TO THE LOCAL COMMUNITY

Entrepreneurship, in one way or another, makes the following

contributions 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 facilities 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

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IMPORTANCE TO THE PHILIPPINE ECONOMY

Entrepreneurship, in one way or another, makes the following

contributions to the Philippine Economy:

1. It encourages competitiveness and thereby challenges

entrepreneurs to keep improving their products and servi
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 facilities 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.

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

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 LESSON 7

SOURCES ENTREPRENEURIAL IDEAS

The entrepreneurial process of creating a new venture is shown in the

diagram below.

As future entrepreneur, always remember that a business must be

firmly established on existing business opportunities, and that there
can be no business opportunities in the absence of an entrepreneurial
idea

GOOD SOURCES OF ENTREPRENEURIAL IDEAS

1. Changes in the environment

2. Technological discovery and advancement

3. Government’s thrust, programs and policies

4. People’s interests

5. Past experiences

CHANGES IN THE ENVIRONMENT

1. The Physical Environment Includes

A. Climate

B. Natural Resources

C. Wildlife

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 2. The Societal Environment Includes The Various Forces
Like:

A. Economic Forces

B. Societal Forces

C. Political Forces

D. Technological Forces

THE INDUSTRY ENVIRONMENT OF THE BUSINESS INCLUDES:

A. Government

B. Competitors

C. Suppliers

D. Customers

E. Creditors

F. Employees

TECHNOLOGICAL DISCOVERY AND ADVANCEMENT

- Discovery and advancement in the use of technology are

another good source of entrepreneurial idea and opportunities.
- Most people welcome technological discoveries and
advancements but cannot identify or determine entrepreneurial
opportunities stemming from them. On the other hand, a person
with entrepreneurial interest looks at the possibility of business
opportunities in any new discovery or advancement in
technology.

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GOVERNMENT’S THRUST, PROGRAMS AND POLICIES

The priorities , projects, programs and policies of the Government are

also good sources of entrepreneurial ideas.

• The term government in this lesson refers to the local

government( municipality, city or provincial) or the national
government and its branches.

The programs and agenda of the Philippine government intuitively

address the needs of the Filipino people. There are also instances
when the national government responds to the call of international
agencies or the world market. Whenever there are changes in the
policies and programs of the government, new entrepreneurial ideas
are likely born.

PEOPLE’S INTERESTS

• The interests, hobbies, and preferences of people are a rich

source of entrepreneurial ideas.
• An interest is the feelingof a person whose attention, concern,
or curiosity is particularly engaged by something, or something
that concerns, involves, draws the attention of, or arouses the
curiosity of a person.

For example, she has an interest in poetry, or he is interested in

watching the game

PAST EXPERIENCES

• Past experiences and exposures are also a good source of

entrepreneurial ideas.
• 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.

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 CHAPTER 2

Entrepreneural Character Traits Skills And Competencies

ENTREPRENEURAL CHARACTER TRAITS

• The term Character Traits in this lesson refers to the mark or

attribute that distinguishes an entrepreneur from the owner of
an ordinary small business.
• 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 major clusters:

1. Achievement Cluster

2. Planning Cluster

3. Power Cluster

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.
• 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 oriented
3. Persistent
4. A risk-taker
5. Efficient and quality-oriented

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Opportunity seeker

A person who dreams of becoming successful entrepreneur must be a

seeker business opportunities.

A business opportunity-seeker is an entrepreneur who

1. sees and acts on new business opportunities; and

2. seizes unusual opportunities to obtain financing, equipment,

land, work, space and assistance.

• Business opportunities may arise from changes in the

environment, advancement and discoveries in technology,
government programs and policies, people’s interest, hobbies
and past experiences.
• Successful entrepreneurs do not just watch business
opportunities pass by but readily seize them.
• They do not let entrepreneurial opportunities go to way but
immediately act upon them. They perform what they can do or
accomplish today. This cannot wait for tomorrow to come.

COMMITED

• A highly committed entrepreneur display full committed to the

work or endeavor that he/she is undertaking.
• Commitment is directly related to interest.
• Lack of Interest means lack of commitment

PERSISTENT

• Trials, sacrifices, and failures challenge the entrepreneur to be

persistent.
• The terms “quit” and “surrender” are not included in the
vocabulary of successful entrepreneurs.
• Persistent is the foundation of commitment

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RISK TAKER

• Successful entrepreneurs are business risk- taker.

Three types of risk-takers
1. Aggressive risk-taker
2. Moderate risk-taker
3. Conservative risk-taker

EFFICIENT AND QUALITY ORIENTED

• A successful entrepreneur highly values efficiency and the

concept of quality in all business undertakings. He/ She
1. Always performs the required tasks in accordance with existing
standards of excellence or continuously improves on his/ her
past performance and
2. Strives to do things better and faster with minimal cost.

PLANNING CLUSTER

Is a set of characteristics of successful entrepreneurs that basically

supports the character traits in the achievement cluster.

The entrepreneur who belongs to the planning cluster is

1. a goal-setter
2. an information-seeker
3. systematic in planning and monitoring

GOAL SETTER

• The basic concepts of planning is setting goals and objectives.

Goals and objectives are the guiding points that direct all
actions, efforts and struggles of the entrepreneurs
• In setting the goals and objectives of the business venture, the
entrepreneur is usually guided by the SMART principle. This
means that the goals and objectives are specific, Measurable,
Achievable, Realistic and Time-bound

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INFORMATION SEKER

• Entrepreneurs constantly make decisions that will affect the

operations of their business ventures.
• In the Philippines, offices that are expected to have the required
information often do it actually have them. The usual constraints
or limitations encountered in the gathering of information are
data banks that
1. Are incomplete, dated and irrelevant
2. Are costly in maintenance
3. Lack personnel to maintain them

SYSTEMATIC IN PLANNING AND MONITORING

SYSTEMATIC

• Implies that there is a rational and logical approach in

performing activities. There are step by step procedures that
are scientifically designed to be followed in the preparation of
plans and monitoring of activities

PLANNING

• refers to the setting of goals and objectives.

MONITORING

• refers to the evaluation of the activities and adopted courses of

actions whether they are carried in accordance with the plans.

POWER CLUSTER

• The power cluster includes a set of character traits that reflect

the degree of the interpersonal relations maintained by
successful entrepreneurs with the suppliers of raw materials,
financial institutions, customers, competitors, the government,
employees, and all other stakeholders.
• Power is all about title, position, authority, control, and
supremacy, you’ll find it a challenge. Entrepreneurs can give
themselves any title or position they want. They have complete

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 authority to do whatever they want whenever they want, and
they have ultimate control.

An entrepreneur in the power cluster is

• A persuasive and positive networker

• Self- confident

PERSUASIVE AND POSITIVE NETWORKER

PERSUASION

• Is the capacity of the entrepreneur to convince people.

NETWORKING

• Is the entrepreneurs abilities to bind and merge their business

with others companies of business items.

SELF CONFIDENT

• Self confidence is a key entrepreneurial skill for success.

• Self- confidence is concerned with how a person feels
about his ability.
• Self- confidence is concerned with how a person feels about his
ability. A successful entrepreneur believes in his abilities. He is
not scared to explore un-chartered territories, take risk and take
difficult decisions.
• A person can have high self- confidence in one situation and
totally lack in another.

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.
• It required and developed by a person through constant and
correct practice. They connote dexterity, excellence and
expertise in the performance of particular tasks.
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COGNETIVE SKILLS

• mental ability of the entrepreneur to learn new things, generate

new ideas and express knowledge in both oral and written
forms.
• The human brain is responsible for the development of
cognitive skills, which are essentials in making systematic and
effective plans and monitoring them.

COGNITIVE SKILLS OF AN ENTREPRENEUR INCLUDE

• Ability to understand written material.

• Ability to learn and apply new information.
• Ability to solve problems systematically.
• Ability to create new ideas.
• Ability to innovate new products and procedures or methods.

PROBLEM SOLVING SKILL

Problems are common in the life of an entrepreneur as he/she

manages the day-day-day operations of the business venture. These
problem can be big or small, ordinary or unusual, and repetitive or non-
repetitive.

To be labeled a problem, a situation must have something about it

which is believed to be difficult.

The task of pinpointing or defining or clarifying or analyzing a problem

may be difficult or the task of solving it may be difficult or both. In other
instances solving the problem is easy.

The scientific approach in solving business problems involves

1. Defining the real problem

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

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DEFINING THE PROBLEM.

• every problem solving methodology the first step is defining or

identifying the problem.
• most difficult and the most important of all the steps.
• involves diagnosing the situation so that the focus on the real
problem and not on its symptoms

GATHERING INFORMATION ABOUT THE PROBLEM

• purpose of information gathering is to support the planning of

your organization's work to become more fully inclusive.
• important to look at available facts objective information,
including demographics and best practices.

FORMULATING ALTERNATIVE SOLUTIONS

The entrepreneur must keep in mind that a problem always has

alternative viable solutions. Otherwise, it is not a problem he /she must
list down all the possible solutions to the problem

Alternative solutions grouped by categories:

1. Effect to the business in general

2. Effect to the work force
3. Effect to the supplier of raw materials and utility provider
4. Effect to the end user and prospective consumers
5. Effect to the future operation
6. Effect to other departments or units
7. Effect to the financial, marketing, and production operations

EVALUATING ALTERNATIVE SOLUTIONS

In higher marketing, operation and production management, and

operation research courses, there are quantitative approaches in
evaluating the optimal solution to the problem

In the process of evaluating each alternative solution, the following

criteria must be considered

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In the process of evaluating each alternative solution, the
following criteria must be considered:

1. Availability of production resources

2. Cost involved in the implementation
3. Degree of the risk involved
4. Effect to the whole business
5. Nature, type and size of the problem
6. Level of urgency
7. Different forces in the environment

SELECTING AND IMPLEMENTING THE OPTICAL SOLUTIONS

• The optical solution creates the highest contribution to the

revenue of the business or the lowest contribution to the
incurrence of cost. Unless the decision is implemented, the
problem will not be solved.
• The decision either be effective or not. It is effective when it
solves the effect of problem.
• There is no such thing as the “ best solution” but only one that
is deal or which when implemented will not create another
problem.

EVALUATING DECISIONS

• decision maker must continuously search for the most optimal

solution.
• Another objective in evaluating the solution is to determine
whether there are changes in the environment or some
developments that make the solution already undesirable

TECHNICAL SKILLS

• abilities and knowledge needed to perform specific tasks.

• practical, and often relate to mechanical, information
technology, mathematical, or be scientific tasks.

Some examples include knowledge of programming languages,

mechanical equipment, or tools.

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The technical skills focus mainly on the mechanical or practical aspect
of a person rather than his/her abstractor theoretical thinking. The
technical skills are the 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

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.

The interpersonal skills of an entrepreneur may include, among

others, the following:

1. Skills in verbal communication

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

CORE COMPETENCIES

• person who aspires to become a successful entrepreneur must

fully understand and apply the concepts and principles of
entrepreneurship.
• He/ She must possess and internalize the character traits that
are common among successful entrepreneurs.

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The 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.

TOTAL PERSPECTIVE OF SUCCESSFUL ENTREPRENEUR

to ensure victory as a future entrepreneur you must:

1. Understand fully the concepts and principles of

entrepreneurship
2. Internalize and live out the character traits that are common
among successful entrepreneurs; and
3. Acquire, develop, sharpen and focus your entrepreneurial skills

Doing all of these will define your core competencies and provide and
establish your competitive advantage in the business world

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