12

Entrepreneurship
Quarter 3 - Module 2
Recognize the
Potential Market

Department of Education ● Republic of the Philippines

After completing this module, you need to:
 Learn and understand the sources of opportunities for business.
 Determine the essentials in the entrepreneur’s opportunity seeking
 Identify market problems and propose potential products or
services that will meet the market needs.
 Know the problem in which a business opportunity arises from.
 Identify, screen and proposed solution to meet the problem
 Select the best product or service that will meet the market’s
need with a consideration of generating profit.

What I Know

Lets check first what you already know.

True or False. On the space provided before the number write T if the
statement is true and F if the statement is false.
1. Entrepreneur enter a business because of its profitability.
2. New business ideas provide business opportunities.
3. Entrepreneurial process starts with identification of
entrepreneurial opportunities.
4. Not all changes in the external environment provides
business opportunities.
5. Discovery and advancement in the use of technology are
additional good source of business opportunities.
6. Interest and hobbies of the people are possible good
source of entrepreneurial ideas.
7. Industry environment of business is under technological
discovery and advacement sources of opportunities.
8. The variables in the physical environment include the economic
forces.
9. Entrepreneurial heart flame refers to the ability of the
entrepreneur to sense without using the five senses.
 10. Entrepreneurial mind frame permits the entrepreneur to see
things in a very positive and optimistic light.
11. The business operates in the industry environment.
12. Opening a Halo – halo business during summer seasons.
13. Environmental scanning is conducted only when a new
business is opened.
14. When the barriers to the competitive forces are high, the
effect to the growth of the business is likewise high.
15. Entrepreneurs need not observe and evaluate the priorities
of the government.

What’s In

In the previous lesson, you already know about the difference

between businessman and entrepreneur. Knowing all the entrepreneurial
concepts will not assure a person of becoming a successful entrepreneur
and not all business people are entrepreneurs. Some says being an
entrepreneur is a calling; a lot of qualities must be possessed to be
considered successful and sustainable. So, if you are given a great
opportunity to venture into the field of entrepreneurship, it may be a long
process to undertake and the willingness to take a risk. Also, you’re not
only the one who’s in progress but at the same time, you’re helping for
esson 1
the development growth of our economy.

What’s New

FIX ME
Direction: Arrange the scrambled letters to form a correct word.
1. UPSIERSPL 6. UTSBETIUST
2. NISSUBES 7. ICEVERS
3. KERTAM 8. PECITIONMTO
4. EDICRRSTO 9. IMCLTEA
Lesson
Recognize a Potential Market
1
5. SUTEMOSRC 10. NTERTSAN

What is It

Entrepreneurial Ideas

The creation of an entrepreneurial ideas 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 presented in
the diagram below. (Aduana, 2017)

Creation of Identification Opening of

entrepreneur of entrepreneur
ial Ideas entrepreneuri ial Venture
al

Figure 1. The Entrepreneurial Process of Creating New Venture

Essentials in Entrepreneur’s Opportunity Seeking

These are the basic foundation that the entrepreneur must have in
seeking opportunities:
Entrepreneurial mind frame. This allows the entrepreneur to see
things in a very positive and optimistic way in the midst of difficult
situation. Being a risk - taker, an entrepreneur can find solution when
problems arise.
Entrepreneurial heart flame. Entrepreneur's driven passion, they are
attracted to discover satisfaction in the act and process of discovery.
Passion is the great desire of an entrepreneur to achieve his/her goals.
 Entrepreneurial gut game. This refers to the ability of the entrepreneur
of being intuitive. This also known as intuition. The gut game also means
confidence in one’s self and the firm believes that everything you aspire
can be reached.
Sources of Opportunities

There are many ways to discover opportunities. Looking at the big

picture some have noticed the emerging trends and patterns for business
opportunities. While others are trying to find out their target market.
Some are the following sources of opportunities:

1. Changes in the environment

Entrepreneurial ideas arise when changes happen in the external
environment. A person with an entrepreneurial drive views these changes
positively. External environment refers to the physical environment,
societal environment, and industry environment where the business
operates.
1.1 The physical environment includes
a. Climate- the weather conditions.
b. Natural resources- such as minerals, forests, water, and
fertile land that occur in nature and can be used for
economic gain.
c. Wildlife- includes all mammals, birds, reptiles, fish, etc.,
that live in the wild.
1.2 The Societal environment includes the various forces like
a. Political forces- includes all the laws, rules, and
regulations that govern business practices as well as the
permits, approvals, and licenses necessary to operate the
business.
b. Economic forces- such as income level and employment rate.
c. Sociocultural forces- customs, lifestyles and values that
characterize a society.
d. Technological environment- New inventions and
technology innovations.
1.3 The industry environment of the business includes:
a. Competitors
b. Customers
c. Creditors
 d. Employees
e. Government
f. Suppliers
For example, one factor in the physical environment that can
easily change is the climate. The temperature is very high during
summer but very low during the rainy season. An individual with
entrepreneurial drive can be extremely imaginative and inventive in
identifying opportunities. He/she can venture a business that responds
to the needs of the people during summer and rainy season.

2. Technological discovery and advancement

A person with entrepreneurial interest sees possibility of business

opportunities in any new discovery or because of the use of latest
technology.
For example, an individual with knowledge in repair and installation
of a machine engine discovers that additional engine parts that
considerably reduce fuel consumption.

3. Government’s thrust, programs, and policies

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

also good sources of ideas.
For example, the use of firecrackers to celebrate New Year’s Eve is
strictly prohibited. People without entrepreneurial interest will view the
ordinance as a plain restriction. However, for an entrepreneur, it is a
business opportunity to come up with a new product that will serve as a
substitute for firecrackers.

4. People’s interest
The interest, hobbies, and preferences of people are rich source of
entrepreneurial ideas. Like the increasing number of Internet Café at
present could be lead to the strong attachment of young people to
computers.

5. Past experiences
 The expertise and skills developed by a person who has worked in a
particular field may lead to the opening of related business enterprise.
For example an accountant who has learned the appropriate
accounting and management skills and techniques in a prominent
accounting firm can start his/her business venture by opening his/her own
accounting firm.

Forces of Competition Model

It is also known as the “five forces of competition,” An industry
environment is a competitive environment. Regardless of what product or
services you have, competition is always present.

Competition – it is the act or process of trying to get or win something.

For example, the prices are lower when there is a competition among
the
stores.

These are the five forces competing within the industry:

 Buyers
 Potential new entrants
 Rivalry among existing firms
 Substitute products
 Supplier

1. Buyers
The buyers are the one that pays cash in exchange to your goods
and services. For example, the influenced of the price or in the bargaining
strategy. The buyer has a strong and magnified bargaining power. The
threat of its bargaining power will be less if the following factors notice:
a. There are several suppliers available in the market.
b. The buyer has the potential for backward integration.
c. The cost of switching the supplier cost is minimal.
d. The product represents a high percentage of the buyer’s cost.
e. The buyer purchases large portions of the seller’s product or services.
 2. Potential New Entrants
A new entrant is defined as the one who enters something. For
example, the level of capital requirements, if the business requires huge
capital, new entrants should decline to join the business. This gives a
threat to the business. This can be notice if there is the presence of the
following factors:
a. Substantial capital requirement.
b. Strict government policy.
c. Difficulty in accessing distribution channels.
d. Economies of scale.
e. High cost of product differentiation.
f. High switching cost

3. Rivalry among Existing Firms

Rivalry is a state or situation in which people or groups are
competing with each other. For example it depends on the Marketing
strategy of your competitor, like giving freebies and special offers. The
intensity of rivalry among existing firms is characterized to the following
factors:
a. Diversity of rivals.
b. Number of competing firms.
c. Characteristics of the products or services.
d. Increased capacity.
e. Amount of fixed costs.
f. Rate of industry growth.

4. Substitute Products
Substitute means anything that takes the place or function of
another. For example the consumers decide to use margarine as a
substitute for butter. In case the price of butter increases, preferably the
consumer will gradually switch to margarine.

A substitute product can give a big threat in the industry environment if the
following factors are notice:
 a. Switching cost is low.
b. Preferences and tastes of the customers easily change.
c. Product differentiation is highly noticeable
d. The quality of substitute products dramatically improves.
e. The price of substitute product is substantially lower.

5. Suppliers
The Suppliers are the one that provide something that is needed or
wanted. For example if the supply and services being offered is unstable
or keep. The intensity of the threat is strong in this kind of the competitive
force in the industry. This can be notice if there is the presence of the
following factors:
a. The supplier has the ability for forward integration.
b. Suppliers in the industry are few, but the sales volume is high.
c. Substitute products are not readily available in the market
d. The switching cost is very high.
e. The product or service is unique.
 What’s More

WORD HUNT
Think of words or terms related to the topic and find the words in the grid
horizontally, vertically, or diagonally. Write the words or terms on the
space provided below.
V E N T U R E A B C DE F A B C D E F S
A B N P O H W QG S DL OS E T U E Q
B C T R P R O DU C T S R L R E H R B E
C V R E P GO Y T R E P T G S T V A C N
V HE NO V R F D A B C U D E I O GV T
HK B E R C T K R F GE N H C J R K H R
K I C I T H U L V D E O C E U A T U K E
I DV DU K N S J Y I R Z O Q E U Y P
DGH GN OU A O F GT U X N X N D R
GL K L I P W L R E P U R E P O J OG E
L HZ HT S P K L I ON H L O M E L N
HA X QI M L G C V R I V A L R Y H E
A DS J E T U R E A B B S T T U H A U
S S U B S T T U T E S J E T U R F R
V T U R E A B QR S J E T U T U R E A B

1. 6.
2. 7.
3. 8.
4. 9.
5. 10.
 What I have Learned

Definition of Terms
Opportunity seeking - Process of considering, evaluating, and pursuing
market based activities that are accepted to be beneficial for the
business.
Entrepreneurial process - can be defined as the steps taken in order to
begin a new enterprise. It is a step-by-step method, one has to follow to
set up a business.
Entrepreneurial ideas - an innovative concept that can be used for financial
gain that is usually centered on a product or service that can be offered
for money.
Essentials of entrepreneur’s opportunity seeking - These are the basic
foundation that the entrepreneur must have in seeking opportunities,
such as entrepreneurial mind frame, heart flame and gut game.
Sources of opportunity - can be attain by assessing and looking at changes
in the environment; technological discovery and advancement;
government’s thrust, programs, and policies; people’s interest, and past
experiences.
External environment - refers to the physical environment, societal
environment, and industry where the business operates.
Government - refers to the local government (municipality, city, or
provincial) or the national government and its branches.
Competition – it is the act or process of trying to get or win something.
Substitute – anything that takes the place or function of another.
New entrants – the one who enters something.
Suppliers – are the one that provide something that is needed or wanted.
Buyers – are the one that pays cash in exchange to your goods and
services. Rivalry – is a state or situation in which people or groups are
competing with each other.
 What I Can Do

Activity 3:
COMPLETE ME
Complete the table below by supplying it with products that you consider
similar. Write the product and not the brand in their respective columns.
Then describe and differentiate its characteristics and uses.
Primary Product Substitute Product
No.
( Product name ) ( Product name )
Example Butter - expensive price used Margarine – lesser price also used as
as bread spread. bread spread
1.

2.

3.

4.

5.

Assessment

Direction: Encircle the letter of your choice.

1. It is the process of considering, evaluating, and pursuing
market-based activities that are believed to be advantageous for
the firm.
A. Opportunity seeking C. Opportunity screening
B. Opportunity seizing D. Sources of opportunity

2. This is essential to opportunity seeking which allows the

entrepreneur to see things in a positive and optimistic light in the
midst of crisis or difficult situations.
A. Entrepreneurial mind frame C. Entrepreneurial heart flame
B. Entrepreneurial gut game D. Entrepreneurial heart frame
3. It is the ability of entrepreneur that can sense without using the five
senses, also known as intuition.

A. Entrepreneurial mind frame C. Entrepreneurial heart flame

B. Entrepreneurial gut game D. Entrepreneurial heart frame
4. One of the essetials of entrepreneur’s opportunity seeking that
refers to the driven passion of an individual.

A. Entrepreneurial mind frame C. Entrepreneurial heart flame

B. Entrepreneurial gut game D. Entrepreneurial heart frame
5. What variable of societal environment includes income level and
employment rate?

A. Economic forces C. Political forces

B. Sociocultural forces D. Technological

forces For questions 6 and 7 refer to the following

statements:

A. Preferences and tastes of the customers easily change.

B. The buyer has the potential for backward integration.
C. The cost of switching the supplier cost is minimal.
D. Product differentiation is highly noticeable.
6. Which are the factors of the substitute product that pose a great
threat in the industry environment?
A. A,B,C,D C. A and D
B. A and C D. B and C
7. Which are the factors that influenced the buyer to have a less
threats because of the bargaining power?
A. A only C. A and D
B. A and C D. B and C
8. They are the one that pays cash in exchange to your goods and services.
A. Buyers C. sellers
B. Competitors D. suppliers
9. The intensity of rivalry among existing firms is characterized to
the following factors except one:
A. Diversity of rivals.
B. Number of competing firms.
C. Characteristics of the products or services.
D. The product represents a high percentage of the buyer’s cost.
10. The following are the forces competing within the industry except
one:
A. Potential new entrants and Substitute Products
B. Buyers and Suppliers
C. Rivalry among existing firms
D. Needs and Wants
11. Which of the following good sources of entrepreneurial ideas
determine the interest, hobbies and preferences of people.
A. Changes in the environment C. People’s enterest
B. Technological discovery D. Past experiences
12. Societal environment includes the following, except:
A. Economic forces C. Political forces
B. Sociocultural forces D. Natural resources
13. Which among the following is the result of identifying
entrepreneurial opportunities?
A. Creation of entrepreneurial ideas C. Sources of opportunity
B. Opening of entrepreneurial venture D. Entrepreneurial process
14. What entrepreneurial idea will you recognized, if you
consider the new discovery and advancement of technology as
source of opportunity?
A. Changes in the environment
B. Technological discovery and advancement
C. Government’s thrust, programs, and policies
D. People’s interest

15. Source of entrepreneurial idea where expertise and skills

developeb by a person from its previous work can lead to the
opening of a related business enterprise.
A. Government’s thrust, programs, and policies
B. Past experiences
 C. People’s interests
D. Technological discovery and advancement

Additional Activities

Conduct a short interview of any successful entrepreneur in your locality. Ask

the following question:
 What is the nature of your business?
 Who are your customers?
 What industry are you operating?
 How much was your starting capital?
 How many years in operation?
 How many manpower involved from the start of operation until now?