Module 2: Recognize a Potential Market

Recognize a Potential Market 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
Entrepreneurial Ideas environment where the business operates.

The creation of an entrepreneurial idea leads to the identification of entrepreneurial opportunities, which in turn results in the 1.1 The Physical environment includes
opening of an entrepreneurial venture. 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
The entrepreneurial process of creating a new venture is presented in the diagram below. (Nick L. Aduana, Etrepreneurship in
economic gain.
Philippine Setting for Senior High School, 2017, C&E publishing page 46, Aduana, 2017).
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
Essentials in Entrepreneur’s Opportunity – Seeking e. Government
f. Suppliers
These are the basic foundation that the entrepreneur must have in seeking opportunities:

Entrepreneurial mind frame. 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
This allows the entrepreneur to see things in a very positive and optimistic way in the midst of difficult situation. Being a risk - imaginative and inventive in identifying opportunities. He/she can venture on a business that responds to the needs of the
taker, an entrepreneur can find solutions when problems arise. people during summer and rainy season.
Entrepreneurial heart flame.
2. Technological discovery and advancement
Entrepreneurs are driven by passion; they are attracted to discover satisfaction in the act and process of discovery. Passion is A person with entrepreneurial interest sees possibility of business opportunities in any new discovery or because
the great desire of an entrepreneur to achieve his/her goals. of the use of latest technology.
For example, an individual with knowledge in repair and installation of a machine engine discovers additional engine parts that
Entrepreneurial gut game. considerably reduce fuel consumption.

This refers to the ability of the entrepreneur of being intuitive. This also known as intuition. The gut game also means 3. Government’s thrust, programs, and policies
confidence in one’s self and the firm belief that everything you aspire can be reached. 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
Sources of Opportunities
will view the ordinance as a plain restriction. However, for an entrepreneur, it is a business opportunity to come up with a new
There are many ways to discover opportunities. Looking at the big picture, some have noticed the emerging trends and product that will serve as a substitute for firecrackers.
patterns for business opportunities. While others are trying to find out their target market. The following are some sources of
opportunities: 4. People’s interest
The interest, hobbies, and preferences of people are rich sources of entrepreneurial ideas, like the increasing
1. Changes in the environment number of Internet Cafés at present could lead to the strong attachment of young people to computers.

5. Past experiences
Module 2: Recognize a Potential Market

The expertise and skills developed by a person who has worked in a particular field may lead to the opening of a f. Rate of industry growth
related business enterprise.
For example, an accountant who has learned the appropriate accounting and management skills and techniques 4. Substitute Products
in a prominent accounting firm can start his/her business venture by opening his/her own accounting firm. Substitute is one that serves the same purpose as another product in the market. 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
Forces of Competition Model margarine.
It is also known as the “five forces of competition”. An industry environment is a competitive environment. A substitute product can give a big threat in the industry environment if the following factors are noticed:
Regardless of what product or services you have, competition is always present. a. Switching cost is low
Competition – it is the act or process of trying to get or win something. b. Preferences and tastes of the customers easily change
For example, the prices are lower when there is a competition among the stores. c. Product differentiation is highly noticeable
These are the five forces competing within the industry: d. The quality of substitute products dramatically improves
• Buyers e. The price of substitute product is substantially lower
• Potential new entrants
• Rivalry among existing firms 5. Suppliers
• Substitute products The Suppliers are the one that provide something that is needed in business operations such as office supplies and
• Supplier equipment. In an example where supplies and services being offered is unstable the intensity of the threat is strong in this kind
of the competitive force in the industry. This can be noticed if there is the presence of the following factors:
1. Buyers a. The supplier has the ability for forward integration
The buyers are the ones that pay cash in exchange for your goods and services. One example is the influence of b. Suppliers in the industry are few, but the sales volume is high
the price or in the bargaining strategy. The buyer has a strong and magnified bargaining power. The threat of its bargaining c. Substitute products are not readily available in the market
power will be less if the following factors are noticed: d. The switching cost is very high
a. There are several suppliers available in the market. e. The product or service is unique
b. The buyer has the potential for backward integration.
c. The cost of switching the supplier cost is minimal. Definition of Terms
d. The product represents a high percentage of the buyer’s cost. Buyers – are the ones who pay cash in exchange for your goods and services.
e. The buyer purchases large portions of the seller’s product or services. Competition – it is the act or process of trying to get or win something.
Entrepreneurial process - can be defined as the steps taken in order to begin a new enterprise. It is a step-by-step method
2. Potential New Entrants one has to follow to set up a business.
A new entrant is defined as companies or businesses that have the ability to penetrate or enter into a particular Entrepreneurial ideas - an innovative concept that can be used for financial gain that is usually centered on a product or
industry. For example, in the level of capital requirements, if the business requires huge capital, new entrants should decline to service that can be offered for money.
join the business. This gives a threat to the business. This can be noticed if there is the presence of the following factors: Essentials of entrepreneur’s opportunity – seeking – these are the basic foundation that the entrepreneur must have in
a. Substantial capital requirement seeking opportunities, such as entrepreneurial mind frame, heart flame and gut game.
b. Strict government policy External environment - refers to the physical environment, societal environment, and industry where the business operates.
c. Difficulty in accessing distribution channels Government - refers to the local government (municipality, city, or provincial) or the national government and its branches.
d. Economies of scale New entrants – the one who enters something.
e. High cost of product differentiation Opportunity – seeking – the process of considering, evaluating, and pursuing market-based activities that are accepted to be
f. High switching cost beneficial for the business.
Rivalry – is a state or situation in which people or groups are competing with each other.
3. Rivalry among Existing Firms Sources of opportunity - can be attained by assessing and looking at changes in the environment; technological discovery
Rivalry is a state or situation wherein business organizations are competing with each other in a particular market. and advancement; government’s thrust, programs, and policies; people’s interest, and past experiences.
For example, it depends on the marketing strategy of your competitor, like giving freebies and special offers. The intensity of Substitute – anything that takes the place or function of another.
rivalry among existing firms is characterized to the following factors: Suppliers – are the ones who provide something that is needed or wanted.
a. Diversity of rivals
b. Number of competing firms
c. Characteristics of the products or services
d. Increased capacity
e. Amount of fixed costs