Chapter 7:

PROBLEM SOLVING
STRATEGIES
 The entrepreneurs are not discouraged with the
constraints along the causes of our economic malady. It
should be turned into positive note, and new solutions must
be made to make them different from other individuals There
are lots of opportunities for entrepreneurs who are
hardworking creative and resourceful, and would like to take
the calculated risk.
 Business opportunities are wide open for people who
would like to invest their money into gainful business
activities. They need to find out this new venture that
interests them and how they can harness their technical
knowledge of the trade.
Factors To Consider Of A New Entrepreneur

1. Know your Product or Service

2. Analyze the Market Potentials
3. Determine the Marketing Strategy
4. Know the Competitors
5. Do not set on your Laurels
 Steps In Problem Solving

1. ldentify the problem

2. Gather the data that brought the problem
3. Analyzing the data
4. Formulating alternative solutions
5. Selecting the best alternatives course of action
6. Implementing the best alternative
 Peculiar Characteristics Of Managers In
Solving Problems
1. He develops systems and procedures that are precise
based on current practices in an industry.
2. The manager is interested in solving organizational
problems rather than finding other avenues, in the
solution of the problems.
3. The manager calibrates in the refinement of policies and
procedure and tends to revise them to solve existing
problems.
4. He finds ways and means to provide solutions and
compliance to routine activities.
5. He is interested in details and sensitive to group
cohesion and extract cooperation as a means to group
accomplishments.
 Characteristics Of An Innovator
Entrepreneur In Solving Problems
1. He looks at the problem on different angles and finds
means to circumvent the same.
2. He discovers the roots of the problem and develops
avenues to better solve the problem. He formulates
solutions and alternatives.
3. He develops basic assumptions and hypothesis related
to current practices and makes innovations based on
careful analysis through SWOT.
4. The innovator entrepreneur is interested in the end
results rather than the means to achieve it. He has little
tolerance for details and routine work.

5. He capitalizes on people with bright ideas and talents

and gets their opinion and consensus and with little
regard for people with mediocre ideas
Environmental Scanning

The business environment offers vast opportunities,

and entrepreneurs must understand both its potential and
community conditions. Their main goal is profit, achieved by
investing wisely and ensuring customer satisfaction.
The following factors are contributory to the
development of customer satisfaction:
1. Business Location for Small Entrepreneurs
• Rent and Space
• Terms of Lease Agreement
• Type of Goods or Merchandise
• Income Level of Prospective Customer
• Prospective Sales Volume
• Municipal or City Ordinance including taxes and fees
 • Location of the Areas

2. Location for Small Industrial Plant or Manufacturing

Facilities
• Land Area
• Facilities for Expansion
• Power of Utilities
• Building and Other Utilities
• Plant Site Accessibility
 Strengths, Weaknesses Opportunities, And
Threats(SWOT)
SWOT ANALYSIS is an entrepreneurial tool in
determining the profitability of the business operation.
Opportunities carries with it some risk involved this should
be looked into carefully. The strengths and weaknesses are
internal factors to the entrepreneur while the opportunities
and threats are external factors.
The product must be evaluated along the
following areas:
1. Product strength in the market must have the following:
• Available Technology in Product Processing
• The Source of Raw Materials must be Abundant and
at Lower Price
• Skilled Workers must be Available
• Capital Investment in Machinery and Operating
Expenditures
 • Expertise and Technical Skills of the Management
Team
2. Characteristics of Weak Products and Weak Management:

• Poor Quality and High Price

• Product Desigu and Appeal
• Production Cost
• Supply and Demand
• Weak Product Management
3. Sustainable Product Opportunities in the Market:
• Product Demand
• Presence of Poor Quality in the Market
• Government Policies and Support
• Liberal Credit Terms and Interest Rates

4. Treats to Product Profitability and Market Expansion:

• Entrance of Competition
• The supply of raw materials will be limited as other
competitors will be getting the same suppliers.
• The Emergence of Leftwing Labour Unions
• The Presence of Double Taxation
• Peace and Order in the Area of Business Operation
• The Cost of Power Supply
The entrepreneur should look deeper into the
following areas:
1. The Management Team
2. The Production Process
3. The Marketing Program
4. The Financial Management
The identification of business opportunity:
The following steps will help the prospective
entrepreneur evaluate the idea before going into
business :
1. The starting point of conceiving the idea of the type
of business
2. The technical feasibility and time frame
 Causes Of Business Failure
1. Business profitability is to provide high benefits to the
employees such as profit sharing;
2. Survival from an economic crisis is ability to stay in the
industry amidst financial difficulties that cause closure
and bankruptcy of other establishments most particularly
the competitors;
3. Incremental sales and share of the market is the
introduction of new product lines and design that
expands market share and attract new market segments;
4. Expansion of market area and product lines such as
opening of new outlets, branches and attracting new
dealers by offering new product designs and images;
5. Acquisition and ownership of plant machinery and
premises in buying or acquiring new plants, factory and
other fixed assets shows success in the industry;

6. Getting a long term business contract with the

government or a big business entity.
 Success is having avoided the causes of failure which
the entrepreneur is supposed to avoid. These causes are
avoidable but they must be known and made clear to the
entrepreneur. They are as follows:
1. Undercapitalization
2. Poor Business Location
3. Negligence to Public Policy
4. Unprepared to Risk
5. No New Product or Service
6. Unsatisfactorily Performance of Relatives
7. Irregular Attendance
 Based from the book of Sanchez (2008), he said
“Here is the business pitfalls and mistakes and here is a
collection of thoughts that I consider valuable in running a
business. Some are mistakes (others are major blunder)
that l committed in my business and l hope you will not
commit in your business. Some, I have observed from other
entrepreneur I spoke with. Others came from observing
other businesses.”
 It would be nice if business mistakes do not cost you
money, but they are often times do. Always be on guard as
many of these mistakes apply to most kinds of enterprises
big and small.
• In the initial stages of your business, make sure you do not
overspend on furniture and fixtures, and on machinery
equipment.
• Depending on your business, a second-hand (or pre-
owned) executive table will last as long as a brand new
one.
• Be cautious in buying second hand machinery and
equipment.
• Today, due to technical advances, many brand-new
machines are a better buy than used equipment.
• Make sure that replacement or spare parts are readily
accessible and the repair technicians are available to fix
them.
• In many instances, it is now cheaper to buy rather than
build your own furniture.
• Before you make a major purchase, like a Xerox copier,
think three times before you sign the dotted line of sales
contract.
• Do not count on friends and relatives as business clients.
• Never be too trusting with people when it comes to
granting, credit.
• Success is not a matter of luck.
• However, when luck does come and you become rich, be
sure not to fall victim to the biglangyaman syndrome where
you spend all your profits lavishly only to find out later that
you have lost everything.
• Be a self-motivator
• Do not listen to doomsayers and dispensers of poor
advices.
• Get help from mentors or a business coach.
• Sweat is your equity in business
• Parreto's Principle of 80/20: Put most of your efforts on the
20% of the things that brings 80% of the revenues to your
business.
• You are not in business unless you make a sale.
• Be ready to face rejection.
• Develop a network of friends and business associates to
help you in your business.
• Always expand your business network.
• Never lose sight of your business plan.
• Refrain from announcing to people, even friends and
relatives, how well you are doing in your business
financially.
• Maintain your focus.
• Consider a life insurance policy for yourself to benefit
those special people you will leave behind.
• In the same breath, consider health insurance for you and
your family.
• Quality is number one at all time.
• As your business grows, learn to delegate your back room
office functions while you concentrate on the income-
generating aspects of the business.
• Teach your children the business.
• Suppliers are partners and friends in your business.
• Get over growing pains.
• Do not despair if your business does not turns out as you
first expected it to be.
• Keep unnecessary expenses to a minimum or you will run
out of cash.
• You need not to grow exponentially to say that you are
successful.
• Sometimes, elaborate expansions plans are made to feel
ego, and are based on sound business decisions.
• Turn disadvantages into advantages.
• . Expect the unexpected.
• Success begets other successes.
• Time will come when you will become tired of the
business.
• Long-term planning results in long-term benefits for you.
• Continue to educate yourself
• When taking in a business partner, do not throw caution to
the wind.
• Do not be over-confident with small success especially in
the initial stages of your business.
• . In our youth, we spend our health to gain our wealth. As
we get older, we spend our wealth to gain our health.
Enjoy life!
 Signs that Business Might Fail

1. Lack of Experience by the Entrepreneur

2. Lack of Capital
3. Poor Location
4. Wrong or Inaccurate Inventory
5. Permanent Equipment Problems
6. Poor Credit Practices
7. Increasing Personal Expenses
8. Premature Expansions of the Outlets
9. Bad Attitude of the Owner or Employees
10. Overuse of resources
11. Poor Collection
12. Low Sales in Daily Operations
13. Poor Inventory Management
14. Competition (external and internal)
15. Crime (Internal and External)
 What To Do When Business Starts to Fail?

Besides the above signs, the business should start

buzzing that there is some trouble ahead. If one are an
active business owner, one should be the first to know that
business is about to sink.
The employees will also know and feel that the business
is in trouble. Word gets around fast especially bad news. When
employees start to chitchat about where your business headed,
it is almost sure sign that are in trouble. When you hear them
do this, it should confirm what already know.
 Tactics to Solve Bankruptcy

1. Make a new SWOT analysis considering all | f factors of

present business condition.
2. Start collecting the accounts receivable and notes
receivables.
3. At the same token, minimize credit sales.
4. Borrow money while you are still in a good credit
standing.
5. Increase the prices or tack on additional charges such as
service fees or handling fees when appropriate.
6. Move inventory either by returning them to the supplier
for a refund or selling them to the public at deep
discounts.
7. Monitor cash-on-hand on a daily basis.
8. Delay payments to suppliers and creditors.
9. Renegotiate contracts for smaller and cheaper rent area.
10. Move out to a smaller and cheaper rent area.
11. Institute drastic belt tightening measures.
12. Minimize your personal expenses.
13. Outsource
14. Find new clients or customers to increase sales.
15. Find new salespeople to sell on pure commission basis.
16. To stave off lay-offs, institute a three-day workweek.
17. Terminate unproductive workers. .
18. Get everyone involve in generating sales, including janitor.
19. Liquidate or sell your office furniture, fixtures, or
equipment to generate cash.
20. Get professional help, or at the very least, ask a friend to
counsel you on what to do on next.
21. Find a prospective buyer of your business in whole or in
part, but it is much better if you can sell the whole
business

22. As a Plan B, make plans for filing bankruptcy.