COURSE CODE AND TITLE:

ENTREPRENEURSHIP 2 OPPORTUNITY SEEKER

ENTREPRENEURSHIP 1ENTREPRENEURIAL BEHAVIOR
COURSE DESCRIPTION:
This course explains the importance of entrepreneurship for economic development, opportunities and
threats in the industry.
Learning Outcomes:
Student should be able to:
 Learn the importance and meaning of entrepreneurship.
 Identify the major opportunities and threats in its business environment.
 Evaluate the contribution of entrepreneurs in our economic activity.
 Value the importance of entrepreneurship in the economic activities
 Define the essential terms of entrepreneurship.
 Apply in the business operation.
COURSE FACILITATOR: ROSELLER M. AMPARADO
BOOK LINK:
WWW.REXESTORE.COM

FLEXIBLE TEACHING LEARNING MODALITY

WEEKLY TOPIC MODULE LESSON AND ACTIVITY LINKS
LESSON PAGE
1 A PERSPECTIVE ON 1 ROBERTO G. MEDINA
ENTREPRENEURSHIP
2 ENTRPRENEURSHIP AND INNOVATION 4 ROBERTO G. MEDINA
3 REWARDS FOR SUCCESSFUL 6 ROBERTO G. MEDINA
ENTREPRENEURSHIP
4 PRELIM EXAM
5 OPPORTUNITY SEEKING 13 DR.EDUARDO A. MORATO, JR.
6 INDUSTRY SOURCE OF OPPORTUNITIES 16 DR. EDUARDO A. MORATO,JR.
7 CONSUMER PREFERENCES, PIQUES 19 DR. EDUARDO A. MORATO,JR.
AND PERCEPTIONS
8 SECOND PRELIM
9 OPPORTUNITY SCREENING 22 DR. EDUARDO A. MORATO, JR.
10 ESTIMATING MARKET SHARE AND 26 DR. EDUARDO A. MORATO, JR.
SALES
11 CONCEPTUALIZING THE PRODUCT OR 35 DR. EDUARDO A. MORATO,JR.
SERVICE OFFERING
12 MIDTERM EXAM
13 MARKET RESEARCH 41 DR. EDUARDO A. MORATO, JR.
14 OBSERVATION TECHNIQUE 47 DR. EDUARDO A. MORATO, JR.
15 CUSTOMER PROFILING 52 DR. EDUARDO A. MORATO, JR.
16 SEMI FINAL EXAM
17 POSITIONING 59 DR. EDUARDO A. MORATO, JR.
18 RELEVANT LOCATION DRIVERS 64 DR. EDUARDO A. MORATO, JR.
19 PEOPLE,PROMOTION AND PRICE 68 DR. EDUARDO A. MORATO, JR.
20 FINAL EXAM
A PERPECTIVE ON ENTREPRENEURSHIP
Entrepreneurship is very important component of a capitalist economy like the Philippine
It thrives in economic systems that support innovation and hard work. When entrepreneurs
become successful, the nation is immensely benefited.

ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT

Economic development is a scheme aimed at improving the living standards of the nation’s
citizenry.to achieve economic development goals,proper management of the following elements
is necessary ;
1.human resources[labor supply,education,discipline, motivation];
2.natural resources[land,menirals,fuel,climate];
3.capital formation[machines,factories,roads];and
4.technology[science,engineering,management,entrepreneurship].

The effective and efficient utilization of the various resources elements contribute to the
economic growth. This happens when the element of entrepreneurship is performed well by the
players. The abundance of the natural resources like fertile land, minerals, fuel and good climate
are plus factors by they are not guarantees for positive economic development.
There is a need for entrepreneurs to perform the function of harnessing the potentials of any or
all the various elements, determining the right time.
The performance of the entrepreneur, however, will depend much on the support provided by the
government restrictions limit the effectiveness of entrepreneurs.

WHAT IS ENTREPRENEURSHIP
Entrepreneurship refers to the economic activity of a person who starts, manages,and
assume the risk of a business enterprise. The person who undertakes entrepreneurial activities is
called an entrepreneurs.
The entrepreneur identifies an economic need, considers offering a business solution, proceeds to
assemble the resources required, and assume the risk of either succeeding or failing. An example
of this activities is properly shown on the succeeding the page;

Etrepreneur’s concerns Problem Entrepreneur’s action

at hand
1. Idintifiying an 1.High 1. . Establish a high school for
economic need. income high school students.
2. Assembling families
resources required are not 2. Aquire funds,hire
3. Assuming risk a satisfied people,construct
with the buildings,and the like.
services. 3. Prapared project study,
advertise,maintain good
2. relationship with employers
Resources and others.
must be
made
available.

3 venture
must be
made
The Entrepreneur’s task

If all requirements in a capitalist economy are in place the entrepreneur can assume his
assigned role in the development of the economy .A review of the contributions of entrepreneurs
will reveal that no business, big or small, started without the hand of the entrepreneur. Even if
many of these business failed to survive, still a sizable number developed and proceeded to make
the capitalist economy viable concern. This is made possible because the surviving enterprises
are possible for providing the following;

1.products and services for customers and producers

2.employment
3.taxes
4.demand for suppliers products and services and
5. training facilities for futures entrepreneurs.

An inspections of the array of products offered for sale in a typical supermarket reveals a
wide choice provided to the consumer. When a consumers is making a decisions on which brand
of soap he is going to buy ,for instance, he will be choosing from as many as 10 different brands.
Many years ago , hes choice was limited to one or two brands. Much earlier, soap was not
even available for sale. The consumer had to produce his own requirement.What brought the
consumers to the situation where he has luxury of choosing from many options And this does not
refer to soaps alone but other products as well.
Services which were not previously available are now at the beck and call of the
consumer. The fast food canteen at the corner, parcel delivery, communication through
cellphones, cable television, short-term credit through credit card, money remittance, and the
like, are among the many services made possible by entrepreneurs.
A review of the statistical reports prepared by the government shows that business
organized by entrepreneurs employs millions of people. The taxes paid to the government in the
form licenses, fees, and permits applicable to the employees’ and entrepreneurs, easily amount to
billions of pesos. The taxes collected are, in turn, poured into development projects of the
government.
The entrepreneurs also make sure that the suppliers will have a ready market for their
products and services. The retailers, for instance, assure the viability of big companies like San
Miguel Corporation and Pure foods Company. Hollow block manufactures utilize the output of
big cement factories. VCD and DVD shops provide the necessary linkage between consumers
and producers of movies and recorded music.
Lastly, business enterprises provide a training ground for future entrepreneurs were
former employees of enterprising persons.
 The Entrepreneur’s Task

Land Labor Capital

(Natural Resources) (Human Resources) (Financial Resources

Entrepreneurs

Production Process

Finished Goods and

services
Figure 1

In attempt to make profits, the entrepreneur performs the following specific functions:

1. to supply the necessary capital;

2. to organize production by buying and combining inputs like materials and labor;
3. to decide on the rate of output, in the light of his expectation about demand; and
4. to bear the risk inherent to the venture.

Any business enterprise must offer products or service to the buyers weather these buyers are
consumers or producers. The products or services that will be sold to the buyers must be bought
or manufactured. In any case, there will be a need to hire the services of employees, laborers, and
managers. Equipment, furniture, and machinery must be acquired. All of the above will need
funds which the entrepreneurs must produce, in addition to whatever fund reserves are required.

The next specific function of the entrepreneurs is to assemble a production unit complete with
manpower and equipment, the quality and quantity of which have been predetermined by him.

The entrepreneurs will also determine and make the decisions on the rate of output the firm must
produce. This will have to be tied up with demand.

Finally, whatever risk is involved in the entrepreneurial activity, he must suffer the consequence
of losses if he fails, but he will enjoy the profits as a reward if he succeeds.

Entrepreneurship and innovation

The freedom of competition afforded by the capitalist economy serves to drive the
entrepreneurs to innovate and get ahead of his competitors lest he is driven out of the market.
Buyers of commodities have a tendency to patronize innovative offerings of any kind and if one
who wants patronage, he must remember this motivation.
Innovation may be defined as the introduction of a new method, procedure, custom, devices,
among others. Innovation could be any of the following:

1. a new product;
2. a new process of production;
3. the substitution of a cheaper material in an unaltered product;
4. the reorganization of production, internal function, or distribution arrangement leading to
increased efficiency, better support for a given product, or lower costs; or
5. an improvement in instruments or methods of doing innovation. Innovation may also be
viewed as the last stage in an important process consisting of the following:
a. invention- which refers to the discovery or devising of new paroducts and process;
b. development- which refers to the process by which the ideas and principles generated
from the stage of inventions are embodied in concrete products and techniques; and
c. Innovation- which refers to the actual introduction of a new product or process.

Innovation, if it must be successful, must provide value to the buyers over and above those
offered by competitors. To achieve this, innovation must reduce costs or improve the quality of
product or services offered for sale.

Examples of successful innovations are the following:

1. the cordless microphone;

2. the microwave oven;
3. the cellular phone;
4. the kung fu fight scenes developed by bruce lee in the movies;
5. the karaoke music appliance;
6. the use of Laser in the treatment of eye conditions; and
7. the use of computers by engineers and architects in the design of buildings.

New Ventures and Long-Term Enterprises

A new venture cannot remain as such forever. The entrepreneurs must develop it into small;
business or make it grow into a mature and bigger company if he is to recoup the cost of opening
a new venture and take advantage of the opportunities presented by a mature business.

The transition from a new venture to a successful long-term enterprise consists of at least four
major stages. The stages are as follows:

1. the prestart-up stage

2. the start-up stage
3. the early growth stage
4. the late growth stage

The prestart-up stage happens when the entrepreneurs starts to question the feasibility of an idea,
product, or service. He seeks answers to questions regarding potential markets, production, and
financing. This is a very important stage that the entrepreneurs must consider. If he errs in his
evaluation, he will fail before considerable growth is attained.

In the start-up stage, the following activities are undertaken;

1. formation of the business;

2. generation of necessary capital;
3. purchase of facilities and equipment;
4. constructing prototype products; and
5. Testing the market.

No full-scale activity must be undertaken at this stage for the simple reason that feasibility
must be established and verified.

The early growth stage follows after establishing feasibility. Activities will be on a small scale,
i.e., selling to limited markets with limited resources. If losses occur, it will naturally be limited
also. If the enterprise is successful at this stage, the option to move to the next stage can be
exercised.

The late growth stage is the final stage before the new venture matures into a stable enterprise.
This is when management is structured, long-term financing is established, and facilities
planning are undertaken. This is also the stage where the skills of the entrepreneurs are less
needed. Instead, the skilled manager begins to take over.

Rewards for Successful Entrepreneurship

The use of any of the factors of production deserves to receive some form of compensation. The
factors referred to as “things required for making a commodity” consist of land, labor, and
capital. To make them work, however, a fourth factors becomes necessary and this is the
entrepreneurs.

When land is used in production activities, the owners of land are paid a compensation called
rent. The term “rent” refers specifically to the price paid per unit of time for the services of a
durable good, which, most often, refers to land or buildings.

For the effort of laborers, they are paid wages or salaries. Wagers may be determined on a piece-
rate basis, while salary is based on time-rate.

Interest is the compensation paid to owners of invested capital.

When all the factors of production are properly compensated, whatever is left as profits are
regarded as income and they accrue to the account of the entrepreneur?

The rates of compensation provided to the factors of production are limited to a large extent by
either industry norms or markets forces. Legislation, however, have modified the rates like the
minimum wage rates and mandated interest rates on capital.
The profits accruing to the entrepreneur, on the other hand, are limited only by his skill and
industry. He may reap huge amounts or profits, but he may also lose large amounts in the
exercise.

As the landowner earns rent for allowing use of his property, the owner of capital earns interest
for allowing use of his capital. The laborer on duty earns wages for his effort, while the
entrepreneurship earns profits for deciding how the business shall be run. If he succeeds, he is
compensated for his vision, originality, and bold undertaking.

Factors of production Economic Reward Limiting Factor for Rewards

received
Land Rent Supply and demand

Capital Interest Industry rates/government

mandated rates
Labor Wages/salary supply and demand
legislation
Entrepreneur profits skill of entrepreneur
Figures 2. The factors of production and their rewards

Entrepreneurship and Business Size

To many people, entrepreneurship means running a small business. New business ventures,
however, can also be undertaken on a large scale. Both small and large businesses are confronted
by problems that are entrepreneurial in nature.

To effectively compete, business of whatever size must adapt innovative approaches to its
activities. Examples of innovations are the following:

1. offering business services during Sundays and holidays;

2. manufacture and sale of new products; and
3. Selling on a deferred payment scheme.

Small businesses have the advantage of switching to another business concept whenever
necessary. Large businesses cannot do the same without spending much. To offset the
disadvantage, however, large businesses have started to engage in “entrepreneurship” where a
person with entrepreneurial skills and is employed by the corporation is tasked to launch new
products. This person is responsible for creating innovation of any kind in the organization.

Questions for Review and Discusion

1. Why is entrepreneurship an important component of economic activity

development?
2. What is entrepreneurship?Who is the entrepreneur?
3. What role does the entrepreneur play?
4. In what ways are entrepreneurs useful to suppliers?
 5. To make profits,what specific functions are performed by the entrepreneur?
6. Why is innovation an important entrepreneurship activity?
7. What does innovation consist of?
8. What stages comprise the transition from a new venture to a successful long-term
enterprise?
9. What is the reward accorded to the successful entrepreneur?What happens if he is
not successful?
10. Is entrepreneurship applicable only to small business?Why or Why not?

Suggested Items for Research

1. Prepare a list of five innovative products or services currently introduced in the

market.

Match column A with column B

A B
1.rent ________ A. hire people, acquire funds and the like
2.economic growth______ B. new process of production
3.assembling requires_______ C. follows after establishing feasibility
4.innovation________ D. labor
5.invention_______ E. entrepreneur questions the feasibility of a
product
6.profits________ F.has the advantages of switching to another
business
7.prestart-up stage_______ G. discovery of new products and processes
8.small business________ H. landowner
9.early growth stage_______ I. effective and efficient utilization of the
various resource elements
10.wages_________ J. entrepreneur

OPPORTUNITY SEEKING

Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover
new or different ideas and see whether these ideas will work in the marketplace.
 Entrepreneurs can create value by introducing new products or services or finding better
ways of making them.These may include innovation in terms of product design or addition of
new product features to existing ones. At the highest level, entrepreneurs may totally change the
prevailing business paradigm by rendering it obsolete through the introduction of disruptive
technologies, process and systems.

Entrepreneurial Mind Frame, Heart Flame and Gut Game

Essential to an entrepreneur’s opportunity seeking are the entrepreneurial mind

frame,heart flame and gut game.

The entrepreneurial mind frame allows the entrepreneur to see things in a very positive
and optimistic light in the midst of crisis or difficult situations.

If there is one commonality between an inventor and an entrepreneur, it is their surging

passion or the entrepreneur heart flame.Driven by passion, they are drawn to find fulfillment in
the act and process of discovery.

Passion is that great desire to attain a vision or fulfill a mission. It is about wanting
something so much that a person would be willing to totally devote one’s self to the quest.

The heart flame is also about emotional intelligence or EQ, which is often manifested in
the entrepreneurs efforts to nurture relationship with customers, employees and suppliers.

The final ingredient is the entrepreneurial gut game.This refers to the ability of the
entrepreneur to sense without using the five senses. This is also known as intuition. The gut
game also connotes courage or in the local dialect “lakas ng loob”. It is simply confidence in
one’s self and the firm belief that everything is within reach so long as you aspire for it.

The Many Sources of Opportunities

There are many ways to uncover or discover opportunities. Some have to do with looking
at the big picture and noticing emerging trends and patterns. Others have to do with finding out
what specific customer segments are being targeted in the marketplace. These different sources
of opportunity are discussed in this lesson.

Macro Environmental Sources of Opportunities

Refers to the “big or macro forces” that affect the area, the industry, and the market,
which the enterprise belongs to.

Five Categories in Macro Environment

1. Socio-cultural Environment-includes the demographics and cultural dimensions that

govern the relevant entrepreneurial endeavor.
 2. Political Environment-governance system of the country or the local area of business.It
includes all the laws, rules, and regulations that govern business practices as well as the
permits, approvals and the license necessary to operate the business.
3. Economic Environment-Supply and demand forces mainly drive the macroeconomic
environment. They are the same factors that drive the interest and foreign exchange rates
that fluctuate with the movement of the market forces.
4. Ecological Environment- includes all natural resources and the ecosystem, habitat of
men, animals, plants, and minerals.
5. Technological Environment – New scientific and technological discoveries, which often
lead to the launch and commercialization of new products with superior attributes or to
rendering the old ones obsolete, are the entrepreneur’s nightmares.

Industry Sources of Opportunities

After the Macro Environment, the next biggest sources of opportunities are the industry
and market. One of the difficult aspects about industry analysis is defining what constitutes an
industry in the first place.

Participants in an industry include:

1. Rivals or competitors in a particular type of business (e.g., Jollibee vs. McDonald’s,

Coca-Cola vs. Pepsi, Samsung Galaxy vs. Apple’s Iphone, etc.) True rivals or
competitors are those competing for the same or similar markets.
2. Suppliers of input (e.g., fuel, electricity, raw materials) to rivals as well as suppliers of
machinery and equipment, suppliers of manpower and expertise, and suppliers of
merchandise.
3. Consumer market segments being served by rivals or competitors.
4. Substitute products or services, which customers shift or turn to.
5. All other support and enabling industries.

Market Sources of Opportunities

The entrepreneur must also be able to measure the actual demand and supply as well as
the potential demand and supply of the industry that the enterprise belongs to. Equally important
is the monitoring of the prevalence of product substitutes and their market impact or the existing
players in the industry. It can be discovered from increased or decreased demand as well as
higher or lower supply.

Market Trend Analysis- is conducted by determining the critical variables, which would most
likely affect the future directions of the industy.

Micromarket
 Refers to the specific target market segments of a particular enterprise. These are the
target customers that represent the immediate customers of an enterprise, meaning those who are
currently buying the goods and services offered by enterprise and its direct competitors.

Consumer Preferences, Piques and Perceptions

Consumer preferences refer to the tastes of particular groups of people. Some examples
are the clothes people wear, the food they eat, the music they listen to, and the movie they watch.
The consumer’s age, culture and status affect their preferences. Either way, the entrepreneur can
explore opportunities brought about by consumer preferences or dislikes.

Other Sources of Opportunities

As an opportunity seeker, the entrepreneur will surely discover other sources of

opportunities. Unexpected successes (or failures) can lead to good opportunities.

1. Customer preferences change over time.

2. People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and
even careers have evolved over the years.
3. What piques customers is a great source of opportunities.
4. Before the customer is won over, there is a first a battle for the mind. Next, there is
battle for the heart. Finally, there is a battle for the wallet.
5. The longer the customer wants to use the product, the greater the chances of creating
lasting loyalty.
6. Opportunities abound in shaping consumer perceptions or occupying spaces in their
mind or places in their hearts that have not yet been filled.
7. New inventions, new system and work processes, new insights about the human
psyche, new applications for old knowledge, new revelations about how the physical
world works, new interpretations, new combinations based on the convergence of
previous technologies, new outlooks about how life should be led, and a host of other
new things are tremendous sources of opportunities.
8. Determining personal preferences and competencies lay the foundation for a new
business venture.
9. Unexpected occurrences in both the external and internal environment of the
enterprise indicate that significant changes are happening and opportunities are
sprouting.

Questions:

1. What are the major opportunities and threats in the industry that you expect to participate
in?
2. Given the potential and actual supply and demand situation, will there be a lot of
opportunities open for your existing or envisioned enterprise in the future?What are they?
How attractive are these opportunities?
3. What are the major threats to the supply and demand situation in the future?
 4. Using the matrix,write these opportunities and threats relative to your business endeavor.

TRENDS OPPORTUNITIES THREATS

Macro Environment
Industry
Market
Micromarket
Consumer

2.2 OPPORTUNITY SCREENING

After opportunity seeking comes the rigorous process of Opportunity Screening.

Because of the many opportunities possible for the entrepreneur, it is important to come
up with a short list of a few very promising opportunities, which could be scrutinized in
detail.

The Personal Screen

IN screening opportunities, the entrepreneur first has to consider his or her preferences
and capabilities by asking three basic questions:

1. Do I have the drive to pursue this business opportunity to the end?

2. Will I spend all my time, effort, and money to make the business opportunity work?
3. Will sacrifice my existing lifestyle, endure emotional hardship, and forego my usual
comforts to succeed in this business opportunity?

The 12 Rs of Opportunity Screening

1. Relevance to vision, mission, and objectives of the entrepreneur. The opportunity must
be aligned with what you have as your personal vision, mission, and objectives for the
enterprise you want to set up.
2. Resonance to values. Other than vision, mission, and objectives, the opportunity must
match the values and desired virtues that you have or wish to impart.
3. Reinforcement of Entrepreneurial Interests. How does the opportunity resonate with
the entrepreneur’s personal interests, talents, and skills?
4. Revenues. In any entrepreneurial endeavor, it is important to determine the sales
potential of the products or services you want to offer. Is there a big enough market out
there to grab and nurture for growth?
5. Responsiveness to customer needs and wants. If the opportunity that you want to pursue
addresses the unfilled or underserved needs and wants of customers, then you have a
better chance of succeeding.
6. Reach. Opportunities that have good chances of expanding through branches,
distributorship, dealerships, or franchise outlets in order to attain rapid growth are better
opportunities.
 7. Range. The opportunity can potentially lead to a wide range of possible product or
service offerings, thus, tapping many markets segments of the industry.
8. Revolutionary Impact. If you think that the opportunity will most likely be the “next big
thing” or even a game-changer that will revolutionize the industry, then there is a big
potential for the chosen opportunity.
9. Returns. It is a fact that products with low costs or production and operations but are
sold at higher prices will definitely yield the highest returns on investments. Returns can
also be intangible; meaning, they come in the form of high profile recognition or image
projection.
10. Relative Ease of Implementation. Will the opportunity be relatively easy to implement
for the entrepreneur or will there be a lot of obstacles and competency gaps to overcome?
11. Resources Required. Opportunities requiring fewer resources from the entrepreneur may
be more favored than those requiring more resources.
12. Risks. In an entrepreneurial endeavor, there will always be risks. However, some
opportunities carry more risks than others, such as those with the high technological,
market, financial, and people risks.

The Pre-Feasibility Study

The ultimate goal of doing the opportunities screening matrix is to narrow down the
many opportunities into one or more two most attractive ones. The next step is to conduct
a pre-feasibility study to ascertain the viability of the opportunity. The idea is to focus on
a few key items that could make or break the business concept. This time, the
entrepreneur must go down to the details and take time to consider the following factors
that are contained in a pre-feasibility study:
 Market potential and prospects
 Availability and appropriateness of technology
 Project investment and detailed cost estimates
 Financial forecast and determination of financial feasibility

Market Potential and Prospects

Market potential is based on the estimated number of possible customers who might avail of
the product or service. For the entrepreneur who are entering a business that caters to the basic
customer needs, such as food, clothes, beverage, furniture, appliances, housing, schooling and
the like, there would usually be demand and supply statistics available from government
institutions, industry associations, and research firms.

The entrepreneur must take note that the total market for these products is usually not the issue.
Basic needs tend to be commodities or “commoditized”. Customers have the luxury of choosing
among many basic needs suppliers. That is why these suppliers try very hard to differentiate
themselves from one another by dividing the huge market into many customer segments.

The customers would, oftentimes, make the final choice on what to buy according top several
factors such as;
 1. their purchasing power or disposable income;
2. their proximity or accessibility to the goods or services;
3. their individual desires and preferences;
4. their age or generational grouping;
5. their social, cultural, or ethnic background;
6. Their peer group preferences
7. Their gender;
8. The season of the year ;
9. Their personal identification with trend setters;
10. Their educational attainment;
11. Their technical proficiency and product expertise;
12. Their motivational impetus;
13. Their lifestyle preferences;
14. Their susceptibility to certain advertising and promotional appeals, and many other.

Market estimation is the most difficult task of the entrepreneur because of the many ways
customers can be divided and segmented. However, the most common way resorted to by
entrepreneurs are through the use of demographics such as income (class A,B,C,D, and E), age
(infants, toddlers, six to 12 years, teenagers, young adults, adults, middle agers, and senior
citizens), gender (male, female), level of education, and locational proximity.

Segmenting the Market

Using a set of demographics (e.g., gender, age, place of residence, income class, etc.) will be the
most basic approach in determining the target segment. The entrepreneur must be able to do
actual filed research like surveys, focus group discussions, in-depth interviews, observations
techniques, etc.

Assessing Competition

Market potential is also affected by the number of establishment supplying and serving your
target customers. This process would determine how saturated the market is in the given area of
coverage.

Estimating Market Share and Sales

After estimating the number of potential target market or segment, the next thing that the
entrepreneur should assess is the potential market share he or she can attract. Conservatively, the
entrepreneur can go for a small market share unless the entrepreneur has a very superior product
or service that can immediately command a large market share.

In a pre-feasibility study, the most important task is to quantity the market potential in a
systematic way. The first thing that the entrepreneur must do is to define the market coverage or
reach he or she wants to serve. The area could be as big as a country (or even a continent) and a
small as a neighborhood. The area would define the total population being targeted. Second, the
entrepreneur must be determine the broad market segments within this area or total targeted
population. In a first level attempt at quantifying the market, the entrepreneur could select such
broad categories like gender, age, and income class.

In the assessment of market potential, the entrepreneur should evaluate the relative strength of
the various suppliers or competitors in the marketplace by asking the following questions:

 Who has dominance?

 Who has greater bargaining power?
 Which segments of the total market are saturated and over served and which ones
are relatively underserved?
 Are there market segments which are more attractive than others for the
entrepreneur, either because of past expertise in the segment or weaker
competition in the segment?

The final task of the entrepreneur in this portion of the pre-feasibility study is to determine what
slice or share of the targeted market segment he or she wants to carve out. Without a very
definite product formulation or service proposition, this requires some “educated guessing” or
intuitive insightfulness.

Having determined the forecast or derived market share, the entrepreneur should then estimate
potential sales. The sales forecast can be computed using the following formula: (Estimated
Sales Volume x Estimated Price).

Technology Assessment and Operating Viability

In order to get the enterprise going, the entrepreneur must go through the intricacies of detailing
the operations that would be required by the business, which also includes technology
assessment. By going through this process, the entrepreneur would be able to determine whether
the product or service offering will meet customer demand or not. There are at least four target
customer expectations affecting the scale and complexity of an enterprise’s operations:

1. Quantities demanded. This would determine the needed capacity of operations.

2. Quality specifications demanded. This would dictate the following: (a) quality of input
or raw materials; (b) quality assurance process in transforming input to output; (c) quality
output that meet the operations, standards set; and (d) quality outcomes for the customer
who will be looking for specific results.
3. Delivery expectations. Knowing how much, how frequent, and when to deliver to
customer.
4. Price expectations. The selling price of the product or service would be evaluated by the
customers according to the value they would receive (in terms of quality, delivery, and
quantity) and this value added should be matched against competitors.

Investment Requirements and Production/servicing Costs

 Now comes to the challenges part, the entrepreneur needs to determine how much money is
needed to start business opportunity with consideration to the technologies and operating levels
required. In this respect, there are three investments that need to be funded:

1. Pre-operating Costs. These are the costs related to the preparation for the launch of the
business. These include the pre-feasibility study, in-depth feasibility study, market
research, product development, organizational development, and initial promotional
costs.
2. Production/Service Facilities Investments. This refers to the long-term investment for
the actual business establishment, including investment in land, buildings, machinery,
equipment, computers, software, furniture, vehicles, etc. If the business would be renting
or leasing space, the leasehold improvement (or renovation) would also be part of the
facilities investments.
3. Working Capital Investment. This includes the investment needed to operationalize the
business, compose of cash, accounts receivable, and inventories (raw materials, work-in-
process, and finished goods). The entrepreneur must see to it that he or she has enough
cash to cover the inventories to be purchased (or manufactured), the accounts receivable
to accommodate customers, and the operating expenses would include the following:
a. Employee salaries, wages, and benefits
b. Rent and lease expenses
c. Utilities
d. Transportation
e. Fees and licenses
f. Commissions
g. Office supplies, etc.

In effect, this part of the pre-feasibility study asks two questions:

1. Do I have enough resources to cover the necessary investment?

2. Would my sales estimates be significantly higher that my monthly production/service
costs in order to produce profits?

Financial Forecasts and Determination of Financial Feasibility

Upon completing the first three parts of the pre-feasibility study, the entrepreneur should now be
able to proceed in constructing his or her enterprise financial forecasts for the business. The
financial forecast refer to the monetary transactions that the business is expected to engage in.
ultimately, the end results of the financial forecast will indicate the feasibility of the enterprise.

Financial forecasting calls for the creation of the four critical financial statements: namely, (1)
income statement; (2) balance sheet; (3) cash flow statements; and (4) funds flows statements.
The marketing strategy and the production or service delivery program should translate into
forecasts of costs of goods produced. The rest of the enterprise delivery system should translate
into forecasts. The resources mobilized and held by the enterprise are translated into forecasts of
the balance sheet (which show the investments in the form of assets and their corresponding
financing in the form of liabilities). The flow of resources should be translated into funds and
cash flow statements. For a better understanding, this discussion will concentrate on preparing a
simple income statement and balance sheet.

Income Statement

The income statement is a financial statement that measures an enterprise’s performance in terms
of revenue and expenses over a certain period.

Balance sheet

Creating the balance sheet is a bit more complicated because one has to look at three different
things: assets, liabilities, and equities.

Assets represent all the investments in the enterprise including the initial investments that you
considered in the pre-feasibility study (investment requirements). These include cash (on hand
and in bank), accounts receivable, inventory, of goods, equipment and machinery, facilities,
vehicles, etc.

Financing the assets or investments are the liabilities and equity. Liabilities represent the
enterprise’s debts to suppliers, to banks, to government, to employees, and other financiers.
Stockholders’ equity represent the inventors investments in the stock (or shares) of the business.

Financial Ratios and Measurements

In any business endeavor, the investor or the entrepreneur himself or herself will always be
interested in knowing the payback period or how long will it take for him or her to get back what
he or she invested in the enterprise.

The Feasibility Study

For bigger project that entail millions of pesos worth of investment, a full-blown feasibility study
might be required more than the pre-feasibility study. As compared to pre-feasibility study, a
feasibility study is more comprehensive and detailed. It requires a more rigorous approach. A
feasibility study is prepared to convince bankers and investors to put money into the business
opportunity. In writing the feasibility study, the entrepreneur should take into consideration the
following:

1. A more in-depth study to market potential to ensure that the business proposal will reach
the forecasted sales figures;
2. Proof that the product or service being offered has the right design, attributes,
specifications, and preferred features;
3. Proof that the entrepreneur and his or her team have the necessary experienced, skills,
and capabilities to maximize the venture’s chances of success;
4. Legal visibility;
5. More detailed costing on the different assets and more justification for the production
and operating expenses; and
 6. More thorough analysis of the technology and its sustainability.

OPPORTUNITY SEIZING

After opportunity seeking and screening, the entrepreneur is ready for opportunity seizing, the
final stage. By now, the entrepreneur has an idea as to where he or she will locate the business
and how he or she will market the product or service. At this stage, the entrepreneur must be able
to determine the critical success factors that enable other players in the same industry to succeed
while, at the same, be vigilant about those factors that cause other business to fail.

Crafting a Positioning Statement

In order to craft a positioning statement, the entrepreneur is advised to look at other competitors
(or substitutes) in the market place. Details such as their major buyers, attributes or features that
make the competitors’ products attractive should give the entrepreneur idea. Customer profiling
will come into the picture – their characteristics and traits, behavior and usage pattern,
preferences and dislikes.

MARKET RESEARCH

Entrepreneur know thy market well!. This simple reminder must keep thecentrepreneur
alert all time. The entrepreneur should exert all efforts to know the market he or she wants to
exploit.

Market Research Methodologies

Important market information can only obtained by conducting a good market research.
The more entrepreneur knows about his or her relevant market, the more customers can be
properly segmented and reached can be positioned, brands can be promoted, prices can be set,
and locations can be pinpointed.

Market Research Methodologies Approach:

1.

2. Sales Data Mining 6. Questionnaire Design

3. Focus Group Discussion 7. Sampling Techniques
4. Observation Technique 8. Sample size
5. Survey Research

CUSTOMER PROFILING

Customer knowledge starts with good customer profiling.

Methods of Customer Profiling

1. Demographics 3. Tecnographics
2. Psychographics 4. Application of Customer Profiling
 5. Market Segmentation 7. Market Mapping
6. Market Aggregation

Questions:

1.Are there any special food preferences, buying habits and ways of dressing that are
unique to your local area? What are they? Reflect on what cultural or historical factors
brought these about?
2.Who is your peer or reference group?(These are the people of your age that you usually
hang out with). Does your group have special interest that influences what you do and
buy?
3.Given your home or area of residence, how do your environmental surrounding affect
what you do and buy?
4.How do you classify yourself according to your sophistication level in the technological
gadgets? In sports?

POSITIONING-Is the way the customers perceive the enterprise and its products or services in
their minds.

LATITUDE lays out what is important to the different customer segments from their
differing points of view.

LONGITUDE in the marketing map represents the product features and attributes of
competitors in the marketplace.

PRODUCT- Is the tangible good or intangible service that the enterprise offers to its customers
in order to satisfy their needs and to produce their expected results.

There are four general types of products that are marketed by enterprises:

1. Breakthrough products
2. Differentiated products
3. Copycat products
4. Niche products

PACKAGING- Identifies the products, describes its featuresand benefits and complies with the
government rules on specifying contents, weights, chemical composition, and potency.

PLACE-Is often recited mantra of salespeople who want to have the best access to their
customers.

PEOPLE-Are the ultimate marketing strategy.

PROMOTION-Is the explicit communication strategy adopted by an enterprise to elicit the

patronage, loyalty and support not only from its customers but also from its other significant
stakeholders.
PRICE-Is a major factor for the customer in buying a product.

Challenge yourself:

Get your creative juices flowing by using an existing product. Better yet,if you
have your own business idea or prototype, think of a unique way of packaging it.To help
you out,you may want to consider any or a combination of the five purposes of packaging
mentioned in this chapter.
Be a resourceful to find ordinary materials in your house to be put together as a
unique packaging for the chosen product. These can be scraps of wrapper, cardboards,
colored papers,foil,ribbons,trimmings and et.
For a more exciting approach to this challenge, others in the class may also
participate and have a set of judges to decide which one has the best packaging based on
a given criteria(Uniqueness,50%;Creativity,20%;Resourcefulness,20%;and
Functionality,10%

Roseller M. Amparado
Facebook: Royjeid Amparado
Contact number: 09453306827