ELEC REVIEWER

LESSON 1: ENTREPRENEURSHIP, ENTREPRENEUR, ENTERPRISE

Who is an Entrepreneur?

- The American Heritage Dictionary defines an entrepreneur as a person who organizes and directs
a business enterprise, assumes all the risks for the sake of profit.
- The word entrepreneur comes from the French word “entreprendre” which means to begin
something, undertake. 
1. Cantillon defines an entrepreneur as one who bears uncertainty, buys labor and materials,and
sells products at certain prices.  He is one who takes risks and make innovations on the factors
of production.
2. In French concept, an entrepreneur is an adventurer, undertaker and projector.  His function is
to supply and accumulate capital.
3. To Schumpeter, an entrepreneur is an innovator.  He does new things or does things in a
new way.  He supplies new products; makes new techniques of production; discovers new
markets and develops new sources of raw materials
4. Peter Drucker says that an entrepreneur always searches for change, responds to it and
exploits it as an opportunity.
5. Medina defines entrepreneur as a person who identifies an economic need, considers offering
a business solution, proceeds to assemble the resources required and assumes the risk of
either success or fail of the business.

What is an Enterprise?

- An establishment that supplies us with products and services in exchange for payment is an
enterprise or business.
- Products, also called goods, are tangible items—things you can touch such as clothing, furniture,
pens, cellphones, etc.
- Services are tasks we pay others to do or provide for us. Services are intangible, which means that
you cannot touch them.

What Is Entrepreneurship?

- Entrepreneurship is the act or process of organizing and directing a business enterprise

- They are responsible for the success of their business ventures even though they were not the
founders (Dumlao, 2010).

LESSON 2 : ENTREPRENEURIAL DEVELOPMENT

- The entrepreneurship development is a drive to achieve overall economic development through

industrial activity.
Entrepreneurship Development incorporates four basic issues: 

a. the availability of material resources, 

b. the selection of real entrepreneurs, 
c. the formation of industrial units, and 
d. the policy formulation for the development of the region(s).

LESSON 3: FUNCTIONS OF ENTREPRENEURS

1. Develop new markets

2. Discover new sources of materials.
3. Mobilize capital resources.
4. Introduce new technologies, new industries and new products.
5. Create employment.
6. Provides taxes to the economy. 
7. Empower individuals. 
8. Enhance national identity and pride.
9. Enhance competitive consciousness. 
10. Improves quality of life.
11. Enhances equitable distribution of income and wealth

LESSON 4: TYPE OF ENTREPRENEURS

An entrepreneur is a person who attempts to earn a profit by taking the risk of operating a
business enterprise.

1. Solo Self-Employed Individuals – entrepreneurs who work alone or with only a few employees
are known as solo self-employed individual. Solo self-employed individuals are perhaps the most
numerous of all entrepreneurs.
2. Team Builders – entrepreneurs who expand small, usually one-person businesses into larger
companies are team builders.
3. Independent Innovators – individuals who create companies to manufacture and sell products
they have invented are independent innovators.
4. Franchisers – entrepreneurs who build several units of an effective business are known as
franchisers. The entrepreneurs may have designed and built the original business, or they may
have purchased a business started by someone else.
5. Economy-of-Large-Scale Exploiters – when a firm has lower average costs due to its large sales
volume, economies of large scale are involved. Entrepreneurs who can sell a large volume of goods
at reduced prices are economy-of-large-scale exploiters.
6. Capital Aggregators – entrepreneurs who take the lead in establishing financial institutions that
require a large amount of start-up capital are capital aggregators.
7. Acquirers – people who become entrepreneurs by buying an existing business are acquirers.
 8. Buy-Sell Artists - rather than making their money from the day-to-day operations of a business,
buy-sell artists turn profit by buying a business and then selling it at a higher price.

LESSON 5: ENTREPRENEURIAL TRAITS AND CHARACTERISTICS

Successful entrepreneurs are often described as persons who:

1. Moderate In Taking Risks – persons who quit secure jobs and invest money in a new enterprise
have much at stake. They are taking a risk. Their businesses may succeed and provide profits for
years to come. On the other hand, the business may fail and cause financial ruin. Entrepreneurs
are willing to take middle-of-the-road or moderate risks.
2. Self-Confident – successful entrepreneurs have self-confidence. Self-confidence means believing
you can achieve what you set out to do. You are not afraid to take chances. You know you can get
the job done.
3. Hardworking – creating a new enterprise is hard work. Helping customers, keeping accounting
records, and cleaning are just a few duties you may have to perform on a given day.
4. Goal-Oriented - do you know what you want to achieve in life? Successful entrepreneurs know
where they are going by setting goals. A goal is an objective, something you plan to achieve.
5. Responsible – when you are responsible, you answer or account for what happens. You accept
blame for failure, and you accept credit for success. An as entrepreneur, you will be responsible
for the success or failure of your business. You will set goals and hold only yourself responsible if
they are not met.
6. Innovative - successful entrepreneurs are innovative because they introduce new ideas or
methods. They try to improve existing products and services or create new products and services.
7. Knowledgeable About Technical Factors – you must have technical knowledge to succeed as an
entrepreneur. Technical knowledge is what you know about a product or service.
8. Knowledgeable About Business Factors – you will also need business knowledge. Business
knowledge is knowing how to operate the enterprise. Entrepreneurs must see that all tasks are
performed appropriately.

Advantages of Working for Yourself

1. Personal Satisfaction – to some persons, the chief reward of working for your self is personal
satisfaction. Personal satisfaction means doing what you want with your life.
2. Independence – another advantage of entrepreneurship is independence. Independence is
freedom from the control of others. As an entrepreneur, you decide how you will use your
knowledge, skills, and abilities.
3. Profit – one of the major rewards expected when starting a new business is profit. Profit is the
amount of sales income left after all expenses have been paid.
4. Status – self-employed people often enjoy persona benefits, such as status. Status is a person’s
social rank or position. Entrepreneurs receive attention and recognition through customer contact
and public exposure.
5. Job Security – many enterprises are created by prons who are seeking job security not available
elsewhere. Job security is the assurance of continuing employment and income
Disadvantages of Working for Yourself

1. Possible Loss of Invested Capital – a risk of entrepreneurship is the possibility of losing invested
capital. Invested capital refers to the entrepreneur’s money used in starting the enterprise. As a
general rule, the riskier the business, the greater the profit potential.
2. Uncertain or Low Income – another disadvantage of owning your own business is the possibility
of uncertain or low income. This is true even in well-established enterprises. This is often the case
during the first six to twelve months of operation. The level of sales and income tends to be low in
these early months when the business is not known to many people.
3. Long Hours - entrepreneurs are not 8-5 hours; they do not punch time cards. Many entrepreneurs
work fourteen and fifteen hours a day, six or seven days a week. The owner is often the first to
arrive in the morning and the last to leave at night. Business hours are set at the convenience of
customers, not the desire of the owner.
4. Routine Chores –running your own business may involve chores you do not like.

LESSON 6: HOW TO BECOME A SUCCESSFUL ENTREPRENEUR?

1. Don’t take “no” for an answer – fear of failure is one of the reasons that many entrepreneurs fall.
Successful entrepreneurs view failure as a positive experience – something to learn from and
overcome in the future.
2. Learn from the best – even the best entrepreneurs of our time worked with other experts in their
industry before going it alone.
3. Stay hungry and ambitious – running a successful business is not an ego trip for successful
entrepreneurs. It’s their desire to grow and provide a better product or service for their
customers that keeps them hungry and ambitious. The moment that an entrepreneur stops
wanting to learn new things is the moment that complacency sets in, allowing others to overtake
you and leave you behind.
4. Never stand still – evolve with the times. Any successful entrepreneur requires business agility
with the ability to learn and adapt to new methods, processes or technology that can make their
business stronger and efficient.
5. Nurture long-term business relationships – your ability to nurture long-term working
relationships with like-minded entrepreneurs within your industry will be one of the key factors
in the long-term success of the business.
6. Inspire those around you. Even the richest, most experienced entrepreneurs cannot be good at
everything! All entrepreneurs require a team of people around them that complement their skills.
The real skill is not only hiring the best possible team to support you, it’s about hiring people who
share your vision and passion. By inspiring and investing in your team, not only they will succeed
but the business itself too.
 UNIT 2
 
THE ENTREPRENEURIAL ENVIRONMENT

TOPICS:

Lesson  1   Business Environment

Lesson  2   Features of Business Environment

Lesson  3   Significance of Business Environment

Lesson  4   Elements of Internal and External Environment

Lesson  5   Industry Analysis

Lesson  6   Types of Industry Analysis

LESSON 1   
THE BUSINESS ENVIRONMENT

- The term ‘business environment’ means the sum total of all individuals, institutions and other forces that are
outside the control of a business enterprise but that may affect its performance.
- The environment of your business consist of the conditions, circumstances, and influences that affect your
business’ ability to achieve its goals or objectives. It exists in an environment that has both internal and external
components. (Viray, et.al, 2018)
- The internal environment exists within your business organization.
- The external environment lies outside your business organization. 

LESSON 2 
FEATURES OF BUSINESS ENVIRONMENT

Business environment, has the following features:

Totality of external forces: Business environment is the sum total of all things external to business firms and, as
such, is aggregative in nature. 

Specific and general forces: Business environment includes both specific and general forces. Specific forces
(such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately
in their day-to-day working. General forces (such as social, political, legal and technological conditions) have
impact on all business enterprises and thus may affect an individual firm only indirectly.

Inter-relatedness: Different elements or parts of business environment are closely interrelated. For

example, increased life expectancy of people and increased awareness for health care have increased the
demand for many health products and services like diet Coke, fat-free cooking oil, and health resorts. New
health products and services have, in turn, changed people’s life styles.

Dynamic nature: Business environment is dynamic that it keeps on changing whether in terms of technological
improvement, shifts in consumer preferences or entry of new competition in the market.

Uncertainty. Business environment is largely uncertain as it is very difficult to predict future happenings,

especially when environment changes are taking place too frequently as in the case of information technology
or fashion industries.

Complexity.  Since business environment consists of numerous interrelated and dynamic conditions or
forces which arise from different sources, it becomes difficult to comprehend at once what exactly constitutes a
given environment. In other words, environment is a complex phenomenon that is relatively easier to
understand in parts but difficult to grasp in its totality.

Relativity.  Business environment is a relative concept since it differs from country to country and even region
to region. Political conditions in the USA, for instance, differ from those in China or Pakistan. 

Lesson 3

Significance of Business Environment

1.  It enables the firm to identify opportunities and getting the first mover advantage.

2.  It helps the firm to identify threats and early warning signals.

3.  It helps in tapping useful resources.

4.  It helps in coping with rapid changes.

5.  It helps in assisting in planning and policy formulation.

6.  It helps in improving performance.

Lesson 4

The Elements of External and Internal Environment

The External Environment

The External Environment is composed of dimensions in the broader society that influence an industry and the
firms within it. We group these dimensions into six environmental segments: (1) demographic (2) economic (3)
political/legal (4) socio-cultural (5) technological and (6) global.

The Demographic Segment

The demographic segment is concerned with a population’s size, age structure, geographic distribution, ethnic
mix, and income distribution. Demographic segments are analyzed on a global basis because of their potential
effects across countries’ borders and because many firms compete in global markets.

The Political/Legal Segment

The political/legal segment is the arena in which organizations and interest groups compete for
attention, resources, and a voice of overseeing the body of laws and regulations guiding the interactions among
nations. Essentially, this segment represents how organizations try to influence government and how
governments influence them. Constantly changing, the segment influences the nature of competition.

The Sociocultural Segment

  The sociocultural segment is concerned with a society’s attitudes and cultural values. Because attitudes and
values form the cornerstone of a society, they often drive demographic, economic, political/legal, and
technological conditions and changes. It is important to note that a nation’s culture has a primary effect on
its social character and health. 

The Technological Segment

Pervasive and diversified in scope, technological changes affect many parts of societies. These effects occur
primarily through new product’s processes, and materials.The technological segment includes the institutions
and activities involved with creating new knowledge and translating that knowledge into new outputs, products,
processes and materials.

The Global Segment

The global segment includes relevant new global markets, existing markets that are changing, important
international political events, and critical cultural and institutional characteristics of global markets.
Globalization of business markets creates both opportunities and challenges for firms.

The Internal Environment 

All organizations have strengths (competitive advantage) and weaknesses. Internal strengths and weaknesses,
together with external opportunities and threats and a clear statement of mission, provide a basis for establishing
objectives and strategies. Objectives and strategies are established with the intention of capitalizing upon
internal strength and overcoming weaknesses.

Creating Value

 By exploiting core competencies and meeting the demanding standards of global competition, firms create
value for customers. Value is measured by a product’s performance characteristics and by its attributes for
which customers are willing to pay.

Key Elements in the Internal Environment

Resources
Broad in scope, resources cover a spectrum of individual, social, and organizational phenomena.
Typically, resources alone do not yield a competitive advantage. In fact, a competitive advantage is created
through the unique bundling of several resources.

Capabilities

As a source of capabilities, tangible and intangible resources are a critical part of the pathway to
the development of competitive advantage.

Four Criteria of Sustainable Competitive Advantage

A sustained competitive advantage is achieved only when competitors have failed in efforts to duplicate the
benefits of a firm’s strategy or when they lace the confidence to attempt imitation. 

1.  Valuable. Valuable capabilities allow the firm to exploit opportunities or neutralize threats in its external
environment. By effectively using capabilities to exploit opportunities, a firm is able to create value for
customers.

 2.  Rare. Rare capabilities are possessed by few, if any, current or potential competitors. Capabilities possessed
by many rivals are unlikely to be a source of advantage for any of one of them. Instead, valuable but common
(i.e. not rare) resources and capabilities are sources of competitive similarity. Competitive advantage results
only when firms develop and exploit capabilities that differ from those shared with competitors.

3.Costly to Imitate. Costly-to-imitate capabilities are          capabilities that other firms cannot easily develop

4. Non-substitutable. Non-substitutable capabilities are capabilities that do not have strategic equivalents.

LESSON 5 and 6

INDUSTRY ANALYSIS

An industry’s economic traits and competitive conditions and how they are expected to change
determine whether its future profit prospects will be poor, average, or excellent. Industry and competitive
conditions differ so much that leading companies in unattractive industries can find it hard to earn respectable
profits, while even weak companies in attractive industries can turn in good performances.

The Industry’s Dominant Economic Features

As a working definition, we use the word industry to mean a group of enterprises whose products have so many
of the same attributes that they compete of the same buyers. The factors to consider in profiling an industry’s
economic traits are fairly standard:

Market Size

Scope of competitive rivalry (local, regional, national, international, or global).

Market growth rate and where the industry is in the growth cycle (early development, rapid growth  and takeoff,
early maturity, mature, saturated and stagnant, declining).
TYPES OF INDUSTRY ANALYSIS

An important part of industry and competitive analysis is to delve into the industry’s competitive process to
discover the main sources of competitive pressure and how strong each competitive force is. This analytical step
is essential because managers cannot devise a successful strategy without understanding the
industry’s competitive character.

SWOT ANALYSIS

 A situation or SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is critical to the creation of any
strategic plan. The SWOT analysis begins with a scan of the external environment. Organizations must examine
their situation in order to seek opportunities and monitor threats. Sources of information include customers
(internal and external), suppliers, governments (local, state, federal, international), professional or trade
associations (conventions and exhibitions), journals and reports (scientific, professional, and trade). 

THE FIVE-FORCES MODEL OF COMPETITION

 
Threat of New Entrants 

.  Economies of Scale

.   Product Differentiation

.    Capital Requirements

.  Switching Costs
.  Access to Distribution Channels

. Cost Disadvantages Independent of Scale.

.  Government Policy

.  Expected Retaliation

UNIT 3  
MANAGING INNOVATION AND ENTREPRENEURSHIP 
 
TOPICS: 
Lesson  1   Innovation and Entrepreneurship 
Lesson  2   Types of Innovation 
Lesson  3   Other types of innovation  
Lesson  4    Five Stages of Successful Innovation  

Introduction 
 
Sustaining innovations are the incremental year-by-year developments that all good companies are tedium
ready. Other sustaining innovations are advance, leapfrog-beyond-the-competition products. It doesn’t matter
how technologically challenging the innovation is. However, conventional competitors almost always win the
battles of sustaining technology. 
 
Technological innovation is progressively the basis of the needs for competitive advantage for every firm all
over the country. Moreover, building an organization to successfully and repeatedly bring technological
innovations to the market is a startling managerial encounter.  The course will focus on the practices and
processes that managers use to manage innovation effectively. 
 
This unit guides the students to examine entrepreneurship innovation as a strategy that requires making an
improved product to craft or sell higher profit margins to their superlative customers. It also directs students to
quickly recognize competitors who have influential innovations to fight the sustaining battles as long as they
can win. 
 

                                      
The Difference Between Innovation & Entrepreneurship 
 
Innovation and entrepreneurship are interrelated words used in the business field. Others may think they
are the same, but using them interchangeably would be making a huge mistake. While they revolve in the same
idea, it is relevant to clearly understand and know their difference. 
 
The innovation is applying your creativity to come up with a unique idea or solution. It is a technological
invention, which lets parts do what they could not previously do. You have an engine, wheels, and axles, and
you put them together to invent the car. Progress relies on innovation, and great innovators can get rich.   
 
Entrepreneurship, by contrast, is applying the innovation to bring ideas to life. A social invention let
people do what they could not previously do. Entrepreneurs grasp the opportunity to cash in on the innovation.
They build businesses and propel the innovation forward. Progress depends on entrepreneurship, and great
entrepreneurs get even more decadent than great innovators. 
 

 Type of Innovations 
 

Incremental Innovation 

Most innovations are incremental, gradual, and continuous improvements in the existing concepts, products, or
services in the current market. The incremental innovations are just a little better than the previous version of
the product or service and have only slight variations on an existing product formulation or service delivery
method. 

Disruptive innovation 

The concept of disruptive innovation is introduced by a professor, academic and business consultant Clayton
Christensen first in an HBR article and later in his book called Innovator's Dilemma.  Disruptive innovation is a
theory that refers to a concept, product, or service that creates a new value network either by entering an
existing market or by creating an entirely new market. 
 
In the beginning, disruptive innovations have lower performance when measured by traditional value metrics
but have different aspects that are valued by a small segment of the market. These types of designs are often
capable of turning non-customers into customers. Still, they do not necessarily appeal to the mainstream
customers' needs and preferences, at least not just yet. 

Sustaining innovation 
The sustaining innovation is the opposite of disruptive innovation as it exists in the current market. Instead of
creating new value networks, it will improves and grows the existing ones by satisfying a customer's needs. 
 
Like incremental innovation, sustaining innovation's product performance that is made slightly better with every
iteration by reducing defects. The new and improved version of the product can be more expensive and have
higher margins than the previous one if it targets more demanding, high-end customers with better performance
than previously available.  More so, it might as well be cheaper if it leads to higher volumes and, thus, higher
absolute profits. 

Radical innovation 

The radical innovation is rare and it has the same characteristics as to disruptive innovation but is different in a
way that has simultaneously uses the revolutionary technology and the new business model.  
 
Radical innovation will then be solving global problems and addresses needs in entirely new ways than what
we're used to. It even provides solutions to needs and issues we didn't know that we had to completely
transforming the market or an even the entire economy as a whole. Although radical innovations are rare, there
have a numerous of them in the recent past. 

 Other Types of Innovation 

 
While the four types mentioned above of innovation in the innovation matrix are a common way of
describing the technology, an invention uses, and its impact on the marketplace,  it is not the only way to
categorize such innovation but you wouldn't necessarily start your next initiative in innovation  by  telling the 
people to come up with a new disruptive  ideas in business that are ready to transform the entire industry, or
simply to make more incremental innovation happen. 
 
By  getting a strong, actionable and concrete  result, innovation should be in holistically approached . In
this part of the lesson, we'll introduce other innovation types that can be helped to improve and open new value
in different parts of your business. 
 
 

Eight (8) Types of Innovation 

 

Product innovation 

The product innovation is  the most common form of innovation and it refers to improvements in performance
characteristics and attributes of the product. It can also use components that differ from previously
manufactured products. 
 
Product innovations are  tangible, can involve radically new technologies, or can be built based on
combining technology existence in a new way. However, they don't necessarily have to involve any technology
at all. 
 
Service Innovation 

The service innovation refers to a new or significantly improved service concept, product, or process in a new
or existing market. For example, it can be a further customer interaction nor distribution channel, nor system
that do improves the process of delivery and/or a new solution in the customer interface. 
 

Process innovation 
The process combines the 1. skills; 2. technologies; and 3. structures that used to produce products and provide
services.  Process innovation generally refers to the implementation of a new or significantly improved
production or delivery method. It may also be indirectly related to the company's products and services, such as
support function processes in Human Resource or Finance. 

Technological Innovation

As a source of innovation, technology can be treated as critical success factor for increased market
competitiveness. Technological innovation involves new or improved technology, such as; 1. a new type of
machinery or 2. alteration of some form of technology into a product, processes, or service delivery methods.

The Business Model Innovation 

In all its simplicity, the business model is how a company functions and earns money.  To name a few, It
consists of core values and resources, strategy, core channels, and target customers. 

The Marketing Innovation 

For an innovation to be successful, people need to find it and then benefit from it. The primary purpose of
marketing innovation is to open up new markets or increase market share. Design is typically considered to be a
marketing innovation if it brings significant changes to the "traditional" marketing mix (4Ps: Price, Product,
Promotion, and Place) of the industry in question.

The Architectural Innovation 

Architectural innovation was introduced by a Harvard Business School professor Rebecca Henderson and dean
Kim Clark back in 1990. The architectural invention is described as the reconfiguration of existing product
technologies that create an improvement in how components, some of which are not necessarily innovative, are
combined.

The Social Innovation 

Social innovation are new practices or technological inventions that aim to meet social needs better than the
existing solutions and these types of innovative solutions can be funded or be provided by either public or
business or commercial entity.

LESSON 4
 

 
 
Five Stages of Successful Innovation 
 
Idea Generation and Mobilization 
 
The generation stage is the starting line for a new idea. Successful idea generation should be fueled both by
the pressure to compete and by the freedom to explore. IDEO, the product development and branding company
based in Palo Alto, California, is an excellent example of an organization that encourages successful idea
generation by finding a balance between playfulness and need. 
Advocacy and Screening 

At this stage, it is the time for weighing an idea's pros and cons. Advocacy and screening have to take place
simultaneously to weed out ideas that lack potential without allowing stakeholders to reject ideas impulsively
solely based on their novelty. The authors found that companies had more success when the evaluation process
was transparent and standardized. Employees felt more comfortable contributing when they could anticipate
how their ideas would be judged. For example, one software engineer from an information technology
organization said, "One of the things I have struggled with is evaluations of my ideas. Some of my ideas light
up fires around here, while others are squashed. I grow skeptical when [the executives] ask for ideas and then
do not provide feedback as to why an idea was not pursued." 

Experimentation 

The experimentation stage tests the sustainability of ideas for a particular organization in a specific time and in
one particular environment. At this stage, it's crucial to determine who the customer will be and what he or she
will use the innovation. With that in mind, the company might discover that although someone has a great idea,
it is ahead of its time or just not right for a particular market. However, it's important not to interpret these kinds
of discoveries as failures — they could be the catalysts of new and better ideas. 
 
Commercialization 

In the commercialization stage, organization should always look to its customers to verify that the innovation
should solves their problems and then analyze the   benefits and costs of the innovation rolling out. The authors
notably ensure that "an invention is only considered an innovation once it has been commercialized." However,
the commercialization stage is important one, similar to the advocacy, in this it will take the right people to
progress their idea to the next level of the developmental stage. For example, one chief executive officer said,
"We learned a simple thing: 
 
Researchers and idea creators do not appreciate the nuances of marketing and commercialization. In the past,
we tried to get the researchers involved in the commercialization aspects of the business. 

Diffusion and Implementation 

The diffusion and implementation stages are "two sides of the same coin." Diffusion is the process of gaining
final, companywide acceptance of an innovation, and implementation is the process of setting up the structures,
maintenance, and resources needed to produce it.  
 
A good example of a successful approach to diffusion comes from International Business Machines Corp.,
which involves its employees early in the idea-generation stage and conducts so-called innovation jams, to
which they invite not only employees but also clients, business partners, and even employees' families. IBM
aids later diffusion by giving everyone a stake in the idea from the beginning.