ENTREPRENEURSHIP STUDY NOTES

An entrepreneurial venture may either be a sole proprietorship, a partnership, or a corporation, engaged in

merchandising, manufacturing, or service. Nevertheless, whatever type and nature of business ventures is
opened to exploit different business opportunities, innovation or creativity defines the distinction between an
entrepreneur and an ordinary business person.
Thus, the concept of innovation or creativity must, in almost all instances, be introduced and practiced. An
entrepreneur finds way to introduce innovation from the production process to the marketing stage, while an
ordinary businessperson simply imitates business practices and procedures.
The concept of innovation or creativity can easily be practiced and highly noticeable in a manufacturing
operation since raw materials are transformed to finished goods through the production process. Innovation
can be introduced from the production phase up to packaging and delivery.
The three important elements in the production system are; the input, the transformation of production process
and the output.
Figure 1.1. The Three Important Elements in the Production System
The Input includes the following:
1. Manpower
2. Materials
3. Machine
4. Design
5. Instructions
The Production process, also referred to as the transformation or conversion process, is the stage of
production where the materials are transformed into the final product with the aid of manpower and machine.
Input
Production Process
Output
The output represents the final product from the production process and distributed to the customers.
4 M’s of Production
The most serious issues in the whole production system are the inputs and the transformation process. Their
quality determines the quality of the output.
The factors involved in the input and the production process are usually referred to as the Four M’s of
production, namely Manpower, Method, Machine, and Materials.
Figure 1.2. The Four M’s in the Production System
Manpower
Manpower talks about human labor force involved in the manufacture of products. It is measured as the most
serious and main factor of production. The entrepreneur must determine, attain and match the most competent
and skilled employees with the jobs at the most appropriate time period.
Educational qualifications and experience, status of employment, number of workers required, skills and
expertise required for the job are some of the manpower criteria that must be highly considered by the
entrepreneur.
Materials
It simply refers to the raw materials necessary in the production of a product. Materials mainly form part of the
finished product. Just in case the resources are below standard, the finished product will unsatisfactory as well.
The entrepreneur may consider cost, quality, availability, credibility of suppliers and waste that the raw
materials may produce.
Four M’s
 Manpower
 Method
 Machine
 Materials
OUTPUT
7
CO_Q2_Entrepreneurship SHS
Module 6
Machine
Machine is about manufacturing equipment used in the production of goods or delivery of services. In the
process of selecting the type of equipment to purchase, the entrepreneur may consider types of products to be
produced, production system to be adopted, cost of the equipment, capacity of the equipment, availability of
spare parts in the local market, efficiency of the equipment and the skills required in running the equipment.
Method
Method or production method is the process or way of transforming raw materials to finished products. The
resources undergo some stages before it is finalized and become set for delivery to the target buyers. The
selection of the method of production is dependent on product to produce, mode of production, manufacturing
equipment to use and required skills to do the work.
MAN MACHINE METHOD
Skill Design
Technology Installation Schedule
Organization
Resources Supplies Procedure
Communications
Design Budget
Quality Demands
MATERIAL OTHER
Figure 1.3. Illustration of Four M’s in the Production System
The product is the physical output of the whole production process. It should be valuable and beneficial to the
consumers and should satisfy their basic needs and wants. A product can be heterogeneous or homogeneous.
A heterogeneous product has dissimilar characteristics, parts, and physical appearance. It can be easily
Improve
Process
Equipment
Attribute
8
CO_Q2_Entrepreneurship SHS
Module 6
identified from other products. Entrepreneurial ventures that produce heterogeneous products include makers
of furniture, bags, and home decors.
On the other hand, a homogeneous product has a physical appearance, taste, or chemical content that can
hardly be distinguished from that of the other products. Businesses that produce homogeneous products
include makers of soft drinks, and medicines.
After knowing the production process and system, and how the product is being processed, not it is important
to know about product description, wherein product description promotes and explains what a product is and
why it’s worth buying. The purpose of a product description is to provide customers with details around the
features and benefits of the product so they’re obliged to buy.
Know who your target market is, focus on the product benefits, tell the full story, use natural language and
tone, use power words that sell, and use good images. These are guidelines for you to have a good product
description; since some customers are very particular with it since they consider the welfare of their family, if it
is safe to use.
Prototype is created before the massive production of such product; an entrepreneur must consider
prototyping. One of the important early steps in the inventing process is making a prototype. A prototype is a
duplication of a product as it will be produced, which may contain such details as color, graphics, packaging
and directions. Benefits are the reasons why customers will decide to buy the products such as affordability,
efficiency or ease of use. The features of the product or service merely provide a descriptive fact about the
product or service.
Most importantly, it is better to test your product prototype to meet customers’ needs and expectations; and for
your product to be known and saleable. Pretesting of the product or service is similar to a sample of the
product or service given to the consumer free of cost in order that he/she may try the product before
committing to a purchase.
The entrepreneur’s main concern is the satisfaction of a customer, for they are the life blood of the business.
Without them, all the efforts, will be wasted as well as the chance to venture into a new business. In a
manufacturing venture, the supplier plays a vital role. They are your business partners, without them your
business will not live. You need them as much as you need your customers to be satisfied. But as an
entrepreneur you have to
9
CO_Q2_Entrepreneurship SHS
Module 6
choose a potential supplier who has loyalty and values your partnership: a supplier who would lead you to the
fulfillment of your business objectives, mission and vision. This entity is part of a supply chain of a business,
which may offer the main part of the value contained within its products. Certain suppliers may even involve in
drop shipping, where they ship goods directly to the customers of the buyer.
How do supply chain management systems coordinate planning, production, and logistics with suppliers?
Supply chain management systems automate the flow of information among members of the supply chain so
that they can use it to make better decisions about when and how much to purchase, produce, or ship. Value
chain is a method or activities by which a company adds value to an item, with production, marketing, and the
provision of after-sales service. The main goal and benefit of a value chain, and therefore value chain analysis,
is to make or support a competitive benefit. A supply chain is a structure of organizations, people, activities,
data, and resources involved in moving a product or service from supplier to customer. The main objective of
supply chain management includes management of a varied range of components and procedures, for
instance, storing of raw materials, handling the inventory, warehousing, and movement of finished product from
the point of processing to the point of consumption.
When value chain management is implemented effectively, the flow of products and materials is improved
through the accurate forecasting of sales and demand as well as improved inventory management. Delays are
also minimized and products are visible and traceable throughout the supply chain.
Supply chain management decreases purchasing cost. Retailors depend on supply chains to quickly distribute
costly products to avoid sitting on expensive inventories. Any delay in production can cost a company tens of
thousands of pesos. This factor makes supply chain management ever more important.
Value chains help increase a business's efficiency so the business can deliver the most value for the least
possible cost. The end goal of a value chain is to create a competitive advantage for a company by increasing
productivity while keeping costs reasonable.
10
CO_Q2_Entrepreneurship SHS
Module 6
Business Model
Business model describes the factors of how an organization creates, delivers, and captures value in
economic, social, cultural or other contexts. The development of business model construction and variation is
also called business model innovation and forms part of a business plan. It is a company's plan on how it will
make revenues and make a profit. It describes what products or services the business plans to manufacture
and market, and how it plans to do so, as well as what expenses it will incur.
There are important phases in developing your business model, namely: identifying the specific audience;
establishing business process; recording business resources; developing strong value proposition; determining
key business partners; and creating demand for today’s generation strategy and being open for innovations.
After developing a business model, we will proceed in developing a business plan. To be able to successfully
complete this module, you need to prepare a business plan and operate your plan and finally keep records of
your business transactions.
Business Plan
What is a Business Plan For?
Entrepreneurs who plan to enter any business endeavor must have a business plan on hand to guide them
throughout the process. Different business plans are prepared for different purposes. There are business plans
written prior to setting up an enterprise, which are similar to a prefeasibility study and a feasibility study. Many
new enterprises need to convince prospective business investors about the soundness and potential of their
business.
11
CO_Q2_Entrepreneurship SHS
Module 6
There are business plans that are written during the first few years of the enterprise in order to guide the
entrepreneur on which strategies would be most beneficial for the enterprise to take. And there are business
plans that are focused on bringing the enterprise to a higher level of growth, a period where the enterprise has
already reached its peak and would want to enter into another endeavor by creating and re-establishing itself.
Clearly, a business plan serves many masters. First, it serves the entrepreneur who must set a navigational
course. Second, it serves investors and cautious financiers. And third, it serves the managers and staff of the
organization so that they will know the strategies and programs of the enterprise.
Read the different scenarios below to fully understand the importance of having a business plan.
Scenario 1:
“Jessie is the eldest of the five children of Mr. & Mrs. Natividad. The family is having difficulty to support their
everyday needs. Because of this, Jessie tried selling banana cue and with his dream to make his business
grow, he put up many stalls in the community without considering the advises of his friends to make a business
plan before implementing his decision. After a few months his stalls shutdown.”
Scenario 2:
“Mercy is the youngest in the family. She found out that she loves to cut hair and apply make up on her friends.
Until such time that her friends introduced her to their friends too for haircut and make up when there are
occasions. A few months after, Mercy was told by her friends to put up a beauty parlor in their place. So she
asks her mother who is also a businesswoman to teach her how to make a business plan and eventually
ended with a successful business.”
Scenario 3:
“Monna is a diligent student: because of her knowledge gained from school about business plan she was able
to enhance her skills in business and finally found herself into her laundry shop business.”
Each scenario taught us that a business is not just about how much income or profit you can get, but it’s about
the life of your business. And in having a business, you also have to consider Technological forces, Social
forces, Political forces, Cultural forces, Economic forces and Legal forces.
12
CO_Q2_Entrepreneurship SHS
Module 6
The following are the components found in a Business Plan.
 Introduction - this part discusses what is the business plan all about.
 Executive Summary - is part of the business plan which is the first to be presented but the last to be made.
 Management Section - shows how you will manage your business and the people you need to help you in
your operations.
 Marketing Section - shows the design of your product/service; pricing, where you will sell and how you will
introduce your product/service to your market.
 Financial Section - shows the money needed for the business, how much you will take in and how much you
will pay out.
 Production Section - shows the area, equipment and materials needed for the business.
 Competitive Analysis - is the strategy where you identify major competitors and research their products,
sales and marketing strategies.
 Market – refers to the persons who will buy the product or services
 Organizational chart - is the diagram showing graphically the relation of one official to another, or others of a
company.
Before you proceed, let us first recall our previous lesson.
Profit is the amount you gain after selling your product. In computing your profit, you just simply follow this
formula:
Sales - Cost of Goods Sold = Gross Profit
The gross profit represents the difference between net sales and cost of sales. Variable costs are those things
that change based on the amount of product being made and are incurred as a direct result of producing the
product.
Variable costs include:
1. Materials used
2. Direct labor
3. Packaging
4. Freight
5. Plant supervisor salaries
6. Utilities for a plant or a warehouse
7. Depreciation expense on production equipment
8. Machinery
Fixed costs generally are more static in nature. They include:
1. Office expenses such as supplies, utilities, a telephone for the office, etc.
2. Salaries and wages of office staff, salespeople, officers and owners
3. Payroll taxes and employee benefits
4. Advertising, promotional and other sales expenses
5. Insurance
6. Auto expenses for salespeople
7. Professional fees
8. Rent
Guidelines for Successful Business Plan Implementation:
1. Objectives – the entrepreneur should have a clear idea on what is his purpose of putting up his enterprise.
2. Tasks – this means that the entrepreneur must know what are the tasks he has to perform in order to realize
his objectives.
3. Time allocation – This means that the entrepreneur should have a time table or a schedule to follow for
every task so that the tasks will be accomplished timely and he can realize his objectives.
4. Progress – This means the entrepreneur should monitor the development of the tasks and the
accomplishment of the objectives.

In operating a business, the entrepreneur should first consult professionals for advices, like accountants
or consultants from small enterprises. In your case, you can consult your teacher in Entrepreneurship or
anyone you think who could help you.
The following are the basic requirements to start a business in the Philippines:
 Securities and Exchange Commission (SEC) Registration - for partnership or Corporation
 Department of Trade and Industry (DTI) Registration - for your business tradename
 Mayor’s Business Permit - for getting the license to operate in the city or municipality and payment of
your local business taxes
 Bureau of Internal Revenue (BIR) Registration - for getting TIN, official receipts and invoices,
registering your books of accounts and paying your national Internal revenue taxes
 SSS, PhilHealth, and Pag-Ibig Fund registration - for registering yourself or your company as an
employer and for remitting your employees’ contribution together with your employer’s share

Other steps to follow before operating a business are as follows:

1. Set up an accounting system or hire an accountant. Knowing how the business is doing financially
is important for planning and survival.
2. Advertise the business. No one will buy the products or services if customers do not know that the
company exists. You can make use of the social media.
3. Secure insurance for the business. Liability insurance protects the business in the event of litigation.
Consider life and disability insurance, health insurance and fire insurance when you are leasing an office
or storefront.

Keeping Business Records

Good record keeping can help protect the business, measure the performance and maximize profit.
Records are the source documents, both physical and electronic, that specify transaction dates and
amounts, legal agreements and private customer and business details.
Developing a system to log, store and dispose of records can benefit the business. A systematic recording
allows you to:

A. plan and work more efficiently;

B. meet legal and tax requirements;
C. measure profit and performance;
D. protect your rights; and
E. manage potential risks.