pdfcoffee.com_entrepreneurship-in-philippine-setting-by-nick-l-aduanapdf-pdf-free.pdf

I ~ ~ ;SRI~
in Philippine Setting
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NICK L. ADUANA
, /
C & E PUBLJS~~ .
FORE OJJ~(: lJW.
VALUATION con
NOTFORSALE
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C & E Publishing, Inc.
2016

TABLE OF CONTENTS
~ CORI CONCEPTS OF INTRIPRINIURIHIP
Chapter 1
Understanding Entrepreneurship 2
Lesson 1
Defining Key Terms 3
Lesson 2
Salient Features of Entrepreneurship 9
Lesson 3 Theories on Entrepreneurship 20
Lesson 4
Entrepreneurship and Ordinary Small Business Activity 27
Lesson 5
Misconceptions on Entrepreneurship 34
Lesson 6
Importance of Entrepreneurship 39
Lesson 7
Sources of Entrepreneurial Ideas 46
Chapter 2
Entrepreneurial Character Traits, Skills, 52
and Competencies
Lesson 1
Character Traits Common to Successful Entrepreneurs 53
Lesson 2
Skills and Core Competencies in Entrepreneurship 69
PRELIMINARYACTIVITIES
OF ENTREPRENEURIAL VENTURE CREATION
Chapter 3 The Environment of the Entrepreneurial Venture 83
Lesson 1 The Physical Environment 84
Lesson 2 The Societal Environment 89
Lesson 3 The Industry Environment 100
Lesson 4 Environmental Scanning: Internal Analysis 110
Lesson 5 Nature and Type of Entrepreneurial Venture 122
Chapter 4 Market Identification 137
Lesson 1 Market Segmentation 138
Lesson 2 Market Targeting 147
Lesson 3 Market Positioning 156
Consumer Marketing Strategies
162
Chapter 5
Consumer Buying Behavior
163
Lesson 1
Entrepreneurial Research on Consumer
173
Lesson 2
Buying Behavior
184
Lesson 3 The Marketing Mix
199
The Concept of Needs, Wants, and Branding
Lesson 4

1
~
PRENEURIAL VENTUREIXPLOITAT10N
INTRE
O,apter6
Business Plan 210
. to Business Plan Preparation
Lesson 1
Introduction . 2,,
. summary Environment Analysis,
Lesson 2
Executive 1 • • 22,
and BusinessDescnpt1on
Lesson 3
Organization Plan, Production Plan, 233
and operation Plan
Lesson 4
Marketing Plan and Financial Plan 245
Chapter 7
Simple Bookkeeping and Financial Statements 253
Lesson 1 Simple Bookkeeping 254
Lesson 2 Income Statement 276
Lesson 3 Balance Sheet 286
Chapter 8 Simple Financial Statement Ratio Analysis 294
Lesson 1 Profitability Ratios 295
Lesson 2 Liquidity Ratios 306
Lesson 3 Solvency Ratios 317
ENTREPRENEURW APPLICAffON
BY OPENING ASMALL BUSINESS
U~IIII
Activity 1 Completion of the Initial Business Requirements 327
Activity 2 Preparation of the Physical Structure of the Business 329
Activity 3 Handling of Daily Business Transactions 331
Activity 4 Submission of Final Requirements 333
Glossary 335
References 34°
Other Books Written by the Author Published by C& EPublishing, Inc. 342
Index 343

~ LIST OF FIGURES
1.2 Salient Features of Entrepreneurship 10
1.6 The Flow of Entrepreneurial Benefits 40
1.7.1 The Entrepreneurial Process of Creating 46
a New Vent ure
1.7.2 The External Environment of a Business Venture 48
2.1.1 Major Groupings of Entrepreneurial Characteristics 55
2.1.2 Characteristics of an Entrepreneur 55
Who Aspires to Achieve
2.1.3 Characteristics of a Planner 60
2.2.1 The Sources of Skills 70
2.2.2 The Brain as the Center of Cognitive Skills 70
2.2.3 Welder 74
2.2.4 Reading the News Online 74
2.2.5 Entrepreneur Exhibiting His Presentation Skill 75
to Influence Prospective Customers
2.2.6 The Entrepreneurial Competency 76
2.2.7 The Entrepreneurial Competency as Source 76
of Competitive Advantage
2.2.8 The Total Perspective of a Winning Entrepreneur 77
3.1.1 The Entrepreneurial Process of Creating a New 84
Venture
3.1.2 Entrepreneurial Character Traits, Skills, and 85
Competencies Influencing the Opening
of Business
3.1.3 Entrepreneurial Environment as Another Factor 85
Influencing the Opening of Business
3.1-4 The Physical or Natural Environment 86
3.2.1 The Relationship between the Environment 89
and the Business
3.2.2 The Societal Environment Surrounding the Business 90
3.3.1 The lndu~try Environment and Its Forces 10 1
3.3.2 The Five Forces of Competit ion Model 104
in t he Indust ry Environment
3.4.1 The Interrelationship among External Environment 110
Forces, Scanning Tools, and Purpose
3-4.2 Availability and Capability Features 112
of Business Resources
3-4.3 The Business Competency 117

tlonship of Entrep:eneurlal 1i3
3-5.1
The P.~~mpetericy and Business Competency
to opening a Business
The Three important Elements n 7
3,5.2 in the Production System
Ms in the Production System 128
3.5.3
The Four
The Business venture and Its Market
4.1
.1
139
The Three Entrepreneurial Marketing Strategies
4.1.2
140
to Identify the Market
4.1
.3
The Total Market Divided into Different Segments 14,
4 .2.1
The Market Identification Process 147
4.3.1
Perceptual Map of Product Price and Quality 157
5.1.1
The Entrepreneurial Journey 163
5.3.1 The 7p5 of Marketing 185
5.3.2 The Three Elements of Cost 188
5-4.1
Maslow's Hierarchy of Needs 200
6.2.1 Sample Business Model 222
6.2.2
Sample Perceptual Map (Segmentation StudyGuide) 227
7.1.1 Two-Column General Journal 256
7.1.2 The Posting Process 266
7.1.3 The Ledger 266
7.1-4 Posting and Cross-referencing 268
7.1.5 Cash Account After Posting and Footing 269
7.1.6 Trial Balance for Modem Laundry Center 270
7.2.1 Bookkeeping Processes Prior to the Preparation
of Financial Statements
276
~ LIST OF TABLES
3.2.1 Template of PESTEL Analysis 95
3.2.2 Template of Environmental Forces Matrix 96
3.2.3 Placement of Interest Expense in the Matrix 97
3.3.1 Competitive Forces Matrix 105
3.3.2 Huge Capital Requirement as a Barrier 106
to Potential New Entrants
3.4.1 Basic SWOTAnalysis 115
3.4.2 SWOT Analysis Matrix 115
3-4.3 BCGAnalysis Matrix 116
4.2.1 Sample Data for Segmentation Matrix 150
4.2.2 Ap I' . 151
P ication of Entrepreneurial Marketing
strategies in Selected Segments

PREFACE
'c k lllll' tn tlw 'l'rld lf cntreprl'ncurship!
rlrn, brn,1', Lllfrcl're11c11rs'1ip i11 Pl1ilippi11e Setting, is designed primarily for Senior High
Sd"1(h)I studt·nts. f'ilL'rl' ,1re two objectives being addressed in this book. The first is to provide
tlw k.tTTll' r with the basic entrepreneurial concepts and principles notwithstanding the
,l1..ukmi' tr,id. being pursued. The second is to develop within the learner a desire to become
.1 1..ivn,1m1c ,md successful entrepreneur.
RelatiVl' to the first objective, this material is basically informative. It has been prepared in
,ll'CL'
1
rd,1
nc1..' with the requirements and standards of the K-12 Curriculum of the Department of
Educ.ltion (DepEd). It highlights the fundamental concepts and principles of entrepreneurship
with c,1reful con~ideration of the business environment predominantly existing and operating
in the Philippines. In addition to the fun'damental concepts discussed in the various areas,
this book. also serves as the working tool for higher collegiate subjects like economics,
sociology, finance, accounting, marketing, management, operation science, and even strategic
management with entrepreneurial perspective.
Relative to the second objective, this book injects some procedural and practical guidelines
applicable to any business plan of the new entrepreneur. The.re are constant reminders
about the necessity of evaluating oneself at the end of the lesson to determine and test the
entrepreneurial drive within the learner. Entrepreneurship is a way of living a successful and
happy life. Opening a small business based on entrepreneurial perceptions would be a really
good start.
The book is divided into four major parts.
Unit 1. Core Concepts of Entrepreneurship
Unit 2. Preliminary Activities of Entrepreneurial Venture Creation
Unit 3. Entrepreneurial Venture Exploitation
Unit 4. Entrepreneurial Application by Opening a Small Business
Uni t 1 underlines the need to understand fully the entrepreneurial concepts anr~
. . . h characteristics that are common among successful entrepren~u
pnnoples. It introduces t e . . the fi'eld of entrepreneurship.
· I k'lls and competencies m
and highlights the entrepreneuna s 1 •

, , . , tl .1 ,nusl t,,1 111h.
krlnkl•n heto1'l· opvnin,,·
1 1 i'tfl'rl'rl ll'II Vtlll '~ HI ., n ,111
Unil - l·c,,·,,r:-: I w 11 '
1
. •1 f.,r nn nnnlyH
iH tlf thl' environrrH.'nl
. . , . , l , I ,h.,~ii'A'~ I W lll ll ' U1
11J
entrl'}'l'l'lll'lft,11 v, ntull . 1 1.
11
~ .·
1, ,ntn'twt•rwurinl vt~nture boHt•d on bu~in"
. t'fy t-lw tllt''"' .,pprnpt,., { l c~R
thPn m1.wl...'s h.) 11... t'll
1
. • l 1 ·on'-lit.kril'l)' thl' lwhnvior nnd 11l'l'ds of ti
l l ti ' ·nvirclllllH.
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,,pp1)rt11nitil'S pt'l'Sl'llh'L ,y l I..
l,n·~t'l 1'(11'Sllll l._'rS.
... i ''f . t i >·unwnl'iry materials lh..il n1usl be available lo th
Unit I i,knttl1L'S the L lll't1.•n L l l ' . . . . e
· . f , • .,. the smnll business and durmg its daily operations. Th~
'nh'L'Pl'l'nl...'111' .,t tlw t11nl' o op1.:ning , . 1 . e
L • ••. l ~
tivities mu~t he guided by the busmcss p an, properly recorded in
vJrtnus tc'ntrl'prencu1 ,a aL • · . . . . . .
l k f
. nts ,..,,d finally evaluated and analyztld m terms of profttab1hty, liquidity
the )OO ~ o ,1l cou 'c, " ' '
~md 5olvcncy.
Unit 4 presents the requirements and the activities to be performed as the entrepreneur
operates and handles the small business.
Each chapter starts with a Nature and Concept section that gives the learners a total
perspective of the specific subject. In this section the imp·ortance of a particular area is
connected to the whole concept of entrepreneurship. Tn similar manner each chapter endsby
providing a summary of the topics discussed and an assessment of how much the students
have learned.
The author hopes that this material will be of great help to Senior High School students
as they correctly practice entrepreneurship. The author also would like to express sincere
gratitude to all the faculty members, chairpersons, program heads, and deans of various
schools, colleges, and universities for continuously using his other books in fundamentals
of accounting, partnership and corporation accounting, mathematics of investment, income
and transfer taxation, feasibility study preparation, and financial statement preparation and
analysis.
NICK LUZ ADUANA
J

-
CORE CONCEPTS OF
ENTREPRENEURSHIP
Chapter 1
Lesson 1
Lesson 2
Lesson 3
Lesson 4
Lesson 5
Lesson 6
Lesson 7
Chapter 2
Lesson 1
Lesson 2
Understanding Entrepreneurship
Defining Key Terms
Salient Features of Entrepreneurship
Theories on Entrepreneurship
Entrepreneurship and Ordinary Small
Business Activity
Misconceptions on Entrepreneurship
Importance of Entrepreneurship
Sources of Entrepreneurial Ideas
Entrepreneurial Character Traits,
Skills, and Competencies
Character Traits Common to Successful
Entrepreneurs
Skills and Core Competencies in Entrepreneurship

CHAPTER
,: . NIG
S; -
UNDERSTANDING
ENTREPRENEURSHIP
At the end of this chapter, the learner should be able to
1. define entrepreneur and entrepreneurship,
2. describe the salient features of entrepreneurship,
3. discuss the different theories on entrepreneurship,
4. distinguish between entrepreneurial venture and ordinary small
business activity,
5. determine factors that contribute to the misconceptions
on entrepreneurship,
6. describe the importance of entrepreneurship, and
7. identify the sources of entrepreneurial ideas.

I
f
r
LESSON
1
WRNING
.
0 1
OOMf
[]
Defining Key Terms
At the end of this lesson, the learner should be able to define entrepreneur
and entrepreneurship.
• NITURE ANO CONCEPT
What comes into your mind when you hear the words entrepreneur and
entrepreneurship?
You may iajtially refer to an entrepreneur as a business person and entrepreneurship as
the business. Others may specify the former to be the ordinary businessperson and the latter
to be a small- to medium- scale business. Some may even consider that there is no difference
between the two terms.
So what does this lesson provide for your entrepreneurial journey as a student?
1. It outlines the operational definitions of the terms "entrepreneur" and
"entrepreneurship" and makes a clear distinction between them.
2. It defines their differences in terms of concepts, beliefs, understanding, and approaches
adopted by an entrepreneur and an ordinary businessperson.
3. It highlights the basic theoretical concepts, principles, approaches, and strategies used
in entrepreneurship.
4. It aims to build a strong entrepreneurial foundation to pique an interest among
students to become successful entrepreneurs.
Do you imagine yourself becoming an entrepreneur and managing your own
business in the future?
Thus, acquiring basic working knowledge in entrepreneurship becomes a necessity for
you. Plain ignorance of the fundamental entrepreneurial concepts may contribute to the
failure of your endeavor.
Lesson 1 I Defining Key Terms

1
f
,,1trenrt'lll'llrt,1I prinnrlcs l'quip'i you With th
. • k 1 )wil'dgl' o l r • · LJ e
/cquinng sutf a.1l'11t I l . . . , t ,nrl•ncurial opporturn l1cs. r owever e
. JI ' i -ndmc1x111ll/ lt1~lnrc1 . . 'Veria
necess,'lrV tools m h,mo ing a .· .· I •s of l'ntrcpn'm•ursh1p ts not an assuranc ' h
. . . , , ·cnls.:tndp11 m1pt. etat
full understnndmg ol the LOlll i- . y i lnvc tn work hard to go through the Wh
, , , . -1 l ,ntn•pn•1wur. o1 ' . . . oJe
vou will brconw r1 SUL Lt: s~ u c 1
curial principles 1s one thmg and becorn·
- K win, the 0ntrepn·1 1
ng a
rntrcprcncurial process. no ~
successtul L
'ntrq1rl'ncur is ,111lllhcr. .
. • · les when it cannot provide you the
Sv why learn entrepreneurial princtp
· . . :Jul entrepreneur?
,issm·ana of becommg a success .
. ts d principles in entrepreneurship may not complete
knowing the vanous concep ~ an . 1d . . y
, . . . . • aking entrepreneuna ec1s1ons.
guarantee success in a competitive position m m
OVERVIEW OF THE DEFINITION
There is no universally accepted definition of entrepreneurship, even among universities
and colleges offering entrepreneurship program in the Philippines and abroad. Some of the
reasons for this are as follows:
1. Different views and theories have been developed in the field of entrepreneurship.
2. The scholars who provided the definition for entrepreneurship are largely influenced
by their own individual personal beliefs.
3. The entrepreneurial models introduced by scholars are predominantly influenced by
the prevailing economic situations during specific periods in history.
4. The frameworks and methodologies of researches on entrepreneurship are highly
dependent on the theories and the contexts of the research endeavors.
For example, the Austrian economist and political scientist Joseph Schumpeter gave
much emphasis on the concept of product innovation, marketing, and production methods.
Schumpeter categorically described an entrepreneur as an individual with distinct social
characteristics or attributes. According to him, there are very few among the millions in the
population who can be considered as entrepreneurs. Some scholars supported the concept of
Schumpeter's, but others disagreed with his views.
Severalsources such as books and researches on entrepreneurship offer various definitions
of the term. Therefore to avoid confusion, this lesson provides an operational definition of
entrepreneurship based on the ultimate objective of the concept and the expected directionand
demand in the future. The various activities conducted by small businesses in the Philippines
are equally considered in the formulation of the operational definition.
Chapter 1 I Understanding Entrepreneurship

Entrepreneur
Tlw lcrm "cntrl'prl'twu r'' origin::tll'S from
the Frl'nch wnrd n1fr<'tn-r11dre w hich means" lo
undertake." lt connt)tcs a business pamdigm
which sih'11ifit.•s the start t>
f a new business
underta king. O n the otlwr hand , the term
"entrepreneurship" comes from the word
entrepreneur. lt refers to a particular field
0f practice or process, as compared to an
entrepreneur which is i:~ person practicing
entrepreneurship. Comparatively, the
relationship is like that of a manager and
the management in which a manager is a
person who practices correctly the concept of
management.
The American Heritage Desk Dictionary
defines an entrepreneur as a person who organizes, operates, and assumes the risk of
business ventures. In this book, however, an entrepreneur is defined as a person who strongly
advocates and correctly practices the concepts and principles of entrepreneurship in operating
and managing the self-owned business venture. This venture is also called enterprise.
This operational definition puts emphasis ontheconcepts ofadvocacy and correct practices.
These two concepts outline the primary difference between the owner of an ordinary small
business and the entrepreneur. Furthermore, another key feature of this definition is that an
entrepreneur owns and manages the small entrepreneurial endeavor or small business.
Entrepreneurship
This book operationally defines entrepreneurship as the art of observing correct practices
in managing and operating a self-owned wealth-creating business enterprise by providing
goods and services that are valuable to the customers. All discussions in this book are made
within the peripheral concept of this operational definition. Understanding the correct
meaning of the term dispels the doubts and misconceptions with the definition; promotes
and enhances better comprehension of the entrepreneurial field; and helps build a strong
foundation about entrepreneurship.
Small Business and Ordinary Small Business
A small business is different from an ordinary small business. Small business refers to a
business or enterprise that correctly adopts and practices the principles of entrepreneurship.
It is owned by one person with a limited workforce of not more than 20 persons.The term also

,
h
t have been strongly promoted by both
. es (SMEs) t a . .
.. I k s the small and medium enterpns L . t' s (NGOs) in their destre to improve the lives
me Ul L t I orgamza 1
onL
d non-Povern111en a
government ;1 n n urship.
I ti ·ough entreprene
of thl' Filipino penp c 11 • . t -115 to a business enterprise manag d
. mall business per ai . e
On the other hand, ordinary s d t of and does not practice the concepts
l is not an a voca e h h
and opemtcd bv an m,vner w 10 . h 'l' . s small businesses, w et er ordinary o
. . - . ship. In the P 11ppme , t
and pnnopks of entrepreneur · .
1
They can be found almost anywhere anct
. l . d routing like mus nooms. . .
not, rtrl~flouns ung an sp . . 1 d and national roads, and m pubhc markets
I
·ty t ets mumc1pa roa s ,
evervv.•here - a ong ci s re '
hospitals, schools, and amusement places.
.
1
. th Philippines? The reason could be that many Filipino
Why does tlus 1appen m e . . . . d .
. d' 11 businesses smce 1t 1s the easiest an m ost practical
fa milies resort to openmg or mary sma
t th
· · A small amount of m6ney can be used to start up a simple
wav to augmen eir mcome.
sari-saristore business, or a small stall or pushcart in which food and other
st
aff can be sold in
quantities. However, the mere opening of a business enterprise is not entrepreneurship and
the person owning and running its day-to-day operations is not an entrepreneur but rather a
a businessperson.
Most of the owners of ordinary small businesses in the Philippines may not be considering
entrepreneurship as an advocacy. Some of them may not have even heard of the term and
merely intend their businesses to serve as the source of their livelihood or as a means to lessen
their financial problems. In reality, many ordinary small businesses in the Philippines have
not really progressed ever since they started some years ago. What is worse is that others have
gone bankrupt and collapsed after some time.
LESSON SUMMAR'
1. Entrepreneur refers to a per h
. . son w o strongly advocates and correctly
practices the concepts and prin · 1 f
. cip es o entrepreneurship in operating and
rnanagmg the self-owned entrepreneurial ventu
. re.
2. Entrepreneurship is the art of ob .
operating a If d servmg correct practices in managing and
se -owne ' wealth- f . .
goods ands . h crea mg busmess enterprise by providing
erv1ces t at are valuable t th
0 e customers.
Chapter 1 I Understanding Entrep
reneurship
•

LESSON ASSESSMENT l<
...~~J~
I. Write Trut' ii the ,,;t,1k111.'11 t is correct. Otherwise' write False and state your reason
briefly.
1· An l'nln'prcneur perceives entrepreneurship as the mere opening and
manc1ging of a small business.
2. Knowing all the entrepreneurial concepts will assure a person of becoming
a successful entrepreneur.
3. Having a degree in entrepreneurship will assure a person that his/her
business endeavor will succeed.
4. Since there is now a degree program in higher education leading toward
entrepreneurship, the academe has already adopted a universal definition
of the term entrepreneurship.
5. Entrepreneurship originates from the Greek word entreprendre which
means to undertake a business.
6. An entrepreneur can be a juridical person or those entities that have been
created by the operation of law.
7. The distinguishing mark that differentiates an.entrepreneur from an owner
of an ordinary small business is the commitment of the entrepreneur to
entrepreneurial concepts and principles.
8. In layman's term an entrepreneur is a person who opens his/her own
business, assumes responsibility over its operation and management, and
assumes the risks of the business.

. small businesses open their businesses be
q Most PYm'rs L)f ordinary - . caus
· _ . . , . . f the operations. eO
f
tlw p rotitab1'1ty aspect 0
10. All businesspeople are entrepreneurs.
II. A. Discuss the need to have a correct underStanding of the.co~cept of en~epreneurship
What advantages will it provide to a person who IS interested 1n becolll.i ·
ng a
successful entrepreneur?
B. Enumerate the reasons why there is no universally accepted definition of the tel'In
entrepreneurship.
C. Distinguish between an entrepreneur and an ordinary businessperson.
III. Pretend that you will be putting up a small business. Follow the instructions below,
1. Tell what kind of business venture you intend to open and why you have chosen it.
2. Explain briefly how you can be an entrepreneur and not merely a businessperson.
I
-·----
Chapter 1 I Understanding Ent
repreneurship
I

LISSOM
RNING
, ME
[]
Salient Features
of Entrepreneurship
At till'.' end of thi~ lt•sson, the learner should be able to
l. l.'numer,1te the sc1lient features of Pntrcpreneurship and
1 l'Xplain C:'ach fea ture.
NATURE AND CONCEPT
.,.·
From its.operational definition, entrepreneurship consists of five salient features.
1. It is an art of correct practices.
2. It is a wealth-creating venture. .
3. It provides valuable goods and services.
4. It entails opening and managing the self-owned enterprise.
5. It is a risk-taking venture.
The salient features of entrepreneurship provide better understanding of the whole
concept. They also act as the point of reference in determining whether a particular business
endeavor is operating within the realm of entrepreneurship.
Lesson 2 I Salient Features of Entrepreneurship

I
wealth creating
venture
Art of correct
practices
Providing values
to customers
Entrepreneurship
Opentng and
managing self-owned
business
Risk-taking
venture
Figure ,.2. Salient Features of Entrepreneurship
I
Noticeably the salient features of entrepreneurship do not include entrepreneurship as a
source of livelihood or as the answer to the financial problems of the owner of the business.
ENTREPRENEURSHIP IS AN ART OF CORRECT PRACTICES
Entrepreneurship is an art and not a science. It is not governed by fixed and absolute rules,
whereas science is. Thus, there is constant change which denotes movement and innovation.
Entrepreneurship, therefore, is not static or stagnant. It continuously grows, develops,
improves, and expands; the change does not stop. The development of entrepreneurship
through the years is a proof that it is an art that continuously evolves and responds to the
changing needs of the people.
.~s an art'. entrepreneurship is dynamic. By the moment the economic activity changes, the
pohttcal, social, and entrepreneurial activities will eventually change.
As an art, ent~epreneurship_is closely related to creativity. By creativity, there is a constant
change .
or evol~hon that contnbutes towards the enhancement of the enterprise. Creativity
results m new ideas which are the backbone of entre h . E keep on
searching for something new Th f d preneurs ip. ntrepreneurs . l
. . · ey m ways to transform new ideas into entrepreneuna
opportunities.
1l1is aspect differcntiJtcs •
m cntrepre f A.n
entrepreneur transforms feas·,bll" .d n~ur rom an ordinary small businessperson. · .
• < - e new i eas int fnaf'
small businessperson onlv buil :l . . 0
an entrepreneurial venture, while an on 1 . -
1
J ls upon ex1stmg id t . . f h t<;
her business. ' eas o gain immediate earnings rorn -
rfach~a
~
p~t~er
~1
~1UU~nd.de;,r~s~
ta;n~d;in;g~E;n~tr~e:::::==·=-----_______________-/
preneursh,p
I

I
l I I . • , •mh ,, 1h 1t nothirw i-; "l'rn1.rnenl in thC'
.' :- 11 1111111,, ,•nl11' pn·1w11t p111 1 .. 111111 l ,1 i, 1'~ 11 nH l • , , r ·
!kid nt ,•nlrt'pt•
crn'tll'.--hii' , h,il 1,, .ipf1lk,1I ,1,, 111 t111l' 1.•nl1,•pn •1w11r 111,w nnl b(' applicable to
,1,H,thn t ·1,rt.1i n thmg~ 111,1, 1i.,p111,11 tn l HW 1•11tr1•p1l'lll't1r L,ut m,w nnl happl'n to c'lnotlwr.
J'nt rq1n•nt'1r:--h1p ~11111dd b1, 111 ,tdr,·vd n,it ,l '-- ., :--.l 1,•nu· bul ,,... ,111 drl. Crl'.'ltivity should always
h : "l'plt,•d tu t•ntrqwl'iwuri,il llthit't'l,,king-. bv rt:'gul.uly l'V,1lu<,1ling the rnurkel t1nd the
t'll ir,11rnwnt ,md 1c,pt11 1d111g hi l1 11• d1,111g1·:-- 1111111•111.
Art in l'llfrq, tt'tkurship i~ ,11
~0 r1,lokd to the C1)rrl"rl pral'tircs 0r ways of carrying out
t'ntrcpn·rn·11ri.1l ,1di,·iti,•s. Thi• owner 1)i ,111 ord in,irv sm.:ill bu~1ncss has the freedom to
111,m,1g1' .md opcnH1· hb / lw, busi ness according to ~h.1t pleases him/her. ld<'ally, he/she
prt_'fcr.-. busi1wss ,Klivilil'S whirh Ml' durll' ('<1sily. The l'lllrcrr~ncur, however, has to perform
l'ntrcprc,wuri,,I ,1ctivilics corrt•ctly rq~t1rdll'ss of whether they cue undertaken easily or not.
What is impnrt<1nl in cnlrL'prcneurship is thc1t the business activities are performed correctly.
N01.,, ask yourse~f thefollowi11g q11estio11s:
1. ls crentiv ity present in tltc operation of ordinary small businesses along
tlte streets and l1igl11vays and in yo11r 11eighhorl1~od? Why do you say so?
2. Will you consider the daily b11siness practices of the small business owner .,,
witlti11 the concept of e11trepreneursl1ip? Why?
Entrepreneurship Is a Wealth-Creating Venture
This feature sounds simple, but this has been most misconstrued because of the word
wealth. We often hear the old maxims "Health is wealth" or "Knowledge is wealth." However,
this is not the concept of wealth in entrepreneurship.
In most instances, ordinary small businesspeople equate wealth with the term profit. ln
the parlnnce of accounting, profit represents the excess in~ome or revenue from the cost and
expenses.
Although profit may be a good indicator of wealth, it can be measu~ed in different ways.
The economist, for example, has a different perspective of wealth from that of an accountant.
Profit, therefore, in its strict sense, does not equate to wealth. To put it differently, assume that
the cost of your product is 'P'60. You sell this product to a customer for ~80. As a result of the
sale, definitely you have a mark-up or a profit of ~ 20 is gained.
However, the question is, "ls one enriched by twenty pesos?'' ln case the sale is not in cash
(i.e., the sale is on account or on credit), and the customer does not pay, you lose ~80 in the
transaction.
Entrepreneurship, however, is operating within the concept of wealth creation rather
than profit generation. The concept of profit is more applicable in the area of accounting as
a way of measuring the operating performance of a business. According to Rmufom Hou5c
Webster's Dictionnry, wealth is defined as the abundance of money, property, or possession.

,
. does not even refer to business p
. . , Ith in its c;tnd sense, . al d fi . . to-fit
lhis ct1nL'c..'ptti.1l dl'11111t1on ol ll ,1 , i " b ,dance" in theconceptu e rutionof We-.1t .
J -• ,--,s the wnrL a u r h se "l f qi h_
Thi - bc..,c..)k stron~lv un crs1.n L. t· g profit is t e very es . Ice o Wea.Ith .
:s , i not of JL
·coun in ' l.J'
The conct>pl c..)t clbundancc ,111L .
c..'ntn'prL'llc..'uridl c..~t1Lic,,,,or. . d l it has already includ d
--h . onunues to eve op, , e Oth
As the fil'ld ul l'ntrl'pre1wu1 ~ ip c hip in this book is limited only to the bus,.... ~
l - ,n -ept of entrepreneurs b . ....less
conn.-,ts. Ihnvcvcr, l ll' u c.. f ,, should open your own usmess as a we l~L
' t apr'"'n~ur there ort.:, you a. l.ll-
pc
1r,Hiigt11. As an Ln re.. t.: •I ' an income-generating venture.
cn',1ting ,·cnturt.' and not sole y as . .
' . . h h king philosophy that it will provide an income is coll'.n
0 ing i1 busmess wit t e wor d f on
pend_ L businesspeople. It should not be the approach an way o an entreprenellr
arncmg or mary 1 k f dinary busine ·
'- h different perception and out oo rom an or ssperson.An
An entrepreneur as a th . tur hil
looks at his/her own business as a weal -creahng ven e, w e an ordinrll"'I,
entrepreneur . f · ~ y
. ds his/her small business basically as a source o income.
busmessperson regar ,
Some literature, however, define entrepreneurship as a process 0
~
starhng_a business.
This definition obscures the real meaning of entrepreneurship. As ~xplamed e~rlier, the mere
opening of a business is definitely not entrepreneurship, _and neit~er does it mean :vea.lth
creation. A business has to generate wealth for the owner m a creative w ay. Otherwise it is
not an entrepreneurial endeavor but is merely an ordinary small business.
Wealth is created when the benefits derived by the owner in providing goods and services
to the customers are abundant enough to cover the costs incurred by the business. At the
same time, it provides personal benefits to the owner, which in tum improve his/her life.
Otherwise, the small business is not a wealth-creating venture. The wealth created by the
small business must improve the life of the owner and cascade to the development of the local
economy and eventually of the whole country.
The creation of wealth must gradually accelerate and benefit both the owner and the
community. Unless this happens, the business is not a wealth-creating venture and may
remain where it started. That is why an entrepreneur regularly evaluates the level of wealth
created by the business.
The adoption of the wrong concept of wealth creation is the primary reason why most of
the small business ventures in the Philippines do not prosper. In a worst-case scenario, the
owner takes the venture only as a means to support the basic needs of the whole family ona
daily basis. This seems to be the real scenario of small businesses in the local communities in
the P~ilip~ines. The owner of the business makes routine exchange of goods and services for a
certam pnce. He/She accepts any income generated by the business. This is not, however,the
real ~ssence of e~trepreneurship. Wealth creation is not merely the selling of the products or
services for a pnce Neverthel 11· d • u,,
. · ess, se mg pro ucts or services for a price does not necessar J
mean creating wealth This is 11 th · · l
· usua Y e misconception of the ordinary businesspeop e.
. Wealth is ~reated when the value of the business has increased abundantly and the life of
its owner has improved conside bl If . . ted
. . ra Y· not, then the business 1s being m anaged and opera
not withm the framework of entrepreneurship.

Nou1
t1sk yoursc~f tlrt·followi,rg q11cstin11s:
l I t • ,,e,,turt' or an h,come-
1. s your sm,1l1 l,u~irlt'ss 11 u,calt 1
-crcn ,,,g
ge,irratiug t'tttery,ris,•? Wiry ,lo you say so?
2. Docs your b11si1wss Jielp improve your life? How?
Entrepreneurship Provides Valuable Goods and Services
The owner of a business, in most instances, is engaged in the sale of goods and services.
Howe'er, the mere act of selling goods or providing services does not make a person perfo_rm
or act within the concept of enb·epreneurship. Anybody can sell goods or services for a pnce.
A peddler in the bus station, for example, sells goods to the travelers. However h~/she
ca1u1ot be considered as an entrepreneur. It would be safe to address him/her as an ordinary
businessperson.
Entrepreneurship creates economic wealth by providing goods and services to the
consumers. These goods and services must have a value in order to create wealth. Otherwise,
they become wasted. One essential principle in entrepreneurship then is, "not to sell waste
to consumers but only valuable goods and services." Anything of no value to anybody is
definitely a waste.
Valuable goods and services highly satisfy the target buyers in terms of quality and price.
The entrepreneur convinces the consumers that they gain more benefits than what they pay
for the goods and services.
The entrepreneur defines value from the perspective of the buyers and not only from his/
her own because what is valuable to the entrepreneur may not be of any value to the consumers.
Value, therefore, is subjective. Not every person considers the same things as valuable.
Businesses that offer goods and services that are valuable from the buyer's perspective are
operating within the concept of entrepreneurship. The business will definitely be a wealth-
creating venture. When consumers are satisfied with the products and services offered by
an entrepreneur, they tend to patronize the business and even endorse it to others. Thus,
in simple analysis, wealth is created. The reverse happens when an entrepreneur sells the
products and services which are not valuable to the consumers. The latter may buy them the
first time but may not patronize them for a second time and may look for the same products
and services from other sellers. In this case, wealth is lost.
For example, will adding two side pockets to the ladies bag that one intends to produce
from local raw materials be valuable to the target users? If the answer is yes, then the product
can start. However if the answer is no, it is not advisable to add the two side pockets.
Assume that you are adding two side pockets without knowing whether this will make
your product more valuable or not. By adding two side pockets to your product, additional
materials and labor expenses will be incurred. The cost of producing the product, therefore,
will increase.

l
. _, l'-l~ 1mTl'd<::L'~. nus will put "o
"'-.cl111W, pt tct: cl . i - . ll ltl~
. . · t in(rL'dSl1" tht lltn,l ..1 ~11lllltlf rn"l ud at a lo,Yer p
Wt the production L t
1
~
1 1" be ...,L' r l'1c~
nen . . since compditN" n' . 1 t . ' iluabk then these an- Wasted .
favorable pos1t1on , . I s1de pPL"'L' .., ~ iltq
very un . . do nol find the Jddition,1 , ' ,ntrcnrc1wur, 1t J-. l1 tnust to ascertain fi~.
Jf the consume1 s s 1 tuturL l r .J • l ·'-!~
· I:: sines:-.. IJenee, cl. ' I . ion ou r prnuuct 1:- 'a uab}e t
cause a loss for ~
•out 1u. ' I t will be P acCL • o ~
t th -' ::iddition..11 value t 1a i that 1dding another alue to a Product
whether or no ~ "
1
, ,5 rt:'mernbcn.:>L ' Ot
It should he a wa · ·e
target consumers. , .. th roduct or serYlL .
. . 1 . ·ease the cost ot e P .
service will sure Ymet _ mers in the field ot entrepreneu.rshi
I ze vour tdrget cOn5l1 - . r
It is important that vou ana Y - ·our notential customer.
. - . , can become r
They should be studied smce evef} one .
Now ask yourself the following questions:
1 bl 7 t'hi/ do 11011 sat/ so?
1. Is your product or service va ua r. . . .
. . d t r serl'in' r aluable?
2. From w hose perspective zs your pro HC o .
. .k d t or sen,ice 1,n[uable to your target
3. How will you ma 'e your pro uc
market?
Entrepreneurship Entails Opening
and Managing the Self-Owned Enterprise
This feature highlights two important elements: the concept of opening a self-owned
.enterprise and the concept of managing it.
The entrepreneur opens his/ her own business under the principle of entrepreneurship.
It must be self-owned in order to qualify as an entrepreneurial endea,·or. A business i5
considered self-owned when the person managing its daily actiYitif's is also its owner. This
is a straightforward requirement of entrepreneurship. Businesses that are being managed by
others for the benefit of the owners do not fall Nithin the sphere of entrepreneurship. Such
businesses are operating under the concept of intrapreneurship.
The concept of intrepreneurship may include the business practices of franchising ao<l
buyout. However, this topic is outside the coverage oi this hook. Franchisin<> and hU·out are
U
Sually taken up in higher marketing subjects. 0 -
The issue in a self-owned b ,· . . . . . .
It is n ·th b usmess
15
ery clear and ~nnple; 1t 1s plainlv about ownership.
e1 er a out the amount of . , t :i . . . c;
enterprise. Therefor b .
1
_n es eL capital nor about the nature of the busmrs"
e, usinesses fallmo- undc tl r
range from a small b k O
r ie concept of entrepreneu1ial endeavor 1110-
a ery or restaurant in the · l b
1
· ·1n
company operating throu 1-J . . neig 1 or 100d to a multimillion constructH
h. g1out the Philippines ··ct d thl'
owner
1
mself/ herself. ~, pro 1 E' that the bu,iness is managed by
. Entrepreneurship has gene 11 , b
nuscon t' h ra een equ..1t d ·
1
.
cep ion t at must be prop - l . . e wit 1 ordinan small busine<:;ses. This I~ ,1
er correcte :! 0 . ..
L · ne factor that contributes mainh· to lbt:-
Chapter 1 I Understandin
g Cntreµr""neursh,p

misconcl'ption jc.; lhil l in thl' Philippines, it has been n common knowkdge that small businesses
arc mar1dged bv thl'ir owners. The smle1ll convenit•nce stores in the neighborhood, the small
schOl)I supplil'Sstore.., in front of schools, the smc11l refreshment parlors along the streets, and
the smc1II stalls in the public markets arc usually managed by their owners. Entrepreneurship
then h.1~ conw to rekr to nrdinMy small-and-medium scale businesses only, leaving out big
busirwsscs in the pwccss.
Arl()ther factor that contributes highly to this misconception is that most programs of non-
gon'mmcntc1I organizations (NGOs) promoting entrepreneurship have been directed toward
and are participated in by ordinary small businesses. While there is nothing wrong with the
support of NGOs to small businesses, the same has made the impression that entrepreneurship
is purelr about small businesses when in fact the concept of entrepreneurship also covers big
businesses whose owners and managers are one and the same person.
The significant contributors to the promotion of entrepreneurial activities in the
Philippines, as spearheaded by the Entrepreneurship Development for College Education
Level, the Small Enterprise Research and Development Foundation, and the University of the
Philippines Institute for Small-Scale Industries, to mention a few, have primarily focused on
small-and-medium scale enterprises.
Entrepreneurship is not about the size of the business but rather about its sole ownership.
In other words, entrepreneurship includes small, medium, and multimillion businesses that
are managed by their respective owners.
Then why do NGOs and even national government offices focus on small businesses in
their entrepreneurial programs? It may be because the owners of small businesses lack the
necessary knowledge, training, and budget for their entrepreneurial activities, so that both
the government and NGOs desire to assist them. On the other hand, big businesses operating
under the concept of entrepreneurship have the much-needed financial requirements to
support their operation.
Another misconception of entrepreneurship relative to self-owned businesses is that it
is more inclined toward production or manufacturing and is not applicable to buying and
selling of goods or rendering of services. This misconception has been highly influenced by
the fact that most of the entrepreneurial programs of both the government and NGOs have
been directed toward agriculture, aquaculture, craftsm~nship, toy making, furniture making,
and food processing, to name a few. Generally, entrepreneurship includes all types of business
operations, namely production or manufacturing, merchandising, and services.
• 1n entrepreneurship, the owner of a business must also be the manager of the daily
operations of the entrepreneurial venture. A business, whether big or small, that is managed
by a person other than its owner is not within the concept of entrepreneurship. In such a
case, the owner cannot be considered as an entrepreneur but as an ordinary businessperson.
Similarly, the person handling the activities of the venture is not an entrepreneur but a
manager.
Lesson 2 ISalient Features of Entrepreneurship

-
w
. . ment. It rpft>rs to the process of Sctf
• . . ··n ·inle 111 111811,111,c ing th
P1annmg 1s ,m important P11
c r- .
11
, 1
wner and manager, must clearly e
. . , , ' ur being l l t . Set th
go<1ls ot tht' bus11wss. 1 he entu prene ' /
1
hou ld est,1blish a clear direction of h· e
. . . I th . words he s ,cs . 1S/h
~nnls ot his/ lwr busml'ss. n ° ct ' ' :i f. ·te answer to the question "Wh er
' /Sh st have a L c mi ' ' ere "'"°l
1.:'ntt·l'pt·e1wuri,1l VL
'nture. He e mu, f.. _
7
,, 1J
t . f' ... or ten ycnrs a ter .
mventt·cpre1wuri,1I venture oe m 1ve _ .
· . _
t'on that an ordinary businessperson open
Cnmp,1rMivd~,, it i::- a com1~1on obse1v~ t sits and waits for the business to moved s ~he
doors of his/ her business early m the morning, . f the whole year It is U.ring
the dav and closes it at night. This is his/her routi~e orh 'b'l't f. f ·1 a ~Ust Of
., ' • h t Janrung t e poss1 11 y o a1 ure is
tfo.
, part of the entrepreneur to plan. Wit ou P ' d h d . . h great.
f h labors long an ar m preparmg t e farrn f
An entrepreneur is similar to a armer w O or
planting.
tl Ian for the course of your entrepre
As a future entrepreneur, you have to constan YP . . . .neur-
ial endeavor. Planning does not cost anything but the benefit you will gam from exercising it
can be rewarding.
Now ask yourself the following questions:
1.
2.
3.
Do you know someone who owns a small business? _
b . ? H ?
Does he/she personally manage his/her own usmess• ow·
Do you think he/she is an entrepreneur or an ordinary small
businessperson? Why do you say so?
Entrepreneurship Is a Risk-Taking Venture
The basic concept of risk in entrepreneurship can be expressed in this statement, "Risk is
inherent in an entrepreneurial venture."
Inotherwords, onceanentrepreneurialventure is bornbecause ofnew ideas or opportunities,
risk comes simultaneously with the venture. Risk cannot be detached from any entrepreneurial
venture and the only way to remove it is to close the venture. However, closing the business
means giving up becoming a successful entrepreneur. Hence, closing the business is not the
ultimate answer in handling its inherent risk. The risk in entrepreneurship is called a business
risk. So every time the word risk is used in this book, it refers to a business risk.
The approach in handling business risks differentiates an entrepreneur from an ordinary
b_
usinessperson. Usually, an ordinary businessperson does not understand the nature ofbusiness
nsk which in one way h . . r
. . or anot er may lead to the failure of his/her business. He/She shuns0
avoids it which indicates th th / h
a e s e only favors operating under favourable condition.
Howcanoneavoidsom thin h • • . hi
ho b . e gt at is inherent m one self? Or, in the light ofentrepreneurs p,
w can a usmess avoid somethi h . . . . . . id
ng t at is mtrms1c m its process? One definitely cannot avo
---
I

something that is a lt·l'adv ;1 part of his/ lwr bC'ing. WhNcver one goes, he/ she brings it along. In
other vvords, whcrc,·cr th1;.• businl'ss gm",, !here will always be business risks.
Hence, an entrepn.'t1l'Ur should f.1n.• bu-.inrss i·iskRintelligently. He/ She cannot eliminate
something ingr.1ined. in cntrcpn~iwurshi p. lnsll',ld, he/ she rnust find ways to minimize the
E'ffects ot the risk.
Now a~k yourself tire following questions:
1. Are you a risk-taker or 11ot? Why do you say so?
2. How do you face or avoid risks?
3. What business risks do you foresee in your future entrepreneurial
venture?
a 'LESSON SUMMAR'
1. Entrepreneurial concepts and principles are not fixed. They constantly
change and are highly influenced by the changes in the environment. The
evolutionary processes happening in entrepreneurship are mainly due to
the creativity and innovation born or created from business opportunities.
As new ideas are created, new entrepreneurial ventures open.
2. A wealth-creating venture is an enh·epreneurial undertaking wherein
wealth is created. It is a business endeavor where the resources of the
enterprise have been utilized fully to maximize the investment of the
entrepreneur. The venture improves the life of the entrepreneur in terms
of economic, financial, social, moral, and psychological aspects.
3. Value isbasically theoppositeofwaste.Productsandservicesare considered
valuable when they provide additional benefits to the buyers and users.In
entrepreneurship, value is always measured from the perspective of the
consumers. The goods and services become valuable when the consumers
get additional benefits from using the products or availing of the services.
4. All businesses, whether big or small, are operating within the concept of
risk-taking because of uncertainty. Nobody knows what will happen
tomorrow. Business risks cannot be eliminated. TI1ey are inherent in the
venture. Entrepreneurs, however, face the business risks instead of avoiding
them. They find ways to minimize the effects of the business risks.

;, LESSON .4ssESSMENf
~
. write false and state your
t Otherwise reilso1-
. correc . ,,
. . statefllent is
I. ,Trite Tn1e if the .
briefly.
1.
. :i . a person's character.
. . les dre fixeL u1
·al pnnop
Entrcpreneun
----------~
---------- t status quo in appearance, procedure
. tion deno ea ,or
2. Creativity and mnova
practice.
b iness endeavor is profit.
3_ The primary objective of any us
. h 1 1 f wealth of the entrepreneur means m1provement ui
4. Increase mt e eve o
his/her economic status.
5. The entrepreneur seeks a wealth-creating venture rather than a profit.
generating venture.
6. Values or additional features added to products or services are also
valuable to the customers.
7. Everybody is a potential customer of a business venture.
8
· Business ven_tu~es under the direct supervision of the n1anager and not the
owner fall w1thm the strict concept of entrepreneurship.
9. Government program !I
business son entrepreneurship are mainly focused on sma
es.
10. En~tr
:e
:p
:r=
en
~e
=u
~r-s~
f~
in
-d
~w
_ a_
y_
s-to
_a__
_
d_b
___
____________
____
voi usmess risk.
--
ir~
~~~~=-==-==-==-==-==--=--=--=-==
Chapter 1 I Und =-:-
erstanding E t
n repreneurship

II. A. Discuss why cntrepl'eneurship is an art and not a science.
B. Differentiate wealth-creating venhtre from an income-generating venture.
c. Discuss why profit is not a good measure to determine the success of an
entrepreneurial venhue.
D. Describe who determines whether the goods or services are valuable.
E. Differentiate how an entrepreneur and an ordinary businessperson handle business
risk.
III. Form groups of four members each. As much as possible, group members should come
from the same community. Choose one activity from the list. Brainstorm about it and
report your findings in class.
1. Pick one small business existing in your neighborhood. Observe the day-to-day
activities of its owner. Interview him/her. Evaluate if the business is a wealth-creating
venture.
2. Recall an invention that you think has significantly changed your lifestyle. Evaluate
how creative and valuable it is to you.
3. Pick one of your present activities that you consider risk-taking. Tell how you minimize
the risk.
4. Bring a product to the class like a bag, a pair of shoes, paper, and a paper fastener.
Enumerate its uses and explain its value to you. Tell also if it is valuable to others.

LESSON
Theories •
on Entrepreneurship
should be able to
. I n the learner
d f this esso '
At the en ° hip and
trepreneurs
. theories on en .
1. identify some . n entrepreneurship.
f the theories o
2. cite the importance o
NATURE AND CONCEPT
A theory is a generalization that explains a set of facts or phenomena._It is not an absolute
truth. It can be supported by another observation or proven to be otherwise.
In the process of evaluating the soundness and logic of various entrepreneurship theories,
remember that the scholarswho developed or contributed them mostly anchored theirconcepts
on the economic events which were happening at that time. Learn by heart the theories that
you deem appropriate and applicable in your prospective business and will support your
desire to become a successful entrepreneur. Evaluate them and choose the theory or theories
that you will believe and accept. In other words, there is no right or wrong answer.
There are several theories on entrepreneurship. Here are some of them.
1. Innovationtheory
2. Keynesian theory
3. Alfred Marshall theory
4. Risk and uncertainty-bearing theory
5. Other theories on entrepreneurship
Chapter 1 I Understanding Ent
repreneurship
I

INNOVATION THEORY
. t·on theory on cnlrl'fJrcncurshi p was contributed by Joseph Schumpeter,
The mnova 1 . . • .
. conomist and nolilirn l scil'nl isl. He wrote about 1t m h1s book, The Theory of
an Austrian e r-
Economic Development.
The innovation theory regards economic development as the product of structural change
or innovation. Schum.peter argued that the chances for economic development to take place
would be slim unless revolutionary changes in the circular flow of economy would happen.
An economy with<?ut any revolutionary change is deemed to be static and cannot expect
any economic development. Simply put, there will be no development in any economic
equilibrium or status quo.
Schumpeter strongly believed that innovationis the force that will propel the revolutionary
change. It will cause the creative destruction of the static mode of the economy, stir the
entrepreneurial activity, and encourage con1petition. Unless innovation takes place, economic
equilibrium or status quo will remain.
It becomes the primary role of the entrepreneur to introduce innovation in any of the
following forms:
1. new product
2. new production method
3. new market
4. new supplier
5. new industry structure
Will you consider the innovation theory as one of your guiding posts in your
j<Jurney as an entrepreneur?
KEYNESIAN THEORY
. ":11e Keynesian theory on entrepreneurship was developed by John Maynard Keynes, a
Bntish economist. The key concepts of the theory were included in his book, The General
~ory of Employment, Interest and Money, which was published during the Great Depression
m 1936.
The theory put so much emphasis on the role of the government in entrepreneurial and
economic development, m.ost especially when the economy was experiencing depression. It
sugge5ts that entrepreneurial activities may not be favorable in the future unless the short-
term problem of economic disequilibrium is finally resolved through the active participation
of the government.
Lesson 3 I Theorie~ on Entrepreneurship

•, 1 ventures only when the
• 1n,nrcnc uri ,-1 ·
. , •II i11 tlw ,r c ,, t · · J ,prcssion mo Cl
rill' pri,·,1 k ~l'rlnr ni.1 ' pcrfl,, n1 I l . ' . -icriod o f economic c , . '. ney
11l Wl'Vl'l' du n n1, '1
~ · durin g this time th
nl'LH11l' h,l'l' L'mn1
g h 11 HH H')' · ( , J ·k ,rs is high. It is at
t r ( , n lll)'l'll W ()I L ' · 1 1 d b
b l'i.'l)llll'S ~L
lrL
'(' .rnd t hl' , 1111n b L' l' , 1 un1.: 111,.. . . ti , cnlrcprcncunal roe Paye y th~
~ ·11tL'l'VL'nl1on 111 l( . · b and ·
lht' ~lwcrnnwnt must m,1ke ,1 strong t nnd creating more JO s . pro1ects
• , lo tlw <'conomy
prl ,lk SlYtnr bv iwuri ng nH1 n • nWlll y
(nr l..l,mmunitit's. . , h ardl felt d uring the Great
. ' . , , ,urinl cndcavm was Y_ ·f f .h .
Hist<.irv 1't' 't'."1 1s Lh.lt lhc c n lt L Pll I L • " " ]uctant to mvestfor ear o aving
. . . , . .· , , ,ntrepreneuis were re h
l)cpn'~sion m thl' Ll mtcd Stc1tcs ~lt1LC L h
1
d a critical role t en.
l enu11ent t at P aye .
pt)(,r rt'turns on im 'L'SInwnt. It was t ,e gov . h .
K ian theory of entrepreneurs ip?
Are _11011 going to consider tlte tenets of the eynes
ALFRED MARSHAL THEORY
h 11 English economist, was introduced
The entrepreneurship theory of Alfred Mars a ' an f f t • h
• · 1 ted that there are our ac ors 1n t e
in hi~ book, Principles of Economics. As he strong Yasser . . h
· · ) f ods and services 1n t e economy
production (land, labor, capital, and orgaruzatlon o go . . . . '
· d. · 1 t Without the active parhc1pat10n of
he considered organization as the coor matmg e emen ·
or0'anization the other factors of production will remain inactive in their role for economic
0 I
de'elopment.
_
Marshall regarded the entrepreneurs as the prime movers in the organization. They
are expected to create new commodities or improve the existing ones. He believed that the
entrepreneurs could perform and meet expectations only if they had a thorough
understanding of the industry where they operated. Without the active participation of
entrepreneurs in the economy, development will surely be slow and limited.
Marshall further suggested that an entrepreneur must be able to foresee possible changes
in the future supply and demand pattern. He/She must also possess the necessary skills to
be an entrepreneur. Marshall observed that though the skills and abilities required of an
entrepreneur are so numerous, only a few exhibited a high degree of proficiency.
Will your entrepreneurial drive be influenced by the entrepreneurshi theo
ofA lfred M arshal? · p ry
RISK AND UNCERTAINTY-BEARIN G THEORY
Frank Hyneman Knight A .
. , , an mencan economist 1· .
bearing theory of entrcpreneurshi in l . . , conceptua ized the nsk and uncertainty-
B d
. p 11s book, Rzsk, Uncertainty and Prof°it .
' a opt1ntr s 1 'J' ·
· o t me concepts of th , 1 · .
an agent of ti " . c ear y economists Kn· ht . d
.
1
t' production process wl• .
1
/ ' ig v1ewe an entrepreneur as ·
Knight h , .,cie 1e she com t h
' 0-vever, added risk-tak· . 1
ec s t e producers and the consumers.
entreprene f mg as an rmporta t d '
ur rom a worker. 11
imension that will differentiate an
C
hapter 1 / Understanding Entrepreneurship

Knight considered uncertainly a n im portant foclor in Lhe p rod uction of goods and services.
He believed that the entrepreneur must anticipa te possible random events to happ en while
shouldering the risk at the same li me. The entrepreneur would be eventua lly rewarded w ith
high profits.
Do you consider the rislc-uncerf-aint-y bearing theory of entrepreneurship
applicable to you as.future cnt-rcpreneur?
OTHER TH EORI ES ON ENTREPRENEURSHIP
There are other theories on entrepreneurship. This does not mean, however, that they are
inferior to the previously listed theories.
l. Weber's sociological theory. In sociological theory, Max Weber stressed that social
cultures are the primary driving elements of entrepreneurship. The entrepreneur is
expected to perform the role of a good constituent by executing his/her entrepreneurial
activities in line with good customs and traditions, religious beliefs, and morals.
2. Kaldor's technological theory. The technological theory was developed by Nicholas
Kaldor who considered modern technology as an essential factor in production.
In the absence of modern technology application in entrepreneurship, economic
development would be·slow and growth might not be expected. The entrepreneur is
expected to keep abreast with modern technology and find ways to apply the same in
the entrepreneurial endeavor. Proper application of modern technology will promote
efficiency in the production of goods and services.
3. Leibenstein's gap-filling theory. In . this theory on entrepreneurship, Hem y
Leibenstein proposed that the primary role of entrepreneurship in any economic
activity is to fill the existing gap. Entrepreneurship is responsible for recognizing
trends in the market. The entrepreneur is expected to possess abilities that will connect
the different markets. He/She must extend assistance to entrepreneurial ventures
experiencing failures and deficiencies.
4. Kirzner's learning-alertness theory. Israel.Kirzner was the main proponent of this
.theory. He pointed out spontaneous learning and alertness as the two m ajor attributes
of entrepreneurship in any given economy. The entrepreneur must be alert in
recognizing entrepreneurial opportunities and the ignorance.of consumers as well.
He/She must immediately find appropriate remedy to correct the error or wrong
perception.
Which of these theories do you considerfitting to your dream of becoming a
successful entrepreneur?
lesson 3 I Theories on Entrepreneurship

Remember that there is no correct or wrong theory. Regardless of the entrepreneur.ship
theory that you choose, the most important thing is that you base your business decisions not
on your personal likes and dislikes but rather on sound reason.
LESSON SUMMAR'
. f facts or phenomena. It
I. . th t explains a set o .
1. A theory is a genera 1
zahon a b ther observation or
b orted Y ano
is not an absolute truth. It can e supp
proven to be otherwise. .
h. • I de the following:
2. Some theories on entrepreneurs 1
P me u
. of Joseph Schumpeter
a. Innovation theory. The innovat10n theor~ t' development.
considers innovation as the primary factor a ec ing
. of John Maynard Keynes
b. Keynesian theory. The Keynesian theory . h
. 11 d · g depress10n, to t e
attributes economic growth, especia Y unn
government.
c. Alfred Marshall theory. The Alfred•Marshall theory generalizes that
the orgamzat10n plays t e most s1gm 1can
· · h · ·t· t role among the different
factors of production.
d. Risk and uncertainty-bearing theory. The risk-uncertainty bearing
- theory of Frank Hyneman Knight states that an entrepreneur faces the
risk ofuncertainty in the process ofconnecting the supplier and the buyer.
e. Weber's sociological theory. The sociological theory of Weber asserts
that social cultures have significant contributions to entrepreneurship.
f. Kaldor's technological theory. The technological theory of Kaldor
gives importance to the advancement of technology as an element of
production.
g. Leibenstein's gap-filling theory. The gap-filling theory of Leibenstein
advocates that entrepreneurship fills the gap . . . . .
. in any economic activity.
h. Kuzner's learning-alertness theory Th 1 .
Kirtzner focuses on learning and ale~tne:s earn1ng-~lertness theory of
entrepreneurship. . as the primary attributes of
Chapter 1 / Understanding Entrepreneurship
I
I

~li-iM:&Uii-iMii:i•._________ _
I. Write True if the statement is correct. Otherwise write False and state your reason
briefly.
1. Theories express absolute truths about events or phenomena.
2. In sociological theory, Weber emphasizes that the social cultures are the
primary elements of entrepreneurship.
3. The innovation theory of entrepreneurship suggests that the economic
equilibrium must be creatively destroyed in order to have an economic
development. .
4. The development of Keynesian theory of entrepreneurship was highly
influenced by the economic boom.
5. The Keynesian theory of entrepreneurship generalizes that the
government plays a major role in the economic growth especially when
the entrepreneurs are reluctant to invest more funds.
6. The entrepreneurship theory of Alfred Marshall suggests that the active
participation of the entrepreneur in the organization will affect the economy
negatively.
7. Frank Knight.added creativity as another factor in the production of goods
or services.
8. Based on the risk-uncertainty bearing theory, the entrepreneur is expected
to receive higher profit as a reward for the highest risk taken.
Lesson 3I Theories on Entrepreneurship

9· According to the technological theory, economic growth is expected to be
slow unless the entrepreneurs apply modern technology in their business
underta.kings.
lO. The learning-alertness theory says that the alertness of the entrepreneurs
to the changes in the external environment wiII significantly influence the
development of the economy.
II. Discuss the features and significance of the t'1.eories on entrepreneurship.
III. Form groups ~f six members each, preferably with members from the same community.
Observe the activities of the entrepreneurs in your local community• Do the following
and report your observation in class. ·
1. Identify which theory on entrepreneurship best applies to the businesses that you
have observed. Explain why you chose that theory.
2. Make your own theory o.i;i entrepreneurship for the businesses that you observed, give
your theory a name and explain how it applies to the said businesses.

tff-B•H!
-
~._,,,,.
t
~
' '
.
-
Entrepreneurship
and Ordinary Small
Business Activity
At the end of this lesson, the learner should be able to
distinguish between entrepreneurship artd ordinary small business
activity, and
determine the importance of knowing the distinction.
Entrepreneurship is different from the activities of ordinary small businesses. This does
not mean, however, that entrepreneurship does not connote small business. It does because
entrepreneurship covers small- and medium-scale businesses. The distinction lies in the
descriptive word"ordinary."
This lesson outlines the differences betweenentrepreneurship and the activities of ordinary
small businesses. Knowing them will help you assess yourself if you are an entrepreneur
or a mere owner of an ordinary small business. You will be able to completely avoid the
perceptions or behavior similar to the latter and focus more on the perceptions or behavior of
the former.
~eneurship and the activities of ordinary small businesses differ in the following areas:
A .
z.
3.
, 4.
,5.
6.
7.
,,
Motive in opening a business·
Perception of risk in the business
Reactions to changes in the environment
View on competition
Vision for development and growth
Horizon of business operation
Sources of business funds
;·
- ------------ - - - -----
Lesson 4 I Entrepreneurship and Ordinary Small Business Activity 27

-
MOTIVE IN OPENING A BUSINESS
An entrepreneur starts a business 'enture based on entrepreneurial concepts and Princi l
and the aspiration to become successful. He/ She is constantly on the lookout for new~
es
fresh ideas, which can be found in the business environment. The business environment ~
marked by creativity and innovation. It continuously changes and evolves. N ew and fresh
ideas for the entrepreneur lead to business opportunities. Likewise,
th
e entrepreneur mak
use of entrepreneurship as a means to a happy and fruitful life. Entrepreneurship is percei,:
as a wealth-creating venture that will ultimately improve the life of the entrepreneur.
On the other hand, the owner of an ordinary small business opens a business With
the primary goal of making it his/ her source of livelih
_god. The business becomes a major
provider of the family for their financial requirements. The owner of an ordinary small
business operates with a basic motive of earning profit. However, the level of profitabilitv
15
sometimes neglected. The profitability aspect and the level of profitability are two distin~t
rmportant issues.
Now ask yourself these questions:
1. What small business would you engage in?
2.
3.
Why would you open your own small business?
When your next-door neighbor opens a small business and it attracts
good customers, are you also going to open your own small business?
Why do you say so?
PERCEPTION OF RISK IN THE BUSINESS
The entrepreneur takes and faces the business risk squarely. He/She considers it inherent
in the business venture, prepares the business for it, and finds ways to minimize its effects.
The owner of an ordinary small business, on the other hand, believes that the b usiness risk is
a deterrent to the operation of the business and must be avoided.
Usually the owner is not concerned with corning up with appropriate strategies to handle it.
1. Would you expect risks in your business? Why?
2. How would you handle the risks in your business?
3. Would yo h h
u ave t e necessa l . -
would it be? ry P an in case business risks arise? What
Chapter 1 / Understanding Entrepreneurship

REACTIONS TO CHAN GES IN THE ENVIRON M ENT
The ~ tnpreneur reacts positively to the changes in the environment. Changes in the
business environment bring new ideas for entrep_reneurial opportunities. The entrepreneur
considers changes in the environment a creative mechanism for development and growth in
the enh·epreneurial activities. They become a new source of possible entrepreneurial venture.
Entrepreneurs do not simply wait for the changes to happen in the entrepreneurial
environment. They outline alternative courses of action in anticipation of the changes to
happen. On the other hand, the owner of an ordinary small business remains passive and static
to changes in the environment where his/her business operates. He/She usually believes that
change in .the environment is not a plus factor to the daily operations but rather a source of
neo-ative consequences.
C,
1. What possible changes.may take place in the environment where your
business operates?
2. Would you consider them favorable or_unfavorable to your business?
Why? ,
3. What benefits can your business derive from the changes in the
environment?
VIEW ON CQM'.PETITION
For the entrepreneur · the presence of competition is a ! ign of a healthy economic
environment. The environment where the venture operates can be considered neutral or free-
trade because of healthy competition. Competition will undoubtedly force entrepreneurs to
continuously improve their present products or services. It will be one of the factors that w ill
make them creative in their endeavor.
The owner of an ordinary smalf business, however, views competition as an unhealthy
element in the business environment ·and tries to avoid it. He/She is very uncomfortable
working in a competitive environment and strongly discourages competition in the business
community. ·
1. What is your -piew about competition?
2. Do you consider competition in your community healthy? Why?
3. How should you treat your competitors?
Lesson 4 I Entrepreneurship and Ordinary Small Business Activity

NT AND GROWTH
EVELOPM E
V's'ON FOR D . f his/her entrepreneurial venture i
. ti e com se o h k n terrn
Uy outhnes
1
of action. He/S e ma es sure th s
Tl e entrepreneur usua nd long-term plans at t,
, d'um-term, a 1 .
I t-tenn, me I b iness is c ear. .
of s , 0 1 d nission of his/ her us t'vities toward the attainment of the Pl
..·on an I ·1 b siness ac I . •~s
v1
s1 . ligns the da1 y u h way that the operahons Wi]] Pro ..
The entreprenem a . the venture in sue a . >1ct,
erly manages
He/She prop to the venture. .
I
nent and growth . h ther hand, rehes upon chance or luck.
deve op1 II b siness on t e o h Iti
f n ordinary srna u . ' H /She is not so muc concerned aboutit
The owner o a f h' /her business. e . . s
aintaining the status quo o is he/she is satisfied with its earrungs.
m d wth as long as
development an gro
ifthese questions: .
Now ask yourse E. ur business? Why or why
z nt plan 1 or yo
Would you have a deve opme . . .
1.
2. not? .1 · t plan a useless endeavor?
Would you const er prepar
'd ing a deve opmen
Why or why not?
t Zan in concrete terms? Why or
3. Would you express your developmen p -
why not?
4. What would be the emphasis ofyour one-year d:velopment plan? How
about your three-or-f ive year development plan.
HORIZON OF BUSINESS OPERATION
An entrepreneur thinks,glabally but acts locally. His/Her sight is always focused on
the stars above, while his/her feet are firmly~~imr~d on.the ,ground. He/She is primarily
concerned with the major economic even~ !oh!}' in the local environment but also in the
global business market. The entrepreneur has a strong notion that the business venture will
be going out of the loca] market and will soon face healthy competition in the international
market.The entrep h b h
reneur as ot _
loca] and global perspectives.
The owner of an ord. .. - - ~
environment. He/Sh d mary _small busmess, meanwhile, is centered only on the local
· e oes not Intend t t' · ·
or view of operating outs·ct
O
par icipate m the global environment. The concept
never b . l e the local market . . .
een an idea Worth ent t . is 111conce1vable. In other w ords expansion has
N er all1ing for the Owner f . d.
010
•sk yourselfthese . 0
an or m ary small business.
1 questions:
. Toward UJh
at business hori ..
2. W,, . Zon UJou/d d.
Y'lVou1a Youchoose that b . you trect your business?
. llsiness horizon?
Chapter 1 I -
Understandin
g Entrepren
· eurshio
I

SOURCES OF BUSINESS FUNDS
When the entrepreneur finds that the proposed business endeavor is a wealth-creating
venture, he/ she explores ways to generate the much-needed funds from both internal and
exte1:nal resources. He/She strongly believes that the wealth that the venture may crea~
e is
more than enough to compensate for the sourced funds.
On the contrary, the owner of an ordinary small business tends to limit the funding of
his/her business enterprise to personal •resources. Loans from external resources can be a
risky undertaking for him/her. He/She fears that financial institutions will not be willing to
extend financial assistance to the business. In other words, he/she is already fully convinced
that he/she is pursuing the hnprogressive type of business endeavor.
1.
2.
3.
4.
What will be the primary source offunds for your business?
Will financial institutions be willing to finance it? WhY_?
Do you strongly believe that your business venture is worthfunding by
external sources? Why or why not?
Would you consider the cost of borrowtng before you actually borrow
the funds? Why?
..·a .
.LESSON SUMMAR' ...
d the owner ofan ordinary small business are different
J. The entrepreneur an . .
,. in the following areas:
Motive in opening a business
a.
b. Perception of risk in the business
Reactions to changes in the environment
c.
d. View on competition
Vision for development and growth
e.
f. Horizon of business operation
g. Sources of business funds
2_ Knowing the differences between an entrepreneur and an owner of
an ordinary small business will help you assess yourself, if you are an
entrepreneur or a mere owner of an ordinary small~business. Such
kno_wiedge will enable you to avoid completely the percept~ons or behavior
similar to the latter and focus more on the perception b h · •
s or e av10r of the
~~- .
Lesson 4 I Entrepreneurship and Ord· . . .
- mary Small Business Activity

I. Write True if the statement is correct. Otherwise write False and state your reason
briefly.
1. An entrepreneur and an owner of an ordin~ry small business are totally
different from each other.
2. The primary motive of an owner of an ordinary small business in opening
the business is the business opportunity provided by the environment.
3. An entrepreneur finds alternative ways to avoid business risks.
4. :he owne~ of an ordinary small business considers business risks inherent
m the busmess venture. ·
5. Changes in the external environment .
on the perception of an entrepreneur.present busmess opportunities based
6. The owner of d.
an or mary small b . . .
the external environment usmess anticipates possible h .
· · c anges m
7. Comp t· . ---.:--..
· - - -- -- - -
e !hon increas .
owner ofan ord. es the creativity and . .
mary small b . Innovative ch
usiness. aracteristics of the
8. The perspective-
for d -- - -- --- .
short-and 1 evelopment
- ong term I and gr h
p ans of en owt is usuall .
trepreneurs. y m anifested in the
Chapter 1 I U . .
nderstand·
. mg Entrepreneurship

q A 11 cr~on who i~ an cnl-rt'~1n.~
m•ur is also a businessperson.
10. In most instances, owners of ordinary small businesses are hesitant to look
for C.tcrnnl ~ourccs of funds.
II. Differentiate an entrepreneur from an owner of an ordinary small _
business in the
following areas:
1. Motive in opening a business
2. Perception of risk in the business
3. Vision for developn1.ent and growth
Ill. Form groups of six members each with members preferably coming from the same
community. Do the following tasks.
A. Choose one small business in your neighborhood. Conduct a guided interview of its
owner. Elicit the primary reason why he/she opened the business. Determine if he/
she manages the business _
as an entrepreneur or as an owner of an ordinary small
business.
B. Discuss among yourselves how you react to changes in the environment. For example,
there is a change in your class schedule or a change in the price of your favorite food.
Report on your common reaction to changes in the environment.
C. Share to the class any personal experiences in selling that you may have.
Lesson 4 I E t
n repreneurship and O d'
. r mary Small Business Activity

t~ill•)~ l
Misconceptions
on Entrepreneurship
At the end of this•lesson, the learner should be able to
l"P....._,~.,.~ 1
...._,.,. 1. identify some misc~nceptions on entrepreneurship and
2. state the importance of having the correct perception on
entrepreneurship.
(illill ·
[J
Entrepreneurship has its fair share ofmisconceptions, the basic of which is equating it with
the activities of ordinary small businesses. Listed below are some common misconceptions
on entreprene~rship. Knowing them will enable you to understand ·the concept of
entrepreneurship and differentiate it from the activities of ordinary small businesses.
1. Entrepreneurship applies only to manufacturing businesses.
2. Entrepreneurship applies only to small businesses.
3. En~epreneurship applies mostly to persons with good edu cational background in
busmess courses.
4. Entrepreneurship applies only to a good economy.
5. Entrepreneurship is simply opening a small business.
ENTREPRENEURSHIP APPLIES ONLY
TO MANUFACTURING BUSINESSES
It is a misconception that entrepreneurship is only applicable to manufacturing but not
to merchandising and service. It should be remembered that merchandising and providing
services are also business ventures.Theie are exchanges of values in these businesses but there
are also risks. However, creativity and innovation appear limited in merchandising because
there is no transformation in the appearance and content of_the product. In other words,
1
/ Chapter, / Understanding Entrepreneurship -
---

I
in a merchandising business, the appearance of the product does not change from the time it is
boughtfrom the manufacturer m1til it is finally sold to the consumer.The major merchandising
activities involved are buying and selling only. Likewise, creativity and innovation are hardly
noticeable in merchandising and service. In case there will be creativity, it can be imitated
easily by the c01n petitor:
On the other hand, in a manufacturing operation, the product passes through the different
stages of processing from raw materials to finished goods. It is during the processing period
that creativity and innovation take place.
Regardless of whether the business venture is merchandising, service, or manufacturing,
the concept of entrepreneurship is applicable.
TO S'MALL eus1N,ESSES
E_
ntrepreneurial concepts and principles do not make any distinction as to the size of the
business venture. The amount of the business capital does not serve as a reckoning ground
for classifying whether the·venture is operating within the concept of entrepreneurship or
ordinary small business. Entrepreneurship principles, in their·strict sense, apply to small,
medium, and big businesses. In this book, small business refers to business with employees
of not more than 20 employees.
You will notice that many programs of the government and NGOs on entrepreneurship
are focused on the organization and development of small businesses. These efforts have
led to the belief that entrepreneurship is about small businesses only. This perception is
basically wrong. The concepts and principles of entrepreneurship are applicable·to all types
of businesses regardless of their sizes. ·
Nevertheless, when the business venture becomes big, expands its operations, or opens
other branches locally or abroad, the owner usually employs a qualified manager to run the
day-to-day operations of the branches. In so doing, the owner may relinquish to the manager
certain functions such as decision-making and marketing. In effect, entrepreneurship then
becomes corporate entrepreneurship, _
which is a process that goes on inside an existing
b .
usmess venture and may lead to new ones and the development of new products and
services. Franchising and the transition of a sole proprietorship to a corporation are good
examples of this case. . . ·
Lesson 5 I Misconceptions on Entrepreneurship

ENTREPRENEURSHIP APPLIES MOSTLY TO PERSONS
W ITH GOOD EDUCATIONAL BACKGROUND IN
BUSINESS COURSES
Nobody is born an entrepreneur. To become a successful entrepreneur, you must kn
the basic concepts and principles of entrepreneurship and apply them properly to your cho;w
business. The environment in which your business operates also contributes to its success e
n
Although business courses may help you in the field of entrepreneurship, it does not
however, provide an assurance that you will become a dynamic entrepreneur. There ar~
several forces that significantly influence the success of a business venture. These forces in
the market are sometimes considered threats because they may lead to the downfall ~f the
business.
I
Michael Porter, in his book, Competitive Advantage: Creating and Sustaining Superior
Performance, identified the threat of new entrants, the bargaining power of the supplier and
1
buyer, and the threat of substitute products and services as some factors that may contribute
to the success or failure of the business.
That entrepreneurship applies mostly to persori.s with sound academic background in
business courses is a misconception. The practice of entrepreneurship does not even require
any entrance examination in business courses. In reality, successful entrepreneurs come from
all walks of life and have different .educational backgrounds from different colleges and
universiti~s in the country. Studying in prominent colleges or universities does not guarantee
you of becoming a successful entrepreneur. It is your inner driving force that carries you
towards becoming a dynamic entrepreneur.
TO A GOOD ECONOMY
An entrepreneur finds business opportunities in both flourishing and distressed
economies. E~trepr~neurship can exist in both good and bad economies. During a financial
crackdown, big ~usmesses usually adopt a conservative approach in utilizing their resources.
They red uce their production output and hold on to their cash. This will ultimately reduce
employment and congest the flow of mane . th
y m e economy.
While big businesses are co tr ti' h • · 11
b
. n ac ng t e1r production output during such an event, srna
usmesses, on the other hand . . .
ff II 1
. ' increase their output. Since small businesses are expected to
su er sma osses m the ev .
committed one k . e~t the operatmg performance will not be favorable, the truly
5 ma e substantial appl' t' f
time and ma ica mn ° resources and maximize their biggest assets-
npower - to sustain their businesses.
Chapter 1 I Und .
erstand,ng Entrepreneurship

/
Even during a fi nancial crackdc1wn 1
w w ili" "s ,,., l
I '-- " · C ull )(2 created oncl .
opportw1ities can be identified. The bad economy does not co n 1
t l· ' new business
. • . I p e e y serve as a const . . t
to the contmuation of entrepreneunal ventures and even the creati· . f ram
ENTREPRENEURSHIP IS SIMPLY OPENING
A SMALL BUSINESS
on o new ones.
Entrepreneurship does not merely mean opening a small business. This is simply the first
step in actualizing the entrepreneurial venture. Prior to this, the business must have already
passed through the preliminary stages of scanning the environment and preparation of the
feasibility study and business plan. Entrepreneurship does not start and end with opening a
small business. It is a.long, continuing process.
a LESSON SUMMARY .
1. The term entrepreneurship is commonly misunderstood. It is often equated
with the activities of ordinary small businesses.
2. The common misconceptions on entrepreneurship include the following:
a. Entrepreneurship applies only to manufacturing businesses.
b. Entrepreneurship applies only to small businesses.
c. Entrepreneurship applies mostly to persons with good educational
background in business courses.
d. Entrepreneurship applies only to a good economy.
e. Entrepreneurship is simply opening a small business.
3. Knowing some common misconceptions on entrepreneurship will enable
you to understand the concept of entrepreneurship and differentiate it
0
from the activities of ordinary small businesses. A clear perspective of
entrepreneurship will provide you with a good foundation in the study of
this field.
: Lesson 5 I Misconceptions on Entrepreneurship .

LESSON -
ASSESSMENT
A. Choose three inisconce t. . . .
words. c· P wns on entrepreneurship and explain them m your ow
ive some sam I . ~
B P e scenarios for each one.
· Ask your parents b • . h" · ·
a out their view and understanding of entrepreneurs
1
P·Write th ·
answer on a cl . •1t
. ean sheet of paper and report it in class. Indicate whe
th
er you agree
notw1th or
your parents and explain why.
C. Conduct · · . h" Ch
f . _a mm1-survey on the misconceptions on entrepreneurs •P· oose five
nends, five teachers, and five neighbOrs or relatives as respondents. Ask them how
they understand entrepreneurship. Tally their answers and discuss them in class.
_ , Chapter 1 I UnrJp r <;f11nrli nr< C ... h~-- - -

LESSON
Importance of
Entrepreneurship
1. explain the importance of entrepreneurship to the Filipino people,
2. state the significant contributions of entrepreneurship to the local
community, and _
3. ~etermine the importance of entrepreneurship to the Philippine
economy.
.
(.fJ NIUunE·ANo CONCEPT
The significance of entrepreneurship in our lives cannot be undermined. Take a look at
the small businesses, whether ordinary or not, that are operating in your community. These
can be small restaurants or eateries:, photocopying centers, convenience stores, and school
supplies stores. Assess their importance and contributions to your life and to other people. ·
Now imagine that these businesses do not exist. What do you think will happen to the people's
lives? ·
Your daily experiences with these small businesses and the benefits that you derive from
them are clear testimonies to the important role that they play in our lives.
In this lesson, we will take a look at the significant contributions of entrepreneurship to
the lives of Filipinos in general, the community, and the Philippine economy. Different related
materials, studies, books, and literature on entrepreneurship, as well as the government,
NGOs, and the academe, have identified and recognized the importance of entrepreneurship.
COMPOUNDED BENEFITS OF ENTREPRENEURSHIP
~ - ------ ---- - - ..:. ----~ -- ------- - - - - --
First, it is important to have a background understanding of the effects of entrepreneursJ.iip
on the lives Qf individual Filipinos, the local community, the Philippir:!e ec9p.qmy. Basically
the benefits derived from entrepreneurship are compounded f;o~ -
one level to the next. It
Prod~ces a chain of p_
rogressl_ve r~s~lt_
s from the individual entrepreneur to the community
and fmally to the whole Philippine economy. - - ·
Lesson 6 I Importan ce of Entrepreneurship

In other words, the contributions of entrepreneurship cannot be specifically delineated
from one party to another. Once the life of the entrepreneur or any individual Filipino is
benefitted, the local economy where entrepreneurship is practiced benefits as well. When
the benefits afforded by entrepreneurship to the people have been transferred to the local
community, the effect is already doubled.
When the 'Philippine economy grows on account of entrepreneurship, the concomitant
effects of development and growth are returned by the government to the community and
finally to every Filipino.
Contributions of
entrepreneurship
Filipino people Local community · Philippine economy
Figure 1.6. The Flow of Entrep_reneurial Benefits
In the given diagra th £.
. . . m, e irst party to receive the b .
Fihpmo people.The term FT • . . enefits of entrepreneurship is the
1 1p1no people m this case m a .
herself and other people who h d' . Yinclude the entrepreneur himself/
ave irect dealings with the entre r . .
The benefits received b th . . . · P eneur 1n the commumty.
. y e F1hpmo people are . .
community where the concept f transferred to or shared with the local
0 entrepreneurshi . .
transferred to the Philippine econom fl P is practiced. Then these are either
. y or owed back to th p-1· . .
or benefits of entrepreneurship that w t t e 1ipmo people. The contributions
en o the Phili ·
the local community and to the Filipin . ppme economy are then flowed back to
0 people.
-

/
Here is an example to illustrate the domino effects of entrepreneurship.
Jenny's Hair Saloon
Jenny, upon seeing a promising and brilliant business opportunity in the
community, opened a beauty shop.
She went to the Department of Trade and Industry (DTI), the City Government
of Davao City, and the Bureau of Internal Revenue (BIR) to process, pay, and
comply with all the documentary requirements and fees in opening a business. The
total taxes and licenses paid by Jenny in opening the business amounted to
:Ps, ooo.
. Upon receipt of the·business permit, Jenny immediately bought all the needed
equipment and materials for her beauty shop. For all these equipment and fixtures,
she paid 'P'6o, ooo~She then rented a business space at :P:10, ooo per month.
She hired and employed five beauticians and provided them salary above the .
minimum salary and all statutory benefits. The total annual compensation and
benefits paid by Jenny to her employees for the year a·mounted to :P:540, ooo.
Jenny at the end of the year is enriched by :P:590, ooo after paying the annual
income tax of :P:110, ooo to the BIR. ·
Asessing the case of Jenny's Hair Saloon, based on the flow of benefits and contributions
of entrepreneurship, the effects will appear as follows:
1. Jenny as the entrepreneur is enriched by :P:590, 000 during the year.
2. The five employees or beauticians are enriched financially at a total·amount of:P540,000.
3. The owner of the rented building is enriched by :P:10,000 per month or.:P:120,000
for the whole year, while the supplier of equipment and fixtures was enriched by
:P:60,000.
4. The local government collected local taxes amounting to :P5,000 from Jenny's Hair Saloon.
5. The national government, through its collection agency, BIR, collected the annual
income tax of :P:110,000.
6. The taxes collected by the local and national government will be returned to the
general public in the form of services like roads, street lights, police security, and other
public services.
The benefits and contributions ofentrepreneurial venture in this case will actually produce
a series of benefits. For exampl~, Jenny may be able to hire more employees or build a new
house on account of the wealth generated from the venture. If she decides to construct a
new house, that will entail the hiring of construction workers and purchase of construction
materials.
The hiring ofconstructionworkers will mean additional budget should be provided to salaries
~d wages. The payment of salaries and wages to workers will mean increasing the disposal
IIlcome of the workers. ·
Lesson 6 I Importance of Entrepreneurship

Similarly the beauticians, because of their salary, m ay be able to sen d their children to
school or buy additional household furniture and appliances. Sending of children to school
will mean buying school supplies and paying the tuition fees. Buying of additional household
furniture and appliances will mean additional income to their sellers.
The list of the possible effects and contributions of entrep reneurship seems limitless.
Nevertheless, this book simply groups the major contributions of en trepreneur.ship to the
Filipino people, the local community, and the Philippine economy. The listings indicated in
, a
particular group are not all inclusive.
Importance to the Filipino People
Entrepreneurship makes the following contributions to the lives of the Filipinos:
1. It provides guidelines in their wealth-creating ventures.
2. It helps improve their financial and social life.
3. It helps broaden·their cre-
ativity. .
4. It helps make their live h .
s appy, frmtful, and successful.
Importance to the Local Community
co Entre?reneurship, in one way or another .
mmuruty: 'makes the following contributions to the local
1. It provides employment in th .
2 It e community
. creates new demand . h .
mt emarket ·
3. It makes substantial contribution to . . . .
4. It facilitates the movement of th f the ra1smg and collection of taxes
5. It creates new busin e actors of production .
6. It prom t ess opporturuties. .
o es a peaceful and 1 . . .
7. It increases constru ti ovmg community.
c ve competition. .
Importance to the Phili .
Entrepreneurshi pp,ne Economy
1 p makes the follow· .
. ~t encourages com . . mg contributions to the p . . . .
nnproving th . petitiveness and h hihppme economy:
2 eir produ t t ereb h
. It helps find cs and service y c allenges
3 an entre s. entrepreneurs to keep
. It helps h preneurial ni h .
asten the c e m the
turmoil or crackd economic reco World market.
4 I f own very proc
. t acilitates th . ess of the Phili . .
5. It a . esmooth flow f PPines during financial
ssists the n ti o Inone .
the World mar: onal government . ~ m the local market ..
et. in its desire t .
o have favorable .
Chapter 1 I Und .
----- economic ratings in
erstanding Entrepreneurship - - - - - - - - - -- - - ---- -..:..._

.a LESSON SUMMARY
1. Entrepreneursh ip affects the lives of the Filipinos th 1
1
. , e oca comm ·ty
and the Philippine economy. uni ,
2. Entrepreneurship makes the following contributions to th l'
F·1· · e ives of the
11pmos: ·
a. It provides guidelines in their wealth-creating ventures.
b. It helps improve their financial and social life..
c. It helps broaden their creativity.
d. It helps make their lives happy, fruitful, and successful.
3: Entrepreneurship, in one way or another, makes the following
contributions to the local community:
a. .It provides employment in the community.
b. It creates new demand in the market.
c. It makes substantial contribution to the raising and collection of taxes.
d. It facilitates the movement of the factors of production.
e. It creates new business opportunities.
f. It promotes a peaceful and loving community.
g. It increases constructive competition.
4. Entrepreneurship makes the following contributions to the Philippine
economy:
a. It encourages competitiveness and thereby challenges entrepreneurs
to keep improving their products and services.
b. It helps find ah entrepreneurial niche in the world market.
c. It helps hasten the economic recovery process of the Philippines during
financial turmoil or crackdown.
·d . It facilitates the smooth flow of money in the·local market.
e. It assists the national government in its desire to have favorable
economic ratings in the world market.
Lesson 6 I Importance of Entrepreneurship '·

-
LESSON.ASSESSMENT
I. Write True if the statement is correct Oth . ·t
· False and state your re
. • erw1se wn e ason
briefly.
L Entrepreneurship is only important to the entrepreneur.
2. The benefits received by an individual Filipino from entrepreneurship Will
remain with him/ her only.
· · · · ntribution of entrepreneurship
3. The creation of more jobs for F1hp1nos 1s a co
to the Philippine economy.
4_ From the perspective of the local community, entrepreneurship helps
hasten the economic recovery of the Philippines.
5. Entrepreneurship develops the creativity of the entrepreneur.
6. The contributions of entrepreneurship to the Philippine economy flow
back to the individual Filipinos.
7. Entrepreneurial activities have a domino effect to the Filipino people, the
local community, and the Philippine economy. . ·

8. Entrepreneurship offers minimal contributions to job-creation problems of
the con1munity.
9. Entrepreneurship discourages competition in all forms.
10. Entrepreneurship creates new demand and new r:!larket.
---- / /
II. A. Discuss the flow of entrepreneurial benefits from the individual Filipinos to the
Philippine economy. Use two other examples of small businesses.
B. Suppose that in one local community, there are 5 small businesses while in another
locality, there are 30 small businesses. Which of two localities do you think has
improved economic activities? Which of the two localities do you want to live in?
Explain your answers.
III. A. Form dyads. With a partner, pick one business in your local community. Evaluate
its daily activities and determine whether it provides entrepreneurial benefits to
the owner, the local community, and the Philippine economy. Report your findings
in class.
B. Research on additional contributions of entrepreneurship to the lives of the
.Filipinos, the local community, and the Philippine economy.
C. Research on the following statistical data of two major cities of your choice for
years 2010 and 2015. Compare and interpret the data that you gather.
1. Number of establishments
2. Number of employed workers
3. Total compensation of the workers
Lesson 61 /mporiance ofEntrepreneurship ■

· LESSON
[Ll'
··,,i
' '
0
,
Sources of
Entrepreneurial Ideas
1. describe the process involved in the creation of a new entrepreneurial
venture and
2. identify the possible sources of entrepreneurial ideas.
After knowing the importance of entrepreneurship to the Filipino people, the local
community, and the Philippine economy, let us now identify the possible sources of
entrepreneurial ideas. The c_
~eation of a~ eru:repFeneurjal idea leads to the identification of
entrepreneurial opportunities, which in turn results in the--operung7)ran -entrepreneurial
venture.
The entrepreneurial process of creating a ne~ venture is shown in the diagr~m below.
Creation of Opening of
entrepreneurial
venture
Figure 1.7.1. The Entrepr~neurial Process of Creating a New Venture
As a future entrepreneur, always remember that a business must be· firmly established
on existing business opportunities, and that there can be no business opportunities in the
absence of an entrepreneurial idea.

/
In contrast, the owner of an ordinary small business usually opens a business even if there
are no business opportunities existing in the community. As a result, the business can hardly
move frmn where it started even after several years of operation. Thus, it all boils down to
the basic need to identify the sources of entrepreneurial ideas, some of which are as follows:
1. Changes in the environment
2. Technological discovery and advancement
3. Government's tlu-ust, programs, and policies
4. People's interests
5. Past experiences
CHANGES IN THE ENVIRONMENT
Entrepreneurial ideas arise from the changes that happen in the external environment with
entrepreneurial implications. Not everyone welcorp.es changes in the external environment.
However, a person with an entrepreneurial drive views these changes positively. He/She
determines what business opportunities they may provide.
The term external environment in this lesson refers_t.9 ~he physical environm: nt, societal
environment, and industry environm,ent where the business operates.
1. The physical environment includes
a. climate,
b. natural resources, and
c. wildlife.
2. The societal environment includes the various forces like
a. economic forces,
b. sociocultural forces,
c. political forces, and
d. technological environment.
3. The industry environment of the business includes
a. government,
b. competitors,
C. suppliers,
d. customers,
e. creditors, and
f. employees.
Lesson 7 I Sources of Entr~preneuria/ Ideas

Physical Environment
Soc;etal
EnYro,,mert
Political forces Industry Environment
Go errirner·
Employee
The new
Creditors
business compe ,
Consumer Supplier,
Technolog cal
environrnent
GO ernment
Natural resources
Clirnate
V/ildlife
Figure 1.7.2. The External Environment of a Business Venture
(' .
As an entrepreneur, you must keenly observe and be vigilant to the rp,ictinn- .
the people to the changes in the external environment. These changes ma · or n,<1 fl·
have an entrepreneurial implication. You must determine, therefore, ,·hat chan~c-- ha t
entrepreneurial indications.
For example, one factor in the phvsical environment that mav dramattCalh· cham!t' 1- ' 1t
climate. The temperature is very high during summer but 'erv l~w during the rain· ...t',l " l~··
A person with entrepreneurial drive can be very crca ti e and inno ative in identit in~ •·t
entrepreneurial opportunities based on the giv~n environmental change. He/Sht> ...-an <'?< •·
a business venture that responds to the needs of the people during c;ummer and dunn~ ! ·t
rainy period.
-

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