MODULE 1

THE WORLD OF THE ENTREPRENEUR

People in the Philippines have the freedom to choose the type of work they will do. Some choose to work for other people in stores, factories, offices, etc. Others hope to have their own businesses. The opportunity for business ownership is one of the characteristics of the Filipino. This module will help you understand what it is like to start your own business and be self-employed.

OBJECTIVES:

After studying this module, the student should be able to:

1.      Define entrepreneurship.

2.      Distinguish between entrepreneurship and small business management.

3.      Identify the major fields of business activity.

4.      Discuss the future prospects for entrepreneurship.

THE ROLE OF THE ENTREPRENEUR

Each year, thousands of individuals launch new business enterprises. By meeting the needs and wants of consumers, they build rewarding careers for themselves as entrepreneurs.

Who is an Entrepreneur?

An entrepreneur is a person who organizes and directs a business enterprise, assumes all the risks for the sake of profit. The word entrepreneur comes from the French entreprendre which means to undertake. If you start a business, or buy one that someone else started, you are an entrepreneur.

An establishment that supplies us with products and services in exchange for payment is an enterprise or business. The country depends on thousands of entrepreneurs to supply the products and services everyone needs. Products, also called goods, are tangible items—things you can touch such as clothing, furniture, and pens.

Services are tasks we pay others to do or provide for us. Services are intangible, which means that you cannot touch them. Examples of using services include calling a plumber, going to a barbershop or hair salon, taking music lessons, or taking your car to a mechanic for repairs.

What Is Entrepreneurship?

Entrepreneurship is the act or process of organizing and directing a business enterprise. It is easy to understand why starting a business from scratch is entrepreneurship, but why is the term used when people buy either existing businesses or franchises? Because these people also take risks, invest money and energy, and apply their own creativity and ingenuity to the business. They are responsible for the success of their business ventures even through they were not the founders.

Entrepreneurs spend a lot of time organizing, managing, and assuming responsibility for their enterprises. Organizing is the process of gathering the money, people, and machinery needed to get the business started. Managing involves seeing that the day-to-day tasks are performed appropriately. Assuming responsibility means making sacrifices for the enterprises. This may include working twelve hours a day and having little time to spend with family and friends. It may require going without pay for weeks or months. However, once the business is successful, the entrepreneur will profit from these efforts.

Most new enterprises start small and have these key features:

1.      The owner is the manager.

2.      The owner supplies most of the money used in starting the enterprise.

3.      The business is usually local, serving the immediate community and nearby cities and municipalities.

How Do Entrepreneurship and Small Business Management Differ?

Entrepreneurs and small business management are separate yet related yet. Entrepreneurship refers to the act or process of organizing and directing a business enterprise. It is the source from which all businesses, both large and small, come from. On the other hand, small business is one that is independently owned and operated and is not one of the major companies in its field of business activity. The process of operating a small business is known as small business management.

Why Study Entrepreneurship?

The study of entrepreneurship is important to you because it may lead you to a satisfying career, and it may help you in dealing with customers who are entrepreneurs.

To Explore Career Opportunities. People study entrepreneurship to see what it takes to start a business. They want to learn how they can change an idea, a recipe, or their flair for fashion into a career. Of all the people who think about becoming self-employed, more than several hundred actually launch new enterprises each day. Ask yourself this question when thinking about your career: Why not start a business?

To Learn About Potential Customers. Small businesses are often customers for other business firms. For example, insurance salespersons call on business owners (entrepreneurs) to sell fir, medical, and other insurance policies. Architects plan new commercial buildings and assist with remodeling. Various manufacturers provide items needed by small businesses such as computers, sales registers, calculators, machinery, and supplies. Other examples are loan officers in banks who process small business loans; advertising salespersons for newspapers and radio stations who call on small businesses; and real estate agents who sell and lease business property.

Why Important Roles Do Small Business Perform?

Small business firms are an important part of Filipino business because they (1) distribute to consumers most of the products made by large manufacturers, (2) provide goods and services to big businesses, (3) generate ideas for new goods and services, (4) perform certain services better than larger firms, and (5) keep consumer products in working order.

Distribute to Consumers. Even though a product is manufactured by a large company, it will probably be sold to the consumer by a small business. Automobiles, for instance, are manufactured by large corporations located in the Philippines and other countries. However, cars are sold to the public through car dealerships. Products of giant companies in the Philippines are available in thousands of small enterprises throughout the country.

Distribute to Big Business. Small businesses provide goods and services to big businesses. Products such as cars, airplanes, electronics (television, radio, cell phones) have hundreds of component parts that are manufactured by small enterprises.

Develop New Ideas. The Philippines depends on small businesses for inventions that lead to new and better products. Many products of today came about because an entrepreneur saw a need and searched for a way to meet it. Individuals or small firms invented power steering for cars, FM radio, aerosol cans, air conditioning, dry chemical and foam fire extinguishers, and hydraulic brakes. Their talents also gave us pre-cast concrete, pressure-sensitive cellophane tape, quick-frozen food, soft-contact lenses, zippers, and the photo copy machine.

Provide Services. Small business often do better than big businesses in providing services that require personal contact with customers. When shopping for services such as dry cleaning, hairstyling, portrait photography, travel plans, and car repairs, customers are often more interested in personal service than in price. Therefore, they are more likely to go to small businesses first.

Repair Products. Owners of electrical, mechanical and electronic products used in homes and businesses depend on entrepreneurs to keep these items working. Think how difficult it would be if refrigerators, microwave ovens, cars, computers, cell phones had to be sent back to the factory for repair. Fortunately, this does not have to be done. Thousands and of shops provide repair for all these products.

THE FIELDS OF SMALL BUSINESS

Successful entrepreneurs are in almost every area of Philippine business. The five major fields of business activity are (1) extractive, (2) manufacturing, (3) wholesaling, (4) retailing, and (5) services.

Extractive

Extractive enterprises grow products or take raw materials from where they are found in nature. Some of the kinds of enterprises in this field are agriculture, forestry, mining, and commercial fishing. Examples of extractive enterprises include:

1.      Vegetable and fruit farms in rural areas surrounding cities.

2.      Growers of flowers used for special occasions and decorations.

3.      Sand and gravel companies that provide products for construction.

4.      Coal mining for fuel.

Manufacturing

Manufacturing businesses take raw materials and change them into a form that consumers can use. A picture frame manufacturer takes wood and glass and makes a finished product. A baker changes flour, sugar, shortening, and spices and cakes and pastries.

Manufacturing, more than any field, lends itself to big business. This is because it takes large sums of money and many employees to start most of these enterprises. To make cars, for example, you need millions of pesos worth of equipment and materials and hundreds of trained employees.

Wholesaling

Wholesales buy goods from extractive or manufacturing enterprises and sell them to other businesses. They usually buy in large quantities and then sell in small quantities. For example, the maker of blouses for women may sell 3,000 blouses to one wholesaler. The wholesaler, in turn, may sell 60 blouses to each of 50 women clothes store. Finally, the stores will sell the blouses one at a time to 60 customers. Many wholesalers are small businesses and have only a few employees.

Some wholesalers specialize in selling goods to institutions such as hotels, hospitals, and schools. Others sell goods that manufacturers use in making other products.

Wholesalers are the usual source of supply for many items sold in retail stores. Examples include hardware, stationery, groceries, fruits, and vegetables. Others handle laboratory or office equipment for professionals such as doctors and dentists.

Retailing

Retailers buy products from wholesalers, manufacturers, or extractive enterprises and sell them to customers. The four forms of retailing are over-the-counter, mail-order, direct, and vending machine retailing.

Over-the-Counter Retailing. The most common form of retailing is over-the-counter retailing. This involves having a store where customers come to shop and buy what they want from the retailer’s stock. Examples of small business retailers include clothing stores, shoe stores, building materials stores, car parts dealers, appliance and electronics stores, restaurants, record shops and jewelry stores. A number of supermarkets, discount stores, and department stores are owned and operated as small business enterprises.

Mail-Order Retailing. In this form, customers see the goods they want in catalogs or advertisements. The customers send orders to the retailer’s place of business by mail or telephone or through the internet via the company’s website or its email. After the retailer receives the order, the goods are shipped to the customer. Almost any type of is sold this way. Small mail-order retailers tend to sell only one type of product.

Direct Retailing. In direct retailing, the salesperson comes to the home of the consumer with products or samples. Two types of direct retailing are door-to-door and party plan. IN door-to-door selling, the entrepreneur calls on each home in a neighborhood or telephones the customer to set up an appointment to sell products. Cosmetics and household cleaning products are often sold this way. When the party plan is used, one customer hosts a party for several friends. A salesperson comes to the party to display and demonstrate products and to take orders. This plan is used to sell such products as clothing, jewelry, and kitchen items.

Vending Machine Retailing. In vending machine retailing, the customer deposits money in a machine and receives the goods immediately. A wide variety of products are sold by this method. Soft drinks, candy, coffee, tissue, and phone cards are familiar examples. Other items sold in this manner are snacks, small toys, and sandwiches. Vending machines stocked with hot and cold foods and beverages have replaced cafeterias in some offices and factories.

Services

Of all the fields of business, services are generally the easiest to enter. They can usually be started with very little money. Many can be operated from the home or from a small office or shop. Examples are typing, encoding, accounting services, small appliance repair, watch repair, cell phone repair, shoe repair and key reproduction.

Small enterprises offer hundreds of different kinds of services to consumers, other businesses, and government agencies. Services are found in these categories: (1) personal services, (2) business services, (3) repair services, (4) entertainment and recreation services, and (5) hotel and lodging services.

Personal Services. Enterprises offering personal services perform work directly for a person. Included are beauty parlors, laundry and dry cleaning shops, photography studios, travel agencies, funeral homes, day-care centers, music teachers, automobile driving instructors, dance instructors, and wedding coordinators. There are thousands of personal-service enterprises in the Philippines. Most are small business.

Business Services. Tasks performed by one business firm for another are called business services. Examples include advertising agencies, janitor and building maintenance services, store and building security firms, temporary employee services, and equipment rental businesses. Sign shops, accounting firms, and delivery services are also included in this group.

Repair Services. The repair services group includes enterprises that perform work on goods owned by the customer. Examples are businesses that repair cars, motorcycles, electronics, home appliances, cell phones, watches, shoes. Also included are upholstery and furniture repair shops, plumbers, electricians, and carpet cleaners.

Entertainment and Recreation Services. Enterprises in the entertainment and recreation services category service Filipinos in search of fun and fitness. Examples include bowling alleys, swimming pools, movie theaters, amusement parks, bodybuilding gyms, spas, badminton courts, and video movie rental shops.

Hotel and Lodging Services. Hotel and lodging enterprises provide lodging for persons on business or pleasure trips. Examples are hotels, motels, and resorts.

THE OUTLOOK FOR ENTREPRENEURSHIP

Through the years, entrepreneurs have turned their ideas into goods and services. In meeting the needs and wants of consumers, they have built rewarding careers for themselves. As you think about having your own enterprise, and being successful as many others have been, you should consider these points: (1) growth of new business in the country, (2) areas of opportunity, (3) causes of business dissolution, and (4) how to prepare yourself for success.

Growth Factors

Two forces will affect the growth of new businesses in the coming years. These are a growing population and an increased interest in entrepreneurship.

Growing Population. The need for goods and services grows with increases in population. The country as a whole is growing. New businesses will be needed, especially enterprises that serve growing population groups.

Interest in Entrepreneurship. Never before have so many people been interested in starting their own enterprises. The level of education has also increased. In comparison with past years, many more people are prepared for entrepreneurship. They have skills that can be sold to others in the form of goods and services.

Areas of Opportunity

The overall outlook for new enterprise is favorable. But certain areas of business have a better chance than others to succeed. So you have to be constantly on the lookout for these areas. Some areas with a bright future are (1) services, (2) leisure and recreation, (3) electronics and computers.

Services. The demand for services continues to grow rapidly. As more women pursue careers outside the home, more families will depend on service enterprises. And with higher incomes, many families are buying more home appliances, electronic gadgets, cars, and recreation equipment. This has created a demand for repair services. Some entrepreneurs have become specialized to better serve customers. In addition to general auto repair shops, for instance, there are those specializing in car air conditioning, carburetor, brakes, and mufflers. Small enterprises will continue to be strong in the service areas because they can give the personal attention consumers want.

Leisure and Recreation. Goods and services used in leisure and recreation are expected to be in demand. These include sports clothing, and other equipment.

Causes of Business Dissolution

When an enterprise goes out of business for any reason it is called a business dissolution. Nationally, for every five new businesses formed, four will close within 5 years of start-up. About 90 percent of these are voluntary dissolutions; the owners close the business because they want to retire, open a different kind of business, or start a company in another location. The remaining 10 percent close down for financial reasons and are known as involuntary dissolutions. These are business failures. Some people go out of business leaving unpaid bills. Others try to arrange to pay their bills even though they are no longer in business

Why does a business fail? Some experts say the entrepreneur’s lack of management skill is the main cause. Other reasons for failure include the entrepreneur’s lack of experience in the particular field of business, insufficient cash to get the business off to a good start, a poor location, or offering a product or service that consumers do not want.

Should the possibility of dissolution discourage you from creating your own enterprise? No! However, you should be aware of the risks involved and take steps to avoid as many problems as you can. In other words, you should prepare for success.

Preparing For Success

Begin preparing for success by learning as much as possible about your chosen field of business. You can do this by taking classes in school and by working in a business similar to the one you intend to start.

Your school may offer classes directly related to your future enterprise. For example, you may be able to study car repair, general merchandise retailing, interior design, or printing to prepare for business ownership in those fields. In addition, classes in accounting, marketing, record keeping, keyboarding, and computer programming are useful to entrepreneurs.

Through work experience, you will come in contact with many of the problems faced by entrepreneurs in your chosen field. The variety of the tasks is usually more important than th length of your work experience. Thus, you should learn all the major activities, such as making the product, providing the service, keeping the records, or selling. You can obtain work experience by enrolling in a cooperative education program or by working after school and in the summer. After graduation, you may choose to work full time for someone else until you obtain the necessary skills.

One of the best ways to prepare for success is to know yourself. It may seem surprising, but thousands of people start enterprises each year without thinking of what it is like to be self-employed. They know what some of the advantages are, but they have given little or no thought to the disadvantages. In other words, they really do not know if entrepreneurship is for them.

Once you have decided to create a new enterprise, you should start preparing a business plan. A business plan or a feasibility study is a written description of every part of a new enterprise. Beginning with a definition of the business you intend to conduct, a business plan maps out the course for the enterprise. While you will refine this definition as you develop each part of the business plan, it is important to have at least an initial definition that answers the key question:  What will you offer your customers, and why?