Entrepreneurship Fundamentals

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Questions and Answers

What is entrepreneurship primarily defined as?

Adopting a passive approach to business

Focusing solely on profit generation

Creating or seizing an opportunity and pursuing it regardless of resources (correct)

Managing existing resources efficiently

Which attribute is considered a core competency of an entrepreneur?

Technological advancement

Financial wealth

Opportunity-seeking and initiative (correct)

Infrastructure ownership

What does effective management involve for entrepreneurs?

A hands-off approach to employee management

Avoiding risk at all costs

Achieving goals using organizational resources and employees (correct)

Prioritizing profits over team collaboration

How is the concept of taking risks relevant to successful entrepreneurship?

Successful entrepreneurship involves calculated risks and exploiting opportunities Signup and view all the answers

What is an example of a personal entrepreneurial competency?

Networking and persuasion skills Signup and view all the answers

What role does informed decision-making play in entrepreneurship?

It involves gathering information to make decisions with significant risks Signup and view all the answers

Which of the following is a component of the EMPRETEC program?

Identifying entrepreneurial competencies for development Signup and view all the answers

What does the principle of having a vision signify in entrepreneurship?

Clear purpose and direction for the business Signup and view all the answers

What should a production plan include regarding the manufacturing process?

Physical plant design and machinery usage Signup and view all the answers

Which component is essential in the financial plan of a business?

Pro forma income statement Signup and view all the answers

What does the organizational plan provide in terms of business structure?

Documentation of ownership and organizational chart Signup and view all the answers

In an operation plan, what must be described for a retail business?

Product sourcing, inventory management, and sales tracking Signup and view all the answers

What aspect of a business's mission statement is most crucial?

Stating the core values and purpose Signup and view all the answers

What is covered under the assessment of risk in a business plan?

Potential internal and external risks Signup and view all the answers

Which component of the marketing plan is NOT typically included?

Manufacturing processes Signup and view all the answers

What does the timetable/milestones section of a business plan indicate?

Timeframes for major activities and milestone achievements Signup and view all the answers

What is the primary goal of the group discussion method in business idea generation?

To identify potential problems with a product or service Signup and view all the answers

Which of the following methods focuses on expressing thoughts associated with given words to discover business ideas?

Free Association Method Signup and view all the answers

The Checklist Method is primarily used to:

List possibilities and generate ideas from existing products or services Signup and view all the answers

What key elements are entrepreneurs able to derive from trends in the business environment?

Bargaining powers of competitors and suppliers Signup and view all the answers

Which factor does NOT significantly influence an individual's creativity?

Market share analysis Signup and view all the answers

What characterizes a convergent thinker?

They seek a single final solution Signup and view all the answers

Which of the following best describes divergent thinking?

Exploring many possible solutions Signup and view all the answers

Which statement correctly represents the impact of situational factors on creativity?

They enhance creativity when individuals face concrete situations. Signup and view all the answers

What is a significant risk associated with entrepreneurship?

Losing family support Signup and view all the answers

Which of the following is NOT a reason for failure in entrepreneurship?

Strong brand loyalty Signup and view all the answers

What distinguishes a mega entrepreneur from a micro entrepreneur?

The extent of risk they are willing to absorb Signup and view all the answers

Which term best describes businesses that involve outsourcing services?

Service Businesses Signup and view all the answers

What consequence is associated with high levels of mismanagement in a business?

Declining profit Signup and view all the answers

Which type of entrepreneur is likely to engage in small businesses as an alternative to formal employment?

Micro Entrepreneur Signup and view all the answers

Which of the following describes the entrepreneurial process?

A structured system to achieve goals Signup and view all the answers

What is a common misconception about startup costs in entrepreneurship?

They can often be underestimated Signup and view all the answers

Which of the following is NOT a common reason for business plan failure?

Thorough competitor analysis Signup and view all the answers

What is the first stage of opportunity recognition according to Hills, Shrader, & Lumpkin?

Precondition Signup and view all the answers

Which factor in opportunity recognition refers to a person's previous knowledge of the market?

Market awareness Signup and view all the answers

What does entrepreneurial readiness primarily assess?

The individual's risk management skills Signup and view all the answers

What type of attitude is suggested for answering questions during a business plan presentation?

Cooperative and open Signup and view all the answers

Which of the following best defines an opportunity from a business perspective?

An exploitable set of circumstances involving risk Signup and view all the answers

Which is a crucial element to include in a business plan to avoid appearing unprofessional?

Detailed financial projections Signup and view all the answers

What is a critical step in the assessment stage of opportunity recognition?

Evaluation of ideas and their viability Signup and view all the answers

Study Notes

Definition of Entrepreneurship

Entrepreneurship is defined as the process of creating or seizing an opportunity and pursuing it regardless of resources controlled.
Entrepreneurship is also defined as the science of converting processed ideas into a remarkable business venture.
Entrepreneurship is the capacity for innovation investment, and expansion into new markets and techniques.

Definition of Entrepreneur

An entrepreneur is someone who starts and manages a business.

Underlying Principles for Business Success

Entrepreneurs have a vision, manage effectively, take risks and opportunities, and make informed decisions
Having a vision provides a sense of purpose and direction for the business.
Effective management refers to achieving business goals and objectives with the help of employees and the proper utilization of organizational resources.
Entrepreneurs are accountable for the success or failure of their businesses.
Entrepreneurs need to apply informed decision-making, which involves logic and collecting information, when facing a significant risk or consequence.

Core Competencies

Core competencies refer to an entrepreneur's traits or personal attributes.

EMPRETEC Program of the United Nations

EMPRETEC is the Spanish acronym for Emprendedores (entrepreneurs) and tecnologia (technology).
The program was first introduced in Argentina in 1988 and has been implemented in 36 countries.

10 Personal Entrepreneurial Competencies

Opportunity-seeking and initiative
Persistence
Fulfilling of commitments
Demand for quality and efficiency
Taking Calculated Risks
Goal-setting
Information-seeking
Systematic planning and monitoring
Persuasion and networking
Teamwork and leadership

Description of the Business

Products and/or services
Size of the business
Mission statement and core values
Location of the business and its major physical assets
Background of the business owners/entrepreneurs

Production Plan

Manufacturing process
Physical plant
Machinery and equipment
Suppliers of raw materials
Future capital equipment needs

Operation Plan

A description of the company’s operations (manufacturing, service, retail or online business).
Flow of orders for goods and services.
Detailed information about the processes of a retail business.
Details of the design and function of an online business website.

Marketing Plan

Pricing
Distribution
Promotion
Sales forecasts

Organizational Plan

Documentation of the venture’s form of ownership
Organizational chart
Skills and abilities
Roles and responsibilities

Financial Plan

Assumptions
Pro forma balance sheet
Pro forma income statement
Cash flow projections
Sources and uses of funds
Breakeven analysis

Assessment of Risk

Potential risks - internal or external
Strategies for preventing or minimizing risk
Response to risk, should it occur

Timetable/Milestones

When major activities will happen and when milestones will be reached.

Trends, Risks, and Disadvantages

Losing stable income
Lack of family support
Long hours
No health benefits
All expenses are the entrepreneur's responsibility
The entrepreneur does not get paid if they do not work
High start-up costs

Disadvantages

No regular salary
Work schedule
Administration

Reasons for Failure

High debt ratio
High levels of mismanagement
Unexpected staff resignation
Inadequate inventory
Selling products below cost
Dwindling working capital, consistent negative cash flow, and the inability to secure operational capital
Declining profit
Loss of market share

Trends

Internet Businesses
Service Businesses
Home-Based Businesses
Socially Responsible Nonprofit Businesses
Focus on Technology
Outsourcing
Strategic Alliances
Corporate Ventures
Convenience Products/services

The Entrepreneurial Mindset

Theory of Economic Development

Two types of entrepreneurs: Mega Entrepreneur and Micro Entrepreneur

Mega Entrepreneur

Individuals who have generated substantial value and profits from innovations in a very short period of time
Willing to absorb huge risks using enormous amounts of capital in their business
Lead to rapid economic progress
Add a huge amount of value to the economy
Attract a number of competitors and imitators
Are crucial in rapid economic prosperity.

Micro Entrepreneur

Individuals who initiate business enterprise, but the value-added and profits they make are limited
Value-added and profits are limited
Their contributions are minimal
Attract few competitors and imitators
They are short on funds and have inadequate skills
They cannot undertake huge capital, sophisticated technology, or extensive risks
Engage in micro and small businesses as an alternative to formal employment.

Entrepreneurial Process

A system entrepreneurs follow to achieve their goals.
Uses the group discussion method to elicit ideas from the usual brainstorming
After identifying all the problems and issues with the product or service, the participants are tasked to give alternative solutions to the problems

Free Association Method

A method used in psychology to elicit unconscious thoughts of individuals by expressing their thoughts associated with words and ideas.

Checklist Method

A creative way of obtaining business ideas from target participants by listing all the possibilities that ideas can be connected to, reprocessed and associated with

Generating Business Ideas Through Trends in the Business Environment

Methodologies that focused on the Business Environment
Porter’s Five Forces of Competition
SWOT Analysis
Environmental Scanning

Based on Trends in the Business Environment, Ideas Can Be Gathered From:

Bargaining powers of competitors and suppliers
Major shift in government involvement in business
Sociodemographic changes and technological developments

Bargaining Power of its Competitors and Suppliers

Lower the selling price
Product differentiation

Factors that Influence Creativity

Problem-Solving Factors
Motivational Factors
Situational Factors
Organizational Factors

Creative Problem Solving

A procedure of answering a problem with mechanism and technique incorporating creativity
Divergent thinkers think of all possible ways to reach a solution.
Convergent thinkers think for a final solution.

Osborn-Parnes Model

A technique for creative problem-solving that involves six stages:
- Fact Finding
- Problem Finding
- Idea Finding
- Solution Finding
- Acceptance Finding
- Implementation Finding

Appendices

Market research data
Detailed financial projections
Opportunity Assessment Plan
Curriculum vitae of the management team
Price lists from suppliers
Profile of competitors
Sample Licenses (Mayor’s permit, BIR, Health permit etc.)

Why Do Some Business Plans Fail?

The document is sloppy and looks unprofessional.
The executive summary is not coherent and is too long
Unclear on why people would want to buy the product or service
The sales and financial projections are unreasonably optimistic
Inadequate description of the qualifications and experience of the management team
Inadequate assessment of the potential threats to the business

How to Present a Business Plan

Tell a compelling story.
Exhibit confidence and professionalism.
Cover the basics.
Adopt a cooperative attitude when answering questions.

Recognizing, Assessing and Exploiting Opportunities

Opportunity (according to Cambridge Dictionary): a situation or occasion that makes it possible to do something that you want to do.
Opportunity (from a business perspective): an exploitable set of circumstances with uncertain outcome requiring a commitment of resources and involving exposure to risk.

Stages of Opportunity Recognition

Precondition (Preparatory Stage)
Conception (Gestation Stage)
Visioning (Hunch; Logic of Connections)
Assessment (Evaluation of Ideas)
Realization (Production of Prototype)

Factors in Opportunity Recognition

Market awareness: refers to personal exposure to the market and its components including customers and suppliers. Tools used are market analysis and environmental scanning.
Entrepreneurial readiness: refers to a variety of features of an individual to start a business venture; types of resources, financial, physical and human resources; ability of the individual to take risks and manage uncertainties once the enterprise is operational.
Connections (networks): families and friends as well as business associates can bring about opportunities that an individual can pursue.

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Description

Explore the essential definitions and principles of entrepreneurship and what it means to be an entrepreneur. This quiz covers the necessary traits, management skills, and vision required for business success. Test your knowledge on entrepreneurship concepts and principles.