Entrepreneurship Lessons 2 & 3 PDF

**ENTREPRENEURSHIP** **LESOON 2: RECOGNIZING THE POTENTIAL MARKET** **Recognizing the Potential Market** As the saying goes, the most difficult part of every task is where and how you start. The same is true with entrepreneurship. **The Entrepreneurial Process** - The entrepreneurial process...

**ENTREPRENEURSHIP** **LESOON 2: RECOGNIZING THE POTENTIAL MARKET** **Recognizing the Potential Market** As the saying goes, the most difficult part of every task is where and how you start. The same is true with entrepreneurship. **The Entrepreneurial Process** - The entrepreneurial process is a step-by-step procedure in establishing any kind business that an entrepreneur has to undergo. It is composed of four aspects. **1. Opportunity spotting and assessment.** - This is the beginning of the process and is considered the most difficult. Entrepreneurs at this point take note of interesting trends their environment. - Consumers are reliable sources of opportunity information because market needs originate from them. **2. Developing a business plan.** - Entrepreneurs should formulate a business plan when they have already spotted and assessed the opportunities for a market. - A business plan is a comprehensive paper that details the marketing, operational, human resource, financial strategic direction, and tactics of the business. **3. Determining the capital needed.** - A big idea can never be translated into reality if the entrepreneur\'s resources are limited. **4. Running the business.** - This is the part where the entrepreneur should use the resource allocated for the new venture. The business plan prepared in step 2 should already have been implemented. **ENTREPRENEURIAL IDEAS** The creation of an entrepreneurial idea leads to the identification of entrepreneurial opportunities, which in turn results in the opening of an entrepreneurial venture. Essentials in Entrepreneur's Opportunity -- Seeking **These are the basic foundation that the entrepreneur must have in seeking opportunities**: **Entrepreneurial mind frame.** This allows the entrepreneur to see things in a very positive and optimistic way in the midst of difficult situation. Being a risk - taker, an entrepreneur can find solutions when problems arise. **Entrepreneurial heart flame.** Entrepreneurs are driven by passion; they are attracted to discover satisfaction in the act and process of discovery. Passion is the great desire of an entrepreneur to achieve his/her goals. **Entrepreneurial gut game.** This refers to the ability of the entrepreneur of being intuitive. This also known as intuition. The gut game also means confidence in one's self and the firm belief that everything you aspire can be reached. **Sources of Opportunities** There are many ways to discover opportunities. Looking at the big picture, some have noticed the emerging trends and patterns for business opportunities. While others are trying to find out their target market. **The following are some sources of opportunities:** 1. **Changes in the environment** Entrepreneurial ideas arise when changes happen in the external environment. A person with an entrepreneurial drive views these changes positively. External environment refers to the physical environment, societal environment, and industry environment where the business operates. **1.1 The Physical environment includes** a. **Climate** -- the weather conditions. b. **Natural resources** -- such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain. c. **Wildlife** -- includes all mammals, birds, reptiles, fish, etc., that live in the wild. 2. **The Societal environment includes the various forces like** a. **Political forces** -- includes all the laws, rules, and regulations that govern business practices as well as the permits, approvals, and licenses necessary to operate the business. b. **Economic forces** -- such as income level and employment rate. c. **Sociocultural forces** -- customs, lifestyles and values that characterize a society. d. **Technological environment** -- new inventions and technology innovations. **1.3** **The Industry environment of the business includes:** a. Competitors b. Customers c. Creditors d. Employees e. Government f. Suppliers For example, one factor in the physical environment that can easily change is the climate. The temperature is very high during summer but very low during the rainy season. An individual with entrepreneurial drive can be extremely imaginative and inventive in identifying opportunities. He/she can venture on a business that responds to the needs of the people during summer and rainy season. **2. Technological discovery and advancement** A person with entrepreneurial interest sees possibility of business opportunities in any new discovery or because of the use of latest technology. For example, an individual with knowledge in repair and installation of a machine engine discovers additional engine parts that considerably reduce fuel consumption. **3. Government's thrust, programs, and policies** The priorities, projects, programs, and policies of the government are also good sources of ideas. For example, the use of firecrackers to celebrate New Year's Eve is strictly prohibited. People without entrepreneurial interest will view the ordinance as a plain restriction. However, for an entrepreneur, it is a business opportunity to come up with a new product that will serve as a substitute for firecrackers. **4. People's interest** The interest, hobbies, and preferences of people are rich sources of entrepreneurial ideas, like the increasing number of Internet Cafés at present could lead to the strong attachment of young people to computers. **5. Past experiences** The expertise and skills developed by a person who has worked in a particular field may lead to the opening of a related business enterprise. For example, an accountant who has learned the appropriate accounting and management skills and techniques in a prominent accounting firm can start his/her business venture by opening his/her own accounting firm. **Forces of Competition Model** It is also known as the "five forces of competition". An industry environment is a competitive environment. Regardless of what product or services you have, competition is always present. **Competition** -- it is the act or process of trying to get or win something. For example, the prices are lower when there is a competition among the stores. These are the five forces competing within the industry: - Buyers - Potential new entrants - Rivalry among existing firms - Substitute products - Supplier **1. Buyers** The buyers are the ones that pay cash in exchange for your goods and services. One example is the influence of the price or in the bargaining strategy. The buyer has a strong and magnified bargaining power. The threat of its bargaining power will be less if the following factors are noticed: **2. Potential New Entrants** A new entrant is defined as companies or businesses that have the ability to penetrate or enter into a particular industry. For example, in the level of capital requirements, if the business requires huge capital, new entrants should decline to join the business. This gives a threat to the business. **3. Rivalry among Existing Firms** Rivalry is a state or situation wherein business organizations are competing with each other in a particular market. For example, it depends on the marketing strategy of your competitor, like giving freebies and special offers. **4. Substitute Products** Substitute is one that serves the same purpose as another product in the market. For example, the consumers decide to use margarine as a substitute for butter. In case the price of butter increases, preferably the consumer will gradually switch to margarine. **5. Suppliers** The Suppliers are the one that provide something that is needed in business operations such as office supplies and equipment. In an example where supplies and services being offered is unstable the intensity of the threat is strong in this kind of the competitive force in the industry. **ENTREPRENEURSHIP** **LESOON 2: RECOGNIZE AND UNDERSTAND** **THE MARKET** **VALUE PROPOSITION AND UNIQUE SELLING PROPOSITION** Before focusing on the topics of value proposition and unique selling proposition, you must first know the marketing process. In a nutshell, marketing is all about knowing the customers. A value proposition (VP) simply states why a customer should buy a certain product service. The value proposition is the major driver in customer purchase or service availlment. 1. The following are some tips for the entrepreneur on how to create an effective value proposition to the target customers:\ Prepare a situation analysis that details the problem(s) of the customers, 2. Make your value proposition straight to the point, simple, and specific; in short there should be no complications. Your value proposition has to target your major objective. 3. Highlight the value of your product or service so that customers will easily get what benefits you can provide. 4. Adapt to the language of your market. Ensure that your target market understand clearly what you are trying to say and avoid putting unnecessary and inexplicable phrases. 5. Add credibility-enhancing elements such as actual testimonials from customers. Several quality management certifications, such as the ISO seal, add more credibility to the product or service that you\'re trying to sell. 6. Differentiate your value proposition with your competitors. Examples of value proposition differentiators are the originality of the product or service, its functionalities, or if the product or service can be tailor-fitted to the customer\'s preference, among others. To illustrate, here is a sample potential value proposition from the most common small businesses in the Philippines. Aling Tere\'s Sari-Sari Store Situation analysis: Prior to the establishment of a sari-sari store, Aling Tere notices that there is a convenience store in her vicinity, where many call center agents, nurses, and construction workers buy food, beverages, and other products during odd hours (from 10 PM to 6 AM). Proposed value proposition: \"Tindahang maaasahan, bukas kahit anong oras! **Unique selling proposition (USP)** refers to how you will sell the product or service to your customers. It addresses the customers\' wants and desires. After you create your value proposition, you have to figure out how to advertise or promote certain unique features of the product or service that you\'re trying to sell. - The following are some tips for the entrepreneur on selling proposition to the target customers: - Identify and rank the uniqueness of the product or service attribute. - Be very specific. - KISS (Keep it short and simple) **Proposed unique selling proposition**: \"Tindahang maaasahan, bukas kahit anong oras" You will notice that the proposed value proposition and unique selling proposition are the same. Why? Because the most compelling differentiating factor is positioning the value proposition is also the perfect unique selling proposition, considering all the factors enumerated were all met (defined unique attribute, specific, and short/simple). **A. Target Market** Market Targeting is a sage in market identification process that aims to determine the buyers with common needs and characteristics. Prospect customers are a market segment that an entrepreneurial venture intends to serve. In targeting a specific market, it will exclude people if it will not fit your criteria. Rather, target marketing allows you to focus your marketing money and brand message on a specific market that is more likely to buy from you than other markets. Choose a product that is more affordable, efficient, and effective to reach potential clients and generate business. **Commonly used methods for segmenting the markets are follows.:** 1\. **Geographic segmentation** -- the total market is divided according to geographical location. **Variables to consider** a. Climate b. Dominant ethnic group c. Culture d. Density (either rural or urban) 2\. **Demographic Segmentation** -- divided based on consumers **Variables to consider** a. Gender b. Age c. Income d. Occupation e. Education f. Religion g. Ethnic group h. Family size 3\. **Psychological Segmentation** -- divided in terms of how customers think and believe **Variables to consider** a. Needs and wants b. Attitudes c. Social class d. Personality traits e. Knowledge and awareness f. Brand concept g. Lifestyle 4\. **Behavioral Segmentation** -- divided according to customers' behavior pattern as they interact with a company. **Variables to consider** a. Perceptions b. Knowledge c. Reaction d. Benefits e. Loyalty f. Responses **B. Customer Requirements** Customer requirements are the specific characteristics that the customers need from a product or a service. There can be two types of customer requirements: 1. Service Requirement 2. Output Requirement **Service Requirement:** An intangible thing or product that cannot be touched but the customer can feel the fulfillment. There are elements in service requirement like on-time delivery, service with a smile, easy-payment etc. It includes all aspects of how a customer expects to be treated while purchasing a product and how easy the buying process goes. **Output Requirements:** Tangible thing or things that can be seen. Characteristic specifications that a consumer expects to be fulfilled in the product. Costumers will avail services as a product, then various service requirements can take the form of output requirements. For example, if the consumer hires a multi cab, then on-time arrival becomes an output requirement. Customer buys gadgets (phone speaker) the specification like the loudness and clarity are the output requirements. **C. Market Size** The entrepreneur's most critical task is to calculate the market size, and the potential value that market has for their start-up business. Market research will determine the entrepreneurs' possible customers in one locality. **What is Market Size?** Market size is like a size of the arena where the entrepreneurs will play their business. It is the approximate number of sellers and buyers in a particular market. In determining the market size, the entrepreneur will conduct a strategic marketing research from reliable sources using the following method. The first step is to estimate the potential market -- approximate number of customers that will buy the product or avail your services. The second step is to estimate the customers who probably dislike to buy your product or avail the services. The third step is for the entrepreneur to estimate the market share, that means plotting and calculating of the competitor's market share to determine the portion of the new venture. **Market Research** Market Research or Marketing Research Process can be defined as the process of gathering, analyzing and interpreting the information about the products or the services to be offered for sale to the potential consumers in the market (De Guzman, 2018, p. 25) **DATA COLLECTION** is the most valuable tool in any type of research study. Inaccurate data collection may cause mistakes and ultimately lead to invalid results. (Edralin, 2016, p. 80) **TIPS in COLLECTING DATA** - Organize collected data as soon as it is available - Know what message you want to get across and then collect data that is relevant to the message - Collect more data - Create more data - Take note of interesting or significant data Three different data collection techniques -- **SURVEY (Questionnaire), INTERVIEW and FOCUS GROUP DISCUSSION --** and evaluate their suitability under different circumstances **SURVEYS** are the most common way to gather primary research with the use of questionnaires or interview schedule. These can be done via direct mail, over the phone, internet (e.g. Google) or email, face-to-face or on the Web (e.g. Skype or Viber). When designing or constructing your own research questionnaire, remember the following guidelines. (Edralin, 2016) - Keep it as simple as possible - Make sure it is clearly appealing and easy to read - Cluster or block related questions - Move from complex questions to more specific questions - Make sure questions are concise and easily understood - Avoid questions that are difficult to answer - Make sure response scales used are consistent with categories that are mutually exclusive **INTERVIEW** is one of the most reliable and credible ways of getting relevant information from target customers. It is typically done in person between the researcher/entrepreneur and a respondent where the researcher asks pertinent questions that will give significant pieces of information about the problem that he will solve. Personal interviews are the traditional method of conducting an interview. It allows the researcher to establish relationship with potential participants and therefore gain their cooperation. It generates highest response rates in survey research. **FOCUS GROUP DISCUSSION (FGD)** - is an excellent method for generating and screening ideas and concepts. It can be moderated group interviews and brainstorming sessions that provide information on user's needs and behaviors. **The following are considerations in the use of focus group discussions in market research:** - The length of the session is between 90 and 120 minutes. - Conduct focus groups discussion with 8 to 10 participants per group. - Assign an expert moderator / facilitator who can manage group dynamics. - Use a semi-structured or open-format discussion - Strive for consistency in the group's composition (for example, it may not be advisable to have business customers and retail customers in the same focus group, their needs are very different) (Leedy & Ormrod, 2001, pp.40-41)