Entrepreneurial Behavior PDF

ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR Everyone can tell you the risk. An entrepreneur can see b. ability to influence others the reward. - Robert Kiyosaki c. tendency to take risks...

ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR Everyone can tell you the risk. An entrepreneur can see b. ability to influence others the reward. - Robert Kiyosaki c. tendency to take risks d. a tolerance for uncertainty PREPARING YOURSELF TOWARDS ENTREPRENEURSHIP → Theory of Effectuation (Saras Sarasvathy) pattern of thinking ENTREPRENEUR idea that the future is unpredictable but controllable "Therefore, it is the actions that unlock our true → came from the French word “entreprendre” which greatness, and our mindset is the precursor for the means to undertake or to take on actions we take” → a person who undertakes risk 3. Entrepreneurship can be taught According to Investopedia → it is a method that requires practices → entrepreneur is an individual who creates a new → we are not born with an entrepreneurial mindset, but business, bearing the risks and enjoying the rewards. you must work to develop it → entrepreneurs play a key role in any economy, using the skills and initiative necessary to anticipate needs 4. Entrepreneurs are not extreme risk-takers and bring new ideas to market → entrepreneurs should be calculated risk-takers → entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business or 5. Entrepreneurs collaborate more that they compete procedures 6. Entrepreneurs act more than they plan Pandemic – adapt and improvise 7. Entrepreneurship is a life skill Why aspire to be an entrepreneur? → freedom to decide Our economics future depends on our entrepreneurs → unfixed income and lifestyle WHAT'S STOPPING YOU? YOU ASPIRE TO BE AN ENTREPRENEUR Lack of education Necessity – to provide Lack of support Opportunity – exploring other revenue ventures Lack of money No idea BUSINESSMAN VS ENTREPRENEUR No guidance No time Businessman Fear → goal is to earn profit (money) TIPS FOR WANNA BE ENTREPRENEURS Entrepreneur → innovate and create new ideas Theory → goal is to provide value (innovate) Inspiration Practical FAMOUS ENTREPRENEURS Seek various sources (shark tank, various final pitch, Elon Musk – Tesla and X etc.) Travis Kalanick – Uber (laging failure) Mark Zuckerberg – Facebook / Meta DIFFERENT KINDS OF ENTREPRENEURS Steve Jobs – Apple Bill Gates – Microsoft (went through 10,000 hours) 1. Born entrepreneur → no convincing needed ENTREPRENEURSHIP → trained by parents or developed his own skills to spot opportunities Entrepreneurship may be different from what you think → these people are visionaries Entrepreneurship 2. Children of successful entrepreneur → a discipline that seeks to understand how → children that inherited or took over complete opportunities are discovered, created, and exploited, management from parents by whom, and with what consequences → they became CEO and must bear the pressure of doing good or better than the parents DEBUNKING THE MYTHS OF ENTREPRENEURSHIP 3. Children of Wealthy Parents 7 TRUTHS → parents that own considerable financial or property assets 1. Entrepreneurship is not reserved for startups → success of these individuals are greatly influenced by → start-up – a temporary organization in search of a work experience or values from parents scalable business model (Steve Blank) → "Spoiled Child" syndrome 2. Entrepreneur do not have a special set of ex. Mr. Lance Gokongwei took over the executive role of Mr. personality traits John when he passed away. → iba-iba personality traits but should have something in common a. a desire for achievements  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR 4. Experienced individuals with investible funds 2. Adult Population Survey (APS) → individuals that have funds and they feel they have the → APS is participated in by a minimum of 2,000 adults innate or acquired new skills to start a business and asks about activity, phases of entrepreneurship, profitably and perception and intentions of the population → fashion designer, culinary skills, artistic talents, etc. regarding entrepreneurship. → in GEM Surveys, this is the data on individual 5. Retired career professional entrepreneurial attitudes, activity, and aspirations. → Retired professionals with substantial savings and retirement benefits ENTREPRENEURIAL ACTIVITY → Mental smartness to invest in real estate/stocks when → country's societal values towards entrepreneurship values are low → individual's psychology, demographic characteristics, → before, the employer bares the risk. now, they are and motivations personally exposed to the risk → tends to be more conservative PHILIPPINES ENTREPRENEURSHIP REPORT → example of established by a retired career (2015 GEM Global Data) professional: KFC 6.Franchise specialists → can be a franchisor → local or foreign brands → foreign brands sometimes fail because they overlook the "Filipino Taste" in food → franchisor provides technical support → franchisor must be hands on ENTREPRENEURIAL PRINCIPLES Risk and reward equation Experience and industry familiarity Scale of business Projected sales Capital needed Start-up challenges Entrepreneurial commitment and mindset "Act Local. Market Global." – Norm Bond THE GLOBAL ENTREPRENEURSHIP MONITOR (GEM) → GEM carries our survey-based research on entrepreneurship and entrepreneurship ecosystems around the world → only global research DIFFERENCES ENTREPRENEURIAL PHASES → began in 1999 (schools) AND GEM INDICATORS → today the study measures entrepreneurial activity across 115 countries 1. Potential entrepreneurs → measures individual entrepreneurship attitudes → pre-stage → raise awareness of the importance of entrepreneurship → individuals plan a business in the next 12 months impact: largest cross-national 2. Nascent entrepreneurs goal: to provide high-quality research business has been established and operating for less than 12 months – less than/year Entrepreneurship (GEM Definition) → any attempt at new business or venture creation, such 3. New business owner as self-employment, a new business organization, or → more than 1 year (12 months) but less than 3.5 years the expansion of an existing business by an individual, a team of individuals, or an established business” 4. Established business owners – Kelly, Singer, and Herrington, 2016 → more than 3.5 years GEM Surveys 1. National Experts Survey (NES) → NES inquires about the opinions of experts (minimum of 36 experts) on the entrepreneurial environment in their respective countries that support or constrain entrepreneurial activities and growth. → various industry experts  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR Potential Entrepreneurs - will plan and seek TOP 5 CONSTRAINTS OF ENTREPRENEURSHIP opportunities in the next 12 months IN THE PHILIPPINES Nascent Entrepreneurs and Owner-Manager of a New Business - part of the Total Entrepreneurial Activity government policies 77.8% (TEA) finance 38.9% Owner-Manager of an Established Business (more cultural and social norms 30.6% than 3.5 years) – will seek new business operations corruption 22.2% after 3.5 years physical infrastructure 22.2% MOTIVATION FOR EARLY-STAGE INDUSTRIES AND VARIETIES OF ENTREPRENEURSHIP ENTREPRENEURIAL ACTIVITY VARIETIES OF ENTREPRENEURSHIP Necessity-based Entrepreneurs → no choice / out of free will 1. Corporate Entrepreneurship (Intrapreneurship) → people who have the inability to find a job → a process of creating new products, ventures, → out of necessity, to earn income processes, or renewal within large organizations → it is typically carried out by employees working in units Opportunity-based Entrepreneurs separate from the organization who creates and test → to increase their income innovations that are then assimilated back inside the → to create / exploit an opportunity broader organization THREE ECONOMICS DEVELOPMENT STAGES ex. Roger Enrico – Richard Montañez (janitor – founded Cheetos) 1. Factor Driven Economics → countries that depend on agriculture and extraction 2. Social Entrepreneurship businesses using more labor factors and natural → this type of entrepreneurship that the primary purpose resources. is to source innovative solutions to address social or → ex. Philippines environmental problems rather than simply to achieve commercial goals → ex. A country that heavily exports sugar ex. Blake Mycoskie – founder of Toms (Shoes), Toms 2. Efficiency Driven Economics Roasting Company (coffee beans), and Toms eyewear → countries that have become more competitive with program (eyewear) economic development supported by industrialization and economics of scale where capital intensive 3. Family Enterprise businesses dominate the economy → a business that is owned and managed by multiple → have big manufacturing businesses (car & oil) family members, typically for more than one → ex. China generation → what makes family enterprising part of the portfolio of 3. Innovation Driven Economics entrepreneurship types are that each generation has → countries that rely more on new knowledge and an opportunity to bring the organization forward in expanding into the service sector new, innovative ways → ex. Japan, Korea, and Taiwan ex. George Ty of Metrobank What makes country entrepreneurial? 4. Serial Entrepreneur (Habitual entrepreneur) → the type of entrepreneurs who start several → may maayos na economy businesses, whether simultaneously or one after the other. THE ENTREPRENEURSHIP ECOSYSTEMS → not satisfied with just focusing on one business, serial entrepreneur are constantly looking out for the next big Certain conditions for small to medium businesses to thing or exploring ways to implement their diverse flourish: range of ideas a. Financial Resources → he is also someone who sets up a different venture b. Support from Government (incentives from the over a period of time, often reinvesting profits from the government + exempt for tax) sales of an existing business to finance a new one c. Entrepreneurship Education (lessen business failure sometimes in an entirely different field of activity + business opportunities and network) → this pattern may reflect the entrepreneur’s preference d. Research and Development (R&B) Transfer for creating new ventures rather than managing larger e. Commercial and Legal Infrastructure (property and established businesses legal rights) f. Entry Regulation (meet regulatory costs of starting a ex. Gokongwei – URC, Robinson’s Mall, Sun cellular, business – incentives) Cebu Pacific, Southstar Drug, Generics, TJP, Ministop → 2 factors of Entry Regulation (Uncle John), True Value, Abenson’s o Market Dynamics – annual rate of change in markets o Market Openness – degree of new businesses to have a freedom to enter g. Physical Infrastructure h. Cultural and Social Norms → entrepreneurs tend to thrive more in an environment where they feel encouraged enough to start a business.  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR 5. Technology Entrepreneur (Technopreneur) → you register your → person who has founded a new venture to develop business with this office some form of advanced technology, most commonly and apply for your in industry sectors such as information and Bureau of Internal business's taxpayer communications technology (ICT), biotechnology, Revenue (BIR) identification number nanotechnology, and other applied sciences (TIN), registration of → this kind of entrepreneurial activity is often very fast- books of accounts, and moving, because of new scientific discoveries and authority to print often intensive international competition and is also associated with technological innovation 2. Partnership → an association of two or more person who act as co- 6. Lifestyle Entrepreneur owner of a business → person who has set up a small business to pursue a → each partner contributes money, property or service & personal interest such as craft or a sporting activity profession to their organization → this type of entrepreneur prioritizes quality of life over other common motivations for running a business TWO TYPES OF PARTNERS → the liability of a general 7. E-preneur / Cyberpreneur partner extends up to → refer to the growing number of people who run his personal properties businesses that depend entirely on the internet → even the personal property of a general ex. Shopee (C-group Singapore) general partner partner can be taken to pay creditors. FORMS OF BUSINESS OWNERSHIP AND → personally responsible REGISTRATIONS IN THE PHILIPPINES for all the debts of the business. 1. Sole or Single Proprietorship → only liable to the extent → form of business organization that is owned and limited partner of his contribution to usually managed by one person business. → oldest and the simplest form of business ownership → easiest to start and manage. → capitalist partner - contributes money, property and → the owner is also the general manager of the company belongings. → Independence and Flexibility → industrial partner - provides service, management or Advantages: even his profession. – low cost of formation and dissolution – independence and flexibility Advantages: – tax advantage and less government regulation – easy to organize (two or more) – availability of more capital and credit partners Disadvantages: – retention of profits – unlimited liability (loans are all yours and pwede kunin – better business skills and knowledge lahat) – limited financial resources Disadvantages: – limited business skill and knowledge – limited liability – if in case the business fails, the owner will be liable – lack of stability to all financial obligations – lack of management of disagreement MANDATORY GOVERNMENT AGENCIES THAT A 3. Corporation START-UP BUSINESS NEEDS TO REGISTER WITH: → an artificial being created by operation of law, having the right of succession, and the powers, attributes and AGENCY WHAT properties expressed authorized by law or incident to → this is where you its existence register if your → United States Chief Justice John Marshall defined Department of Trade enterprise is a single corporation in his famous 1819 decision as "an and Industry (DTI) proprietorship artificial being invisible, tangible, and existing only in → the agency will issue a contemplation of the law." certificate of registration certificate of registration of business ex. Richard Montañez of Cheetos name → you register with the Stocks are the shares or certificate of ownership of a specific Barangay in the corporation. The owners of stocks are so called Barangay Hall municipality or city stockholders or shareholders where you will operate barangay clearance your business → this office will issue the Barangay Clearance → you register with the Local Government Unit municipality or city (LGU) where you will set up your business. business permit → this office will issue the business permit  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR TWO TYPES OF CORPORATIONS Other critical aspect to really be legal is your: → it is owned by a few BUSINESS PERMIT individuals, usually relatives and friends the table below is basically the same for both sole → they limit ownership to proprietor and partnership/corporation. private or close the public and corporation maintained common PARTNERSHIP AND SINGLE PROPIETOR interest to the CORPORATION corporation to avoid DTI registration certificate SEC/Articles of Inc. outside opinions and location map of business location map of business suggestions barangay clearance barangay clearance → it is owned by any community tax (cedula) community tax (class C individual who buys certificate) the open corporation shares of stocks which building occupancy permit building occupancy permit are openly environmental, sanitary environmental, sanitary permit permit Advantages: fire/police clearance fire/police clearance – limited liability building, mechanical, building, mechanical, – ease in raising capital electrical, plumbing electrical, plumbing – stability of existence (good for 50 years) – specialized management 2022 MSME STATISTICS Disadvantages: – difficult to organize – strictly regulated and supervised by the government ADVANTAGES AND PECULIARITIESOF BUSINESS OWNERSHIP FORMS Sole Partnership Corporation Proprietor two or ownership individual five or more more unlimited up to unlimited liability personal subscribed partners liability capital only fees for fees for cost of fees for name, name, starting the trade articles, articles, PHILIPPINES STANDARD INDUSTRIAL business name taxes, taxes, CLASSICIFICATION etc. etc. has a BOARD STRUCTURE OF THE 2009 STANDARD death partner INDUSTRIAL CLASSIFICATION: continuity of corporate dissolves death or business veil or business withdrawal SECTION DIVISION DESCRIPTION existence anytime can agriculture, transferability upon A 01-03 forestry, and upon sell/buy of business partner’s fishing owner’s within SEC or shares consent mining and decision rule B 05-09 loan or loans or loan, stock, quarrying capital C 10-33 manufacturing owner’s partner’s call, public requirement electricity, gas, money money offering majority steam and air management equal D 35 full control wins, day- conditioning control control supply to-day mgt depends water supply; dividends sewerage, profits and on all his own and no. of waste lessens partner’s E 36-39 shares management sharing and remediation activities F 41-43 construction wholesale and retail trade; G 45-47 repair of motor vehicles and motorcycles transportation H 49-53 and storage accommodation I 55-56 and food service activities  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR information and → Substantial alteration, renovation or reconstruction of J 58-63 communication goods are generally considered as manufacturing. financial and K 64-66 insurance Section D – Electricity, Gas, Steam and Air-conditioning activities Supply real estate → This section includes the activity of providing electric L 68 activities power, natural gas, steam, hot water, and the like professional, through a permanent infrastructure (network) of lines, scientific, and mains, and pipes. M 69-75 technical → The dimension of the network is not decisive. activities → Also included are the distribution of electricity, gas, administrative steam, hot water and the like in industrial park or N 77-82 and support residential buildings. service activities public Section E – Water supply, Sewerage, Waste administration Management, and Remediation Activities O 84 and defense; → This section includes activities related to the compulsory management of various forms of waste, such as solid social security or non-solid industrial or household waste, as well as P 85 education contaminated sites. human health → The output of the waste or sewage treatment process Q 86-88 and social can either be disposed of or become an input into work activities other production processes. arts, → Activities of water supply are also grouped in this R 90-93 entertainment section, since they are often carried out in connection and recreation with, or by units also engaged in, the treatment of other service sewage. S 94-96 activities activities of Section F – Construction households as → This section includes general construction and employers; specialized construction activities for buildings and undifferentiated civil engineering works. goods and → It includes new work, repair, additions and alterations, T 97-98 services- the erection of prefabricated buildings or structures on producing the site and also construction of a temporary nature. activities of households for own use Section G – Wholesale and Retail Trade: Repair of activities of motor vehicles and motorcycles extraterritorial → → This section includes wholesale and retail sale (i.e. U 99 organization and sale without transformation) of any type of goods and bodies rendering services incidental to the sale of these goods. Section A – Agriculture, Forestry and Fishing → Wholesaling and retailing are the final steps in the → This section includes the exploitation of vegetal and distribution of merchandise. Goods bought and sold animal natural resources, comprising the activities of are also referred to as merchandise. growing crops, raising and breeding animals, → Also included in this section are the repair of motor harvesting of timber and other plants, animals or vehicles and motorcycles. animal products from a farm or their natural habitats. → Sale without transformation is considered to include the usual operations (or manipulations) associated Section B – Mining and Quarrying with trade, for example sorting, grading and → This section includes the extraction of minerals assembling of goods, mixing (blending) of goods (for occurring naturally as solids (coal and ores), liquids example sand), bottling (with or without preceding (petroleum) or gasses (natural gas). bottle cleaning), packing, breaking bulk and repacking → Extraction can be achieved by different methods such for distribution in smaller lots, storage (whether or not as underground or surface mining, well operation, frozen or chilled), cleaning and drying of agricultural seabed mining, etc. products, cutting out of wood fiberboards or metal → This section also includes supplementary activities sheets as secondary activities. aimed at preparing the crude materials for marketing, for example, crushing, grinding, cleaning, drying, Section H – Transportation and Storage sorting, concentrating ores, liquefaction of natural gas → This section includes the provision of passenger or and agglomeration of solid fuels. freight transport, whether scheduled or not, by rail, pipeline, road, water or air and associated activities Section C – Manufacturing such as terminal and parking facilities, cargo handling, → Manufacturing includes the physical or chemical storage etc. transformation of materials, substances, or → Also included in this section are the renting of components into new products. transport equipment with driver or operator, and the → The raw materials are products of agriculture, forestry, postal and courier activities. fishing, mining, or quarrying as well as products of other manufacturing activities.  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR Section I – Accommodation and Food Service Section P – Education Activities → This section includes education at any level or for any → This section includes the provision of short stay profession, oral or written as well as by radio and accommodation for visitors and other travelers and the television or other means of communication. provision of complete meals and drinks fit for → It includes education by the different institutions in the immediate consumption. regular school system at its different levels as well as → The amount and type of supplementary services adult education, literacy programs etc. provided within this section can vary widely. → Also included are military schools and academies, prison schools etc. at their respective levels. Section J – Information and Communication → This section includes public as well as private → This section includes the production and distribution education. Also includes instruction primarily of information and cultural products, the provision of concerned with sport and recreational activities and the means to transmit or distribute these products, as education support activities. well as data or communications, information → Education can be provided in rooms, radio, television technology activities and the processing of data and broadcast, Internet, correspondence or at home. other information service activities. → For each level of initial education, the classes include special education for physically or mentally Section K – Financial and Insurance Activities handicapped pupils. → This section includes financial service activities, including insurance, reinsurance and pension funding Section Q – Human Health and Social Work Activities activities and activities to support financial services. → → This section includes the provision of health and → This section also includes the activities of holding social work activities, involving a wide range of assets, such as activities of holding companies and activities, starting from health care provided by trained the activities of trusts, funds, and similar financial medical professionals in hospitals and other facilities, entities. over residential care activities that still involve a degree of health care activities to social work activities Section L – Real Estate Activities without any involvement of health care professionals. → This section includes acting as lessors, agents and/or brokers in one or more of the following: selling or Section R – Arts, Entertainment and Recreation buying real estate, renting real estate, providing other → This section includes a wide range of activities to meet real estate services such as appraising real estate or varied cultural, entertainment and recreational acting as real estate escrow agents. interests of the general public, including live → Activities in this section may be carried out on own or performances, operation of museum sites, gambling, leased property and may be done on a fee or contract sports and recreation activities. basis. → Also included is the building of structures, combined Section S – Other Service Activities with maintaining ownership or leasing of such → This section (as a residual category) includes the structures. activities of membership organizations, the repair of computers and personal and household goods and a variety of personal service activities not covered Section M – Professional Scientific and Technical elsewhere in the classification. Services → This section includes specialized professional, Section T – Activities of private households as employers scientific and technical activities. These activities and undifferentiated goods and services and producing require a high degree of training and make specialized activities of households for own use. knowledge and skills available to users. Section V - Activities of extraterritorial organizations and Section N – Administrative and Support Services bodies Activities → This section includes a variety of activities that support PRODUCT OR SERVICE: general business operations. These activities differ COMPETITION, BRANDS, AND SLOGANS from those in section M since their primary purpose is not the transfer of specialized knowledge. CONSUMER NEEDS AND WANTS Section O – Public Administration and Defense; Needs and Wants Compulsory Social Security → your target customers must either need or want your → This section includes activities of a governmental product or service nature, normally carried out by the public → important to distinguish between needing your product administration. and wanting it. → This includes the enactment and judicial interpretation ex: Clothing, Food, Desserts, Gaming of laws and their pursuant regulation, as well as the → customer Perception on your product/service administration of programs based on them, legislative → product differentiation or USP activities, taxation, national defense, public order and safety, immigration services, foreign affairs and the Brands administration of government programs. → name by which a particular product is called → This section also includes compulsory social security → a sign or set of signs certifying the origin of a product or activities. service and differentiating it from the competition → name that influences buyers as it serves as the purchase criterion. ex. Coca-Cola, Evian, Selecta, Magnolia, Arcee Dairy  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR Dealer Brands → these segments often lack adequate attention from → retailers like to leverage on the brand recognition and larger businesses, creating a gap in the market. favorable reputation of their retail establishments → despite their smaller size, niches can be highly → for customers, it makes no difference to them who profitable due to their concentrated customer base manufactures these products PRODUCTION, SERVICE DELIVERY, AND LOGISTICS ex. SM Bonus SALES MANAGER VS PRODUCTION HEAD Logos → if a product does not have a brand, it is a commodity SEVEN GUIDELINES IN CHOOSING PLANT LOCATION (interchangeable with another good or service) → brand needs assistance in enhancing its differentiation 1. Proximity to your Target Market → it is not verbalized, just by seeing it the brand comes to 2. Cost and Reliability of Power Supply mind 3. Quality of Water Supply 4. National and Local Government Laws and Regulations 5. Proximity to Raw Materials Source 6. Availability of Skilled and Semi-Skilled Workers 7. Accessibility to Logistics Suppliers OUTSOURCING/TOLL PACKING 3 STAGES OF INVENTORY → Raw Materials → Goods in Process → Finished Goods Outsourcing → Arranging with a third-party the supply of some of the Slogans and Taglines company’s products (parts) or processes is sometimes → are written and can be seen, read, and spoken practical and cost effective. → interchangeable but with few differences → if there is a product that the company is unable to manufacture (no equipment or very high demand) and SLOGANS its own plant does not have excess capacity, they can → typically, a few words or a short sentence sign an agreement with another company to produce → most often used to represent a specific product line or it. individual marketing campaign → are designed to be less long-lasting than a brand’s tag Toll Packing line → the company wants / needs the product, but it has no ex. UBER: "Move The Way You Want". intention of making it themselves as it would require major investment. TAGLINE → AKA Toll Manufacturing is an outsourcing of production → memorable motto of phrase designed to serve as in which a company provides raw materials to a third- permanent expression of company’s purpose and party servicing company who will then provide the rest mission of services (manufacturing) needed. → are long-lasting, instantly recognizable with your brand → goal is to attach customers and remain as top of mind Toll Manufacturing → an outsourcing of production in which a company ex. Disneyland: "The Happiest Place on Earth" provides raw materials to a third-party servicing Market Segmentation company who will then provide the rest of services → economic / Financial Cluster (Class AB, C, D, and E.) (manufacturing) needed. → identify which cluster you want to position your product or service RISKS OF OUTSOURCING/TOLL PACKING → once the cluster is identified, marketing strategy → Quality Control should follow → Disclosure of Confidential Product Information Good Inventory Management needs ex. Apple, Uniqlo, SM Bonus, Potato Corner managerial teamwork and coordination WHAT'S YOUR GENERATION? USE OF OVERTIME Generation Z 5-25 Millennials 26-40 Overtime Generation X 41-55 → higher pay on Sundays and official holidays Baby Boomers 56-75 → major advantage of overtime is the FLEXIBILITY of The Silent Generation 76+ employees to work a little longer to do the job → management must make sure the attitude of Location: Luzon, Visayas, and Mindanao employees is not to slow down work within the original work schedule because there is an option to overtime. Market Niche → second shift may be difficult if the reason in increase → specific segment of the market that has unique needs in sales volume because sales volume can drop to or preferences former level. → niches are highly specific, targeting a particular group of consumers with distinct characteristics  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR USE OF OVERTIME 4. Penetration Pricing → you are setting a low price early on to quickly build a What is Logistics? large customer base → refers to the purchase and delivery of raw materials, → in a market of similar products with price-sensitive packaging, shipment and transportation of goods to customers, significantly lowering your price can make distributors your product stand out → firms with extensive logistics requirement, they need → lower price can motivate customers to switch brands good amount of trucking services and warehouse / and build demand to your product storage facilities. → increase in sales volume may bring economies of → end objective is to receive what is needed in scale and reduce your unit costs production, storage, and delivery and "JUST IN TIME" RISKS OF PENETRATION PRICING Logistics Management → your customers may expect constant lower prices → involves identifying prospective distributors and → price sensitive customers may be disloyal suppliers and determining their effectiveness and → a price war with your competitors may ensue accessibility 5. Values-Based Pricing PRICING STARTEGIES: COSTS, COMPETITION, → the perceived value to the customer is primarily based DEMAND ELASTICITY on how well it is suited to the needs and wants of each customer. 5 PRICING STRATEGIES → when price doesn’t work, instead of lowering it they alter the product to better suit the market 1. Cost-plus Pricing → Brings together all contributing costs for the unit to be ADVANTAGES OVER COMPETITORS: sold, with a fixed % added onto the subtotal → the price is a better fit with the customer’s perspective → Should always be considered in the entrepreneur’s → the pricing brings more profit, allowing you to acquire pricing decisions, but should not be the only more resources to grow your business consideration → Important terms: Net Sales (sales minus sales discounts, product returns, etc. from gross sales) Cost of Goods Sold or CGS (cost of raw materials, direct & indirect labor cost, and overhead in production) Gross Operating Profit or GOP or Gross Margin (total income) Net sales P 1,000,000 CGS P 750,000 GOP P 250,000 or 25% OTHER PRICING STRATEGIES DISADVANTAGES OF COST-PLUS PRICING →.99% pricing strategy → You do not know the sales volume that would result → nice round number or exacto pricing using the Gross Operating Profit (GOP) rate that you → use of smaller/sachet packaging selected. If your volume is lower than expected, it would not be enough to cover your expenses, interests, PRICE AND DEMAND ELASTICITY and taxes. → Will you generate enough sales volume to recover your Elastics Demand / Products cost of production, operating expenses and still have → price increase = demand decrease income? → You disregard the price levels of your competitors. Inelastic Demand / Products → price decrease = demand retain or demand increase 2. Competitive Pricing → if you’re selling similar products (peanut butter / CHANNELS OF DISTRIBUTION shampoo) it is your job to make sure you know what your competitors are doing pricewise and making Channels of Distribution necessary adjustments. → a distribution channel is a chain of businesses or → three competitive pricing approaches: intermediaries through which a good or service passes Co-operative pricing until it reaches the final buyer or end consumer. Aggressive pricing → a very important element in an entrepreneur’s strategy Dismissive pricing Distribution Channels include the following 3. Price Skimming intermediaries and middlemen: → used when they are introducing innovative new Wholesaler products that have no competition Retailers → they charge a high price at first, then lower it over time Distributors → a high price helps the business recoup some of its Dealers development costs → as market becomes saturated and sales decline, they lower the process to reach more price-sensitive segments  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR 1. Wholesaler → wholesaling is the act of buying goods in bulk from a ENTREPRENEURIAL ETHICS manufacturer at a discounted price and selling to a retailer for a higher price for them (retailer) to → Ethical - doing something good kahit wala nakakakita repackage and in turn resell in smaller quantities at an even higher price to the consumers GOOD BUSINESS ETHICS → buys and sells goods that are generally large in quantity but low in per unit value Ethical standards in dealing with customers → example products: FMCGs (soap, toothpaste, etc.) → the forging of better relationship between the business organization and the customer is the essential 2. Retailer requisite of ethical standards and morality → purchases goods in large quantities from a manufacturer or directly from a wholesaler, and then Community sells in smaller quantities to final consumers → the business enterprise is located in a particular area ex. FMCGs of operation THREE KINDS OF RETAILERS Employees → sari sari stores → the relationship between management and employee → groceries / supermarkets is a personal relationship governed by the golden rule of “do onto others as what you want others to do onto → online retailers you” 3. Distributor Government → large in value and fewer in quantity → profits are subject to taxes in order to support the ex. CATS Motors operational services of the government by providing better roads, health condition of the people, and 4. Dealer education of the community → companies appointed by distributors (AKA authorized dealers) Competitors → fit for durable consumer goods → unfair business competition is always considered a critical point of discussion in the world of business ex: Cars & Appliances You + Idea + Community + Start Some Good = Impact DIFFICULTIES OF FINDING A GOOD DISTRIBUTION CHANNEL SIX DIFFICULTIES OF FINDING A GOOD DISTRIBUTION CHANNEL 1. logistical requirements are hard to acquire (trucking, storage facilities, etc.) 2. small retail stores make it difficult to generate economies of scale 3. few sari sari stores are granted trade terms other than COD 4. profit margins are FMCGs are often slim (rely on large volumes) HOW TO STRENGTHEN YOUR ENTREPRENEURIAL 5. most intermediaries and middlemen are run by family ABILITIES AND SKILLS businesses → learn from people who run their own business, 6. some are undercapitalized especially those in your chosen business field and type YOUR OWN SALES FORCE → attend training courses → find work as an assistant or apprentice in a successful Your Own Sales Force business in the field and type that you are interested in → you can directly sell to your final customers with a → read articles about businesses in your field and type in higher profit margin newspapers and trade journals, either on the internet → sales personnel can explain to prospective buyers the or at libraries to help you think about the problems features of various products / models of each brand these businesses are facing and their proposed → you can set a sales quota solutions → join a small business association in your area and WHAT YOUR SALES FORCE NEEDS participate in forums company vehicle (car / van) → develop the skills and attitudes described on the next compensation slide by applying them in your daily activities: SL and VL benefit increase your motivation and commitment by retirement benefit planning for your future when things go wrong, analyze what happened and RISKS IN HAVING YOUR OWN SALES FORCE improve your ability to learn from mistakes fidelity losses accept the problems, assess the solutions and take damage / loss of company vehicle risks accident involving company vehicle become more open to new ideas and other people’s views ENTREPRENEURSHIP MEETS ETHICS TRUE  ENT5117 – 1st Term Prelims | 1TE2 | njviray ENTREPRENEURIAL BEHAVIOR → E-Commerce platforms usually have a fee of 5% to 7% → asking yourself, what will make my target market want for every purchase of online customers. my product (brand) over the others? → Price skimming was used during the release of the first ever Smart TV. Entrepreneurs need support from government policies → a Thomasian entrepreneur should practice ethical that incentivize entrepreneurship by tax incentives, lower standard among his employees, the customer and the interest rates, and loans. general public that depend on his product or service. → in the 3Ps of a Thomasian Entrepreneur - Profit, Experience and Industry Familiarity People, and Planet are all equally important. → this is principle should be followed for you to be able → in good business ethics, The Competitors - it is to make sure that your workers/employees are immoral to downplay the products of the other performing and charging their services correctly company and spread rumors or gossips with fake validity. → mom and pop stores tend to use exacto pricing. → flash sales are a good example of economies of scale → sari sari stores are small and vary in many ways - space, financial liquidity, business volume, etc. → receiving checks or providing proof of bank transfer is a good solution for Fidelity losses → in dismissive pricing, you price as you wish and do not react to what your competitors are doing → in choosing your plant location, cost and reliability of power supply is when you consider the cost of consumption and type of power generation used. FALSE → during the 1st day of the Entrep Bazaar, the net sales of "Photobooth B" is P40,000.00. net sales are the total amount of money that goes directly to the pocket of the owner. → wholesalers tend to repack products to sell directly to final users. → use of intermediaries / middlemen is always the best option for businesses. → supermarkets are much larger than groceries with 1 or 2 checkout isles → in determining your value-based price, use of ads and promotions is the most important step → bottled water in 711 is an example of an inelastic product → in good business ethics, The Community - the forging of better relationship between the business organization and the customer is the essential requisite of ethical standards and morality → the disadvantage of aggressive pricing is that it leaves you vulnerable to not make optimal decision for yourself because you are too focused on other competitors. → art works of Amorsolo or Manansalaicen example of an elastic product → in choosing your plant location, proximity to your target market is when you consider what kind of workers are needed in the production process. → increase of sales volume during Christmas season is enough reason for you to hire additional permanent employees for production. → Quality and Consistency control is one of the advantages of toll packing → in choosing your plant location, quality of water supply is where you consider your proper waste management and sanitation Unique Selling Proposition and Product Differentiation