Entrepreneurial Management PDF

MODULE 1 PACKET ENTREPRENEURIAL MINDSET MODULE 1 LEARNING OBJECTIVES: By the end of this module, the students will be able to: 1 Explain the concept of entrepreneurship and the process of entrepreneurial action. 2 Describe how structural similarities enable entrepreneurs to make creative mental le...

MODULE 1 PACKET ENTREPRENEURIAL MINDSET MODULE 1 LEARNING OBJECTIVES: By the end of this module, the students will be able to: 1 Explain the concept of entrepreneurship and the process of entrepreneurial action. 2 Describe how structural similarities enable entrepreneurs to make creative mental leaps. 3 Highlight bricolage as a source of entrepreneurs’ resourcefulness. 4 Understand effectuation as a way expert entrepreneurs think. 5 Develop the notion that entrepreneurs cognitively adapt. 6 Discuss the difference between developed (advanced) and developing countries. 7 Explain the meaning of development and its core values. 8 Describe how culture influences entrepreneurship and how entrepreneurship contributes to a country’s development. The Entrepreneurial Mindset I. The Nature of Entrepreneurship Entrepreneurship plays an important role in the creation and growth of businesses, as well as in the growth and prosperity of regions and nations. These large-scale outcomes can have quite humble beginnings; entrepreneurial actions begin at the nexus of a lucrative opportunity and an enterprising individual. Entrepreneurial opportunities are “those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production.” For example, an entrepreneurial opportunity could stem from introducing an existing technological product used in one market to create a new market. Alternatively, an entrepreneurial opportunity could be creating a new technological product for an existing market or creating both a new product/service and a new market. The recurring theme is that an entrepreneurial opportunity represents something new. However, such possibilities require an enterprising individual or a group of enterprising individuals to recognize, evaluate, and exploit these situations as possible opportunities. Therefore, entrepreneurship requires action— entrepreneurial action through the creation of new products/processes and/or the entry into new markets, which may occur through a newly created organization or within an established organization. Entrepreneurs act on what they believe is an opportunity. Because opportunities exist in (or create and/or generate) high uncertainty, entrepreneurs must use their judgment about whether or not to act. However, doubt can undermine entrepreneurial action. Therefore, a key to understanding entrepreneurial action is being able to assess the amount of uncertainty perceived to surround a potential opportunity and the individual’s willingness to bear that uncertainty. The individual’s prior knowledge can decrease the amount of uncertainty, and his or her motivation indicates a willingness to bear uncertainty. As illustrated in Figure 1.1, the McMullen-Shepherd model explains how knowledge and motivation influence two stages of entrepreneurial action. Signals of changes in the environment that represent possible opportunities will be noticed by some individuals but not others. Individuals with knowledge of markets and/or technology are more capable of detecting changes in the external environment, and if they are also motivated, they will allocate further attention to processing this information. Others, however, will remain ignorant of the possibility. The result of Stage 1 is an individual’s realization that an opportunity exists for someone. The individual then needs to determine whether it represents an opportunity for him or her (Stage 2). This involves assessing whether it is feasible to successfully exploit the opportunity given one’s knowledge and whether it is desirable given one’s motivation. In other words, does this opportunity  for someone (third-person opportunity belief) represent an opportunity for me (first-person opportunity belief)? If the individual overcomes enough doubt to form (1) the belief that the situation represents an opportunity for someone in general, and then (2) the belief that the opportunity for someone is an opportunity for himself or herself personally, this individual may act. Therefore, to be an entrepreneur is to act on the possibility that one has identified an opportunity worth pursuing. It involves entrepreneurial thinking—individuals’ mental processes of overcoming ignorance to decide whether a signal represents an opportunity for someone and/or reducing doubt as to whether an opportunity for someone is also an opportunity for them specifically, and/or processing feedback from action steps taken. II. How Entrepreneurs think Entrepreneurs think differently from non-entrepreneurs. Moreover, an entrepreneur in a particular situation may think differently from when faced with some other task or decision environment. Entrepreneurs must often make decisions in highly uncertain environments where the stakes are high, time pressures are immense, and there is considerable emotional investment. We all think differently in these strained environments than we do when the nature of a problem is well understood and we have time and rational procedures at hand to solve it. Given the nature of an entrepreneur’s decision-making environment, he or she must sometimes (1) think structurally, (2) engage in bricolage, (3) effectuate, and (4) cognitively adapt. a. Think Structurally Forming opportunity beliefs often requires creative mental leaps. These creative mental leaps are launched from a source—one’s existing knowledge. In the case of entrepreneurial opportunities, an example of a creative mental leap is from knowledge about existing markets to a new technology that could lead to products/services that satisfy that market. Alternatively, the creative mental leap could be from knowledge about a technology to a new market that could benefit from its introduction. Making these connections between a new product (or new service, new business model, or new technology) and a target market where it can be introduced is aided by the superficial and structural similarities between the source (e.g., the market) and the destination (e.g., technology). Superficial similarities exist when the basic (relatively easy to observe) elements of the technology resemble (match) the basic (relatively easy to observe) elements of the market. In contrast, structural similarities exist when the underlying mechanisms of the technology resemble (or match) the underlying mechanisms of the market. Thus, individuals who can see or create structural matches between a technology and a target market, especially in the presence of superficial mismatches, are more likely to recognize entrepreneurial opportunities. b. Bricolage Entrepreneurs often lack resources. As a result, they either seek resources from others to provide the “slack” necessary to experiment and generate entrepreneurial opportunities or they engage in bricolage. By bricolage we mean that some entrepreneurs make “do by applying combinations of the resources at hand to new problems and opportunities.” This involves taking existing resources (those at hand) and experimenting, tinkering, repackaging, and/or reframing them so they can be used in a way for which they were not originally designed or conceived. From this process of “making do,” entrepreneurs can create opportunities. c. Effectuation As potential business leaders, you are trained to think rationally and perhaps admonished if you do not. This admonishment might be appropriate given the nature of the task, but it appears that there is an alternate way of thinking that entrepreneurs sometimes use, especially when thinking about opportunities. Professor Saras Sarasvathy (from Darden, University of Virginia) has found that entrepreneurs do not always think through a problem in a way that starts with a desired outcome and focuses on the means to generate that outcome. Such a process is referred to as a causal process. But, entrepreneurs sometimes use an effectuation process, which means they take what they have (who they are, what they know, and whom they know) and select among possible outcomes. Imagine a chef assigned the task of cooking dinner. There are two ways the task can be organized. In the first, the host or client picks out a menu in advance. All the chef needs to do is list the ingredients needed, shop for them, and then actually cook the meal. This is a process of causation. It begins with a given menu and focuses on selecting between effective ways to prepare the meal. In the second case, the host asks the chef to look through the cupboards in the kitchen for possible ingredients and utensils and then cook a meal. Here, the chef has to imagine possible menus based on the given ingredients and utensils, select the menu, and then prepare the meal. This is a process of effectuation. It begins with given ingredients and utensils and focuses on preparing one of many possible desirable meals with them. Effectuation helps entrepreneurs think in an environment of high uncertainty. Indeed, organizations today operate in complex and dynamic environments that are increasingly characterized by rapid, substantial, and discontinuous change. Given the nature of this type of environment, most managers of firms need to take on an entrepreneurial mind-set so that their firms can successfully adapt to environmental changes. This entrepreneurial mind-set involves the ability to rapidly sense, act, and mobilize, even under uncertain conditions. In developing an entrepreneurial mind-set, individuals must attempt to make sense of opportunities in the context of changing goals, constantly questioning the “dominant logic” in the context of a changing environment and revisiting “deceptively simple questions” about what is thought to be true about markets and the firm. For example, effective entrepreneurs are thought to continuously “rethink current strategic actions, organization structure, communications systems, corporate culture, asset deployment, investment strategies, in short every aspect of a firm’s operation and long-term health.” d. Cognitive Adaptability Cognitive adaptability describes the extent to which entrepreneurs are dynamic, flexible, self- regulating, and engaged in the process of generating multiple decision frameworks focused on sensing and processing changes in their environments and then acting on them. Decision frameworks are organized on knowledge about people and situations that are used to help someone make sense of what is going on. Cognitive adaptability is reflected in an entrepreneur’s metacognitive awareness, that is, the ability to reflect upon, understand, and control one’s thinking and learning. Specifically, metacognition describes a higher-order cognitive process that serves to organize what individuals know and recognize about themselves, tasks, situations, and their environments to promote effective and adaptable cognitive functioning in the face of feedback from complex and dynamic environments. To be more cognitively adaptable, it requires us to “think about thinking which requires, and helps provide, knowledge and control over our thinking and learning activities—it requires us to be self- aware, think aloud, reflect, be strategic, plan, have a plan in mind, know what to know, and self- monitor.19 We can achieve this by asking ourselves a series of questions that relate to (1) comprehension, (2) connection, (3) strategy, and (4) reflection  1. Comprehension questions are designed to increase entrepreneurs’ understanding of the nature of the environment before they begin to address an entrepreneurial challenge, whether it be a change in the environment or the assessment of a potential opportunity. Understanding arises from recognition that a problem or opportunity exists, the nature of that situation, and its implications. In general, the questions that stimulate individuals to think about comprehension include: What is the problem all about? What is the question? What are the meanings of the key concepts? Specific to entrepreneurs, the questions are more likely to include: What is this market all about? What is this technology all about? What do we want to achieve by creating this new firm? What are the key elements to effectively pursuing this opportunity? 2. Connection tasks are designed to stimulate entrepreneurs to think about the current situation in terms of similarities to and differences from situations previously faced and solved. In other words, these tasks prompt the entrepreneur to tap into his or her knowledge and experience without overgeneralizing. Generally, connection tasks focus on questions like: How is this problem similar to problems I have already solved? Why? How is this problem different from what I have already solved? Why? Specific to entrepreneurs, the questions are more likely to include: How is this new environment similar to others in which I have operated? How is it different? How is this new organization similar to the established organizations I have managed? How is it different? 3. Strategic tasks are designed to stimulate entrepreneurs to think about which strategies are appropriate for solving the problem (and why) or pursuing the opportunity (and how). These tasks prompt them to think about the what, why, and how of their approach to the situation. Generally, these questions include: What strategy/tactic/principle can I use to solve this problem? Why is this strategy/tactic/principle the most appropriate one? How can I organize the information to solve the problem? How can I implement the plan? Specific to entrepreneurs, the questions are likely to include: What changes to strategic position, organizational structure, and culture will help us manage our newness? How can the implementation of this strategy be made feasible? 4. Reflection tasks are designed to stimulate entrepreneurs to think about their understanding and feelings as they progress through the entrepreneurial process. These tasks prompt entrepreneurs to generate their own feedback (create a feedback loop in their solution process) to provide the opportunity to change. Generally, reflection questions include: What am I doing? Does it make sense? What difficulties am I facing? How do I feel? How can I verify the solution? Can I use another approach for solving the task? Specific to the entrepreneurial context, entrepreneurs might ask: What difficulties will we have in convincing our stakeholders? Is there a better way to implement our strategy? How will we know success if we see it? Entrepreneurs who are able to increase cognitive adaptability have an improved ability to (1) adapt to new situations—that is, it provides a basis by which a person’s prior experience and knowledge affect learning or problem solving in a new situation; (2) be creative—that is, it can lead to original and adaptive ideas, solutions, or insights; and (3) communicate one’s reasoning behind a particular response. III. THE INTENTION TO ACT ENTREPRENEURIALLY Entrepreneurial action is most often intentional. Entrepreneurs intend to pursue certain opportunities, enter new markets, and offer new products—and this is rarely the process of unintentional behavior. Intentions capture the motivational factors that influence a behavior; they are indications of how hard people are willing to try and how much of an effort they are planning to exert to perform the behavior. As a general rule, the stronger the intention to engage in a behavior, the more likely should be its performance. Individuals have stronger intentions to act when taking action is perceived to be feasible and desirable. Entrepreneurial intentions can be explained in the same way. The perception of feasibility has much to do with an entrepreneurial self-efficacy. Entrepreneur’s self-efficacy refers to the conviction that one can successfully execute the behavior required; people who believe they have the capacity to perform (high self-efficacy) tend to perform well. Thus, it reflects the perception of a personal capability to do a particular job or set of tasks. High self-efficacy leads to increased initiative and persistence and thus improved performance; low self-efficacy reduces effort and thus performance. Perceived desirability refers to an individual’s attitude toward entrepreneurial action—the degree to which he or she has a favorable or unfavorable evaluation of the potential entrepreneurial outcomes. Therefore, the higher the perceived desirability and feasibility, the stronger the intention to act entrepreneurially. We next investigate the background characteristics of entrepreneurs to understand why some individuals are more likely to engage in entrepreneurship than other individuals. That is, we examine how background characteristics provide an indication of whether certain individuals are more or less likely to perceive entrepreneurial action as feasible and/or desirable and therefore whether they are more or less likely to intend to be entrepreneurs. Role Models and Support Systems One of the most important factors influencing entrepreneurs in their career path is their choice of a role model. Role models can be parents, brothers or sisters, other relatives, or other entrepreneurs. Successful entrepreneurs frequently are viewed as catalysts by potential entrepreneurs. As one entrepreneur succinctly stated, “After evaluating Ted and his success as an entrepreneur, I knew I was much smarter and could do a better job. So I started my own business.” In this way, role models can provide important signals that entrepreneurship is feasible for them. Role models can also serve in a supportive capacity as mentors during and after the launch of a new venture. An entrepreneur needs a strong support and advisory system in every phase of the new venture. This support system is perhaps most crucial during the start-up phase, as it provides information, advice, and guidance on such matters as organizational structure, obtaining needed financial resources, and marketing. Since entrepreneurship is a social role embedded in a social context, it is important that an entrepreneur establish connections and eventually networks early in the new venture formation process. As initial contacts and connections expand, they form a network with similar properties prevalent in a social network—density (the extensiveness of ties between the two individuals) and centrality (the total distance of the entrepreneur to all other individuals and the total number of individuals in the network). The strength of the ties between the entrepreneur and any individual in the network is dependent upon the frequency, level, and reciprocity of the relationship. The more frequent, in-depth, and mutually beneficial a relationship, the stronger and more durable the network between the entrepreneur and the individual. Although most networks are not formally organized, an informal network for moral and professional support still greatly benefits the entrepreneur. Moral-Support Network It is important for each entrepreneur to establish a moral-support network of family and friends— a cheering squad. This cheering squad plays a critical role during the many difficult and lonely times that occur throughout the entrepreneurial process. Most entrepreneurs indicate that their spouses are their biggest supporters and allow them to devote the excessive amounts of time necessary to the new venture. Friends also play key roles in a moral-support network. Not only can friends provide advice that is often more honest than that received from other sources, but they also provide encouragement, understanding, and even assistance. Entrepreneurs can confide in friends without fear of criticism. Finally, relatives (children, parents, grandparents, aunts, and uncles) also can be strong sources of moral support, particularly if they are also entrepreneurs. As one entrepreneur stated, “The total family support I received was the key to my success. Having an understanding cheering squad giving me encouragement allowed me to persist through the many difficulties and problems.” Professional-Support Network In addition to encouragement, the entrepreneur needs advice and counsel throughout the establishment of the new venture. This advice can be obtained from a mentor, business associates, trade associations, or personal affiliations—all members of a professional support network. Most entrepreneurs indicate that they have mentors. How does one find a mentor? This task sounds much more difficult than it really is. Since a mentor is a coach, a sounding board, and an advocate— someone with whom the entrepreneur can share both problems and successes—the individual selected needs to be an expert in the field. An entrepreneur can start the “mentor-finding process” by preparing a list of experts in various fields—such as in the fundamental business activities of finance, marketing, accounting, law, or management—who can provide the practical “how-to” advice needed. From this list, an individual who can offer the most assistance should be identified and contacted. If the selected individual is willing to act as a mentor, he or she should be periodically apprised of the progress of the business so that a relationship can gradually develop. Another good source of advice can be cultivated by establishing a network of business associates. This group can be composed of self-employed individuals who have experienced starting a business; clients or buyers of the venture’s product or service; experts such as consultants, lawyers, or accountants; and the venture’s suppliers. Clients or buyers are particularly important group to cultivate. This group represents the source of revenue to the venture and is the best provider of word- of-mouth advertising. There is nothing better than word-of-mouth advertising from satisfied customers to help establish a winning business reputation and promote goodwill. Suppliers are another important component in a professional-support network. A new venture needs to establish a solid track record with suppliers to build a good relationship and to ensure the adequate availability of materials and other supplies. Suppliers also can provide good information on the nature of trends, as well as competition, in the industry. Finally, personal affiliations of the entrepreneur also can be a valuable part of a professional-support network. Affiliations developed with individuals through shared hobbies, participation in sporting events, clubs, civic involvements, and school alumni groups are excellent potential sources of referrals, advice, and information. Each entrepreneur needs to establish both moral and professional-support networks. These contacts provide confidence, support, advice, and information. As one entrepreneur stated, “In your own business, you are all alone. There is a definite need to establish support groups to share problems with and to obtain information and overall support for the new venture.” Therefore, it is important to recognize that entrepreneurial activity is embedded in networks of interpersonal relationships. These networks are defined by a set of actors (individuals and organizations) and a set of linkages between them, and they provide individuals access to a variety of resources necessary for entrepreneurial outcomes.35 These resources may assist in efforts to discover and exploit opportunities, as well as in the creation of new independent organizations. The trust embedded in some of these networks provides potential entrepreneurs the opportunity to access highly valuable resources. For example, business networks are composed of independent firms linked by common interests, friendship, and trust and are particularly important in facilitating the transfer of difficult-to codify, knowledge-intensive skills that are expensive to obtain in other ways. These networks also create opportunities for exchanging goods and services that are difficult to enforce through contractual arrangements, which facilitates the pursuit of opportunities. To the extent that a network provides an individual greater belief in his or her ability to access resources critical to the successful achievement of entrepreneurial outcomes, this increased perceived feasibility will strengthen entrepreneurial intentions. This can include intentions for sustainable entrepreneurship. MODULE 2 PACKET THE PHILIPPINE ENVIRONMENT FOR ENTREPRENEURSHIP MODULE 2 LEARNING OBJECTIVES: By the end of this module, the students will be able to: 1 Explain the Business Climate for MSME Development and the 7Ms Way of Uplifting MSMEs 2. Assess the current profile of MSMEs in the Philippines 3. Identify the challenges and opportunities of SMEs in the country 4. Define current Policies and Programs for the MSME Sector 5. Describe MSME Plan Development 2017-2022 Framework Elements The Business Climate for MSME Development The business climate in which MSMEs find themselves situated today is complex and fluid due to the ever- changing economic and political landscape. Providing business opportunities and ensuring good governance for the citizenry, including the MSMEs, are some key international commitments that promise newer and much larger markets through the ASEAN Common Market and the APEC partnership. Properly navigated, these regional and global commitments should provide the Philippine MSMEs with much bigger economic opportunities than would otherwise be available if they had focused solely on the domestic markets. 7Ms Way of Uplifting MSMEs As part of the goal of ensuring inclusive growth and addressing income inequality, there is a need to empower those at the bottom of the pyramid and marginalized sectors with the right mindset and know–how to be able to move up in life. DTI has come up with 7Ms to help MSMEs set-up a business and be smarter entrepreneurs. These can help in making a difference in the market, while contributing to a larger cause of sustaining the Filipino entrepreneurial revolution. A. Current Profile of MSMEs in the Philippines The MSME sector in the Philippines consists of 896,839 establishments or 99.54% of the 900,914 total registered establishments in the country in 2015 (Figure 1). Micro-enterprises constitute the largest portion (89.53%), followed by small enterprises (9.59%), and medium enterprises (0.43%). This composition is at par with those of MSME sectors in other ASEAN countries. Together, these MSMEs generated a total of 4,784,870 jobs or 61.61% of the country’s total employment (Figure 2). The micro enterprises produced the biggest share (29.43%) closely followed by small enterprises (25.34%) while medium enterprises were far behind at 6.83%. Geographically, the MSMEs are concentrated in Luzon with almost 50% located in NCR, CALABARZON, and Central Luzon (Figure 3). Following them are Central Visayas and Western Visayas. The regions with the lowest number of MSMEs are CAR, Caraga, and ARMM. The rank distribution of the MSMEs in the country is strongly correlated with the distribution of GRDP contribution of the regions. About half of the country’s MSMEs are largely engaged in “wholesale and retail trade” (Figure 4) which constitutes almost half of the establishments (46.51%). A far second is “accommodation and food service activities” (13.27%) which is closely trailed by “manufacturing” (12.71%). Other key industries being undertaken by MSMEs are “information and communication” (3.92%) and “financial and insurance activities” (3.83%). Challenges and Opportunities The MSME sector, while having made strides over the years, continuously faces challenges that have implications in its further development. Among such challenges are: 1) Access to finance Currently, as provided under the law, there is a mandatory 10% lending allocation to the sector, providing opportunities for MSMEs. However, in general, banks tend to prioritize larger corporate borrowers because of higher gains, perception of lower credit risk, higher repayment rates, and the availability of collateral. Also, access to financing from traditional financial institutions is limited due to the lack of credit information. Since interest rates are at historic lows and banks’ loanable funds are at high level, this translates into more opportunities for MSMEs to borrow. One way is to create the necessary enabling environment that encourages banks to see MSMEs as a viable market. However, recognizing the relatively high risk, the government should also develop or support the development of credit enhancement mechanisms (e.g., guarantees, insurance) to address associated risks of borrower default. Similarly, there is a strong need to enhance MSME financial literacy to make them more aware of financial resources and programs available. MSMEs need to be equipped to utilize diversified sources of financing. 2) Business environment and the cost of doing business Despite substantial improvements in streamlining the process of business licensing/issuance of mayor’s permit through the issuance of DTI/DILG/DICT Joint Memorandum Circular No.1 Series of 2010 and 2016, as well as securing FDA licenses to operate through the Market Authorization Portal, several government procedures and requirements for business in general are still numerous, repetitive, and time consuming in accomplishing, making it more costly for MSMEs to comply with. This is true for many NGAs and LGUs that are characterized by non-uniformity of rules, weak support for MSME and poor coordination among themselves. The business environment should be characterized by streamlined and simplified rules and procedures. Inter- and intra-government cooperation for MSME development is necessary to achieve aligned and applied policies and regulations that would promote synergies at the regional and national levels. 3) Access to market Many MSMEs find it difficult to penetrate and sustain their presence in desired markets. Lack of technical knowledge hinders these enterprises from participating in global value chains, as such MSME contribution to exports remain small. Another factor may be the low compliance of MSMEs with national and international standards such as quality and environmental standards, rendering them uncompetitive in the world market. In order to support methods for enhanced market access and integration into global value chains, there is a need to increase information on both domestic and global markets. Promotion of partnership with large enterprises as well as the adoption of national and international standards of quality and environment may likewise be pursued. Further, promotion of online-based information systems may also have intensified as one of the cost-effective means of market access for the MSMEs. 4) Productivity and efficiency Enhancements to productivity and technology are deemed to be the major drivers of MSME development and progress. Many MSMEs find it difficult to innovate and undertake cost-effective methods, thus, their labor productivity suffers from poor technical education and low skill levels. The sector is hampered by unavailability and high cost of inputs due to inadequate infrastructure, and seasonality and instability of raw materials supplies, among others. Capability building interventions, linkage with large enterprises including multi-national corporations, and strengthening of industry clusters, are some of the measures to enhance productivity and foster innovation in MSMEs. 5) Impacts of climate change and ease of undertaking disaster recovery Due to its geographic location, the country ranks high in terms of exposure and risks to natural hazards such as earthquakes, typhoons, flooding and storm surges. Since MSMEs are a key driver of local economic development, resilience to both natural and man-made disasters should look not just into the context of shared community disaster risks but also in terms of business continuity. Efficient and effective business continuity programs should be made available to any enterprise, given their importance in the locality and their critical condition due to the risks they face. MSME should develop and strengthen their resilience by incorporating business continuity and emergency preparedness and response. Using business continuity planning framework enables MSMEs to direct and control their activities in order to ensure the continuity of services and recover losses after a disaster. Against the backdrop of challenges faced by MSMEs, present opportunities provide the long-term impetus for MSMEs to be a more significant driver in the country’s economic development. Among these are the following: 1) The Philippine economy as the world’s next powerhouse From 2012 to 2016, the Philippines was one of the fastest growing economies in the world based on gross domestic product (GDP). This has made the country one of the world’s most attractive investment destinations for both local and foreign businesses. On the supply side, this impressive growth performance creates tremendous opportunities for logistics, raw materials, employment, business, and virtual hosting. On the demand side, a larger and more cash-rich consumer base promises more robust domestic markets. The growth prospects of the country can only get even better through the years, barring any unforeseen circumstances. 2) The ASEAN Economic Community (AEC) and other Free Trade Agreements The integration of the ten (10) ASEAN economies starting in 2015 offers numerous opportunities for nimble MSMEs to expand their export, diversify markets within the region and forge partnerships with other ASEAN MSMEs in procuring globally competitive products and services. The various Free Trade Agreements (FTAs) that the Philippines has entered into offer opportunities for MSMEs to increase exports while welcoming investments from counterpart countries which include their own MSMEs. 3) Solid demographics because of a young and vibrant population The country is already the 12th largest country in the world in terms of population, majority of which are composed of young and economically active age group whose consumer tastes are increasingly changing. It behooves the MSMEs which are largely domestic-oriented to recognize opportunities in these shifting demographics to enable them to properly take advantage of this demographic group – as potential entrepreneurs, customers and source of labor The country has historically been in a demographic “sweet spot,” where the young are more than the old and the working-age population is large enough to support the elderly segments of the population. This could mean a larger seedbed for youth entrepreneurship, wider domestic market due to increasing per capita income along with the sheer volume of potential customers, a technology-driven work force, and improved investment prospects from potential partners from developed countries with aging populations. 4) Green Growth The President signed the landmark Paris Agreement on Climate Change that calls for the reduction of carbon emissions, which have been linked to the occurrence of natural disasters and extreme weather conditions. The global trend toward lower carbon emissions presents opportunities for MSMEs to produce products and services that are environment-friendly. A key driver to realizing the potential benefits of the Paris Agreement will be for businesses to engage and look for market-driven ways to increase investment in low-carbon and renewable energy sources in producing goods or services. Currently, the government is developing the roadmap on Nationally Determined Contribution (NDC) in compliance with the Paris Agreement that outlines the country’s Low Emission Development Strategies/Goal/Pathway. The government may also introduce measures like carbon taxes and subsidies for green infrastructure. Increasing investments in renewable energy and non-fossil-fuel-intensive products will likewise provide opportunities for growth and employment. C. Current Policies and Programs for the MSME Sector The Philippines has a legal framework governing the policy for MSME development enshrined in the Magna Carta for Micro, Small and Medium Enterprises (RA No. 6977, as amended), the Barangay Micro Business Enterprises Act of 2002 (RA No. 9178, as amended by RA No. 10644), the Go Negosyo Act (RA No. 10644), and the Youth Entrepreneurship Act (RA No. 10679). Said laws work synergistically to provide a holistic approach in setting strategic measures that encompass a wide range of relevant sectors under the purview of MSME development. Government policies and programs for MSMEs cover the following outcome areas: 1. Business Environment (BE) - a dynamic practice and culture of governance that fosters the establishment, development, sustainability, and competitiveness of socially responsible and environment-friendly MSMEs. 2. Access to Finance (A2F) - the sustained availability of reasonably priced, socially responsible, and environment-friendly financial products, services, and support programs that are designed for MSMEs and those MSMEs can conveniently and readily access. 3. Access to Markets (A2M) - the sustained ability of MSMEs to be competitive in selling their products and services to existing and new markets, both domestic and international, under a climate of fair, free, socially responsible and environment-friendly trade practices. 4. Productivity and Efficiency (P&E) - the production and delivery of competitive, standards-compliant, socially responsible, and environment- friendly products and services that generate optimum economic returns. Some of the major policies, programs, and projects in the four outcome areas are as follows: Policies and Programs Supporting MSMEs OUTCOME AREA 1: BUSINESS ENVIRONMENT 1. RA No. 9501: Magna Carta for Micro, Small and Medium Enterprises (as amended, RA No. 6977, RA No. 8289) An Act that promotes, supports, and encourages entrepreneurship through providing program assistance, and strengthening a balanced and sustainable development to MSMEs. 2. RA No. 9178: Barangay Micro Business Enterprises (BMBEs) Act of 2002 An Act promoting the establishment of Barangay Micro Business Enterprises (BMBEs), allocating incentives, benefits, and other purposes 3. RA 10644: Go Negosyo Act An Act promoting job generation and inclusive growth through the development of micro, small, and medium enterprises, mandating the establishment of Negosyo Centers in all cities, municipalities, and provinces, which shall be responsible for promoting ease of doing business and facilitating access to services for MSMEs. 4. R.A. 10679: Youth Entrepreneurship Act An Act promoting entrepreneurship and financial education among Filipino youth. 5. RA 9485: Anti-Red-Tape Act An Act to improve efficiency in the delivery of government service to the public by reducing bureaucratic red tape, preventing graft and corruption, and providing penalties therefor. 6. Joint Memorandum Circular No. 1 Series of 2011 Guidelines in implementing the standards in processing business permits and licenses in all cities and municipalities. 7. Joint Memorandum Circular No.1 Series of 2016 Revised standards in processing business permits and licenses in all cities and municipalities 8. Enhanced Business Name Registration System Provides ease of registering and paying business name registration online. OUTCOME AREA 2: ACCESS TO FINANCE 1. RA No. 9501, Section 15: Mandatory Allocation of Credit Resources to Micro, Small and Medium Enterprises (as amended, RA No. 6977, RA No. 8289) For a period of 10 years from the date of the Act, all lending institutions under BSP rules, whether private of public, shall set aside at least 8% for micro and small enterprises and at least 2% for medium enterprises of their loan portfolio and make it available for MSME credit. 2. Microfinance program for micro, small, and medium enterprises (MSMEs) such as ‘Pondo sa Pagbabago at Pag-asenso,” or P3 Program Aims to provide affordable loan program for MSMEs for this sector to shun loan sharks such as 5-6 money lending scheme. The P3 is designed to bring down the interest rate at which micro-finance is made available to micro enterprises. 3. Access of Small Entrepreneurs to Sound Lending Opportunities (ASENSO) Program A revitalized government-led MSME financing program which aims to lower the effective cost of borrowing and liberalize requirements, create wider financing system that will give MSMEs access to short and long-term funds and standardize lending procedures. Under the program, MSMEs get the necessary assistance also through market exposure, human resource training, and product development. 4. Credit Surety Fund Program (CSF) A credit enhancement program designed by BSP that aims to increase the credit worthiness of MSMEs experiencing difficulty in obtaining loans due to lack of collateral, credit knowledge, and track record. 5. Access of MSMEs to Digital Payments A digital finance ecosystem with the right mix and range of service providers, digital solutions, and delivery channels should facilitate the convenience, affordability, and reliability of financial service. In line with this, the National Retail Payment System (NRPS) aims to establish a safe, efficient, reliable and affordable retail payment system in the country. The framework defines high-level policies, standards and governance principles covering retail payment operations and infrastructures. This is an integral reform considering that out of 2.5 billion payment transactions per month, only 1% are made through electronic means. This will translate to lower cost and higher efficiency for our MSMEs as well as unleash the potential of e-commerce. OUTCOME AREA 3: ACCESS TO MARKET 1. Go Lokal! A retail concept store which showcases innovative, high quality Philippine products crafted, designed and produced by the country’s MSMEs. It also serves as a free marketing platform where MSME partners gain access to the local consumer market, and ultimately, to the global export market. 2. Market Development Programs such as OTOP Program A priority program of the government to promote entrepreneurship and create jobs. Through OTOP, local chief executives of each city and municipality take the lead in identifying, developing, and promoting a specific product or service, which has competitive advantage. 3. Export Pathways Program (EPP) EPP focuses on providing export assistance through a systematic approach, providing interventions at every stage of an exporter’s growth. It utilizes the Value Chain Approach (VCA), Industry Clustering, and Sub-contracting to arrive at a holistic export development program. 4. Enhanced Support for Trade Fairs This is the provision of a more organized menu of market services like trade fairs which are affordable to SMEs, through greater participation and partnerships with private organizations, LGUs and other key sectors. The DTI implements national, regional, sectoral, as well as international trade fairs such as the National Trade Fair (NTF), Manila F.A.M.E. International, International Food Exhibition (IFEX), and e- Services Philippines, among others.  5. oneSTore oneSTore.ph is an e-commerce web application that operates nationwide and caters primarily to Philippine consumers. It helps DOST-assisted MSMEs widen the scope of their target market and It can help deliver economic growth and increase business opportunities. oneSTore provides customers with an effortless shopping experience and retailers with simple and direct access to the largest customer base in the Philippines. 6. Tindahang Pinoy A depot that will showcase world-class, export-quality Philippine products. This facility aims to help exporters penetrate the domestic consumer and tourism markets with fund assistance from the DTI through the Philippine International Trading Corporation (PITC). 7. Drive on Foreign Trade Agreements The DTI, in partnership with the Bureau of Customs (BoC), the Tariff Commission and the private sector, has organized a series of information sessions on Doing Business in Free Trade Areas (DBFTA) nationwide to encourage and assist entrepreneurs to use Free Trade Agreements (FTAs) and benefit from them. Understanding emerging and new markets as well as instruments such as FTAs will help exporters address new challenges in the global business environment. 8. Brand Equity Development Program (BrEDP) A new initiative of the government to develop innovative and globally competitive brands that can successfully penetrate into the national, regional/ASEAN, or international markets. The overall goal of the program is to increase awareness and identity of at least one brand per province, per year over the six years of implementation from 2017 to 2022. OUTCOME AREA 4: PRODUCTIVITY AND EFFICIENCY 1. Shared Service Facilities (SSFs) This program entails setting up common service facilities or production centers for certain processes to give MSMEs access to better technology and more sophisticated equipment to accelerate their bid for competitiveness and help them graduate to a next level where they could tap better and wider markets and be integrated in the global supply chain. The project is implemented in cooperation with the academe, LGUs, and private organizations. 2. SME Roving Academy (SMERA) A continuous learning program for the development of micro, small, and medium enterprises to become competitive in domestic and global markets. 3. Small Enterprise Technology Upgrading Program (SET-UP) SETUP provides MSMEs with equipment and technical assistance to enable them to increase sales and production, streamline and improve overall company operations, upgrade the quality of products and services, conform to national and international standards of excellence, and be competitive in their respective fields. 4. KAPATID Mentor ME The Program is an initiative of the DTI and the Philippine Center for Entrepreneurship (PCE) to help the country’s micro and small enterprises (MSEs) through coaching and mentoring where mentors teach MSEs on different aspects of business operations. 5. Food Innovation Center The Centers, which are located in a state universities and colleges or private higher educational institutions, aim to produce value added agricultural and fishery food products by becoming the hub for innovations and technical support services for the food processing industry. Support services include food testing, information, packaging and labeling design, consultancy services, trainings, and seminars. 6. Industry Clustering The Program entails the delivery of various forms of technical assistance/interventions such as skills training, product development, market development and access, and the like in order to capacitate MSMEs and improve their productivity and competitiveness Strategic Directions of MSME Development MSME Plan Development 2017-2022 Framework Elements Looking into the individual elements of the framework, we examine the logical flow of the Plan, from its vision, through the focus areas and the respective goals within those areas, the strategies (both the general or line strategies and the cross-cutting strategies) that can be adopted to achieve those goals, the action plans following those goals, and the necessary institutional support to undertake such action plans. 1. Vision The Plan’s development framework is anchored on the medium-term vision that by 2022: More globally competitive MSMEs that are regionally integrated, resilient, sustainable, and innovative thereby performing as key drivers of inclusive Philippine economic growth. This implies: Globally competitive MSMEs which can deliver innovative products and services that are preferred by consumers locally and internationally; Productive and innovative MSMEs which can continuously develop and transform competitive products and services that satisfy the demands of a discriminating market; Regionally integrated MSMEs in the ASEAN with diversified markets and partnerships in global markets; Resilient MSMEs which are capable of coping and overcoming negative effects of human-made and natural adversities; and, Highly sustainable MSMEs which can withstand the ever changing demands of the market, make profits without harming society and environment, and turn challenges into business opportunities. 2. Focus Areas, Goals, Strategies and Action Plans For the Plan period, there are three focus areas which are critical in attaining the vision for 2022 which the MSMEs urgently need to improve on. The vision is underpinned by five strategic goals with corresponding strategies and action plans, whose attainment can lead to the vision’s realization: FOCUS AREA 1: BUSINESS ENVIRONMENT This pertains to the general background, situation, or milieu – the “ecosystem” as it were – in which businesses are born and thrive in. FOCUS AREA 2: BUSINESS CAPACITY Business capacity can be described as the highest output that an enterprise, business or organization can deliver its products or services in a given amount of time with the available resources. To achieve this, business capacity is normally measured through human capital and technological resources to achieve its targets FOCUS AREA 3: Business Opportunities A business opportunity may be explained as a bundled investment that allows an MSME to utilize knowledge and opportunities of the market successfully engage in it. 3. Cross-cutting Strategies Encompassing all the above-mentioned strategies are the so-called cross-cutting issues that need to be pursued because of their significance to the overall strategies. They will be critical to the long-term viability of Philippine MSMEs should these cross-cutting issues be addressed adequately. The five cross-cutting strategies that may be pursued are: a. Expand MSME Assistance Centers In the implementation of the previous Plans, the presence of MSME assistance centers were seen as crucial to the immediate success and long-term viability of the MSMEs. For instance, Negosyo Centers play vital roles in finding customers, accessing lending and credit markets, and tapping suppliers for raw materials, equipment, and other inputs. On the other hand, the Food Innovation Centers provide assistance on food testing, packaging and labeling design, consultancy services, trainings, and seminars for MSMEs in the food processing sector. b. Strengthen LGUs’ roles A supportive LGU will spell the difference in getting a local MSME get its product or service to market or not. In previous Plans, projects such as One Town, One Product (OTOP) were the result of LGUs identifying their localities’ strong industries, and getting their products to the market. c. Promote Green Growth Resource efficiency and cleaner production is essential to competitiveness. MSMEs have to implement environment-friendly and climate-smart processes and practices to reduce production costs, produce green products and services, and prepare for the impacts of climate change. MSMEs have to be informed about new developments related to green economy, including the opportunities for green markets and linkage to green technology suppliers. An enabling environment accelerating green economic development has to be in place to encourage MSMEs to go green. d. Promote Women and Youth Entrepreneurship The need for a heightened focus on women and youth entrepreneurship is integral in achieving inclusive growth and development in the country. The recent study by the Asian Institute of Management (AIM) showed that 63% of business owners were women and of this number, 52% were micro entrepreneurs while the rest were owners of small and medium enterprises. On the other hand, the Philippine population is composed of young people aged 10-24 years old who are potential entrepreneurs and source of labor. Women and youth have to be empowered by increasing their opportunities to avail of skills development, market information, financial services, etc. to reach their full potential – impacting economic and human development of the country. e. Promote Digital and Internet Economy The pervasiveness of fast-paced advances in Information and Communication Technology (ICT) affects both MSMEs and enablers alike on multiple levels. The digital and internet economy facilitates growth and inclusiveness that allow MSMEs to be more competitive, and foster greater integration among government policies through modernization of the business environment, innovating business capacity, and increased connectivity to create more business opportunities. With the advent of e-commerce, digital finance, and other emerging platforms, the Plan welcomes the different developments to further pursuit goals by leveraging technological improvements and extending it to all MSMEs, regardless of scale or industry. 4. Institutional Support To implement the action plans, necessary institutional support from the national government, LGUs, academe, large-scale businesses, and non-government organizations should be enhanced. Among support activities may include: a. Effective coordination, complementation, and sharing among national and local government agencies together with MSME business groups, academe and NGOs advocating MSMEs. This will necessarily require strengthening of the institutional infrastructure that will deliver basic services to MSMEs and synergize efforts of governments and the private sector on SME promotion with sufficient authority and resources to coordinate both horizontally (i.e., among departments and agencies) and vertically (among different policy levels at city/municipality, provincial, regional, and national level. In pursuing this, the Magna Carta for MSMEs may be reviewed as regards the mandates of the central coordinating and primary agency for MSME policies and programs (i.e., BSMED or SB Corporation); b. Generation of relevant information/data in plan implementation and its needed analysis for timely dissemination to stakeholders and MSMEs for use in planning, budgeting, and M&E; c. Responsive, timely, graft-free, and effective services by implementing agencies and its personnel complement to the MSMEs;  d. Close geographical and sectoral monitoring and evaluation of plan implementation so that timely update and adjustments can be undertaken; e. Necessary budget allocation equitably distributed regionally for all indicated programs/projects/activities and its timely releases for effective plan implementation. Such funding should be sufficient to provide the requirements of the Negosyo Centers, which serve as the frontline services for MSMEs as well as the financing requirements of the sector. f. Policy review of existing laws, rules, and procedures, and formulation of timely, responsive, and relevant policies/amendments to promote and sustain MSMEs 5. Other Priority Areas a. Registering informal MSMEs (particularly Micro) As the vast majority of small businesses are micro, moving them into the formal sector will greatly boost their chances of accessing formal, cheaper financing as well as government assistance to connect them to customers and suppliers. Formalizing them will also provide greater protection both to their business and workers as well as ensure that the government harnesses the potential contribution of the enterprises to the economy. b. Graduating businesses to the next level Registering businesses and entering them into the formal sector will give them greater opportunities to move up the value chain. This will integrate them into domestic and external markets on a larger scale, which promises better and more stable returns to their stakeholders and their communities. c. Resilience and business recovery Business resilience in the face of natural and man-made disasters is vital to the continuity of communities. MSMEs’ ability to get back on their feet the soonest time possible with or without any help from the national government or LGU is necessary to stir economic activity in calamity-stricken areas. Their quickest recovery is the most desirable situation even when catastrophes and difficult conditions such as recessions or depressions begin to take toll on their businesses. d. Academe-Industry Collaboration on Research & Development Academic circles such as universities, colleges, and technical/vocational schools provide many new ideas for businesses that create new products or services, or innovate on existing products and services that promise to bring satisfaction and delight to the customer. Simple curiosity and creativity, unleashed in research rooms and laboratories, bring about new ways of doing things, resulting in novel, innovative products and services, or even new ways of bringing them to their customers through new and engaging packaging or delivery modes. e. Industry Cluster Development The development and promotion of industry clusters are identified as a major strategy in helping achieve its vision of a globally competitive and innovative industry and services sector that contributes significantly to inclusive growth and employment generation. It supports the President’s 10-Point Economic Agenda particularly in promoting rural and value chain development toward increasing agricultural and rural enterprise productivity. Using the industry cluster approach, alliances will be forged with relevant agencies and institutions to develop competitive and innovative SMEs, implement a program for productivity and efficiency, and create conducive business enabling environment. MODULE 3 PACKET APPRAISING AND DEVELOPING YOURSELF FOR AN ENTREPRENEURIAL CAREER MODULE 3 LEARNING OBJECTIVES: By the end of this module, the students will be able to: 1. Measure the behavioral patterns of an entrepreneur; 2. Discuss the ten Personal Entrepreneurial Competencies (PECs) 3. Explore ways to prepare and launch yourself towards an entrepreneurial career. Module 3 – Appraising yourself for an entrepreneurial career Introduction How does a successful entrepreneur behave? You must be asking yourself whether you have these characteristics, and if so, to what extent. These are good questions to answer before you actually go into business. You will be given tools for examining yourself in terms of a possible entrepreneurial career. These tools should help you identify your strengths and weaknesses. Objectives Assessing your Personal Entrepreneurial Competencies The questionnaire below measures an individual’s weak and strong personal entrepreneurial attributes. Would you like to find out how you rate? PEC’s Self-Rating Questionnaire Instructions: 1. This questionnaire consists of 55 brief statements. Read each statement and decide how well it describes you. Be honest about yourself. Remember, no one does everything very well. 2. Select one of the numbers to indicate how well the statement describe you: 5= Always 4= Usually 3= Sometimes 2= Rarely 1= Never 3. Write the number you selected on the line to the right of each statement. Here is an example: I remain calm in stressful situations. = 2 The person who responded to the item above wrote “2” indicating that the statement described him very little. 4. Some statement may be similar but no two statements are exactly alike. 5. Please answer all questions. If you are ready, you may begin. 1. I look for things that need to be done. 2. When faced with a difficult problem, I spend a lot of time trying to find a solution. 3. I complete my work on time. 4. It bothers me when things are not done very well. 5. I prefer situations in which I can control the outcomes as much as possible. 6. I like to think about the future. 7. When starting a new task or project, I gather a great deal of information before going ahead. 8. I plan a large project by breaking it down into smaller task. 9. I get others to support my recommendations. 10. I feel confident that I will succeed at whatever I try to do. 11. No matter whom I am talking to, I’m a good listener. 12. I do things that need to be done before being asked to by others. 13. I try several times to get people to do what I would like them to do. 14. I keep the promises I make. 15. My own work is better than that of other people I work with. 16. I don’t try something new without making sure I will succeed. 17. It is a waste of time to worry about what to do with your life. 18. I seek the advice of people who know a lot about the tasks I am working on. 19. I think about the advantages and disadvantages or different ways of accomplishing things. 20. I do not spend much time thinking how to influence others. 21. I change my mind if others strongly disagree with me. 22. I feel resentful when I do not get my way. 23. I like challenges and new opportunities. 24. When something gets in the way of what I am trying to do, I keep on trying to accomplish what I want. 25. I am happy to do someone else’s work, and if necessary, to get the job done on time. 26. It bothers me when my time is wasted. 27. I weigh my chances of succeeding or failing before I decide to do something. 28. The more specific I can be about what I want out of life, the more chance I have to succeed. 29. I take action without wasting time gathering information. 30. I try action without wasting time gathering information. 31. I get information people to help me accomplish my goals. 32. When trying something difficult or challenging, I feel confident that I will succeed. 33. In the past, I have had failures. 34. I prefer activities that I know well and with which I am comfortable. 35. When faced with a major difficulty, I quickly go on other things. 36. When I am doing a job for someone, I make a special effort to make sure that person is happy with my work. 37. I am never entirely happy with the way in which things are done; I always think there must be a better way. 38. I do things that are risky. 39. I have a very clear plan for my life. 40. When working on a project for someone, I ask many questions to be sure I understand what that person wants. 41. I deal with problems as they arise, rather than spend time trying to anticipate them. 42. In order to reach my goals, I think of solutions that benefit everyone involved in the problem. 43. I do very good work. 44. There have been occasions when I took advantage of someone. 45. I try things that are very new and different from what I have done before. 46. I try several ways to overcome things that get in the way of reaching my goals. 47. My family and personal life are more important to me than work deadlines I set for myself. 48. I find ways to complete tasks faster at work and at home. 49. I do things that other consider risky. 50. I am concerned about my meeting my weekly goals as I am for my yearly goals. 51. I go to several sources for information to help me with my tasks and projects. 52. If one approach to a problem does not work, I think of another approach. 53. I am able to get people who have strong opinions or ideas to change their minds. 54. I stick with my decisions even if others disagree strongly with me. 55. When I don’t know something, I do not mind admitting it. HOW TO SCORE Now, let us see how well you performed in the PEC’s Self-Rating Questionnaire. Using the table below, do the following: a. Enter the ratings from the completed questionnaire on the line above the item numbers in parentheses. b. Do the addition and subtraction indicated in each row to compute each PEC score. Note that the item numbers in the columns are consecutive. Item No.2 below No. 1 and so on. c. Add all the PEC scores to get your total raw scores. (For now, disregard the last column on “Correction Factor”. You will have a chance to work on it later.) 1. Get your score by subtracting the correction factor from your total score. The correction factor is used to determine whether or not a person tries to present a very favorable image of her. If the total score on this factor is 20 or greater, then the total scores on PECs must be corrected to provide a more accurate assessment of the strength of the PEC scores for that individual. Follow the steps below. A. Go to the last column of the ratings table. Total your scores in items 11, 22, 33, 44, and 55. The sum you will get is the correction factor score. B. Now that you have the correction factor score, use the following guide in figuring how to subtract from your raw score. Encircle or highlight the numbers that correspond to your score. If the correction factor score is: 24 or 25 Opportunity seeking -------------- - ------------------- Persistence -------------- - ------------------- Commitment to the work contract -------------- - ------------------- Demand for quality and efficiency -------------- - ------------------- Risk taking -------------- - ------------------- 3. Get your PEC profile by transferring the corrected PEC score to the profile sheet. a. Mark an “X” at the appropriate point on the horizontal line for each PEC. If the score for Opportunity Seeking is 17, it will appear as follows: Opportunity Seeking: : : : : b. Draw a heavy vertical line connecting the “Xs” for each PEC and you have constructed your PEC profile. Developing yourself for entrepreneurship A. Be creative To be creative is to generate ideas and images in your head in order to come up with solutions and alternative solutions to problems. Creativity involves moving around ideas, splitting them, combining them with other ideas; thus arriving at new ways of doing things. Ordinary people simply take things as they are. Creative people look at things as they are. Creative people look at things and images and what else they could be. For example, in your creative moments, try asking one or more of the following questions about anything you have in mind: Is there a way to do it – more easily? - More quickly? - More pleasantly? - More safely? - More healthy? - More comfortably? - More cleanly and neatly? - More sure? - More cheap? - More attractively? - More smartly? Can it be made - more useful, that is, multi-purpose? - More adaptable to other uses? Can it value be enhanced? Can it be combined with some other existing tool or device? Can it be more disposable or portable? Can its distribution methods be improved? Can its package be improved? Can its package be improved? Remember that creativity is within you; it is within all of us. We use it all the time. It is free. It can work for us, regardless of what we are doing- we can exercise creativity. B. Actively Seek Opportunities A successful entrepreneur actively seeks opportunities. He looks at a situation and thinks, “What is in here that can be turned into a business,” or if he is already in business, he asks himself, “What is in that will be good for my business or will improve it?’ Opportunity-seeking is actively going after ideas which can be turned into opportunities. If you will go into business, opportunity-seeking is very important. It will help you in many ways: If you actively seek opportunities, you will find customers or markets where other people find one. If you actively seek opportunities, you will find new uses for old products, including waste products. If you actively seek opportunities, you will find new ways of doing things. If you actively seek opportunities, you will find new products for old markets or customers. C. Take Moderate Risks - The successful entrepreneur take risks, but before doing so, he is able to recognize, assess, and minimize these risks, This is known as calculating, moderating, or controlling the risks. In business, calculating the risk is checking. If you will make or lose money in the process of doing business. - Achievers are moderate risk-takers. High risks are not preferred because the chances of failure are great. On the other hand, lower-risk situations are also shunned because they are not challenging enough. What must you do to be a moderate risk-taker? Here are some suggestions: 1. Assess the situation carefully. 2. Find out if your actions will have negative side-effects. A moderate risk-taker must be prepared to cope with these possibilities. 3. Ask for advice from knowledgeable people. A high risk-taker may think that he can do business without anyone’s help. A moderate risk-taker will get all the advice and information he can get to ensure that he succeed. ‘ 4. Plan for contingencies. Success in risk-taking is to be well-prepared for all eventualities. D. Practice Persistence Trying and trying again until you succeed is what persistence is all about. Persistence is also trying to do something even if other people say that are likely to fail. It means not being afraid of hard work. It also means not being afraid to fail because you can try again. Ask any successful entrepreneurs whether they succeeded right off the first time they tried to start business. Chances are they will say that their first few attempts failed, but they refused to be discouraged. You might also experience initial failure when you decide to be an entrepreneur. If you do, please remember that persistence breeds success. If you feel that being persistent is difficult, you must realize these three things: 1. Do not give in quickly when someone disagrees with you. If you are sure of your stand, do not give in to what other people say without thinking about it. This is a test of persistence. If you try, you might even have a chance  to turn things around and make the person see your point of view and agree with you. If you persist in doing the right thing, the other person will respect you. 2. If you get angry at someone who stubbornly disagrees with you, you persistence will wear off quickly because you will be concentrating on your anger. On the other hand, if you stay cool and composed, you will persuasive, convincing, and credible. 3. Face the opposition squarely and openly. Avoid “behind the back” tactics. Don’t criticize or badmouth the opposition on their absence. These are not the weapons of those who are negotiating with confidence. A truly persistent person will be strong enough to change what needs to be changed and do what needs to be done even if others disapprove. E. Be committed to what you set out do You can practice behavior that will lead to strong commitment to work contract. You need to do this if you are to succeed as an entrepreneur. Keeping your promises and commitments is at the very heart of entrepreneurs. You cannot be committed persons overnight. You must deliberately work at it and practice it with persistence. Here are some guidelines that may help in building your commitment to work contact: 1. Have strength of character. Entrepreneurs have palabra de honor. Their words are their honor. People with strong character will honor what they say- come what may. These strong people will not make alibi. If they fail to keep their word, they admit it as their mistakes or shortcoming. 2. Only make promises you can keep. Entrepreneurs who do not deliver orders on time find to their regret that there is no next time. Customers can always take their business elsewhere. 3. Know what to do when you cannot keep a promise. 4. Cultivate the trust of others. Once trust is broken it is very hard to repair it. Trust is the roof of good entrepreneur customer and entrepreneur-supplier relationship. 5. Clarify expectations. The promise you make must be based on what is reasonable for all concerned. 6. Apologize sincerely. When you are unable to keep your promise, apologize sincerely to your customers. Be sure you have made your side understood completely so that no doubts remain. F. Set High Standards of Quality and Efficiency No matter what you are doing, you can strive for quality and excellence. Good entrepreneurs demand quality and efficiency not only from their workers and suppliers, but also from themselves. They set an example of excellence that expects the people who work with them to follow. In this way, they make sure that the products and services they sell are of good quality. This means good business. Here are behaviors that can help you achieve quality and efficiency in business and other aspects of your life: 1. Consistency is important. Your quality must be steady and reliable. Consistency will give you the competitive edge. 2. A neglected and dissatisfied customer might never return. Worse, they might spread the word around regarding your lousy product and service. Be careful even if you are dealing with only one customer. 3. Devotion to quality and efficiency must become a way of life for you and your workers. Commit yourself to quality not only when doing business, nut also in everyday things, including your personal life. This way, being efficient and quality-conscious becomes a “second nature” to you. 4. Use appropriate technology to help you. New technology may initially cot money, but may be economical for your business in the long run. G. Seek Information Knowledge is power. You need information to get wind of business ideas and opportunities. You need information to determine whether your business idea will be profitable or not, to find out whether there are people who will buy your products, and at what price. You need information about sources of assistance for your business and for business loans. An important source of information is your own experiences and observations. However, oftentimes these are not enough. We have to actively seek information by joining industry chambers where they get to exchange experiences and know-hows with other entrepreneur in the same or similar business. If you are a student, join business-oriented groups like Junior Achiever Society and Young Entrepreneur clubs. Tune in to business- oriented programs and courses. Talk with relatives and friends who are already in business. Ask questions. H. Believe in Yourself Entrepreneurs are rather self-confident people. They believe that they can achieve their goals. So must you. If you do not have faith in yourself, no one else will. For you to be able to make things happen, you must first recognize that you can do so, and nobody else can. Here are some ways to develop your self-confidence. Know as much about yourself as you can. Look at your qualities in a realistic manner. Emphasize your strengths and play down your weaknesses by choosing activities and goals where you do best. Take care of yourself physically so that you look good to yourself and to others. MODULE 4 PACKET BAE 417 – ENTREPRENEURSHIP AND ENTREPRENEURIAL MOTIVATION MODULE 4 LEARNING OBJECTIVES: By the end of this module, the students will be able to: 1. Distinguish the two major motivational factors, internal and external motivation factors 2. Identify the steps that drive the business to grow and develop and the challenges faced by new entrepreneurs 3. Discuss digital entrepreneurship and its opportunities and challenges. 4 Understand effectuation as a way expert entrepreneurs think. 5 Develop the notion that entrepreneurs cognitively adapt. 6 Discuss the difference between developed (advanced) and developing countries. 7 Explain the meaning of development and its core values. 8 Describe how culture influences entrepreneurship and how entrepreneurship contributes to a country’s development. ENTREPRENEURIAL MOTIVATIONS The traditional reason for a person choosing to be an entrepreneur is financial gains. But, according to research, the motivation of a person's entrepreneurial activities cannot be necessary only to fulfill the economic reasons, but it can be to gain social or lifestyle reasons. People have different motivations, ability, and desire to grab the opportunity they see and become entrepreneurs. According to their different motivations, they have a different perception of opportunity considerations, risk-taking behavior and decision-making process. Behind every successful entrepreneur there are some questions which make people curious all the time, where do the persistent motivations come from and help them achieve their goals. There are two major motivational factors, internal and external motivation factors. 3.1 Pull factors The positive motivations for an individual to be an entrepreneur are pull factors. The reason for a person to enter self-employment is that he/she has seen a chance, whether it is a better working condition, better self- expression or even financial freedom opportunity. A chance to introduce a new business idea to the market or an opportunity to create a new business are some of the pull factors that drive entrepreneurs to start their own new business. Here are explained the factors such as a need for achievement, need for independence, need for financial freedom, and persistent love for doing something great as pull factors n entrepreneurship. (Nel, Maritz & Thongprovati 2010.) 3.1.1 Need for achievement Need for achievement and solving a big problem is one of the most powerful motivation towards being an entrepreneur. Take Bill Gates as an example, when he started Microsoft he had the wildest mission ever: computer on every desk and in every home. Actually, at that time he had everything based on his family condition except his unaccomplished dream. His strong desire to accomplish his mission gave him the courage, power, and passion to work persistently over several decades. Now he has a company with more than 80000 employees across 100 different countries. An individual who has a higher need of achievement is more likely to engage in activities that require individual skill and effort, a high degree of responsibility for outcomes, have a moderate degree of risk and clear feedback on performance than an individual with a low need for achievement. So, people high in need for achievement will be more likely to take an entrepreneurial job as their careers than another type of roles. 3.1.2 Desire for independence and financial freedom Independence involves taking responsibility for one's own life rather than living off the efforts of others, and also independence requires using one's own judgment instead of blindly following the assertions of others. According to the research, desire for independence is found to be the primary cause for many people to become an entrepreneur. And most likely entrepreneurs enjoy more independence than other individuals. The people who answer ‘NO' for the question: "Do you want to make a living by relying on others?" tend to start their own business and have a strong motivation for becoming an entrepreneur.  Even though the business they started was a very small one, they are willing to do it. They don't want to listen to others, they don't want to work within any limitation, like asking permission for anything before they take action to do something, and most importantly they don't want to put their time and energy to work for other's dream every day. Because they clearly knew something that they were even forced to do things that they even did not like, they want to be independent and work for their own, this is one of the most important motivational factors behind entrepreneurs (Shane et. al. 2000, 260.) To be realistic, money cannot solve every problem, but we have to believe that money can somehow make life easier. The financial desire shows the fact that people need to increase and secure their own and family income level to secure a decent standard of living. So, the people who are motivated to become an entrepreneur often have a stronger desire to make more money, especially make money by themselves, not under control or limited by others. For them, life would be non- meaningful without having what they wanted. In order to have what they want, the only way is to start their own business, control their own career and have their own financial freedom even if there are some risks (Kiyosaki 2012.) 3.1.3 Persistent love for doing something great There is a hard and bleak truth that nine out of ten startups will fail. One of the driving forces for the last 10% of startups owners to continue and survive the hardest times are their love for what they are doing. The founder of Apple Steve Jobs said "Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do a great work is to love what you do." This is the love behind the world's most famous, leading and innovative company Apple and it is deep inside of the founder Steve Jobs who was the great entrepreneur of the last five decades. Every successful entrepreneur must have a passion that drives them forward. This is also the most important characteristic of most of the great entrepreneurs that they have the long-lasting love for what they are doing, and Steve Jobs is one of them. Because without persistent love nobody can continue in several decades since there are definitely some difficulties along the way and this is when the love plays dramatic roles. And only the people who love their doings can survive until the end. 3.2 Push factors Push factors are seen as "necessity" factors, and they are negative motivation for a person to set up his or her own business. Push entrepreneurs are those groups of people who start self-employment so that they can overcome the impoverished negative environmental impacts, such as unemployment, unstableness of the job market, a potential gap in the market, dissatisfactions caused in workplace competitive situations, lack of jobs in the job market, or even that they were tending to change their lifestyle. These push factors which are related to work are the key factors to push these individuals to be prepared for an entrepreneurial career. 3.2.1 Unemployment Lack of employment opportunities and career prospects is one the top factors for a person to be a self- employed. Nowadays, even though there are lots of job opportunities in the job market, but the challenge is equally big. At the point when a person becomes unemployed, the options are to get another job or become self- employed. On the other hand, situations like being unhappy in the current job, company, position or the job role itself are also some of the reasons for those people who are brave enough to start something of their own and start to control their lives by themselves. There are some groups of people who have unstable income, sometimes low, sometimes high and sometimes nothing. It might be because of the field, company or the economy in general, but this is also one of the triggering factors for them to start their own business and start a career as an entrepreneur and the only thing they want is some stability on their income. Of course, even if they start a business they might have unstable income, but at least they can have more control over their income. This comes back to Knight's view that an individual makes a decision between unemployment, self- employment, and employment. 3.2.2 Opportunity There are some groups of people who can start a business easily as soon as they have a profitable opportunity with minimum investment and less risk factor considerations. There are huge opportunities in the market that push them to grab the opportunity and start their own business. These include these individuals that found a demand for that particular service or product that they felt they could satisfy, most often they had hands- on experiences in that area already. Another example of an opportunity is the connections, contacts, resources, and knowledge they had in that particular industry, providing them with a new business idea or opportunity.  3.2.3 To live better in competitive society There are different types of "pushed entrepreneurs", including individuals who are fired from their jobs, who are not capable to do the jobs due to lack of education, language skills or criminal backgrounds. These groups of entrepreneurs are stimulated by the reality of the society, by the fast-changing society with full of challenge, full of competition. In order to catch up with current trends, this group of entrepreneurs is going to do something, because of the fear of being left behind by the society, even if they do not like to struggle every day to make things happen. Of course, most of the entrepreneurs enjoy the process. On the other hand, being an entrepreneur can be the last forced option for some individuals who could not find a job and do not have anything to survive. In other words, people in desperation to make a living might have more chance of starting their own business. And sometimes this might be the most important motivational factor for some great entrepreneurs to be born in the market. Of course, not all of the people who are in desperation will start a business, but some percentage of them will do, and they took the first step to become an entrepreneur to make a change of their lives, even though there is a small chance for ENTREPRENEURIAL PROCESS AND THE CHALLENGES FACED BY NEW ENTREPRENEURS An entrepreneurial process will contain certain steps that drive the business to grow and develop. 4.1 Entrepreneurial process There are four stages of the entrepreneurial process, which are Innovation, Triggering event, Implementation, and Growth. This model is supported by Hisrich & Peters (2002) who presented the four-stage entrepreneurial process as identifying and evaluating the opportunity, developing the business idea, determining the resources required, and managing the result. This model is presented in figure 1: This model is the integration of all the activities in the entrepreneurial process by Hisrich and Peters. Innovation Triggering event Implementation Growth Innovation, which include creating the business idea, searching for the market opportunity, marketing and information research, creating the concept, identifying the what is the exact value and the development of this product and service; Triggering event, which include, the motivation to start a business, gestation, creating the business plan, assessing the risk, resource acquisition and assembling, the decision to proceed; Implementation, which include setting up and launching the new venture, set up business strategy, business plan implementation, running the business, managing the venture, deploying of resources, incorporation; Growth, which include maximizing profit, getting rewards, continually growing the venture to include other opportunities. These four stages seem like separate from each other and come step by step, but in fact, they are overlapping and depending on each other. In the different stages of the process, there are different skills needed. The factors of problems and success vary according to each of the entrepreneurial process stage. 4.2 Challenges faced by new entrepreneurs 90% of start-ups fail according to Fortune Magazine (2015), and "Fail fast" is a common phenomenon in the startup world. On the road to success, entrepreneurs have to face numerous challenges. At some point, all entrepreneurs feel the pressure fall on their shoulders, and very few of them will overcome and head to success, and most of them will lose. This chapter discusses the common challenges faced by entrepreneurs, which are developing the business idea, raising capital, assembling a business team, finding good employees and right customers, dealing with competition, and keeping up with unforeseen changes, challenges, and expenses. 4.2.1 Developing the business idea and the vision When starting a business, the first challenge faced by every new entrepreneur is developing a business idea. You cannot start a business without a good business idea, and you cannot become an entrepreneur without a business. It is definitely not an easy task to find the right business opportunity or developing a business idea. Entrepreneurs must have eagle eyes to see what others cannot see. In other words, an entrepreneur must see opportunities while others see problems. It is not enough to just see the opportunities, but the real challenge is this individual’s ability to forge the opportunity into a business idea and implement it, creating value out of nothing. This process is like turning lead into gold. This also emphasizes the first step of the lifecycle of a start-up company, which is "SEARCH". (Kanchana, Divya & Beegom 2013, 73.)  Developing a business vision is also a business challenge that entrepreneurs meet in the early stage of setting up a business. It is definitely the duty of an entrepreneur to be ahead of his or her time to envision nd forecast the future, bring into present what is yet to be, instead of just the present way of doing things. Bringing solutions to problems or even upcoming problems is another duty of entrepreneurs 4.2.2 Raising capital After an entrepreneur got a brilliant idea, the next challenge an entrepreneur is going to face is raising capital. It is definitely a challenge to convince investors to invest in something that does not exist since the entrepreneur would be the only person who knows the idea and believes in its future. Trying to convince the investors to believe what you believe, and to make them understand that your ideas are trustworthy is not an easy task, especially for the totally new ideas which do not exist in the market. Additionally, there are plenty of other options for these investors to choose, and most investors prefer to invest in an already established business with a minimal risk and a return guarantee rather than a new one. In different stages, any startup company typically faces different financial problems and issues. (Salamzadeh 2015.) For example, during the building step, the founders would try to negotiate with their families or friends to invest in their ideas. Even though they got some investment, since the business is still in early stages, the entrepreneurs need more money to expand it. Afterwards, in the next stage, the entrepreneurs would search for angel investors, and try to convince them with reasonable valuation plans. In the next stage, the entrepreneur would go for a bigger and longer development and take advantage of venture capital. 4.2.3 Building a business team and finding good employees Building a good supportive business team is the third challenge that an entrepreneur will face when starting a new business. Building a business team should even start before raising the start-up capital for the business. Because a great business team is considered as an asset to a company and many investors put one of their main consideration into the team members. Most of the brilliant ideas and products of the start-up companies even get no chance to get founded because the founder is trying to search for funding as an individual. It is also a common mistake that new entrepreneurs make that they think they can cope with everything alone, and definitely, that is not a long run business strategy. There is no doubt that an entrepreneur has strengths and weaknesses. So, building a strong team is necessary for building a successful business and cover up or compliment the entrepreneur's weaknesses. It is a duty of an entrepreneur to make sure that the team has value and sees the same future as the entrepreneur see. It is not an easy job to pick up right team members for a startup, and it can be stressful and difficult. It is not just enough to find candidates who fit the certain roles, but most importantly the entrepreneurs need to consider their culture and working style fit, and how they will work as a part of the team. This will be even especially stressful when they need to consider the costs to the business and they are under pressure of filling the positions as soon as possible. The process of finding good employees is not as easy as some writers and managers crank up. This process is not simply about presenting the job description and requirements and waiting for the right employees to come. The group of people who know the difficulty of finding trustworthy, hardworking and be passionate employees is the business founders. Often most employees want to work less, while getting paid more. It is really difficult to find the right employee who will be passionate about the business and see the same value and picture of the company as the owners do, and especially their style of working should match the business culture, since the employees represent business to the outside world and are a reflection of the business culture and ethics. (Kanchana et al 2013, 75.) There are several mistakes that new entrepreneurs make when hiring employees. The most common one is to hire someone closest to them, like friends or family members, without making sure that they have the skills to be able to fill the gaps in the company. The second mistake is always going cheap when hiring employees. It is understandable that startups are in a lack of capital, but to bring in someone with experience and talent which can bring the best value to the company is often the best option for a startup. The third mistake is to hire someone just for fixing a current problem and end up paying more in the long run. The best way is to have a proper training to make employees grow with the company and have a processor roadmap to fix the upcoming issues on the way. There are also other mistakes for example hiring someone who is very similar person as the owners, hiring too fast and hiring before defending the roles and responsibilities of this employee. 4.2.4 Marketing and customers New entrepreneurs often have very creative and potential business ideas, but the main problem is how to commercialize these ideas on the global scale. There are many problems regarding commercialization such as inadequate market knowledge and information, payment risks, uncertainty about the market laws, technical standards and regulations. Although the new products or ideas may seem perfect for the creator, the customers may not see them in the same way. During the whole process, companies do not do enough testing in the field, or they are too optimistic, or misread the assumptions about the acceptance of the product or the market. So, it is important to do enough marketing research to hear customers' voice and consider them in the product development. Marketing resources are needed when a new product is launched to the market. At the same time, another main challenge for a startup is a lack of customers. Getting customers is hard and challenging, and there are different reasons why some companies fail in that. For example, a non-functional product or a product with too many features do not fill the customer expectations and attract customers. The credibility gap is also one particular challenge for new customers to engage in companies, because of the fear that they may leave without anything if the company fails. 4.2.5 Decision-related challenges and the entrepreneur themselves According to a Finnish business consulting company called Accelerando which is working especially with young start-ups and has a wide knowledge of common start-up challenges, there are five common challenges related to decision making, which are called "five deadly sins". They are inability to lock strategy, unrealistic budget, being too nerdy, poor execution, and competence and attitude diluting too fast. The first decision-related challenge is the inability to lock strategy. Having an effective strategy is important for a company, but to stick into that and concentrate is equally important. It is hard to concentrate on right things if the clear focus is missing, and the company will end up doing too little or too much. It is essential to clarify the strategy and understand the market. The second challenge is an unrealistic budget. Getting started is important for a company, but if the founder do not know how to budget, placing too high or too low budgets into the projects, will cause a problem sooner or later. The third challenge is being too nerdy, and nine out of ten startups fail because of focusing only on the technology or the product itself, but not paying enough attention to making the buying process easier for the customers. The fourth challenge is poor execution. Creating ideas or products is not the most time-consuming process in the business in general, but the actual implementation takes a long time with a lot of problems and challenges with it. The last, but not the least, challenge is competence and attitude diluting too fast, and it is really important for a founder to balance the t