Entrepreneurship Chapter 1 PDF

CHAPTER 1  CLERICS – builders, managers of large production projects using resources ENTREPRENEURSHIP  CANTILLON – “entrepreneur” - Crea...

CHAPTER 1  CLERICS – builders, managers of large production projects using resources ENTREPRENEURSHIP  CANTILLON – “entrepreneur” - Create w/ proper combination of available  JEAN BAPTISTE SAY – leaders, bringing resources & ideas (limited by economic others to build a single productive envt) organism; distinguished b/w profits on - Obtain fair profit capital & entreps - Innovate, expand, invest in something new  ADAM SMITH, DAVID RICARDO, JOHN – taking risk STUART MILL – business management; S&R - Success depending on economic situations – undervalued importance of entrep; M – - ROLE: growth in GDP/economy significance of economic growth  CANTILLON, Richard – buying at certain  INVISIBLE HAND THEORY (Smith) – not price, selling at uncertain price; trading – needing the effort/desire of capitalists to risk; father of theory of entrepreneurship develop directions; no ordinary skill  SCHUMPETER, Joseph – innovative function  FRANCIS WALKER – distinguished b/w new and better adding improvements-utility indvls who supplied funds & received  LAMB, Robert K. – economic activity w/ interests for these funds & received profit innovation; social decision making from managerial capabilities  COLE, A.H – production/distribution; profit-  ALFRED MARSHALL – 4 factors of making – focus production: land, labor, capital, organization  RONSTADT, Robert C. – creating (– coordinating factor bringing the factors incremental wealth – dynamic process; by together); (entrepreneurship – driving assuming risk: equity, time, commitment, factor of org.); deep understanding of quality; invent/same product w/ value by industries, natural leaders, foresee changes receiving & locating skills & resources – act riskily; taught skills to be an entrep  HISRICH, Robert D. & PETERS, Michael P. –  HARVEY LEIBENSTEIN – should be gap- efforts for creating w/ value to the society; fillers; seeing where the market lacks rewarding activity; risk; expanded demands w/c aren’t currently supplied Ronstadt’s  SCHUMPETER – innovators & developers of  AGUSTIN-ACIERTO – ideas to business untried tech  MEDINA – economic activity of  DAVID MCCLELLAND - productive, entrepreneurs moderate risk-takers  PETER DRUCKER – maximize opportunities; ORIGINS OF ENTREPRENEURSHIP seek  RISK BEARER – in uncertainty & lack of info  ALBERT SHAPIRO – initiative, organize  INNOVATOR – improve things social/economic mechanisms, accept failure  OPPORTUNITY RECOGNIZER  MARCO POLO – practiced trading w/  LESS DEVELOPED COUNTRIES (LDC) – contracts; venture capitalist – passive risk- instead of innovators, copy-cats/adapters takers, trading w/ risk are termed due to poor availability of resources & funds. Neido 3+  o CREATIVE IMITATION – comprehend (3) rational resource allocation – not capturing how innovation is applied or used complexity of market-based systems; DEV’T & GROWTH THEORIES (4) efficiency-based performance – not subsume innovation & non-uniform outputs;  ECONOMIC ENTREPRENUERIAL THEORY not describing uncertainty: known means/ends - Deep roots in classical & neoclassical & & perfect/semi knowledge; perfect competition Austrian Market Process (AMP) X innovation & entrepreneurial activity 1. CLASSICAL THEORY (5) entrepreneurial activity – destructive to the - Directing role of entrepreneur – productive order of economic system and distribution of goods in competitive marketplace (economic world)  3 MODES of PRODUCTION: land, capital, AUSTRIAN MARKET PROCESS (AMP) labor - From unanswered question of NC - Virtues of free trade, specialization, movement competition - JOSEPH ALOI SCHUMPETER 1934: o GAP: no explanation for dynamic concentrated on human action – economy upheaval/trouble generated by entreps of knowledge industrial age o Entrepreneurship as driver of - Result of Britain’s industrial revolution market-based systems – create new 1700-1830s – impulse for the motion of market economy; balance entrep & market 2. NEO-CLASSICAL THEORY - MURPHY, LIAO, WELSCH 2006 – movement - Emerged from criticisms of classical model offered a logic dynamic reality – knowledge - Indicated economic phenomena – communicated throughout market systems, relegated/dismiss to instances of pure innovation transpires, satisfy market needs, exchange, reflect optimal ratio, transpire in system-level change occurs economic system (closed) o Entrepreneur – knows to create new - Market equilibrium – law of demand, law of goods/services = benefits reaped thru supply/price knowledge  ECONOMIC SYSTEM – exchange participants, occurrences, & impact of results of exchange on other market actors PSYCHOLOGICAL ENTREPRENEURSHIP THEORIES o Importance – diminishing marginal - Personal characteristics – stable qualities utility for impetus for entrep in NC (inborn/acquired)  Criticisms: - Reviews traits needed for achievement & (1) aggregate demand – ignores uniqueness of locus of control indvl-level entrep activity; o Factor: environment (2) neither use nor exchange value reflects  3 CHARACTERISTICS FOR future value of innovation outcomes; ENTREPRENEURIAL INCLINATION: risk taking, innovativeness, ambiguity-tolerance Neido 3+ LOCUS OF CONTROL (Julian Rotter) - Access to resources – can act upon an opportunity - Important aspect of personality ( – effects on inclination) FINANCIAL CAPITAL/LIQUIDITY THEORY - Perception about underlying main causes of - Money needed to fund firms, acquire events resources,  Outcomes contingent to INTERNAL - > info & knowledge = more opportunities CONTROL ORIENTATION (ability) or EXTERNAL CONTROL ORIENTATION (luck, SOCIAL CAPITAL or SOCIAL NETWORK THEORY chance, fate) - Success from own ability & external support - Investors/stronger ties = able to acquire resources = opportunity NEED FOR ACHIEVEMENT THEORY (McClelland) HUMAN CAPITAL ENTREPRENEURSHIP THEORY - Driven by the need to excel  Factors: (1) education, (2) experience - Central understanding & knowledge in identifying & exploiting opportunity 3. SOCIOLOGICAL ENTREPRENEURSHIP ENTREPRENEURSHIP CONTRIBUTION TO THEORY ECONOMY - Connections & its benefits - Uphold relationships, trust 1. Utilization of Resources  4 SOCIAL CONTEXT (Reynolds): (1) social 2. Provide Employment networks, (2) life course stage (analysing life 3. Backbone of Economy directly proportional events), (3) ethnic identification, (4) – GDP, Business population ecology 4. Innovate Goods & Services for convenience 5. Gain International Popularity for country 4. ANTHROPOLOGICAL ENTREP THEORY 6. Risk Takers - Origin, development, customs, beliefs of 7. Inspire Others to venture into business community SOCIO-ECONOMIC BENEFITS - Influence of one’s culture & practices  Potent force & recognized sector of OPPORTUNITY-BASED ENTREPRENEURSHIP economy THEORY (Peter Drucker, Howard Stevenson) 1. Promotes self-help & employment - Search for change, respond, exploit the 2. Mobilizes Capital for more incomes opportunity 3. Provides Tax  Entrepreneurial management – pursuit of 4. Empower Individuals opportunity w/o regard to controlled 5. Promote National Identity & Pride resources 6. Enhances Competitive Consciousness – innovations RESOURCE-BASED ENTREPRENEURSHIP THEORY 7. IMPROVES QUALITY OF LIFE convenience - Importance of financial, social, human 8. EQUITABLE DISTRIBUTION OF INCOME & resources WEALTH Neido 3+ CATEGORIES OF SMALL & MEDIUM ENTERPRISES REASONS for SME to PROSPER SME 1. Develop More Personal Relationship – 1. CAPITALIZATION more human contact with products & a. Micro ≤150k producers; better info, quick feedback b. Cottage 150k-1.5M 2. Low Overhead Costs – small scale of c. Small 1.5M-15M operation, cheaper/free labor, low prices d. Medium 15M-60M 3. Catering to Limited/Include Markets – 2. EMPLOYMENT SIZE meet the demands of the community a. Micro ≤5 4. Quick Response to Trends/Situations – b. Cottage 6-9 require less resources in implementing c. Small 10-99 decisions, offer the demand d. Medium 100-199 CHALLENGES FOR SMALL BUSINESSES BARRIERS TO GROWTH OF PH SME 1. Time – decision making, open during a. Poor access to finance holidays or whatsoever b. Obsolete technology 2. More Manual Labor due to inadequate c. Low productivity access to resources/materials d. Lacks skills in upgrading 3. Errors in Production, Low e. Lack of info Quality/Standards adding +cost f. Inability to make entrepreneurial transition 4. Inability to Employ Skilled Workers, g. Poor linkage among industries Professionals due to salary rate, affecting h. Inappropriate location quality & productivity i. Incompetent management 5. Inadequate Access to Technology & j. Poor market access Information k. Lack of infrastructure 6. Lack of Financial Support own money l. Bureaucratic/cumbersome procedures instead of capital from shares of stocks m. Severe global competition IMPORTANCE & BENEFITS OF SME a. New ideas & innovations – useful for the future – convenience b. Success of local economy (GDP); c. Meeting the needs of the people d. Contributing to the community’s productivity e. Distributed growth & development f. Revenue of local community Neido 3+ CHAPTER 2  RISK TAKING - Assess hazards & perils of situation PERSONAL ENTREPRENEURIAL COMPETENCY - Calculate chances of success & profits  ACHIEVEMENT CLUSTER PLANNING CLUSTER  PLANNING CLUSTER  POWER CLUSTER  GOAL SETTING - Set realistic goals & attainable objectives ACHIEVEMENT CLUSTER o Realistic, self-reliant, master principle of  OPPORTUNITY SEEKING synergy, write down goals, set date, smart - Identify possible profitable business endeavor  INFORMATION SEEKING - Actively look for gaps & alter ideas turned - Updates w/ relevant info from credible & into opportunities reliable resources - Fill in markets where demands are not - Awareness in past, present, future issues of reached business o Observe environment, read for ideas, attend seminars, imagine  SYSTEMATIC PLANNING & MONITORING  Assess market situation, - Ready himself & enterprise to undertake  see discrepancies b/w current production business venture process, market demands, gaps-sellers & - Blueprint, steps to achieve something buyers; o Sun Tzu – clearness of plan &  know how to make market situation to assurance in following it = success profit POWER CLUSTER  PERSISTENCE  PERSUASION & NETWORKING - Persevere despite obstacles & failures - Influence & convince others - Courageous to continue hard work - Socialize & develop strong connections o set achievable goals, task o Focus on benefits of decision/action lists/deadlines, go-getter o Women > conversational than men  COMMITMENT TO WORK CONTRACT  SELF CONFIDENCE - Keeping one’s word/promise (high value) - Sense of security w/ oneself - Maturity & strength of character (commit) - Sure of his abilities, skill, talents – uses these w/o hesitation  DEMAND FOR QUALITY & EFFIENCY - Has standard - Produce consistent results for satisfaction ENTREPRENEUR o Garbage in/out – low quality materials = low quality product - Innovators, risk-takers 1. Has idea for business 2. Has business skills – organize & run various factors of production Neido 3+  3. Assume Risks – calculate it & invest ROLES: resources  Perceive opportunities 4. Make Profit  Take risks INVENTOR/INNOVATOR ENTREPRENEUR  Mobilizes capital (grow)  Innovates invent Invent & make profit  Organizes labor & production  Makes decision ENTREPRENEUR MIND BUSINESSMINDED  Plans ahead Innovates Customer Oriented  Sells products at a profit Own idea Profit Minded CATEGORIZED AS: Trend Starters Promote & continue – Focuses on needs stable  SOLO SELF-EMPLOYED – operate alone or Risky Improve innovation hire few employees & perform work personally  DEALERS TO DEALERS – trades, CHARACTERISTICS OF ENTREPRENEURS direct/indirect to line of work 1. First-born  TEAM BUILDERS – building large companies 2. Married by hiring & delegation 3. Men > women  INDEPENDENT INNOVATORS – ideas for 4. 30s; men early 30; women late 30 better products/services; create companies 5. Creativity, independent, can handle to develop, produce & sell uncertainty  PARTNER MULTIPLIERS – resellers, 6. Bachelor’s degree partnership (jolibee; NikeXApple); effective 7. Need for independence business pattern to multiply profits 8. Strong relationship w/ parents – succession  ECONOMY OF SCALE EXPLOITERS – locate 9. Believe in luck business in lower rent & tax areas 10. Focused on long-term  CAPITAL AGGREGATORS – sourcing funds; 11. Rely on professional management use experience & expertise in pooling a 12. Pride in being doers group of financers 13. Take calculated risks  ACQUIRERS – buy businesses (TWT to X) 14. One w/ group or fit into crowd  INDEPENDENT INVENTORS – seek 15. Fall in love w/ anything new patents/credits; inventors who developed 16. Look for newest challenge (new ventures) own products & are in charge of managing  BUY & SELL ARTISTS – corporate raiders; ENTREPRENEUR VENTURE CAPITALIST buy near-bankruptcy businesses Long term for profit Invest & earn on average for ≤ 5 years Neido 3+ OTHER CATEGORIES OFF ENTREPRENEUR ENTREPRENEUR MANAGEMENT  IMMIGRANT ENTREPRENEURS – move to o Idea to o Employee foreign country & start business there business o Works for  CORPORATE CASTOFFS – fired or resigned o Owner w/ risks salary (no risk) o start & expand o Focus on daily then decided to start their own business smooth  COPRENEURS – couples running business o Motivation- function together achievement o motivation-  CYBER ENTREPRENEURS – online; digital o Reward – effort power/position  PART-TIME ENTREPRENEURS – has regular o Casual & o Reward – salary job & own business informal role o Approach is  HOME-BASED BUSINESS OWNERS – from formal to problems their home o Maintains ADVANTAGES status quo of company  Gain control of own destiny  Make a difference DEVELOPMENT OF “ENTREPRENEUR”  Reach full potential  Gain unlimited profits  Contribute to society – efforts recognized  Enjoy DISADVANTAGES  Income uncertainty  Risk of losing entire invested capital  Long hours of work (full responsibility)  Lower quality of life (hands-on)  High levels of stress MOTIVATIONS IN BECOMING AN ENTREP 1. DESIRE TO BE ONE’S OWN BOSS 2. DESIRE FOR FINANCIAL REWARDS 3. DESIRE TO CREATE ONE’S JOB SECURITY 4. DESIRE TO IMPROVE ONE’S QUALITY OF LIFE Neido 3+ CHAPTER 3 o IDEAS PROMPTING – encounter w/ someone else’s idea, customer request, SOUND BUSINESS IDEA events provide clues - NEW BUSINESS VENTURE: Gaining a SCREENING GENERATED IDEAS foothold in the market; success for market entry - Preparation of a list, pick the best - ESTABLISHED BUSINESS: Grow & maintain, o CRITERIA: Feasibility of market, success in competitors technical, financing, financial o Applies the sound business  Economic opportunity w/in the reach of  MARKET FEASIBILITY entrep providing desired value.  Stable & sufficient demand – > demand to (commit/maximizing profit) justify investment; >demand >profit  Time-efficient, less effort, effort  income statement – opportunity-seeking summary of o USING SEARCH QUESTION – answer to planned/expected needs; search question performance (revenue, expense, profit (time)) Neido 3+  balance sheet – hinder accomplishment of obj.; planned/expected position of techniques to minimize risk enterprise on a given date b. REWARDS FOR CREATIVITY –  cash flow – in/out of money assurance of existing; motivate o Determination & analysis of financial c. OPEN COMMS – free-flowing of ratio ideas; problems directed to indvls w/ the ability to offer solution o VERTICAL – hierarchy, up to down o HORIZONTAL – w/in dept d. ALLOWANCE FOR ERRORS – creative indvl finds solutions to correct errors e. CLIMATE OF PARTICIPATION – all members participate f. STRUCTURAL MECHANISMS AIDING CREATIVITY –different parts of a system works together; solved problems easily if there’s structural mechanisms w/in org PRODUCT OR SERVICE IMPROVEMENT: g. TRAINING IN CREATIVITY – creative pursuits (talent, trained) 1. MAINTENANCE COST – life span (matagal) h. FLEXIBILITY – creative employment 2. PERFORMANCE – quality, foundation allowed to engage in activities on 3. ACQUISITION COST – low cost product accommodating hours 4. SALVAGE VALUE – after maintenance value 5. USES – multiple IDEATION FINAL SELECTION - Beginning of business endeavors (invest) - Screening for elimination of ideas o Best source of ideas: market 1. STATUS QUO – all lists passed the criteria - Creative process of generating ideas (from screening) - More ideas, more quality 2. SHORTER LIST – some were eliminated CATEGORIES: 3. ZERO LIST – 1 left (best) a. NEED/WANT DRIVES ORGANIZATION CULTURE & CREATIVITY b. TIME-SAVING DRIVES - Continuous survival & growth thru effective c. MONET SAVINGS innovation d. UNIQUE; INCORPORATING STRONG o Innovation thrive in creative COMPETITIVE ADVANTAGES organization w/ culture: e. LINK TO PERSONAL INTEREST (PASSION) a. ENCOURAGE CREATIVITY & RISK- TAKING – in finding solutions that Neido 3+ WAYS OF DEVELPING IDEAS: by social environment both level & frequency of creative behavior 1. RECOGNIZING THE NEEDS - satisfy 2. IMPROVE EXISTING PRODUCT – innovation ENVIRONMENTAL STIMULANTS FOR CREATIVITY if dissatisfaction a. FREEDOM – sense of control 3. RECOGNIZE TREND – opportunity to b. GOOD PROJECT MANAGEMENT – manager develop products as role model 4. AWARENESS – research & read c. SUFFICIENT RESOURCES – access 5. QUESTIONS & ASSUMPTIONS – relevance, d. ENCOURAGEMENT – enthusiasm for new assume if long term effect ideas 6. NAME then DEVELOP – name lasts, worthy e. VARIOUS ORGANIZATION CHAR. – TIPS IN EVALUATING IDEAS: mechanism for considering new ideas f. RECOGNITION – receive 1. Money follow ideas g. SUFFICIENT TIME – time to think creatively 2. Be a problem solver about sa problem 3. Research as a weapon against failure h. CHALLENGE – arising from intriguing nature 4. Idea longevity of the problem itself 5. Risk on ideas i. PRESSURE – sense of urgency from 6. Test idea against past, present, future competition as a personal challenge 7. Know idiosyncrasies of the market – needs j. OUTSIDE ORGANIZATION – general desire to & factors affecting the buying process accomplish PROTECTING IDEAS: CONCEPT & IMPACT OF INNOVATION 1. CONFIDENTIALLY AGREEMENTS – no sharing - Efforts must be impact-positive of ideas 2. PATENTS – exclusive legal rights to the INNOVATINE ACCOMPLISHMENT EXISTS IF: inventor excluding others to sell, 1. EFFECTING A NEW POLICY – change in manufacture w/ the name orientation/direction o CLASSIFICATIONS: (1) design, (2) 2. FINDING NEW OPORTUNITIES – develop utility, (3) plants patents new 3. TRADEMARKS – distinguish from 3. DESIGNING NEW STRUCTURE – changing competitors; conjunction w/ formal structure, reorganize business/product 4. DEVISE A FRESH METHOD – introduce new 4. COPYRIGHTS – protects creative works; intellectual property ENTREPRENEURIAL CREATIVITY INNOVATION AS: - Creativity, innovation, entrepreneurs – 1. New product inseparable 2. New process of innovation - Creativity - + innovativeness; starting point 3. Substitution of cheaper material of process; innate characteristic; influenced Neido 3+  4. Reorganize production, internal function, distribution arrangements for increased efficiency, support 5. Improve instruments/methods of innov. INNOVATION AS LAST STAGE IN IMPORTANT PROCESS: 1. INVENTION – discovery/improve products; create 2. DEVELOPMENT – principles from invention used to create products/services 3. INNOVATION – actual introduction of product ELEMENTS OF INNOVATION ORIENTATION: a. Value to creativity & innovation b. Orientation towards risk c. Sense of pride; enthusiasm of their ability to do something d. Offensive strategy of taking the lead Neido 3+ CHAPTER 4 (3) Ready transferability of ownership – shares are sold or transferred at will; (4) BUSINESS OWNERSHIP & ORGANIZATION Obtaining capital – capital from the investors; (5) Employee benefits – provide incentives (care, reward) TO CONSIDER IN SELECTING BEST LEGAL FORM OF  Disadv: (1) Legal formality & cost - ORGANIZATION: corporation more control & compliance w/ 1. OWNERSHIP – determine the percentage regulations (tax); (2) Cost, Time – owner will shares work to create and manage the business; 2. MANAGEMENT – works/handles the work cost > time, effort; (3) Taxation – big 3. OWNER – overall goal of the business business, more magless sa tax; double 4. FINANCING – needed money for capital taxation – company profit & stockholders 5. LIABILITY – separation of assets b/w (investors); more profit, higher tax; (4) personal & business; ASSETS – gain; Potential loss of control by founders - LIABILITY – debt boundary b/w founders & management 6. INCENTIVES – attract managerial; benefits, salary  COOPERATIVE – duly registered association 7. TAXATION – legal; for gov’t of persons; voluntarily joined together to achieve a lawful common; Republic Act BUSINESS ORGANIZATION: 6938 – Coop Code of PH; equal; community- oriented than profit; 15 or > =  SOLE PROPRIETORSHIP – 1, solo profit members/shareholders (owners)  Disadv: unlimited liability (mag-isa), limited  Adv: (1) Tax privileges – gov’t sponsored capital (money), activities – no more added taxes; (2) Ability  Adv: all profit sayo to provide direct benefits – cheaper products & services  PARTNERSHIP – 2 or >; depends on the  Disadv: (1) Inequality of profit distribution – characteristics of the business same amount of shares; (2) Pro-masses/  Disadv: one dies (> debt), all other partners pro-poor bias – community oriented; not cover it up; share expenses reach the demanded profit  Adv: > ideas, > brain PRINCIPLES of COOP:  CORPORATION – intangible, contemplation 1. OPEN & VOLUNTARY MEMBERSHIP of law; > owners (stockholders – sell their 2. DEMOCRATIC CONTROL – equal voting interest) w/o affecting continuity of its rights operations; dependent/distinct from the 3. LIMITED INTEREST OF CAPITAL – limited stockholders; (15 only) amount of shared capital  Adv: (1)Limited liability – limited investment 4. DIVISION ON NET SURPLUS – members amount in stock ( hm ur shares, that’s ur gaining benefits liablity); (2) Legal entity – rights; proper 5. COOPERATIVE EDUCATION – make dealing of the problem; provisions for education Neido 3+  6. COOPERATION AMONG COOP. – serve area of operation, size of membership, and interest other pertinent data - 2. Four (4) copies of Articles of REQUIRMENT & PROCEDURE FOR REGISTRATION incorporation together with the bond of - check w/ gov’t agencies to legally operate accountable officers - Four (4) copies of By-laws Registering A Single Proprietorship - Registration fee as prescribed by CDA - Register the business name with the Department of Trade and Industry under the Bureau of Domestic Trade. Dealing With Local Government Units - 2 pcs. 2X2 picture - Papers/docu issued by LGU (DTI, SEC, CDA) - Application fee or registration fee of P110 upon approval Registering A Partnership - Local Gov’t Code empowers LGU to take complete control of their respective - Prepare partnership agreement jurisdiction & make legislation & ordinances - File the partnership agreement with the SEC to the needs of the locality (including tax - Pay filing fee fees impositions - Evaluation of the application by the lawyer o business applicants are affected and staff of Corporate and Legal Department WHERE TO? - Release of the approved registration is 1. Barangay Clearance: Local Barangay Office within 15-30 days 2. Register Business Name: Department of Trade Registering A Corporation and Industry (DTI) Securities and Exchange - Prepare Articles of Incorporation and By- Commission (SEC) (for partnership & corporation laws, bank certification only) - File Articles of Incorporation and By-laws 3. Secure Business Permit or License: Local with the SEC (security & exchange Municipal or City Hall commission) - Pay registration fee 4. Get Tax Identification: Number (TIN) and Secure - Evaluation of application by lawyer and staff an Authority to Print of Corporate and Legal Department 5. Register as an Employer: Social Security System - Release of approved registration ls within (for SSS remittances of workers) 15-30 days 6. Other Government Agencies: Involved in Registering A Cooperative Registration of Business - The following documents shall be forwarded o Failure to comply – consequences with to CDA (cooperative development benefits authority); - Four (4) copies of the economic survey with a general statement describing briefly the structure, purpose, economic feasibility, Neido 3+ AGENCIES: Dealing With Other Government & Private Bodies a. BIR – tax - Agencies like DENR and DepEd may have to b. DOLE – implement programs, policies (can be consulted for their requirements to the complain here) registering organization. c. IPO – patents, trademarks, copyright - entrepreneur's own neighborhood may d. BFAD – foods, cosmetics oppose a business proposition within the e. TESDA – training of the skills barangay. f. NFA – authorize foods (rice, corn, flour) g. PCA – ensure dev’t of oil & coco h. FIDA – handle abaca/ fiber products i. DTI-BPS – standards for quality j. BFAR – protect marine animals k. BAI – protect animals l. BPI – for exporter of plants m. BFD – forest products n. NTA– tobacco MEANING: a. BIR – Bureau of Internal Revenue b. DOLE – Department of Labor and Employment c. IPO – Intellectual Property Office d. BFAD – Bureau of Food and Drugs e. TESDA – Technical Education and Skills Development Authority f. NFA – National Food Authority g. PCA – Philippine Coconut Authority h. FIDA – Fiber Industry Development Authority i. DTI-BPS – Department of Trade and Industry, Bureau of Product Standards j. BFAR – Bureau of Fisheries and Aquatic Resources k. BAI – Bureau of Animal Industry l. BPI – Bureau of Plant Industry m. BFD – Bureau of Fire Protection Neido 3+ CHAPTER 5 FINANCING THE VENTURE LONG TERM BORROWINGS - Debt to start business if no money - medium-term creditors – main businesses meant for providing form of financial assistance CAPITAL REQS 1. MORTAGE – pledging a designated property 1. FIXED CAPITAL as security for loan; sangla; interest, monthly - Money needed for equipment, lands repayment, 30 years - Backbone of the business liability (long run) 2. WORKING CAPITAL 2. BONDS – indebtness of issuing company that - Daily operation (short-term); wages, utility promises a fixed amount of interest to the - Ensure enough liquidity for day2day bondholders (no ownership); returns bond transactions principle - Hard cash - needs approval from SEC when bonds happen 3. GROWTH CAPITAL in corps. - For expansion & change in direction - Purchase new techs, equips., - fixed investments = expensive; less structured; high risk Neido 3+ SHORT TERM CREDITORS 2. Gov’t Institutions – need endorsements from kakilala; direct victims of calamities - cover working capital needs 3. NGO – provide financial assistance; lesser IR - flexible, meet immediate assistance 4. Political Sources – RS w/ politicians has - smooth cash flow, long interest rates adv&disadv; may lead to damaging of reputations 1. COMMERCIAL BANKS 5. Friends & Relatives – RS 2. MERCHANDISE SUPPLIERS – company’s 6. Purchase Order (PO) Financing – commercial inventory/stock may be obtained thru cash/credit banks/financing institutions; bank will finance the (consignment, lay away) production req., & upon delivery of goods to the 3. CREDIT CARD COMPANIES – most convenient; client 4. CAPITAL EQUIPMENT SUPPLIERS 7. Employees - RS 5. LEASING COMPANIES 8. Usurer – 5/6, no checking of track records; unlawful; last resort 6. RECEIVABLE FACTORS – risk of buying receivables at discounted rates 7. DEFERRAL OF PAYABLES IN GENERAL – RS w/ the STOCK MARKET & IPO (initial public offering) employees - Expansion of efforts thru innovation & intro of new products/services - IPO, an alternative for entreps to consider – VENTURE CAPITAL COMPANIES private to public - Private & for-profit orgs providing funds to UNDERSTANDING THE IPO new businesses by purchasing equity positions ---- - Understand the stock market system under o Entrepreneur surrenders portion of the help of the Philippine Stocks Exchange ownership (PSE) o Invest funds in return for the share - Private owned company lists its shares on of ownership PSE for the public to purchase - Help w/ the direct marketing & financial of  3 facts: the business a. New stock offering – underpriced o Old companies – check old records relative to their trading price in the o New companies – check business plan, market profit projection b. Cycles in both volume of new issues & size of the underpricing – “hot issue” the rise of initial returns & OTHER SOURCES volume (needs timing) 1. Lending Investors – collateral, check standing c. New issues tend to underperform limit, less paperwork Neido 3+ IPO PROCESS C’s of CREDIT - Buys the company, not the product - To be able to avail credits from other o Process can take up to 2 years, mainly 6- sources,, they need: 18 months 1. COLLATERAL – in the form of real estate, o Collecting info/docu equip, easily saleable property; o Roadshows – means of showing off the entrep/borrower’s guarantee – if loan can’t be company & improve potential price paid, this serves as the payment performance in the after-market – prepared & executed 2. CAPACITY – entreps/borrowers capacity to  Investment banker sells stocks thru pay the loan prospectus 3. CHARACTER – personal standing of the  Owners have limited influence in decision entrep in his community; standing - privilege making  Begins w/ the entrep’s decision to go public 4. CONTRACTS – needs to uphold the business’  Select investment banker – as underwriter, existence & profitability; not too strict sells shares 5. CONDITIONS – MOP, IR, penalties &  W/ underwriter, entrep prepares prospectus sanctions, provisions for settlement of dispute (legal docs) for SEC (terms & conditions)  IB & managers disseminate info to brokers to sell stock (6. CONNECTIONS) – network, respect, don’t  B4 releasing the offering to the public, abuse or take advantage, violating business decision for actual price is made ethics  Stock exchange, wait na lang DEALING W/ INVESTMENT BANKER - Sells securities to customers at the end of the trade RISKS IN GOING PUBLIC 1. Lose Focus & Direction in Life – entreps regret in the end; realization that the firm is the foundation of something greater 2. Burdensome in Managing the Liquidity of the Company Sales – others find financial management as tiring & less rewarding BORROWING FROM THE BANKS - Require collateral as security for loan Neido 3+  CHAPTER 6  raw products during the operation may be temporarily/permanently stored or moved PRODUCTION & MARKETING OF GOODS & SERVICES FACTORS OF PRODUCTION PRODUCTION – 1. LAND – natural resources - process of creating products/services; 2. LABOR – physical & mental efforts of work - sold at the market; firm delivers 3. CAPITAL – equipment, machines, bldgs., other - creation of utility (satisfaction) physical resources for production - requires set of inputs to yield set of outputs 4. ENTREPRENEURIAL ABILITY – coordinate the 3 PRODUCTION MANAGEMENT factors; spirit of enterprise - does: efficient utilization of inputs & the  input-output RS – productive resources production of outputs at least cost have to undergo processing stage B4 turning - aims: efficient utilization of resources; right into products quality, right price o input – raw materials, components, COSTS OF PRODUCTION labor, capital, energy, power - payments for the factors of production; & o output – goods/services ability & willingness of entreps to produce - for producers: lower cost of production,  know your market !! high profit - abundant raw materials – effectively utilize ENTREP’S ROLE COST OF A PRODUCT - transforms resources into products a. DIRECT MATERIALS – material input making up - decides the labor, capital, the product - has answers to what, why, how, when b. DIRECT LABOR – workers, outputs are closely - profit related to the making of the product  idea, then planned into a product/service c. MANUFACTURING OVERHEAD – all other costs  giant businesses – R&D (research & dev’t incurred, & is NOT part of the product dep’t)  practice cost reduction SUCCESSIVE STAGES OF OPERATION GOAL: PRODUCTION EFFICIENCY OPERATION – main step; raw material is changed - as production manager, aim for into something productivity-“arithmetical ration” b/w used 1. ASSEMBLY – putting parts together to form a & produces resources product - aim for effective & efficient utilization of resources 2. FINISIHING – polishing;  materials & labor as input; 3. INSPECTION – quality check using 5 senses Neido 3+  o Productivity Of Materials – ex. - Preventative tool Increase of 10% utilization of cloth, - Keeps entrep on track to impulsively dip skilled tailor cuts 11 strips, unskilled into business w/ 10 MARKETING PLAN CONTAINS: o Productivity Of Labor – produce more products during working hours 1. EXECUTION STRATEGIES – concrete o Productivity Of Machines – increase operational plan—from the factory to the production by changing speed & customer’s place (discounts, special offers…) such to produce more 2. OBJECTIVE – specific goals, targets, quantifiable/quality results IMPORTANCE OF MARKETING 3. MARKETING MIX – defines the position of - To: obtain & keep customers the business in the market place; - Know the insights of the market; for corporate/product identity to target improvement & such audience; work w/ 7Ps MARKETING CONCEPT & PHILOSOPHY 7Ps OF MARKETING - Entreps must have market orientation – 1. PRODUCT – view your product like ure a - Market driven, customer driven customer; ask questions—worthy? - Provide measures to maintain & thrive the Relevant? business 2. PLACE (CHANNEL OF DISTRIBUTION) – COMPONENTS of MARKETING physical flow of the goods from producer to 1. Customer Needs & Wants the consumer; - organization oriented marketing strategy, a. WHOLESALE – producers - business should fit the market’s interest dispose/sell their products here; WS sells to retailers, consumers 2. Organizational Integration b. DIRECT MARKETING – org directly - customer focus, comms w/ the market to transact - market sees the firm (impression); c. AGENTS – manufacturer’s employees should develop customer- representatives to contact oriented wholesaling companies + commission 3. Goal Achievement - strive for effective marketing contributing 3. PRICING – value placed on products; price to profitable sales charge have direct bearing to the consumers a. PRICING PRINCIPLES MARKET RESEARCH - Pricing cover costs - Lower cost, lower price - Discover the market (guide) - Regularly upgraded to reflect market dev’t NEED FOR MARKETING PLAN - Established to ensure sales Neido 3+  - Target prices adjusted accordingly - Set to preserve order in the market - Fixed to support overall corporate goal b. PRICING A SERVICE – pricing rendered vary to the type of business & product o Labor Cost – salary o Overhead Expenses – intangible costs associated w/ the manufacture of product, rendering of services o Profit – income earned 4. PROMOTION – advertise the products, spread accurate info, trends change 5. PACKAGING – judge the packaging! First impression (appearance); refers to people, place as well 6. POSITIONING – how are the products positioned in the market? In the hearts of the customers?; babalikan ba? 7. PEOPLE – ppl responsible for the sales; skilled workers, right ppl for right responsibility; Neido 3+