Entrepreneurial Management Course PDF

COURSE TITLE: COURSE GENERAL OBJECTIVES: This course aims to teach the approach entrepreneur use in identifying opportunity and creating new ventures, analytic skills that are needed to practice the approach and the background knowledge and managerial skills that are necessary for dealing with the recurring issues involved starting, growing and harnessing the value of new ventures. COURSE SPECIFIC OBJECTIVES: At the end of the course, the students should be able to: 1. Apply and explain entrepreneurial management principles and practices 2. Display appreciation on the significant contribution of small businesses in the economic growth and development. 3. Develop a business plan appropriate to learners and demonstrate presentation skills for the business plan. COURSE STRUCTURE: The course Entrepreneurial Management consists of three (3) structural units divided into 26 modules MODULE NO.8: DETERMINANTS OF SUCCESFUL ENTREPRENEURS MODULE OBJECTIVES After this module, learners should be able to:  Define entrepreneur and Entrepreneurship  Understand why people become entrepreneurs  Identify the characteristics of successful entrepreneurs  Know the qualities of successful entrepreneurs  Describe the skills needed to have as entrepreneurs  Discuss the benefits of becoming successful entrepreneurs  Risks of entrepreneurship INTRODUCTION Success people inspire other people to become successful. Those hopefuls believe that becoming an entrepreneur will allow them to network other people who have already built their great businesses. They think that they have enough potential to find the next profitable idea and change the life of millions. With respect to determining the factors contributing to the success of entrepreneurs, many studies have concentrated on the psychological and behavioral traits of entrepreneurs, the managerial skills and training of entrepreneurs, and the external environment. However, no consensus has been reached as to the level of importance of those factors in entrepreneurs’ success URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Factors that may contribute to their success of entrepreneurs are not unanimously agreed upon by researchers. Most entrepreneurial studies have concentrated on few factors like the managerial skills, trainings the external environment and psychological and behavior traits of entrepreneurs. Other studies in order to determine the role and importance of factors contributing to the success of entrepreneurs, an order legit model is applied to a sample of 130 entrepreneurs. The level of family support, good customer service, charisma and friendliness to customers, business stress, ability to manage personnel, previous business experience, hard work, appropriate training, satisfactory government support, political involvement, being married are found significant determining factors in entrepreneurs’ success. CONTENT ENTREPRENEUR - is a person who organizes a venture to benefit from an opportunity, rather than working as an employee. Entrepreneurs play a key role in an economy. These are the people who have the skills and initiative necessary to anticipate current and future needs and bring good new ideas to market. He is the person who creates a new enterprise and embraces every challenge to its development and operation. ENTREPRENEURSHIP - is defined as an act of starting and running your own business or a tendency to be creative and wish to work for yourself in your own venture. It is a process of creating a new enterprise and bearing any of its risk, with the view of making the profit. Reasons Why People Become Entrepreneurs To many, becoming an entrepreneur might seem like a scary and high risk- taking journey but to some, this unpredictable adventure seems like the perfect path that their life should take and just because: 1. They admire other Entrepreneurs – These hopefuls believe that becoming an entrepreneur will allow them to network with people who have already built great businesses. They think they have enough potential to find the next profitable idea and change the lives of millions. 2. They don’t want to have a boss – Some people struggle with some respecting authority. They don’t like the reality of having people in superior positions managing their work and looking over their shoulder. Even though they don’t like authority figures they believe that becoming their own boss is the only way that they can do work effectively and happily. 3. Can’t handle 9 to 5 Job – The repetitive and routine nature of working 9 to 5 doesn’t feed their burning passion for creativity and passion, They feel like they are simply doing what society expects of them instead of making a difference in the world. It’s through starting their own business that they get to freely express their creative ideas and fulfill their dreams. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 4. They like risks – Building a successful business take a lot of risk, and entrepreneurs love risks. They live for excitement and adventure, brainstorming new ideas and gambling their chance of succeeding in their target market gives them goose bumps. They look to manage projects with high stakes because they have enough confidence to execute them. 5. They just have no other choice – Some people become entrepreneur because they see it as a mandatory journey to take. Their prior experience in the job market or achievements in education makes them realize that working to others is no longer a life suited for them’ Characteristics of Successful Entrepreneurs To be a successful entrepreneur he must have the following characteristics: 1. Risk –Taker 2. Flexibility. 3. Self – Confidence 4. Tenacity 5. Passion 6. Professionalism 7. Integrity 8. Self - motivation Qualities of Successful Entrepreneurs Successful business people have many traits in common with one another. They are: 1. Disciplined – These individuals are focused on making their business work, and eliminate any hindrances or distractions to their goals. They are disciplined enough to take steps every day toward the achievement of their objectives. 2. Confidence – Entrepreneurs do not ask questions about whether they can succeed or whether they are worthy of success. They are confident that their business will succeed. They exude confidence on everything they do. 3. Open Minded – Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly being generated about workflows and efficiency, people skills and potential new businesses. 4. Self- starter –Entrepreneurs know that something needs to be done, they should start it themselves. They set the parameters and make sure that projects follow that path. They are proactive, not waiting for someone to give them permission. 5. Competitive – Many companies are formed because an entrepreneur knows that they can do a job better than the other. They need to win at the sports they play and need to win at the businesses that they create. 6. Creativity – Being able to make connections between seemingly unrelated events or situations that often come with solutions which are the synthesis of other items. They will repurpose the product to market them to new industries. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 7. Determination – They are not thwarted by defeats. They look defeat as an opportunity to success. They are determined to make all of their endeavors succeed, so will try and try again until it does. 8. Strong work ethic – Will often be the first person to arrive at the office and the last one to leave. Their mind is constantly on their work, whether they are in or out of workplace. Skills Entrepreneurs Must Have 1. Management skills 2. Network skills 3. Financial Management skills 4. Social Skills Benefits of Becoming Successful Entrepreneurs Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week. While this maybe tongue - in –cheek, it is true that entrepreneurs have built a reputation for breaking out of the mold and hardworking hard to live a certain kind of life. That is because, for many ambitious professionals, the benefits of entrepreneurs are incredibly rewarding. 1. A flexible schedule – So many people begrudge the office routine that is called the 9 to 5 grind. As an entrepreneur, you have the opportunity to break out of the cycle and create your own schedule. This scheduling power isn’t just feeling, it also may be healthier as well. 2. Autonomy – Reports on the multiple studies that have demonstrated the link between autonomy and job satisfaction. It turns out that employees who have more control over the work tend to be more engaged and less emotionally exhausted. 3. Creating a career that aligns with your values – It is intensely gratifying experience. Someone who believes in respecting the environment, for instance would probably find a career in renewable energy incredibly fulfilling. 4. Meeting like – minded people - By becoming an entrepreneur, you will join a group of ambitious and helpful people who believe in bettering themselves and the world. There are plenty of opportunities to connect with mentors, brainstorm with fellow professionals, and reach out for help during tough times. No one succeeds alone, but with a supportive network of like-minded people entrepreneurs don’t need to. 5. Constant growth and development - Starting a company forces you to constantly improve your skillset, from marketing to closing deals for creating excel reports. There is always more to learn and apply to your business, which can prevent complacency and encourage constant professional growth. 6. Unexpected and thrilling experience – Not knowing exactly how the day is going to play out when you wake up is exciting especially when compared to the predictable and monotonous schedule of a traditional office job. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 7. Choosing who to work with – Entrepreneurs can choose which clients to work with, employees to hire and partnership to pursue. If having to control over business relationships appeals to you, the entrepreneurs life maybe perfect to you. 8. Greater self – confidence – Nothing boosts your confidence more than batting self- doubt and coming out on top. Many entrepreneurs become more confident in their self- sufficiency as time goes on and they see what they are truly capable of. 9. Leadership experience – Self-discipline, communication skill, passion, optimism, patience and unrelenting work ethic. Building a company from the ground up hones these leadership traits which mean that you can transform into an inspiring leader both professionally and personally. 10. The best “Offices” – Digital nomads are becoming increasingly common. These types of entrepreneurship often combine fun travel with online business, and work from cafes, hotels, and co-working spaces in the coolest cities around the globe which can make for some neat offices. RISK OF AN ENTREPRENEURSHIP: 1. Financial Risk - An entrepreneur will need funds to launch a business either in the form of loans from investors, their own savings or funds from family. Any new business should have a financial plan within the overall business plan showing income projections, how much cash will be required to break – even and the expected return to investors in the first five – year timeframe. 2. Strategic Risk – An impressive business plan will appeal to investors. However, we live in the dynamic and fast –faced world where strategies can become outdated quickly. Changes in the market or the business environment can mean that a chosen strategy is the wrong one and the company might struggle to reach its benchmark. 3. Technology Risk – New technologies are constantly emerging, particularly in the era of the fourth industrial revolution. Some of these changes are “paradigm shifts” or “disruptive” technologies. To be competitive, a new company may have to invest heavily in new systems and processes, which could affect drastically the bottom line. 4. Market Risk – Many factors can affect the market for a product or service. The ups and downs of the economy and the new market trends pose a risk to new businesses, and a certain product might be popular one year but not the next. 5. Competitive Risks – An entrepreneurial must always be aware of its competitors. If there are no competitors at all, this could indicate that there is no demand for a product. If there are a few large competitors, the market might be saturated or the company might struggle to compete. 6. Environmental, Political and Economic Risk – Some things cannot be controlled by a good business plan or the right insurance. Earthquakes, tornados, hurricanes, wars and recession are all risks that a companies and new entrepreneurs may face. A market for under develop country, can be unstable and unsafe, or logistic rates or tariffs might make trade difficult depending on the political climate in time. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 ACTIVITY # 1 Answer the following questions. 1. What are the characteristics of a successful entrepreneur and explain. 2. Skills that an entrepreneur should have to become a successful entrepreneur. AVTIVITY# 2 Survey ten (10) customers from your two (2) frequently visited restaurant/s. The survey content should align with the needs of customers, the goods and the services expected from the food business. This activity will provide a wealth of information about customers’ perception. The result of the survey can be used to fine tune and know how to market the restaurant better for the entrepreneurs’ advantage in order for the business to be successful. ASSESSMENT: SAQ # 1 Directions: Write T if the statement is correct and write F if the statement is wrong, give the correct answer on the blank. _____________1. The quality of being disciplined means focusing on making the business work, and eliminating any hindrances or distractions to their goals. They are determined enough to take steps every day toward the achievement of their objectives. _____________2. Entrepreneur is a person who organizes a venture to benefit from an opportunity, rather than working as an employee. _____________3. One of the traits of successful entrepreneurs is being Open-minded wherein you know that something needs to be done, and they should start it themselves. _____________4. Entrepreneur is a process of creating a new enterprise and bearing any of its risk, with view of making the profit. _____________5. An entrepreneur don’t want to have boss, they don’t want reality of having people in superior position, managing their work and looking over their schedule. _____________6. Technology risk is the ups and downs of the economy and the new market trends pose a risk to new businesses, and a certain product might be popular one year but not the next. _____________7. Autonomy as one of the benefits of being an entrepreneur means you have the opportunity to break out of the cycle and create your own schedule. _____________8. Environmental, Political and Economic Risk are some of the things that cannot be controlled by a good business plan or the right insurance. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 _____________9. Leadership experience credits self-discipline, communication skill, passion, optimism, patience and unrelenting work ethic. _____________10. Strategic risk is when an entrepreneur will need funds to launch a business either in the form of loans from investors, their own savings or funds from family. Answers to SAQ #1 1. T 2. T 3. F – Self-starter 4. F - Entrepreneurship 5. T 6. F - Market Risk 7. F - Flexible schedule 8. T 9. T 10. F - Financial risk ASQ # 2 Directions. Enumerate four (4) skills that entrepreneurs must have and at least six (6) characteristics of successful entrepreneurs. Answers to ASQ # 2 Skills Entrepreneurs must have: 1. 2. 3. 4. Characteristics of Successful Entrepreneurs: 1. 2. 3. 4. 5. 6. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Answers to ASQ # 2 Skills Entrepreneurs must have: 1. Management skills 2. Network skills 3. Financial Management skills 4. Social Skills Characteristics of Successful Entrepreneurs: 1. Risk –Taker 2. Flexibility. 3. Self – Confidence 4. Tenacity 5. Passion 6. Professionalism 7. Integrity 8. Self - motivation REFERENCES: https://www.questia.com/library/journal/1P3-2184071411/determinants-of-entrepreneur-s-success-in-a- developing https://purplecowagency.com/5-reasons-why-people-become-entrepreneurs/ https://www.under30ceo.com/10-qualities-of-a-successful-entrepreneur/ https://cfmanitoba.ca/blog/10-awesome-benefits-of-becoming-an-entrepreneur https://www.investopedia.com/ask/answers/040615/what-risks-does-entrepreneur-face.asp MODULE WRITER: URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 9 Characteristic of Small Business Introduction Small-scale businesses employ smaller teams of employees than companies that operate on larger scales. The smallest businesses are run entirely by single individuals or small teams. A larger small-scale business can often get away with employing fewer than one hundred employees, depending on the business type. Small business Small business is defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business. Small business have their own distinctive characteristics. They are the following: 1. Independent management – The owner is also the manager. 2. Small capital requirement - Small business requires only the small capital and this can be supplied by a single or few individuals. 3. Mostly local operation – Small business usually operates in a certain locality although there are cases when the market is not confirmed to a local area. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Advantage of Operating a Small Business 1) Be an employee 2) Be a professional 3) Be a small business operator (SBO) Types of Small Business Sole proprietorship A sole proprietorship is easy to form and gives you complete control of your business. You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business. Partnership Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).  Limited partnerships (LP) A limited partnership exists when two or more partners go into business together, but one or more of the partners are only liable up to the amount of their investment.  Limited liability partnerships (LLP). Limited liability partnerships (LLPs) allow for a partnership structure where each partner's liabilities is limited to the amount they put into the business. This Photo by Unknown Author is licensed under CC BY-SA Limited liability company (LLC) An LLC lets you take advantage of the benefits of both the corporation and partnership business structures. LLCs protect you from personal liability in most instances, your personal assets like your vehicle, house, and savings accounts won't be at risk in case your LLC faces bankruptcy or lawsuits. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Corporation  C corporation A corporation, sometimes called a C corporation, is a legal entity that's separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable.  S corporation An S corporation, sometimes called an S corporation, is a special type of corporation that's designed to avoid the double taxation drawback of regular C corps. S corps allow profits, and some losses, to be passed through directly to owners' personal income without ever being subject to corporate tax rates.  B corporation A benefit corporation, sometimes called a B corporation, is a for-profit corporation recognized by a majority of U.S. states. B corps are different from C corps in purpose, accountability, and transparency, but aren't different in how they're taxed.  Close corporation Close corporations resemble B corps but have a less traditional corporate structure. These shed many formalities that typically govern corporations and apply to smaller companies.  Nonprofit corporation Nonprofit corporations are organized to do charity, education, religious, literary, or scientific work. Because their work benefits the public, nonprofits can receive tax- exempt status, meaning they don't pay state or federal taxes income taxes on any profits it makes. Cooperative A cooperative is a business or organization owned by and operated for the benefit of those using its services. Profits and earnings generated by the cooperative are distributed among the members, also known as user-owners. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Five qualities of successful small business owners 1. Proactive communication Is assertive, honest, and focused on objectives. It keeps the project manager in front of the curve, enabling teamwork, effective decisions, and accountability throughout the project. 2. Impeccable organization The bigger the project, the more important it is to be organized. 3. Constant Learning A desire to learn can help you continually evolve. Reading books and other publications, growing your business network, and seeking mentors can all provide learning opportunities that you can take back to your business. In addition, looking at other companies’ successes and failures can help you learn valuable business lessons. 4. Strategic planning Strategic planning is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization’s direction in response to a changing environment. 5. Language skills With the majority of client communications occurring via email and text, and the growing need for a strong online presence, grammar matters more than ever. Print out important documents and read them aloud. That can reveal grammar mistakes along with other crucial writing issues involving tone, word choice, and structure. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Self-Assessment Quiz 1.1 SAQ 1.1 For your self-assessment quiz, answer the following questions by choosing the letter of the correct answer. Write your answer on the space provided. Good luck! _____1. A partnership exists when two or more partners go into business together, but one or more of the partners are only liable up to the amount of their investment. a. Limited liability partnerships (LLP) b. Nonprofit corporation c. B corporation d. Limited partnerships (LP) _____2. The simplest structure for two or more people to own a business together. a. Limited Partnership (LP) b. Limited liability company (LLC) c. Limited Liability partnership (LLP) d. Partnership _____3. Is defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business. a. Business b. Partnership c. Small business d. All of the above _____4. It gives you complete control of your business a. Sole proprietorship b. Partnerships c. Corporation d. Close corporation _____5. With the majority of client communications occurring via email and text, and the growing need for a strong online presence, grammar matters more than ever. a. Limited Partnership (LP) b. Language skills c. Limited Liability Company (LLC) d. Nonprofit corporation URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 _____6. Sometimes called a C corporation, is a legal entity that's separate from its owners. a. Nonprofit Corporation b. Limited Liability Company (LLC) c. Corporation d. Close Corporation _____7. Is a special type of corporation that's designed to avoid the double taxation drawback of regular C corps a. S corporation b. C corporation c. B corporation d. None of the above _____8. Small business usually operates in a certain locality although there are cases when the market is not confirmed to a local area. a. S corporation b. Cooperative c. Mostly local operation d. Nonprofit Corporation _____9. The owner is also the manager a. Independent management b. C corporation c. B corporation d. Close Corporation _____10. Protect you from personal liability in most instances, your personal assets like your vehicle, house, and savings accounts won't be at risk in case you faces bankruptcy or lawsuits. a. Limited Liability Partnership b. Limited Liability Company c. Limited partnership d. Both A & C URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Answer to Self-Assessment Quiz 1.1 ASAQ 1.1 1. D 2. D 3. C 4. A 5. B 6. C 7. A 8. C 9. A 10. C REFERENCES: Roberto G. Medecina (Entrepreneurship And Small Business Management ) https://wellsfargoworks.com/planning/article/five-qualities-of-successful-small-business-owners https://balancedscorecard.org/strategic-planning-basics/ https://smallbusiness.chron.com/list-explain-characteristics-small-scale-business- 10472.html#:~:text=Small%2Dscale%20businesses%20employ%20smaller,depending%20on%20the%20 business%20type. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure https://www.investopedia.com/terms/l/limitedpartnership.asp URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 10 Features of Small Business Introduction Small business management requires individuals to have a wide variety of business knowledge and understanding. Business owners must often learn new skills as they work in a company and expand its operations. Individuals can often take college courses, attend seminars or review websites to increase their knowledge a small business management. Business owners may also consult with other owners or review information from the Small Business Administration (SBA) regarding small business management techniques. Features of Small Business Management Leadership Business owners must be the leader of their organization. They often provide the mission, values and goals for the small business. Leadership and business ownership are two different things. Many business owners can run their company and complete operations with few problems. However, leading other employees can be a completely different issue. Accounting Accounting is an important business function. Business owners often use accounting to record, report and analyze information relating to financial transactions. Small business accounting usually encompasses several different features. Overseeing company cash flow, paying This Photo by Unknown Author is licensed under CC BY-SA bills, collecting money from sales on account, entering journal entries, and preparing the general ledger and financial statements are a few small business accounting features. Business owners must be able to understand and apply accounting terms, principles and guidelines to their URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 company’s information. Accounting information can also be used by business owners to conduct a performance measurement analysis for business decisions. Human Resources Business owners must pay careful attention to the human resource needs of their company. As a company begins to grow and expand, the hiring of employees is usually an essential part of small business management. Business owners must understand the current job market and how to set wages for various job positions. New employees can also create significant paperwork or administrative issues for small businesses. The performance of background checks and drug tests, and the collection of personal information and other paperwork are all involved with hiring employees. Business owners must decide whether this process will be completed in-house or through a third-party employment agency. Operations Operational management is a key part of small business management. Business owners carefully review their operations to ensure goods or services are produced in a high quality manner. Business owners are also responsible for acquiring economic resources to use in their business operations. Operational management can include production processes, customer service, marketing and other various activities. Smaller or home- based businesses are usually easier to manage. Business owners with larger organizations must usually spend more time managing business operations and ensuring all functions are properly completed. Excellent knowledge of the field of activity A small business entrepreneur should be well oriented in the market, understand the specifics of her industry and know the specifics of his field of activity. Of course, the head of a large company should know all this. Opportunity to Reap Unlimited Profits If the small business succeeds, all profits, big or small, accrue to the owner. If he is not satisfied, he may exert more efforts to increase his profits. This opportunity is not afforded to plain employee. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 It is not correct to say that the days of small industries are gone. Eugene Staley has mentioned five distinct ways in which small industries successfully coexist with large industry. 1. Competition: Small industry can out-compete large industry in certain circumstances and in selected products. Some of these industries are bricks and tiles, fresh baked goods, condiments and preserved fruits, goods requiring small engineering skill, items requiring artistry and craftsmanship. 2. Supplementary: Small industry can “fill the cracks” between the big volume and standardized outputs of large factory. Staley mentions a Madras case where a small tricycle factory flourished alongside a large cycle factory. 3. Components: A small industry can produce components for a large industry. This is the most common example of the small manufacturing sector and many of them function under the protection of big industries. Very often they also derive the advantage of a protected market with assured supply of their output to one or more selected large manufactories. 4. Initiation: Small industry can initiate new products and subsequently grow large with the growth of the product. Staley mentions that many of the automobile factories started this way in USA. In India, the electronics industry looks like taking to this pattern of development. 5. Servicing: Small industry can install service, and repair the products of large industry. In India these industries are growing in respect of major industries like refrigerators, radio and TV sets, watches, and clocks, cycles and motor cycles and motor vehicles in respect of repair, servicing and maintenance. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Self-Assessment Quiz 1.2 SAQ 1.2 For your self-assessment quiz, answer the following questions by choosing the letter of the correct answer. Write your answer on the space provided. Good luck! _____1. Small industry can install service, and repair the products of large industry. a. Initiation b. Components c. Servicing d. Supplementary _____2. Business owners must be the leader of their organization. a. Accounting b. Leadership c. Operations d. Excellent knowledge of the field of activity _____3. Small industry can “fill the cracks” between the big volume and standardized outputs of large factory. a. Opportunity to Reap Unlimited Profits b. Competition c. Human Resources d. Supplementary _____4. Business owners must pay careful attention to the human resource needs of their company. a. Leadership b. Operations c. Accounting d. Human Resources _____5. Business owners carefully review their operations to ensure goods or services are produced in a high quality manner. a. Operation b. Competition c. Human Resource d. Excellent knowledge of the field of the activity URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 _____6. Small industry can initiate new products and subsequently grow large with the growth of the product. a. Excellent knowledge of the field of activity b. Supplementary c. Initiation d. Accountancy _____7. Business owners often use accounting to record, report and analyze information relating to financial transactions. a. Leadership b. Competition c. Accountancy d. Both A & B _____8. A small industry can produce components for a large industry a. Initiation b. Components c. Opportunity to reap unlimited profits d. Servicing _____9. A small business entrepreneur should be well oriented in the market, understand the specifics of her industry and know the specifics of his field of activity. Of course, the head of a large company should know all this. a. Excellent knowledge of the filed of the activity b. Supplementary c. Accountancy d. Components _____10. If the small business succeeds, all profits, big or small, accrue to the owner. a. Opportunity to reap unlimited profits b. Operation c. Leadership d. None of the above URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Answer to Self-Assessment Quiz 1.2 ASAQ 1.2 1. C 2. B 3. D 4. D 5. A 6. C 7. C 8. B 9. A 10. A REFERENCES: Roberto G. Medecina (2014), Entrepreneurship And Small Business Management https://smallbusiness.chron.com/features-small-business-management-3988.html https://www.softwareguide.com.au/6-features-of-small-business-management/ URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 11 Strategic Planning for a Small Business Introduction The resources at the disposal of entrepreneur are always thought to be limited. In spite of the limitation, however, entrepreneurs are not discouraged from pursuing their objectives. They can make use of some techniques that have been proven valuable in business operation. What is Strategic Planning? Strategic planning – refers to the process of determining the primary objectives of the entrepreneurship and then adopting courses of action and allocating resources to achieve those objectives. The definition involves three distinct steps: Strategic Planning Determination of Primary objectives Adoption of Course of Action Allocation of Resources What is Strategic Planning The Determination of Objectives The objectives of the firm are important components of the firm’s strategic planning activities but before these are determined, the firm’s mission statement must first be developed. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 The Mission Statement This term refers to the basic description of the fundamental nature, rationale and direction of the firm. It consists of three concerns: 1. how the entrepreneur intends to use his resources; 2. how the entrepreneur expects to relate to the ever-changing environment; and 3. the kinds of values the entrepreneur intends to offer to his customers. This Photo by Unknown Author is licensed under CC BY-SA Strategic Objectives This term refers to the specific performance targets that the entrepreneurship hopes to accomplish. The objectives define, in specific terms, how the firm’s mission will be realized. Examples of strategic objectives are the following 1. expand production capacity by 50% within two years; 2. increased by 50% by the year 2012; 3. increase market share by 10% every two years; and 4. increase the number of outlets by three within three years. Adoption of Course of Action After the primary [or strategic] objectives are stablished, the entrepreneur must develop a strategy which is alternately called course of action. A strategy is a carefully designed plan for achieving the firm’s objectives. A strategy indicates how the entrepreneur will attempt to accomplish the goals with the resources available. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Examples of strategies are the following: 1. establish branches in strategic locations; 2. design a system that will attract persons with high potentials to work with the company; 3. engage in the recruitment of retailers from nearby provinces; and 4. engage in building up the company’s image as a reliable supplier of quality poultry products. In developing realistic strategies, the entrepreneur can make use of the most popular tools. These are the following:  SWOT Analysis  Forecast of future sales performance. SWOT Analysis The firm which is fully aware of its internal environment [specifically its strengths and weaknesses] as well as external environment [specifically threats and opportunities] is most likely to develop a strategy that considers the firm’s needs. The purpose of SWOT Analysis is to match the firm’s strengths and weaknesses with external opportunities and treats to determine what strategy to adopt. The firm’s strength. Refers to a skill, a competence, a valuable organizational resource or competitive capability, or an achievement that gives the firm a market advantage. The firm’s weakness refers to something a company lacks or does poorly [compared with others] or a condition that puts it at disadvantage. Opportunity refers to the chance offered by the external environment to improve the firm’s situation significantly. Threats refers to a challenge posed by an unfavorable trend or development in the external environment that would lead to, in the absence of purposeful entrepreneurial action, the erosion of the entrepreneurship’s position. Forecast of Future Sales Performance Forecasts are supplementary tools for SWOT analysis. It is an estimate or prediction of the future sales or income of the firm. Forecasts may be short-term [one year or less] medium-term [one to five years], long-term [over five years] Sales forecasts are often determined through a combination of statistical and intuitive forecasts tempered by the experience of the entrepreneur. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 THE ENTREPRENEURSHIP S W T E R A E K N N G E T S H S S E S Opportunities Treats SWOT Analysis Forecast of future Performance Strategy Strategy and SWOT Analysis URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Implementing Strategic Methods Strategies determine the best way to use resources. There is a need, however to develop tactics which will be used to implement the strategies. Tactics are more detailed and they are used to implement the strategies. Tactics are more detailed and they are used to determined how the specific task can best be accomplished on time with available resources. If establish branches in strategic location is a stated strategy, the tactical plan to implement my appear as follows. 1. Identify strategic location 2. Determine the potentials of identified strategic location, and 3. Set a timetable for installing the branches. Deploying the Resources The specific aim for planning is to be able to deploy the right quality and quantity of resources in the various activities required to achieve objectives. The resources would be indicated in terms of human and nonhuman elements. Fundamental Strategies for Small Business There are certain basic strategies that are necessary for survival of small business. These are the following. 1. Flexible strategy 2. strategy of effectiveness as a higher priority; and 3. strategy of starting simple. Flexibility Strategy Small business ventures are not usually afforded the advantages enjoyed by large business. It is very difficult for a small business to affect changes in its environment because its sources are usually limited. For instance, a small business cannot match the adverting budget of a large business if they are not in competition with one another Strategy of Effectiveness as a Higher Priority Effectiveness is sometimes sacrificed for the sake of efficiency. Although efficiency is a desirable goal, it is oftentimes disastrous for small business to neglect effectiveness. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Strategy Starting Simple In starting a new business venture, the entrepreneur often encounter problems related to financing. The temptation is great for entrepreneur to finance all the activities required in operating the venture. Strategy Concerns of Small Business In determining what strategy to adapt, the entrepreneur is confronted with two general situation 1. is he organizing a new business 2. or he currently running old business? New Business This term refers to one that will operated for the first time by small business operator. If so, his option consist of the following. 1. Acquiring existing business; 2. organizing new business ;and 3. buying a franchise SITUATION NEW OLD BUSINESS BUSINESS Acquire an Existing compete with Busines small Business Start a new Business Compete with large Buy A franchise Business Strategy Situations Confronting the Entrepreneur URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Why Small Business Operators Ignore Strategic Planning Important as it is, strategic planning in small business management is often ignore. This situation is true in many parts of the world including the Philippines. The reasons could be any of the following: 1. Lacks of Expertise – Few small business operators are trained in strategic planning 2. Inability to get started – Even if small business operators are convinced about the importance of planning, they fail to get lack of sufficient exposure to planning activities. 3. Uncomfortable, often intangible variables – The uncontrolled and often intangible variables complicate planning which later on discourages the small business operator from repeating the exercise. 4. Resource Poverty- Planning requires time, but the small business operator often times does not have it. 5. Focus on daily operation- The daily requirements of small business usually keep the small business operator to busy that he is left with no time on planning. 6. Failure to realize the importance of strategic planning- The small business operator is expose to the environment of successful Filipino business man who do not engage in strategic planning. This Photo by Unknown Author is licensed under CC BY-ND URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Self-Assessment Quiz 1.3 SAQ 1.3 Fill in the blanks 1. __________ refers to the process of determining the primary objectives of the firm and then adapting course of action and allocating resources to achieve those objective. 2. __________ is the basic description of fundamental nature, rationale, and direction of the firm 3. _________ are specific performance targets that the firm hopes to accomplish. 4. _________ is a carefully designed plan for achieving the firm objectives. 5. _________ is an organized method of assessing firm strength’s and weaknesses And the opportunities and the threats in external environment that confront or confront firm. 6. _________ is something a company lacks or does poorly or a condition that puts in advantages. 7. _________ is an estimate or prediction of the future sales or income of the firm 8. Segment markets, efficient use of research and development, and ________ are strategies applicable to small business. 9. _______ are detailed action used to implement strategies 10. ________ refers to the chance offered by the external environment to improve the firm situation significantly. Activity 1. What is strategic planning? 2. What is the “mission statement “? 3. What is the meaning of Strategy? URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Answer to Self-Assessment Quiz 1.3 1. Strategic Planning 2. The mission statement 3. Strategic objectives 4. Strategy 5. SWOT analysis 6. Weakness 7. Forecast of the future sales performance 8. Think small 9. Tactics 10. Opportunity REFERENCE: Roberto G. Medecina (2014), Entrepreneurship And Small Business Management URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 12 FORM OF BUSINESS OWNERSHIP Learning Objectives At the end of the modules, the students are expected to: 1. Know the importance of identifying the different forms of business ownership. 2. Analyze the pros and cons of each type of business organization. INTRODUCTION One of the first and most important decisions a business owner makes is selecting the organizational form under which he or she will operate. The following are some common organizational types.  Proprietorship  Partnership  Corporation SOLE PROPRIETORSHIP The sole proprietorship or single proprietorship is a form of business organization initiated, owned or capitalized and managed by a single person (usually a business owner). A single proprietorship business format is to be registered with Bureau of Domestic Trade and Industry (DTI). ADVANTAGE AND DISADVANTAGE OF A SOLE PROPRIETORSHIP Organizing or establishing a sole proprietorship business format has the following advantage: 1. Simple to organize – a decision of the entrepreneur or business owner can lead to a quick organization of the business. For instance, the registration of a single proprietorship business with the Central of the Department of Trade and Industry can be completed in about an hour. 2. Low start-up capital – there is no law that sets a minimum level of capital requirement to put up or establish a single proprietorship business. No show money or bank certificate is required to support a declared initial capital. 3. Owner owns all profits – all the profits accrues to the owner/entrepreneur as he or she is not bound by any rules or government regulation to share his profits to anybody. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 4. Total decision making authority – a single proprietorship business is run by its owner as his own, hence, the decision making function totally rest upon the hands of the owner/entrepreneur. 5. Easy to discontinue – unlike the partnership or corporation, a proprietorship is easy to dissolve or discontinue the business. It is purely a prerogative of its owner. 6. Good tax privileges – tax matters and other regulatory requirements favor the sole proprietorship over other forms of business organization. While there are advantages for a single proprietorship form of business, there are also disadvantages and there are as follows: 1. Unlimited personal liability – the context of unlimited personal liability is probably the single greatest disadvantage of a sole proprietorship; that is, the sole proprietor owns all the business’s assets and if the business fails, the owner’s personal assets can be sold to cover debts. 2. Limited skills and capabilities of the sole owner – the skills that can benefit the business is limited to the skills and capabilities of the owner which might not be enough or sufficient for the demands or needs of the business. 3. Limited access to capital – a single proprietorship has a limited access to capital as compared with partnership or corporation. 4. Lack of continuity for the business – the deaths of the owner of a single proprietorship technically means the death of the business also. PARTNERSHIP A partnership is an association of two or more business partners who co-own a business for the purpose of making a profit. A partnership is to be registered with the Securities and Exchange Commission (SEC) just like corporation. Generally, the law does not require very specific rules or guidelines as the content of the partnership agreement. TYPES OF PARTNERS URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 1. General partner – a general partner is one who shares ownership and management of the business and is liable to extent of his separate property after all the assets of the partnership are exhausted. 2. Limited partners – they refer to partners with limited financial liability and they do not take active role in the management of the firm. 3. Silent partners – silent partners are those not taking active role in the operations of the business but are generally known to be partners of the business.\ 4. Dominant partners – they are either active in the partnership nor they are generally known to be associated with the business. 5. Capitalist partners – a partner who contributes money or property to the common fund of the partnership. 6. Managing partner – the partner who is designated to manage the operation of the business of the partnership. 7. Industrial partner – the partner who contributes his knowledge or personal services to the partnership. 8. Secret partner – a partner who takes active part in the business but is not know to be a partner by outside parties. 9. Nominal partner or partner by estoppel – a partner who is actually not a partner but is held out or represented a s partner. 10. Liquidating partner – a partner who is designated to wind up or settle the affairs of the partnership after dissolution. ADVANTAGE OF PARTNERSHIP 1. Easy to establish – because only two or more can form a partnership, it can said that relative to a corporation, a partnership is easy to organized or establishe. 2. Complementary skills of partners – Like the corporation, the skills of the partners can be exploited to the fullest to the benefit of the partnership. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 3. Division of profits – There are no restrictions on how profits will be distributed as king as they are consistent with the provisions of the partnership agreement. 4. Large pool of capital – The capital base of the partner can be availed of thus a form of advantage compared to a proprietorship. 5. Ability to attract limited partners – Depending on the provisions of the partnership agreement, the partnership can attract as many partners ( and so is capital and skills) as possible for the benefit of the partnership. 6. Little governmental regulation – Like the sole proprietorship, the partnership form of business operations is not burdened with red tape or subject of stringent regulations unlike the corporation. 7. Flexibility – Although not as flexible as the sole proprietorship, the partnership can generally react quickly to changing marker condition. DISADVANTAGE OF PARTNERSHIP ARE AS FOLLOWS: 1. Unlimited liability of at least one partner – At least one of every partnership must be a general partner and he/she has unlimited personal liability, even though he or she often is the partner with least personal resources. 2. Difficulty in disposing of partnership interest without dissolving the partnership – To be able to justly and fairly distribute the assets of the partnership, any of the partner has to sell his interest to remaining partners which might be disadvantageous to him. 3. Lack of continuity – Complication arise when one of the partner dies. Partnership interest is often in transferable (unless provided for in the partnership agreement) through inheritance because the remaining partners may not wish to be in association or partnership with the person who inherits the interests of the deceased partner. 4. Potential for personality and authority conflict – Friction may arise among partners is inevitable and difficult to control. Disagreement as to what should be done or what was done has been the reasons for the dissolution of many partnership. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 CORPORATION A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Its owners are the stockholders or shareholders who can sell their interest in the corporation without affecting the continuity of its operations because the life of the corporation is independent or distinct from that of the owners or stockholders. Compared to sole proprietorship, a corporation is more complex of the three major form of business ownership. Corporations are not the only for big organizations but also for small business as well. There are premises or reasons for incorporating and the following are just a few of them: 1. To protect personal finances and assets from business creditors 2. To protect the entrepreneurs from actions of the business 3. To take advantage of executive privileges and perks afforded to corporate employees and officers 4. To begin a business operations with structured set up that can withstand succession issues 5. To allow a flexibility in fund sources 6. To have a better image for the business ADVANTAGE OF A CORPORATION 1. Limited liability of the stockholders – The liability of the stockholders or owners of the corporation is limited to the assets of the corporation is limited to assets of the corporation. That is unlike the single proprietorship, the personal assets or properties of every stockholder can not be sued for the liabilities or debts of the corporation. 2. Ability to attract capital – As a prospective borrower from the bank or other financial institutions, a corporation is more welcomed or preferred as compared to single proprietorship of partnership, Besides, the incorporators and stockholders of the corporation itself are readily available fund sources thus indicating the ability of the corporation to attract capital for whatever purpose. 3. Transferable ownership – Stock owners or stockholders of the corporation can easily effects transfer of ownership without affecting the operations of the business. 4. Larger pool of skills, expertise, and knowledge – Stockholders particularly those forming part of the Board of Directors or in the management team are rich sources URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 of skills and expertise which can be tapped by the corporation to achieve its corporate agenda. DISADVANTAGE OF A CORPORATION 1. Cost and time involved in the incorporation process – in view of the relatively large number of persons involved in forming a corporation ( i. e,. at least five incorporators), the cost involved and the time requirement for the formation or incorporation registration process is somewhat longer and difficult. Built into a large number of incorporators is the exercise of democratic processes in preparing the articles of the incorporation and by-laws that can eat up substantial time. 2. Taxation – the nature of corporation is subject to certain tax regulations which is more costly from the viewpoint of both national income tax and government tax rules. 3. Legal restrictions and regularly red tape – The administrative and legal processes that a corporation goes through in the conduct of its business pose as burdensome and source of irritation to small-scale corporations. 4. Potential loss of control by founders of the corporation – The nature of a corporation as well as the boundary between the powers of the owners/founders and managers of the business may pose as constraint and threat to the founders or stockholders or the corporation. Activity 1 Interview local small business owners, these can be done either using the social media or calling them through phone. What form of ownership did they choose? Why? Prepare URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 a brief report summarizing your findings, and explain advantages and disadvantages those owners face because of their choices. Do you think that these business owners have chosen the form of ownership that is best for their particular situations? Explain. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ____________________________________________________________________ Review Question: 1. Why is having a sole proprietorship business advantageous? 2. Discuss the advantage of a corporation in terms of capital generation. 3. What is the role of the Securities and Exchange Commission in the business organization? 4. Describe the role of the Department of Trade and Industry in business registration. 5. Which business organization you prefer? Explain your reasons. REFERENCES Bureau of Micro, Small and Medium Enterprise Development, Do You Want To Go Into Business, Department of Trade and Industry. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Bureau of Micro, Small and Medium Enterprise Development, Financing Programs for Micro Enterprises, Department of Trade and Industry. Fajardo, Feliciano R., Entrepreneurship, National Bookstore, 2005 Financing Programs for Micro Enterprises, Bureau of Micro, Small and Medium Enterprise Development, Department of Trade and Industry Medina, Roberto G, “Entrepreneurship and Small Business Management”, Rex Book Store, 2002. Negosyo, 50 Joey Concepcion’s Inspiring Entrepreneurial Stories, Philippine Center for Entrepreneurship, 2010 Negosyo, 21 Steps on How to Start Your Own Business, Dean Pax Lapid & Ping Sotto Orcullo, N.A. Jr, Contemporary Entrepreneurship, Academic Publishing Corporation, 2004. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 13 Planning, Organizing, Directing and Controlling the Small Business L E AR N I N G O B J E C T I V E S 1. Understand the functions of management. 2. Discuss the three basic leadership styles. 3. Discuss the three basic levels of management. 4. Understand the management skills that are important for a successful small business. All small businesses need to be concerned about management principles. Management decisions will impact the success of a business, the health of its work environment, its growth if growth is an objective, and customer value and satisfaction. Seat-of-the-pants management may work temporarily, but its folly will inevitably take a toll on a business. This section discusses management principles, levels, and skills—all areas that small business owners should understand so that they can make informed and effective choices for their businesses. What Is Management? There is no universally accepted definition for management. The definitions run the gamut from very simple to very complex. For our purposes, we define management as “the application of planning, organizing, staffing, directing, and controlling functions in the most efficient manner possible to accomplish meaningful organizational objectives Put more simply, management is all about achieving organizational objectives through people and other resources. Management principles apply to all organizations—large or small, for-profit or not- for-profit. Even one-person small businesses need to be concerned about management principles because without a fundamental understanding of how businesses are URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 managed, there can be no realistic expectation of success. Remember that the most common reason attributed to small business failure is failure on the part of management. Management Functions On any given day, small business owners and managers will engage in a mix of many different kinds of activities—for example, deal with crises as they arise, read, think, write, talk to people, arrange for things to be done, have meetings, send e-mails, conduct performance evaluations, and plan. Although the amount of time that is spent on each activity will vary, all the activities can be assigned to one or more of the five management functions: planning, organizing, staffing, directing, and controlling (Figure 1 "Management Functions"). Figure 1 Management Functions Planning URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Planning “is the process of anticipating future events and conditions and determining courses of action for achieving organizational objectives. It is the one step in running a small business that is most commonly skipped, but it is the one thing that can keep a business on track and keep it there. Planning helps a business realize its vision, get things done, show when things cannot get done and why they may not have been done right, avoid costly mistakes, and determine the resources that will be needed to get things done. Organizing Organizing “consists of grouping people and assigning activities so that job tasks and the mission can be properly carried out. Establishing a management hierarchy is the foundation for carrying out the organizing function. Contrary to what some people may believe, the principle of organizing is not dead. Rather, it is clearly important “to both the organization and its workers because both the effectiveness of organizations and worker satisfaction require that there be clear and decisive direction from leadership; clarity of responsibilities, authorities, and accountabilities; authority that is commensurate with responsibility and accountability; unified command (each employee has one boss); a clear approval process; and, rules governing acceptable employee behavior. Except for a small business run solely by its owner, every small business needs a management hierarchy—no matter how small. Each person in the business should know who is responsible for what, have the authority to carry out his or her responsibilities, and not get conflicting instructions from different bosses. The absence of these things can have debilitating consequences for the employees in particular and the business in general. Staffing URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 The staffing function involves selecting, placing, training, developing, compensating, and evaluating (the performance appraisal) employees. Small businesses need to be staffed with competent people who can do the work that is necessary to make the business a success. It would also be extremely helpful if these people could be retained. Directing Directing is the managerial function that initiates action: issuing directives, assignments, and instructions; building an effective group of subordinates who are motivated to do what must be done; explaining procedures; issuing orders; and making sure that mistakes are corrected. Directing is part of the job for every small business owner or manager. Leading and motivating work together in the directing function. Leading “is the process of influencing people to work toward a common goal [and] motivating is the process of providing reasons for people to work in the best interests of an organization. Three major leadership styles: autocratic, democratic, and laissez-faire.  Autocratic leadership occurs when a leader makes decisions without involving others; the leader tells the employees what is to be done and how it should be accomplished  Democratic leadership involves other people in the decision making—for example, subordinates, peers, superiors, and other stakeholders—but the leader makes the final decision. Rather than being a sign of weakness, this participative form of leadership is a sign of strength because it demonstrates respect for the opinions of others.  Laissez-faire leadership (or delegative or free-reign leadership) minimizes the leader’s involvement in decision making. Employees are allowed to make decisions, but the leader still has responsibility for the decisions that are made. Controlling URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Controlling is about keeping an eye on things. It is “the process of evaluating and regulating ongoing activities to ensure that goals are achieved. Controlling provides feedback for future planning activities and aims to modify behavior and performance when deviations from plans are discovered. There are four commonly identified steps in the controlling process. Setting performance standards is the first step. Standards let employees know what to expect in terms of time, quality, quantity, and so forth. The second step is measuring performance, where the actual performance or results are determined. Comparing performance is step three. This is when the actual performance is compared to the standard. The fourth and last step, taking corrective action, involves making whatever actions are necessary to get things back on track. The controlling functions should be circular in motion, so all the steps will be repeated periodically until the goal is achieved. Figure 2 The Controlling Function Levels of Management URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 As a small business grows, it should be concerned about the levels or the layers of management. Also referred to as the management hierarchy (Figure 3 "The Management Hierarchy"), there are typically three levels of management: top or executive, middle, and first-line or supervisory. To meet a company’s goals, there should be coordination of all three levels. Figure 3 The Management Hierarchy Top management, also referred to as the executive level, this level includes such positions as the president or CEO, the chief financial officer, the chief marketing officer, and executive vice presidents. Top managers devote most of their time to developing the mission, long-range plans, and strategy of a business—thus setting its direction. They are often asked to represent the business in events at educational institutions, community activities, dealings with the government, and seminars and sometimes as a spokesperson for the business in advertisements. It has been estimated that top managers spend 55 percent of their time planning. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Middle management is probably the largest group of managers. This level includes such positions as regional manager, plant manager, division head, branch manager, marketing manager, and project director. Middle managers, a conduit between top management and first-line management, focus on specific operations, products, or customer groups within a business. They have responsibility for developing detailed plans and procedures to implement a firm’s strategic plans. First-line or supervisory management is the group that works directly with the people who produce and sell the goods and/or the services of a business; they implement the plans of middle management. They coordinate and supervise the activities of operating employees, spending most of their time working with and motivating their employees, answering questions, and solving day-to-day problems. Examples of first- line positions include supervisor, section chief, office manager, foreman, and team leader. In many small businesses, people often wear multiple hats. This happens with management as well. One person may wear hats at each management level, and this can be confusing for both the person wearing the different hats and other employees. It is common for the small business owner to do mostly first-level management work, with middle or top management performed only in response to a problem or a crisis, and top- level strategic work rarely performed. This is not a good situation. If the small business is large enough to have three levels of management, it is important that there be clear distinctions among them—and among the people who are in those positions. The small business owner should be top management only. This will eliminate confusion about responsibilities and accountabilities. Management Skills Management skill “is the ability to carry out the process of reaching organizational goals by working with and through people and other organizational resources. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Possessing management skill is generally considered a requirement for success. An effective manager is the manager who is able to master four basic types of skills: technical, conceptual, interpersonal, and decision making. Technical skills are the manager’s ability to understand and use the techniques, knowledge, and tools and equipment of a specific discipline or department. These skills are mostly related to working with processes or physical objects. Engineering, accounting, and computer programming are examples of technical skills. Technical skills are particularly important for first-line managers and are much less important at the top management level. The need for technical skills by the small business owner will depend on the nature and the size of the business. Conceptual skills determine a manager’s ability to see the organization as a unified whole and to understand how each part of the overall organization interacts with other parts. These skills are of greatest importance to top management because it is this level that must develop long-range plans for the future direction of a business. Conceptual skills are not of much relevance to the first-line manager but are of great importance to the middle manager. All small business owners need such skills. Interpersonal skills include the ability to communicate with, motivate, and lead employees to complete assigned activities. Hopefully building cooperation within the manager’s team. Managers without these skills will have a tough time succeeding. Interpersonal skills are of greatest importance to middle managers and are somewhat less important for first-line managers. They are of least importance to top management, but they are still very important. They are critical for all small business owners. Decision making is the ability to identify a problem or an opportunity, creatively develop alternative solutions, select an alternative, delegate authority to implement a solution, and evaluate the solution. Figure 4 Management Decision Making URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Making good decisions is never easy, but doing so is clearly related to small business success. Decisions that are based on a foundation of knowledge and sound reasoning can lead the company into long-term prosperity; conversely, decisions that are made on the basis of flawed logic, emotionalism, or incomplete information can quickly put a small business out of commission.” Review Exercise: 1. What are the functions of management? 2. Explain the three basic leadership styles. 3. What are the management skills that are important for a successful small business? URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 References: ”John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 172. Put more simply, management is all about achieving organizational objectives through people and other URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 resources.David L. Kurtz, Contemporary Business (Hoboken, NJ: John Wiley & Sons, 2011), 254. ”David L. Kurtz, Contemporary Business (Hoboken, NJ: John Wiley & Sons, 2011), 257. It is the one step in running a small business that is most commonly skipped, but it is the one thing that can keep a business on track and keep it there.“Management Principles,” Small Business Notes, accessed February 2, 2012, John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 176; David L. Kurtz, Contemporary Business (Hoboken, NJ: John Wiley & Sons, 2011), 257. Business planning for the small business is discussed in Chapter 5 "The Business Plan", and marketing planning is discussed in Chapter 8 "The Marketing Plan". ”John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 176. Establishing a management hierarchy is the foundation for carrying out the organizing function. “Traditional Management Principles,” Small Business Notes, accessed February 2, 2012, www.smallbusinessnotes.com/managing-your-business/traditional-management - principles.html.John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 176. John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 177; David L. Kurtz, Contemporary Business (Hoboken, NJ: John Wiley & Sons, 2011), 257. Kurt Lewin, “Lewin’s Leadership Styles,” Changing Minds, accessed February 2, 2012, changingminds.org/disciplines/leadership/styles/lewin_style.htm; Don Clark, “Leadership Styles,” Big Dog and Little Dog’s Performance Juxtaposition, June 13, 2010, accessed February 2, 2012, www.nwlink.com/~donclark/leader/leadstl.html “Participative Leadership,” Changing Minds, accessed February 2, 2012, changingminds.org/disciplines/leadership/styles/participative_leadership.htm. Kurt Lewin, “Lewin’s Leadership Styles,” Changing Minds, accessed February 2, 2012, changingminds.org/disciplines/leadership/styles/lewin_style.htm; Don Clark, “Leadership Styles,” Big Dog and Little Dog’s Performance Juxtaposition, June 13, 2010, accessed February 2, 2012, www.nwlink.com/~donclark/leader/leadstl.html ”William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 224. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 176. William M. Pride, Robert J. Hughes, and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 226 David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 255. David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 255. Samuel C. Certo and S. Trevis Certo, Modern Management: Concepts and Skills (Upper Saddle River, NJ: Prentice Hall, 2012), 11. David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 256 David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 257. David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 256 John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 188 URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 MODULE 14 THE SEARCH FOR A SOUND BUSINESS IDEA Learning Objectives: At the end of the module, students are expected to: 1. Define a sound business idea. 2. Discuss the role of creativity in the formulation of a sound business idea. 3. Identify and explain the creative process. SOUND BUSINESS IDEA A firm operate in a dynamic environment where success and failure is determined by how well they match and counter the offerings of competitors. Getting ahead of the competition assures the survival and growth of a business. Possible ways of achieving this are: 1. better performing 2. more economically 3. lower acquisition cost 4. higher salvage value 5. more uses 6. more easily available 7. less susceptible to obsolescence To be able to achieve any of the above, a small business is faced with any of two strategic problems: 1. What products or services to offer at the start of the business? 2. What new products or services to offer when the business is already in operation for some time? In any case, the entrepreneur will have to consider a business idea that can be used as an entry tool or a competitive weapon. WHAT IS A SOUND BUSINESS IDEA? A sound business idea is an economic opportunity which is within the reach of the entrepreneur and which will provide him with desirable value. To determine the soundness, some of the questions of the business idea that must be answerable satisfactorily are the following: 1. Is there a sufficient potential sales volume to achieve the required financial returns? 2. Does the entrepreneur possess the ability to produce the require volume? 3. Does the product or service meet a real need? CREATIVITY AND ITS ROLE IN THE FORMULATION OF A SOUND BUSINESS IDEA URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Creativity is defined as the “ reorganization of experiences into new configurations” this will mean mentally taking things apart, rearranging the pieces in new and potentially productive arrangements, and looking beyond normal frameworks for new solution. THE CREATIVE PROCESS The creative process may be divided into four phases, namely: 1. Preparation The collection of two or more large bodies of information that become associated with new and unique ways is undertaken. This provide the person with a fertile ground for the creative exercise. It is also the background, experience, and knowledge that an entrepreneur brings to the opportunity recognition process. 2. Incubation The creative process relaxes and withdraws from the intense preparation period. It means getting out of the situation and observing at a distance after sufficiently relaxing. It is also a stage during which a person considers an idea or thinks about a problem. 3. Insight It occurs when the creative individual discovers new associations and patterns which useful solutions to a problem. 4. Verification It involves testing, refining, demonstrating and communicating the creative ideas during the insight phase. The phases sometimes overlap, however. For instance insights may happen during the preparation period. ELEMENTS OF CREATIVITY When aiming for creative outputs, five aspects of creativity must be considered. Cole and Hamilton listed them as follows: 1. Drive Refers to the motivation or willingness to repeat a process until the answer to a problem is obtained. 2. Fluency Refers to the ability of the creative person to come up with a lot of ideas regarding the problem under consideration. 3. Flexibility It refers to thinking beyond a certain category of ideas. 4. Originality It refers to the ability to consider the use of rare and unusual ideas. 5. Awareness It refers to the ability to see unusual connections between objects and things. TYPES OF INNOVATION To be able to reap of innovation, one must be familiar what forms of innovation may be considered. URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 1. PRODUCT INNOVATION It refers to the new products or services as well as improvements of old products or services. 2. PROCESS INNOVATION It refers to improvement process in the organization. 3. MARKETING INNOVATION It refers to improvement in the marketing functions of promotion, pricing, distribution, packaging, advertising. INNOVATION AND THE RIGHT ORGANIZATIONAL CULTURE In order to be successful at innovation, the right organizational culture must exist. Higgins indicated that this culture must have the following major characteristics: 1. Encouragement of productivity 2. Rewards for creativity 3. Encouragement of risk taking 4. Open communication 5. Allowance for errors 6. Participative climate 7. Structural mechanisms that aid creativity 8. Training in creative process 9. Flexibility The Creative Organization As management is responsible for providing solutions to various problems that will have to be solved or prevented, it must be provide such climate. Allen indicates that such climate is present in a sound organization which stimulates independent, creative thinking by providing well-defined areas of work. A creative organization according to Fulmer has the following characteristics 1. Has open communication among members 2. Has open communication with the outside 3. Has a large variety of personality types 4. Allows members to be themselves 5. Approaches tasks objectively and is able to see both sides 6. Is not afraid of change 7. Is not enamored of change for its own sake 8. Enjoy experimenting with new ideas 9. Wants to know about everything 10. Can tolerate flexible scheduling 11. Is committed to defining goals and achieving them 12. Enjoy its work 13. Makes decisions without concern for repercussions 14. Can’t be charter by time and motion studies The New Product Process URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 When the firm is already in existence for some time and its management would like to maintain its competitive stance, it is faced with a strategic problem of what new product or service to offer. The new products process, according to Kueczmarski, consist of the following: Stage 1 – New Product Direction – Setting Process 1. New Product Strategy 2. Category analysis and Screening Stage 1 – new product process refers to the evaluation of past new product performance, defining the role of new products in the overall of the firm, identifying the range of product categories that may be examined, and analyzing and screening categories identified. Stage 2 – New Product development Process 1. Idea Generation 2. Concept Development 3. Market Testing Stage 2 – new product process refers to analyzing and ranking potentially attractive categories, generating ideas in selected categories. Business analysis of selected concepts is conducted followed by screening concepts to determine which proceeds to a prototype development. Commercialization of the product follows with the development of launch plans and actually introducing the product. Group Creative Technique Some business ideas come from outputs of creative endeavors. When an entrepreneur is confronted with the problem of producing new business ideas and he can utilize the creative skills of a group, there are certain techniques available. They are the following: 1. Interactive Techniques – Meeting face to face with open interchange. a.) Brainstorming – group creative problem solving process that focuses on the following procedures: (1) No negative feedback is allowed on any suggested alternative until all alternatives have been generated (2) Quantity of ideas, not quality, is the key. b.) storyboarding – a structured, but flexible brainstorming process that focuses on Identifying major issues and then brainstorming each of them. 2. Nominal Group Technique – involves a structured process for integrating individual thinking and group interaction in order to capitalize on the benefits of both. 3. Delphi Technique – involves utilizing a series of questionnaires administered by a central individual to experts who never meet face to face. As the respondents reply, their questionnaires are summarized, and a new questionnaire, based on their responses to the first to developed and sent to them. This repeating process continues until a group consensus on the problem is reached. Activity 1 URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Make a list of three things that you are passionate about. Now, brainstorm business ideas that might align with each of your passions. ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ Activity 2 If you are going to venture into business, what business would it be? ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ SAQ 1 URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Identify what is being described in each of the following statements. __________________ 1. It involves utilizing a series of questionnaires administered by a central individual to experts who never meet face to face. __________________ 2. It involves a structured process for integrating individual thinking and group interaction in order to capitalize on the benefits of both. __________________ 3. It refers to the new products or services as well as improvements of old products or services. __________________ 4. It refers to improvement process in the organization. _________________ 5 It refers to improvement in the marketing functions of promotion, pricing, distribution, packaging, advertising. __________________ 6. The collection of two or more large bodies of information that become associated with new and unique ways is undertaken. This provide the person with a fertile ground for the creative exercise. __________________ 7. Meeting face to face with open interchange. __________________ 8. It refers to the ability to see unusual connections between objects and things. __________________ 9. It involves testing, refining, demonstrating and communicating the creative ideas during the insight phase. The phases sometimes overlap, however. For instance insights may happen during the preparation period. __________________10. The creative process relaxes and withdraws from the intense preparation period. It means getting out of the situation and observing at a distance after sufficiently relaxing. Activity 1 Make a list of three things that you are passionate about. Now, brainstorm business ideas that might align with each of your passions. ASAQ 1 Identify what is being described in each of the following statements. 1. Delphi Technique 2. Nominal Group Technique 3. Product Innovations 4. Process Innovations 5. Marketing Innovations 6. Preparations 7. Interactive Techniques 8. Awareness URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 9. Verifications 10. Incubation https://www.slideshare.net/Franklin1013/chap-4-the-search-for-sound-business- ideaentrepreneurship-chapter-4 Contemporary Entrepreneurship by N.A. Orcullo, Jr. Ph.D Entrepreneurial Management by Marife Agustin-Acierto Entrepreneurship by Bruce R Barringer and R Duane Ireland URS-IM-AA-CI-0061 Rev 00 Effective Date: August 24, 2020 Module 15 STEPS ON HOW TO START YOUR OWN BUSINESS Learning Objectives: 1. Understand the how to start a small enterprise 2. Discuss the characteristics of a sma

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