Entrepreneurship

Lesson 2

Recognize a Potential Market

Dulce H. Borras
Subject Teacher
Entrepreneurial Ideas
It is an innovating idea
of offering something
different. An idea that
no one else has or even
if they did, yours is a
little bit different.
 The Entrepreneurial Process of
Creating New Venture

Creation of Identification of Opening of

entrepreneurial Entrepreneurial Entrepreneurial
ideas activities venture
Essentials in Entrepreneur’s
Opportunity Seeking
 Sources of Opportunities

1. Changes in the environment

Entrepreneurial ideas arise when changes
happen in the external environment. A person
with an entrepreneurial drive views these
changes positively.
External environment refers to the physical
environment, societal environment, and industry
environment where the business operates
1.1. The physical environment
includes

a. Climate- the weather condition

b. Natural resources- such as

minerals, forests, water, and
fertile land that occur in nature and
can be used for economic gain.

c. Wildlife- includes all mammals,

birds, reptiles, fish, etc., that live in
the wild
1.2 The Societal environment includes the
various forces like
a. Political forces- includes all the laws,
rules, and regulations that govern business
practices as well as the permits,
approvals, and licenses necessary to
operate the business.

b. Economic forces- such as income level

and employment rate.
c. Sociocultural forces- customs, lifestyles
and values that characterize a society.

d. Technological environment- New

inventions and technology innovations.
1.3 The industry environment of the
business includes:

a. Competitors
b. Customers

c. Creditors

d. Employees
e. Government
f. Suppliers
For example, one factor in the physical
environment that can easily change is the
climate. The temperature is very high during
summer but very low during the rainy season.
An individual with entrepreneurial drive can
be extremely imaginative and inventive in
identifying opportunities. He/she can venture
a business that responds to the needs of the
people during summer and rainy season
 Sources of Opportunities

2. Technological discovery and

advancement

A person with entrepreneurial interest

sees possibility of business opportunities
in any new discovery or because of the use
of latest technology.
For example, an individual with
knowledge in repair and installation
of a machine engine discovers that
additional engine parts that
considerably reduce fuel
consumption
 Sources of Opportunities

3. Government’s thrust, programs, and

policies
The priorities, projects, programs, and
policies of the government are also good
sources of ideas
For example, the use of firecrackers to
celebrate New Year’s Eve is strictly
prohibited. People without
entrepreneurial interest will view the
ordinance as a plain restriction. However,
for an entrepreneur, it is a business
opportunity to come up with a new
product that will serve as a substitute for
firecrackers.
 Sources of Opportunities

4. People’s interest
The interest, hobbies, and preferences of
people are rich source of entrepreneurial
ideas. Like the increasing number of
Internet Café at present could be lead to
the strong attachment of young people to
computers.
 Sources of Opportunities

5. Past experiences
The expertise and skills developed
by a person who has worked in a
particular field may lead to the
opening of related business
enterprise.
For example an accountant who has
learned the appropriate accounting
and management skills and
techniques in a prominent
accounting firm can start his/her
business venture by opening
his/her own accounting firm.
Forces of Competition Model

It is also known as the “five forces

of competition,” An industry
environment is a competitive
environment. Regardless of what
product or services you have,
competition is always present.
Competition – it is the act or process of
trying to get or win something.

Business competition is the contest

between organizations that provide similar
products or services or that target the
same audience of consumers. Businesses
compete to convert and retain customers,
increase revenue and gain more market
share.
 FIVE FORCES COMPETING WITHIN THE
INDUSTRY
1. Buyers
The buyers are the one that
pays cash in exchange to
your goods and services.
For example, the influenced
of the price or in the
bargaining strategy. The
buyer has a strong and
magnified bargaining power
 The threat of its bargaining
power will be less if the following
factors notice:

a. There are several suppliers

available in the market.
b. The buyer has the potential for
backward integration.
c. The cost of switching the supplier
cost is minimal.
d. The product represents a high
percentage of the buyer’s cost.
e. The buyer purchases large portions
of the seller’s product or services.
 FIVE FORCES COMPETING WITHIN THE
INDUSTRY
2. Potential New
Entrants
A new entrant is defined
as the one who enters
something.
For example, the level of
capital requirements, if
the business requires
huge capital, new
entrants should decline
to join the business. This
gives a threat to the
business.
 This can be notice if there is the
presence of the following factors:
a. Substantial capital requirement.
b. Strict government policy.

c. Difficulty in accessing distribution

channels.
d. Economies of scale.
e. High cost of product differentiation.
f. High switching cost
 FIVE FORCES COMPETING WITHIN THE
INDUSTRY
3. Rivalry among Existing
Firms
Rivalry is a state or
situation in which people
or groups are competing
with each other.
For example it depends
on the Marketing
strategy of your
competitor, like giving
freebies and special
offers.
The intensity of rivalry among existing
firms is characterized to the following
factors:
a. Diversity of rivals.
b. Number of competing firms.

c. Characteristics of the products or

services.
d. Increased capacity.
e. Amount of fixed costs.
f. Rate of industry growth.
 FIVE FORCES COMPETING WITHIN THE
INDUSTRY
4. Substitute Products
Substitute means
anything that takes the
place or function of
another.

For example the

consumers decide to use
margarine as a
substitute for butter. In
case the price of butter
increases, preferably the
consumer will gradually
switch to margarine.
 A substitute product can give a big
threat in the industry environment if the
following factors are notice:
a. Switching cost is low.
b. Preferences and tastes of the customers
easily change.
c. Product differentiation is highly noticeable
d. The quality of substitute products
dramatically improves.
e. The price of substitute product is
substantially lower.
 FIVE FORCES COMPETING WITHIN THE
INDUSTRY
5. Suppliers
The Suppliers are the one
that provide something
that is needed or wanted.
For example if the supply
and services being
offered is unstable or
keep. The intensity of the
threat is strong in this
kind of the competitive
force in the industry.
This can be notice if there is the presence
of the following factors:
a. The supplier has the ability for
forward integration.

b. Suppliers in the industry are few, but

the sales volume is high.

c. Substitute products are not readily

available in the market

d. The switching cost is very high.

e. The product or service is unique.

BASIC CONCEPTS ABOUT THE BUSINESS
PLAN
A business plan is a
formal written
document
containing the goals
of a business, the
methods for
attaining those
goals, and the time-
frame for the
achievement of the
goals.
 PARTS OF A BUSINESS PLAN

1.Title page
The title, or heading, of the plan, and very brief
description of the business.
The date
The name of the owner
The company name and location
A copyright or confidentiality notice
 PARTS OF A BUSINESS PLAN
2. Table of Contents
A list of the individual sections and their page
numbers, starting with the Title Page and ending
with a section for Special Materials (references,
etc.).
3. Summary/Overview
A brief, but focused statement (a few sentences or
paragraphs) stating why the business will be
successful. This is the most important piece of a
Business Plan because it brings everything together.
4. Market Analysis
Identifies specific knowledge about the business and its
industry, and the market (or customers) it serves.
An analysis that identifies and assesses the competition.
5. Description of the Company
A close look at how the different components of the
business fit together, such as:
Information about the nature of the business and the factors
that should make it successful .
Special business skills and talents that provide the business
with a competitive advantage, such as a unique ability to
satisfy specific customer needs, special methods of
delivering a product or service, and so on.
6. Organization & Management
The company’s organizational and legal structure, Is it a sole
proprietorship? A partnership? A corporation? (See:
“Ownership Structures“)
Profiles of the ownership and management team: What is
their background, experience and responsibilities?

7. Marketing & Sales

The company’s process of identifying and creating a
customer base. (See: “Market Research“)
8. Description of Product or Service
A detailed description of the product or service – from the
customer’s point of view:
How they will benefit from the product or service?
Specific needs or problems that the business can satisfy or
solve, focusing especially on areas where the business has the
strongest skills or advantages.
9. Funding
The amount of current and future funding needed to start or
expand the business. Includes the time period that each amount
will cover, the type of funding for each (i.e., equity, debt), and the
proposed or requested repayment terms.
How the funds will be used: For equipment and materials?
Everyday working capital? Paying off debt?
10. Financials
Explains or projects how the company is expected to
perform financially over the next several years.
(Sometimes called a “pro-forma projection.”) Because
investors and lenders look closely at this projection as a
measure of your company’s growth potential, professional
input is strongly recommended.
11. Appendix
Provides specific information that certain individuals (such as
creditors) may want review. It allows the addition and/or
deletion of information as needed, such as:
Credit histories (personal & business)
Resumes of key personnel and partners
Letters of reference
Details of market studies
Copies of licenses, permits, patents, leases, contracts, etc.
A list of business consultants, attorneys, accountants, etc.
 1. Create a simple
business plan.
2. Submission will be
GROUP ACTIVITY on Monday March
6, 2023.