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CHAPTER 1: Foundations of Entrepreneurial Management ➢ Entrepreneurship is the process of creating something new with value by devoting the necessary time
and effort assuming the accompanying financial, psychic, and social risks and uncertainties; and
KEY QUESTIONS: receiving the resulting rewards of monetary and personal satisfaction.
• Who is an ENTREPRENEUR? – An entrepreneur is someone who creates, develops, and manages a
new business or enterprise, taking on financial risks in the hope of profit. PRIVATE ENTREPRENEURS
Private entrepreneurs are individuals who start and manage their own business ventures
• What is ENTREPRENEURSHIP? – Entrepreneurship is the process of starting, developing, and independently. These businesses are typically small to medium-sized and focus on profitability and growth.
running a business, typically with the goal of creating something new and innovative • Goal: Primarily focused on maximizing profit and building a sustainable, often family-owned business.
• Ownership: Fully or partially owned by one or a small group of individuals. They have full control over
• What is CORPORATE ENTREPRENEURSHIP? – Corporate entrepreneurship, also known as business decisions.
intrapreneurship, refers to the practice of developing new business ideas or innovations within an • Risk: Private entrepreneurs take on a significant amount of personal financial risk, as they often invest
established company. their own capital and resources.
• Operations: They are responsible for all aspects of the business, including product development,
• WHAT IS SOCIAL ENTREPRENEURSHIP? – Social entrepreneurs identify opportunities for change marketing, sales, and finances. The business is typically lean and flexible.
and create businesses, organizations, or initiatives that tackle issues like poverty, education inequality, • Examples: Small business owners, independent consultants, and startups.
climate change, healthcare access, or human rights.
Key Characteristics:
• WHAT IS THE ENTREPRENEURIAL PROCESS? – The entrepreneurial process refers to the series • Independence in decision-making.
of steps an individual or group takes to identify, evaluate, and create a new business or venture. • Flexibility to innovate and change quickly.
• Focus on financial success and self-sufficiency.
• ENTREPRENEUR - French, literally translated, “between-taker” or means “go-between”
➢ The term entrepreneurship has historically referred to the efforts of an individual who takes on the odds CORPORATE ENTREPRENEURS (INTRAPRENEURS)
in translating a vision into a successful business enterprise. Corporate entrepreneurs, also known as intrapreneurs, are individuals who act like
➢ focus on the creation of new organizations, others focus on wealth creation and ownership entrepreneurs within a larger corporation. They innovate, take risks, and drive new projects or business
➢ three behavioral attributes of an entrepreneur: (1) initiative taking, (2) organizing and reorganizing of opportunities, but they do so within the framework and resources of an established company.
social and economic mechanisms to turn resources and situations to practical account, and (3) • Goal: Focus on innovation and growth within a corporate setting, usually aiming to drive new products,
acceptance of risk or failure. services, or internal processes that benefit the company.
• Ownership: The business or project they develop is owned by the corporation, not the individual.
ENTREPRENEUR AND ENTREPRENEURSHIP DEFINITION • Risk: The corporation assumes most of the financial risk, though intrapreneurs may still face career
risks if their projects fail.
1. Go Between • Operations: They operate within the corporate structure and often have access to more resources
- an entrepreneur as a go-between is Marco Polo. who attempted to establish trade routes to the Far (capital, employees, infrastructure) than private entrepreneurs. However, they must navigate corporate
East. In the Middle Ages, the term entrepreneur was used to describe both an actor and a person who policies, hierarchies, and cultures.
managed large production projects. • Examples: An employee who develops a new product line, an internal startup project, or a division
within a company designed to explore new business opportunities.
2. SEVENTEENTH CENTURY
- Richard Cantillon, in the 1700s, developed one of the early theories of the entrepreneur describing the Key Characteristics:
entrepreneur as a risk taker and a rational decision maker who assumed the risk and provided • Innovators within a larger organization.
management for the firm. • Risk is typically absorbed by the corporation.
• Work within a corporate structure with the support of company resources.
3. EIGHTEENTH CENTURY
- the entrepreneur was distinguished from the capital provider. SOCIAL ENTREPRENEURS
Social entrepreneurs focus on solving societal, environmental, or cultural issues through
4. NINETEENTH AND EARLY TWENTIETH CENTURIES innovative solutions, often with the goal of creating a positive impact rather than pursuing financial profit
- Andrew Carnegie, who in-vented nothing but rather adapted and developed new technology in the as the primary objective.
creation of products to achieve economic vitality in the steel industry. In the middle of the twentieth • Goal: To create social or environmental value. While social entrepreneurs may generate revenue, their
century, the notion of an entrepreneur as an innovator was established along with a more refined primary motivation is to address a pressing issue in society or the environment.
definition. • Ownership: Social enterprises may be nonprofit or for-profit organizations, but ownership is typically
more focused on creating value for stakeholders (including the community) rather than personal gain.
• Risk: Social entrepreneurs often take on both financial and social risks, as their ventures are typically
not purely profit-driven and may rely on grants, donations, or impact investments.
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• Operations: They develop models that generate both social and financial value. Their success is often Criteria Entrepreneur Manager
measured by the positive change they bring to society rather than traditional financial metrics.
Goal-oriented, focus sa short- to mid-
• Examples: Founders of nonprofit organizations, B Corporations (socially responsible businesses), or 3. Mindset and Future-oriented, visionary, at palaging
term objectives para ma-achieve ang
social impact startups addressing issues like poverty, climate change, education, or healthcare. Vision naghahanap ng bagong opportunities.
business targets.
Key Characteristics: Mas structured at data-driven,
Madalas based sa intuition, gut-feel, at
• Driven by social impact and addressing societal issues. 4. Decision-Making sumusunod sa protocols at company
mabilisang pagdedesisyon.
• Operate in both nonprofit and for-profit spaces, with an emphasis on sustainability. policies.
• Measure success by social or environmental impact rather than financial profit alone. Lumikha at mag-scale ng negosyo, Magpatakbo ng business operations,
5. Responsibilities maghanap ng investors, at bumuo ng mag-manage ng team, at siguraduhin
PUBLIC ENTREPRENEURS strategy. ang efficiency.
Public entrepreneurs work within government or public sector organizations, driving change Short- to medium-term, focus sa mga
and innovation in the delivery of public services. They aim to improve societal welfare by introducing more Long-term, iniisip ang kinabukasan ng
6. Time Horizon daily operations at quarterly/annual
efficient and effective practices in public administration. negosyo at potential growth.
targets.
• Goal: Improve public service delivery, enhance social welfare, and address public sector inefficiencies
through innovative practices and policies. Mahilig sa pagbabago, naghahanap ng Mas conservative, sinusunod ang best
7. Orientation to
• Ownership: While public entrepreneurs don't own the businesses or projects they work on, they have bagong paraan para mag-improve at practices at nag-a-adapt ng innovations
Innovation
responsibility for leading and initiating public sector changes. maiba sa competition. nang dahan-dahan.
• Risk: Public entrepreneurs face bureaucratic and political challenges, and while they don’t typically take In short, ang entrepreneur ay creator at risk-taker, samantalang ang manager ay organizer
on financial risks in the same way private entrepreneurs do, they may encounter political risks and at stabilizer ng isang negosyo.
challenges in policy implementation.
• Focus: Public entrepreneurs focus on enhancing public policy, improving government services, and MODULE 2: Entrepreneurial Business Planning
solving problems that affect society at large.
• Examples: Public policy innovators, civil servants who launch new public health programs, 1. Scope and Value of the Business Plan
government-led innovation initiatives, public-private partnerships to address urban issues.
• A business plan is a written document prepared by the entrepreneur that describes all the relevant
ENTREPRENEUR vs. MANAGER ENTREPRENEURIAL PROCESS external and internal elements involved in starting a new venture.
• The business plan is like a road map for the business’ development.
• The entrepreneur understands the new venture better than anyone.
• The marketing perspective considers the venture through the eyes of the customer.
• The investor looks for sound financial projections.
• The depth of the business plan depends on the size and scope of the proposed venture.

2. Writing the Business Plan

• Who Should Write the Plan - The Entrepreneur
• How Do Potential Lenders and Investors Evaluate the Plan
- The entrepreneur’s credit history or character.
- Their ability to meet debt and interest payments (cash flow.)
- The collateral or tangible assets being secured.

• Technical Business Plans may be evaluated on the following:

Criteria Entrepreneur Manager 1. Viability: The longer a company can stay profitable, the better its viability.
2. Management Background: For every Business Plan we have to check the background of
Nagpapatakbo ng bagong negosyo, nag- In-charge sa pagpapatakbo ng existing Management, because for every business finance is very important without capital no business will
1. Role and Focus iisip ng business opportunities, at focus business operations, ensuring run.
sa paglago at innovation. efficiency at stability. 3. Market advantage: It means that if the product is giving less profit means Entrepreneur has to
Risk-averse, mas iniingatan ang introduce several offers and discounts to give pick up of the product.
2. Approach to Risk-taker, willing to take financial and
resources at sumusunod sa mga 4. Technology: Now a day’s technology plays a vital role in the business world.
Risk strategic risks para sa business growth.
established policies.
• Presenting The Plan
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- It is often necessary for an entrepreneur to orally present the business plan to investors. Typically, the CHAPTER 3: CREATIVITY, INNOVATION, AND ENTREPRENEURIAL MANAGER
Entrepreneur provides a short (20-30 minutes) presentation of the business plan.
Introduction
There are mainly 5 Ways for Sources of New Ideas: • Creativity is a core building block of innovation.
a) Consumers – Care needs to be taken to ensure that the new idea or the needs represents a large • Without creativity, there would be no innovation, as creativity is the foundation on which innovation
enough market to support a new venture. emerges, develops and grows.
b) Existing Companies – with the help of an established formal methods potential entrepreneurs and • CREATIVITY = developing ideas, processes, or concepts
intrapreneurs can evaluate competitive products & services on the market which may result in new and • INNOVATION = practical application of these.
more market appealing products and services.
• Creativity can lead to commercialized innovation, but to be successful, the creativity and innovation
c) Distribution channels – Not only do the channel members help in finding out unmet or partially met
must create new value for customers and generate return.
demands leading to new products and services, they also help in marketing the offerings so developed.
d) Government – the patent office files contain numerous product possibilities that can assist
• Creativity and innovation are not possible without people who have the required competencies,
motivation, and curiosity to discover and invent something novel.
entrepreneurs in obtaining specific product information, and secondly, response to government
regulations can come in the form of new product ideas. • It is the creativity in people and their ideas that produce innovations, but the organization must
e) Research & development – Entrepreneur’s own R&D is the largest source of new idea. A formal and support and nurture this in part for their benefit.
well-equipped research and development department enables the entrepreneur to conceive and • The people involved in the creative and innovative process can have significant impact on the
develop successful new product ideas. organization’s innovation performance and its ability to be competitive through innovation.
• Every organization needs to be creative and innovate if they are to develop and grow. From an
3. Purpose of the Plan organizational perspective, developing creativity in individuals at all levels strengthens the
organization’s ability to recognize and take advantage of different opportunities. In turn, when
individuals are creative, they feel more selfconfident and energized and derive personal satisfaction
from being creative and productive.

1.2 Creativity
• The core of innovation and is necessary to develop innovative business concepts.
• It is fundamental for identifying the patterns and trends that define an opportunity.
• The application of an individual’s ability to identify and develop new ideas, processes, or concepts in a
unique, novel way.
• It is the act of relating previously unrelated things—a deviation from conventional perspectives.
4. Benefits of a Business Plan 5. Elements of a Business Plan • Both novelty and usefulness are necessary conditions for an idea to be considered creative. The results
Determining the amount and timing of need to be useful and have value or meaning.
resources needed. • Example: Netflix is a highly creative company that recognized an opportunity and capitalized on the
- The business plan indicates the success of the DVD and the booming Internet-streaming service. Netflix has been one of the most
existing resources of the firm, the successful dot-com ventures. Despite a series of hurdles, it was launched in the United Kingdom and
resources needed and some potential Ireland. As shown by Netflix, creativity requires perseverance, passion, and commitment. This is
suppliers of these resources. This demonstrated by such leading companies as: 3M, Apple, Amazon, Facebook, Google, Salesforce.com,
allows the entrepreneur to determine Samsung, Twitter, and Virgin Atlantic Airways.
how much money is needed. • It requires both cognitive and no cognitive skills, inquisitiveness, intuition, and determination.
• A process that can lead to incremental improvements or breakthrough innovations.
• Establishing the direction of the • Breakthrough innovations – Radically new ideas that change industries.
firm. Example: penicillin, the computer, and the automobile
- This enables the entrepreneur to
develop strategies and contingency
• Incremental innovation – occurs most frequently and makes minor changes in the product or service.
Example: voice and text messaging, jet airplane, American Express enhancing financial
plans to reduce the impact of any
services.
problems.
• Apple – successful innovations include the iPhone and the iPad. But the core innovation for Apple is
• Guiding and evaluating. the platforms that have facilitated an ecosystem of creativityfrom gaming to finance to chip making.
- By setting goals and milestones for • Google – formed in 1997, had been transformed from a single product into a diversified web power.
the venture, the business plan lays • Facebook – a social networking site that created a breakthrough innovation by creating a new culture
out the intentions of the entrepreneur as well as his/her values. Accomplishments and results can be that changed the way people communicate. Facebook now has billions of users worldwide.
measured and any deviations to the plan corrected in a timely manner. • General electric – innovations in electronic medical records, innovative new power generation that
reduces emissions, and Water Explorer for Google Earth.
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• 3M – known for the famous Post-It Notes, stain resistant additives and sealers, Mobile Projector implementation stages. It calls for imagining, using intuition, conceptualizing, and synthesizing in the
MP225a, and Unitek Incognito Lite Appliance system. incubation and illumination stages.
• Creativity can range from low levels to relatively high levels. LOWER LEVEL CREATIVITY frequently
involves incremental modifications and adjustments of an existing idea or a combination of two or more 1.4 Trends
previously unrelated ideas in a novel and useful way. HIGHER LEVEL CREATIVITY involves more - A trend often provides a great opportunity for starting a new venture particularly when the entrepreneur
breakthrough contributions. can be at the start of a trend that will last a considerable period of time. Seven trends occurring today
include: Wearable trend, Green trend; Payments trend; Maker trend, Mobile trend, Health trend, and
• DIFFERENT TYPES OF CREATIVITY INCLUDE: the Internet of Things trend.
1. Develops new ideas, processes, or concepts WEARABLE TREND
- As the cost and size of microprocessors continues to shrink, the ability of computers to monitor and
2. Modifies existing ideas, processes, or concepts.
record activity and display relevant information is now a reality. Over $1.4 billion has been invested in
- Creates a new, improved version that is more efficient and effective
the industry since 2009 with over $500 million in 2014 alone. Broadly speaking, the wearable tech
- Adds additional features and functions
industry includes categories such as augmented reality (Google Glass), body monitoring (Fitbit) and
- Performs in a different setting
point of view (GoPro). Consumer interest in “Smart Watches” is expected to boost the industry further
- Targets a new audience
as new companies form to service the industry with applications and accessories.
3. Combines things that were previously unrelated. GREEN TREND
- The green sector continues to provide of wealth of inspiration for entrepreneurs around the world. In
1.3 Creative Process
recent years, there has been a shift beyond traditional capital intensive commodities manufacturing
• Three key aspects of organizational creativity are: and downstream business models designed to scale quickly with relative capital efficiency.
1. Knowledge of the course of action is required for opportunity identification, problem solving, and
PAYMENTS TREND
decision making.
- Money, and the way we manage and exchange it, continues to be an industry undergoing a massive
2. Drive refers to the passion, desire, and motivation to do something new and novel with the confidence
transformation. This industry includes services for lending money (LendingTree.com) to products that
to proceed as a first mover.
allows anyone to accept credit cards (Square), as well as billing and accounting services.
3. Ability refers to the ways in which an individual seeks to identify a solution to a problem by adopting
MAKER TREND
diverse and creative techniques in order to accurately assess and evaluate the situation and identify
- Maker Studios and other outlets like Etsy are part of the growing DIY ecosystem, which is empowering
the best, viable course of action.
individuals to become makers instead of just customers.
MOBILE TREND
THE FIVE COMPONENTS THAT ARE THE ESSENTIAL ASPECTS OF THE CREATIVE PROCESS:
- The mobile phone continues to revolutionize the way we consumer content, make purchases and
1. PREPARATION – Preparation is the background, experience, and knowledge that an individual brings
interact with each other. Consumers are increasingly short on time so activities once confined to a
to the opportunity recognition process. In this preparation stage, the individual attempts to find answers
desktop are now being done on the go with their tablet or phone.
to the question or problem. At this stage, it is important to fully understand the issues involved.
HEALTH TREND
2. INCUBATION – the stage where an individual considers an idea or thinks about a problem. Time and
- Health maintenance and care concerns are significant trends in the next decade, offering opportunities
space are reflected in the solution or considerations that may not be immediately forthcoming. This
for entrepreneurs in cosmetic procedures, mind expansion, fitness centers, fitness toys, fit food,
stage is important where extra help may be needed in order to progress forward.
convenient care clinics, wellness coaches, and nature-loving social networks like Green Mountain
3. ILLUMINATION – The illumination stage involves coming up with an outline of an answer to the
Digital.
question or problem. Frequently this answer needs to be further refined and modified.
THE INTERNET OF THINGS TREND
4. VALIDATION – The individual selects the best choice with a calculated level of risk and uncertainty.
The ultimate success of the chosen alternative depends on whether it can be translated into action.
- Gartner predicts that by 2020, over 26 billion devices will be connected to the Internet, leading
to new products like light bulbs and thermostats.
This stage often requires further modification and adjustments to fit the organizational culture. This is
a particularly challenging stage of the creative process because it requires the individual to objectively - This trend of "Smart" devices has caused Google's Eric Schmidt to warn that the Internet will
reflect on the viability of the idea. soon disappear.
5. IMPLEMENTATION – Implementation involves the use of managerial, administrative, and persuasive
abilities to ensure that the selected alternative is carried out effectively. 1.5 Methods of Generating Ideas
o Innovation occurs through cycles of divergent creative thinking, which brings about many potential Generating new ideas for a new venture can be challenging, especially when the idea is the basis for the
alternatives followed by convergence to a selected solution. business.
o Divergence is breaking from the normal and familiar ways of doing things. It is focused on coming
up with new ideas and solutions. It expands the number of potential solutions through the process Entrepreneurs can use various methods to generate and test ideas, including:
of creativity. 1. Focus Groups
o Convergence is the achievement of some agreement regarding the benefits of a given idea and • Involves an open, in-depth discussion led by a moderator.
the value in pursuing that idea. • Typically consists of 8 to 14 participants.
This process takes time and depends on the question or problem facing the organization. The • Stimulates creative thinking and helps screen ideas and concepts.
creative process involves both logical and analytical thinking in the preparation, validation, and 2. Brainstorming
• Encourages creativity through organized group experiences.
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➢ Requires following four rules: • Attribute listing is an idea-finding technique that requires the entrepreneur to list the attributes of an
➢ No criticism. item or problem and then look at each from a variety of viewpoints. Through this process, originally
➢ Freewheeling is encouraged. unrelated objects can be brought together to form a new combination and possible new uses that
➢ Aim for a high number of ideas. better satisfy a need.
➢ Combine and improve existing ideas. 12. Big-Dream Approach
• The session should be fun and not dominated by a single participant. • The big-dream approach to coming up with a new idea requires that the entrepreneur dreams about
3. Brainwriting the problem and its solution—in other words, think big. Every possibility should be recorded and
• A written brainstorming technique developed by Bernd Rohrbach in the 1960s. investigated without regard to all the negatives involved or the resources required. Ideas should be
• Participants express ideas silently. conceptualized without any constraints until an idea is developed into workable form.
• Each member writes three ideas within a 5-minute period. 13. Parameter Analysis
• The leader can adjust time intervals based on the group's needs. • A final method for developing a new
4. Problem Inventory Analysis idea—parameter analysis—involves two
• Involves identifying and discussing problems in a general product category. aspects: parameter identification and
• Helps generate new product ideas by relating known products to suggested problems. creative synthesis. As indicated in Fig.
• Effective for testing new ideas. 3.1, step one (parameter identification)
5. Reverse Brainstorming involves analyzing variables in the
• Encourages criticism to identify faults in an idea. situation to determine their relative
• Ensures morale is maintained while refining ideas. purpose. These variables become the
6. The Gordon Method focus of the investigation, with other variables being set aside. After the primary issues have been
• Group members do not initially know the exact problem. identified, the relationships between parameters that describe the underlying issues are examined.
• The entrepreneur introduces a general concept. Through an evaluation of the parameters and relationships, one or more solutions are developed;
• The group expresses ideas before the actual problem is revealed. this solution development is called creative synthesis.
• Leads to open-ended solutions and suggestions for implementation or refinement.
7. Checklist Method 1.6 Innovation
• Involves developing new ideas by identifying related issues or suggestions. - Innovation is the key to the economic development of any company, region of a country, or country itself.
• Entrepreneurs use the checklist to guide their ideas or focus on specific areas. As technologies change, old products decrease in sales and old technologies dwindle. Inventions and
• Examples of checklist prompts: innovations are the building blocks of the future of any economic unit.
➢ Putting to other uses Thomas Edison reportedly said that innovative genius is 1% inspiration and 99% perspiration.
➢ Rearranging
➢ Adapting
➢ Transforming
➢ Modifying 1.6.1 TYPES OF INNOVATION
➢ Reversing
➢ Omitting • There are various levels of innovation based on the uniqueness of the idea. There are three major types
➢ Combining
➢ Substituting of innovation, in decreasing order of uniqueness: breakthrough innovation, technological innovation,
8. Free Association and ordinary innovation. These extremely unique innovations often establish the platform on which
• Generates new ideas by writing down related words or phrases. future innovations in an area are developed. Given that they are often the basis for further innovation
• Creates a chain of ideas that build on each other. in an area, these innovations, when possible, are protected by strong patents, trade secrets, and/or
9. Forced Relationship copyrights.
• A five-step process for generating new ideas: a. Breakthrough innovations – Include such ideas as: penicillin, the steam engine, the computer, the
• Isolate the problem’s elements. airplane, the automobile, the Internet, and nanotechnology.
➢ Find relationships between them. b. Technological innovation – occurs more frequently than breakthrough innovation and in general is
➢ Record these relationships. not at the same level of scientific discovery and advancement. Nonetheless, these are very meaningful
➢ Analyze the relationships to find patterns. innovations, as they do offer advancements in the product/market area. As such, they usually need to
➢ Develop new ideas from these patterns. be protected. Such innovations as the personal computer, the flip watch for containing pictures, voice
o These techniques help entrepreneurs generate new ideas and improve their product offerings. and text messaging, and the jet airplane are examples of technological innovations.
10. Collective Notebook Method c. Ordinary innovation – Is the one that occurs most frequently. These more numerous innovations
• A small notebook is distributed with: usually extend an existing innovation into a better product or service or one that has a different-usually
➢ A problem statement better—market appeal. These innovations usually come from market analysis and pull, not technology
➢ Blank pages for ideas push. In other words, the market has a stronger effect on the innovation (market pull) than the
➢ Background data technology (technology push). One ordinary innovation was developed by Sara Blakely, who wanted
• Participants record ideas and suggestions. to get rid of unsightly panty lines
• The best ideas are developed at the end of a week.
11. Attribute Listing
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1.7 DESIGN THINKING the quality and output of design thinking versus a more traditional organizational culture. This type of
- Design Thinking is a new approach to create breakthrough innovation and promote high- performance organization provides an environment for employees to want to own their jobs and do everything
collaboration. It is quite different from analytical thinking and is a process for action. It is a method for possible to make the organization and the results of their position world class.
discovering new opportunities and solving problems. While there are a variety of techniques and tools
that can be used, the core process is somewhat universal. Summary
This chapter focusses on one of the most important yet difficult aspects of effective entrepreneurial
FIVE KEY ELEMENTS IN DESIGN THINKING management—effectively managing creativity, innovation, and using design thinking which are essential
a. Defining the Problem: This first step, correctly defining the problem, while sounding Simple is often to growing a sustainable venture. Creativity, trends, and several methods of generating new ideas were
the most difficult of design thinking. discussed. The overall concept of innovation was presented in terms of the types of innovation, and the
b. Developing the Options: Once the problem is defined, the second element- developing the options- process. The chapter concludes with a discussion of design thinking, a new approach to create
takes place. breakthrough and other types of innovation and promote high performance collaboration.
c. Determining the Direction: This third stage-determining the direction-requires that the most promising
solutions are carefully nurtured. CHAPTER 4 ENTRPRENEURIAL RISK MANAGEMENT DEFINING RISK
d. Selecting the Best Solution: From the many solutions maturing from the previous stage, the best
solution can be selected. • Richard Cantillon (1680–1734) was among the first economists who identified the connection between
e. Executing: Once the optimal form of the solution to the problem is found, the solution needs to be entrepreneurship and risk. Entrepreneurs are reconciled with the fact that the risk is their constant
implemented. follower and their task is to find the best ways for its greater reduction.
• Entrepreneurs face different risky situations, such as loss of market share, non payment of sold goods,
1.7.2 ORGANIZATIONAL BARRIERS decay of products in stores or warehouses, inadequate supply in terms of quality and time, leaving the
- Even when the best methodology and techniques are employed, for design thinking to succeed, there company by any important employee, theft by customers or employees, fires, earthquakes, floods,
is a need for organizational commitment. When first understanding design thinking, an organization traffic accidents and similar.
should be prepared to fail at the beginning. Most people find it difficult to use their imaginations and react • The so-called residual risk is always there—the level of risk that remains after the all measures taken
to distractions. In design thinking, failure is not necessarily bad as it can often lead to success. Design to treat it
thinking focuses on and nurtures a number of alternatives until the best solution emerges. • The entrepreneurs before thinking of minimizing the risk in their work, they should define what the risk
is and in what forms and types it can occur. Generally, the risk represents a condition or a situation in
SOME COMMON ORGANIZATION ISSUES DEVELOP THE FOLLOWING BARRIERS TO THE which someone can or certainly lose something (Vaughan & Vaughan, 2008), or in certain situations, it
SUCCESSFUL IMPLEMENTATION OF DESIGN THINKING could be seen as opportunity to gain something.

a. Lack of Management Commitment TYPES OF RISK

- This barrier is a significant one that occurs in organizations. Top-level management must openly • An entrepreneur could be faced with different types of risks. They could be categorized as strategic
endorse and practice design thinking. Without this, employees at lower levels of the organization will risks, financial risks, organizational risks, juridical risks, risks of reputation, market risks, security risks,
not embrace and practice it themselves. In many cases, there is resistance at some level in the etc.
organization. This permafrost or resistance to using design thinking needs to be unfrozen through • Some authors (Byrd & Megginson, 2013; Ramadani & Hisrich, 2015) divide risks in pure, speculative
training and education. In some cases, the only method of removal is eliminating or reassigning the and fundamental risks, which characteristics are elaborated as follow:
source of the permafrost. 1. PURE RISK – The risk is considered as pure, when it causes a sure loss, or a situation that it is in
b. Lack of Permanent Indicators break-even point and it is always unpredictable.
- Another barrier to the successful use of design thinking is due to the lack of measurable indicators of 2. SPECULATIVE RISK – When the risk is pure, the entrepreneur faces with those situations in which
success. The lack of a quantifiable framework to measure the output of design thinking makes it difficult can only lose, while in a speculative risk, he can lose or can win.
for some organizations to accept and implement it as problem solving methodology. In some 3. FUNDAMENTAL (UNAVOIDABLE) RISK – This type of risk is different from the previous types,
organizations, it is important to begin design thinking by focusing on a small problem with a significant because when it occurs, includes all companies which operate in a respective country or community.
upside potential.
c. Resistance to change • Besides the aforementioned types of risks, in literature could be found the following as well (Kuratko,
- People and organizations often resist change, even beneficial ones, especially when they require 2017):
significant behavioral shifts. To ease this transition, it's helpful to start design thinking processes on • FINANCIAL RISK
unrelated problems before applying them to familiar issues. Three companies that have successfully - Due to a certain investment, the entrepreneur puts at risk an important part of its capital, which
implemented design thinking despite these challenges are IDEO, Redbox Automated Retail LLC, and usually comes from the savings made as a result of any activity in the past.
IKEA. - This capital will be lost if the business fails. Besides the invested capital in a business, if the
business debts exceed the invested capital, the entrepreneur should cover them with his personal
1.7.3. OVERALL CULTURE wealth— outside the business.
- The overall culture of the organization can either support or inhibit design thinking. An organizational • CAREER RISK
culture that is guided by a vision, encourages freedom, and has such characteristics as trust, belief in - A topic that is often discussed is that how an entrepreneur will be able to find a job or to return to
people, expandability, people growth, and job ownership allows more creativity to occur and increases their old jobs, if his business will fail?! How he will tear from himself the epithet of ‘a loser’? Taking a
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decision to start an own business should be thought and analyzed very seriously, especially by those CONTEXT DEFINITION
managers who have a secured organizational job, high salary and a good package of benefits • Initially, entrepreneurs should define the risk area or category that want to treat further.
• FAMILY AND SOCIAL RISK • An important issue is that the entrepreneur be aware about the risks he may face during his work. This
- Starting an own business, besides the financial/material investment, also requires more energy and is known as risk’s context definition.
time to be spent by the entrepreneurs. Constantly, his business commitments can cause problems • Entrepreneurs should define the timeframe for finding an adequate solution about the treated risk, the
of various natures. necessary financial resources, the right people and the necessary information. He should define some
• PSYCHIC RISK criteria which clearly define the levels of risk that can be tolerated or not tolerated for a particular
- The greatest risk may be the one that company’s activity or project.
has to do with the psychological • Safety – Safety must be upheld constantly. No injury or fatality is allowable;
wellbeing of entrepreneurs. The • Financial impact – Costs for an activity/project must be within the approved budget;
financial means can be replaced, the • Media exposure – An activity/project should not undermine the reputation of the company and it
house can be rebuilt, the familiar should be protected from negative media exposure;
relations can be improved, the relations • Timing – An activity/project must be implemented within a defined timeframe.
with friends can be restored, the children • Staff management – The necessary knowledge, skills and abilities for proper implementation of a
can also be adopted, but some certain activity/project must be ensured. If the necessary knowledge, skills and abilities are not
entrepreneurs, who have experienced available within the company, the outsourcing opportunities should be considered;
financial and material disasters, have • Environment – An activity/project should be implemented within the existing environmental legislation
been unable to return back, at least not and the company should be committed in creating of a clean and healthy environment.
immediately
RISK IDENTIFICATION
RISK MANAGEMENT - Risk management represents an integral and very important part of the overall • Entrepreneurs should precisely identify which risks need to be treated. Risk identification is very
management of the company. Risk management itself includes all activities that are related to the important for the company and must be implemented promptly. An unidentified risk at this stage means
treatment of risks, such as planning, identification, analysis, compilation of proactive and reactive that this risk will not be treated as well. The risks that are not treated are accompanied by many
strategies, monitoring and control of risks. uncertainties—entrepreneurs do not know what may be their consequences if they occur
• In order a risk to be identified properly, the entrepreneur should know the components associated with
Benefits of risk management can be summarized as follow: that risk, such as:
1. Treatment of negative situations enables companies to reduce the probability they to be occurred, and o Source—something that has the potential to change, divert or destroy a certain activity or project
if they occur, it will greatly reduce negative consequences. All this allows the company to deal with or to help that change, deviation or destruction, such as competition or government. o Event—
fewer surprises and less expenses incurred in order to correct the eventual mistakes. something that happens as a result of the risk’s source, such as the expansion of a competitor to
2. Risk management enables to accumulate large amounts of data and information from the external and the entrepreneur’s operating area, or bringing a new law by the government that affects the
internal environment, which contribute for a better decision-making process in a company. entrepreneur’s business.
3. Risk management contributes to improve the reputation of the company. Stakeholders, as employees, o Consequences—the result or the impact on the company, stakeholders and assets, such as the
suppliers, bankers, governmental and nongovernmental institutions, other companies, etc., are loss of market share as a result of competition or the decrease of the profit as a result of a new law
interested to be part of such a company or cooperate with it. that runs tax increases.
4. Risk management enables the company to better identify and exploit opportunities in the market. A o Reason (what and why)—why a change, deviation or destruction is occurred, such as the failure
company that creates clearer picture about the inside and outside risks, can easier follow and take to forecast the actions of competition or government decisions.
advantage of an opportunity and fill the gaps in the market. o Control and his level of efficiency—undertaking of activities such as training, market research
and market surveillance. o When and where—the time and the place a risk can be occurred.

Retrospective Approach – related to the risks that have occurred in the past, is most often used and is
easier because approximately are known the reasons and consequences of a similar risk that is identified
in the past.

Prospective Approach – associated with risks that the entrepreneurs do not know them, have not
occurred in the past, but is expected to occur in the near or far future.
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1.4.3 RISK ANALYSIS AND EVALUATION

The entrepreneur must rank risks based on priority in context of consequences that can be caused if
they appear. Based on this, risks can be divided into: critical (damages that can cause liquidation of the
company), significant (damages that require additional investments in order to continue with company’s RISK ANALYSIS AND EVALUATION
operations) and irrelevant (damages can be covered with actual funds). Then, they should define the Risk analysis and evaluation can be carried out through multidisciplinary groups, hiring a
likelihood that a certain risk will occur. Accordingly, risk analysis includes definition of consequences that specialist or expert, interviews and surveys, brainstorming, and through statistical analysis, computer
can cause a certain risk and likelihood that this risk will occur. simulations and modelling, market research and probability analysis. This phase shows which risks require
further treatment and which risks are acceptable and unnecessary to be treated, considering that
RISK ANALYSIS AND EVALUATION consequences of these risks are not substantial.
Based on consequences and likelihood can be determined the level of the risk (Fig. 4.2), It can be done
by using of the following formula: Risk = consequences X likelihood 1.4.4 RISK TREATMENT OPTIONS
During their work entrepreneurs might face different risks, of which some can be avoided and
Consequences from a specific risk can be characterized as: the damages reduced, but there are also particular risks that are unavoidable and the damages that can
[1]. Irrelevant—the risk doesn’t impact changes in the company’s goals and objectives be caused by them can be fatal to the company. Entrepreneurs can use several options to treat risks
[2]. Minor—the risk can be treated with existing resources treatment. The major options are the following:
[3]. Moderate—the impact of risk can be treated, but additional resources are required [4]. Major—
treatment of the risk will require significant additional resources from other sectors or sources • RISK AVOIDANCE – During their work entrepreneurs might face different risks, of which some can be
[5]. Significant—the risk might cause the company to fail achieving its goals and in some cases can avoided and the damages reduced, but there are also particular risks that are unavoidable and the
prove to be fatal to the company damages that can be caused by them can be fatal to the company. Entrepreneurs can use several
options to treat risks treatment. The major options are the following:
Likelihood a risk to occur can be characterized as: • RISK REDUCTION – Includes taking concrete measures to minimize the consequences of a specific
[5]. Almost certain—the risk is expected to occur in the majority of cases, occurs often during the relevant risk, such as installing alarms to secure assets from eventual thefts, or installing fire alarms;
year. Probability of occurrence is 95–100%. • RISK ANTICIPATION – In literature, also known as the self-insurance strategy, where entrepreneurs
[4]. Likely—the risk might occur, at least once during the year. Probability of occurrence is 70–95%. leave aside some amount of money in order to cover damages if a risk occur;
[3]. Possible—the risk might occur at some point, for example, once in 3 years. Probability of occurrence • RISK TRANSFER – means transferring responsibility to a third party, such as insurance companies,
is 30–70%. for example insuring a factory from fire by transferring risk to an insurance company.
[2]. Unlikely—the risk might occur at some point, for example, once in 5 years. Probability of occurrence
• RISK ACCEPTANCE – means tolerating risk, in case it is not significantly consequential to the
is 5–30%.
business, or when the treatment is costlier than the damages that would eventually occur
[1]. Rare—the risk might occur only in extraordinary circumstances. Such a risk has occurred somewhere
else and might occur once in every 5+ years. Probability of occurrence is lower than 5%.
1.4.5 MONITORING AND REVIEWING
Example: if the risk of ‘delay in payment of sold goods’ has a likelihood of ‘possible’ (3) and its • Monitoring and reviewing options and selected plans is very important because the conditions in which
consequences are ‘major’ (4), then the level of this risk is 12, respectively ‘high’ (Risk = consequences x a company operates are always changing and a specific option that may have been appropriate for a
specific situation, might not be applicable for another.
likelihood = 4 x 3 = 12).
• Experts suggest that every managing process of a specific risk should be registered in every detail,
because it’s possible a respective situation to be repeated, and if so, it could be treated much easier.
Also, every type of risk should be communicated among individuals, sectors and managers/owners.
Communication should be involved in every phase of the risk management process.
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• Risk management plays vital role in strategic planning. It is an integral part of project management. An • Therefore, marketing is a process that through market research identifies the customers' needs, desires
effective risk management plan focuses on identifying and assessing possible risks. Some of the key and demands and by offering (producing or servicing), distributing and promoting products/services
advantages of having risk management are as under: simultaneously satisfies them and brings profits to the company.
• Marketing is defined as the process of determining the needs and wants ofconsumers and being able
a. Risk Management in the long run always results in significant cost savings and prevents wastage of to deliver products that satisfy those needs and wants. Marketing includes all of the activities necessary
time and effort in firefighting. It develops robust contingency planning. to move a product from the producer to the consumer. Think of marketing as a bridge from the producer
b. It can help plan and prepare for the opportunities that unravel during the course of a project or to the consumer.
business. • Marketing starts with market research, a learning process in which marketersget to know everything
c. Risk Management improves strategic and business planning. It reduces costs by limiting legal action they can about the needs and wants of consumers, and it ends when somebody buys something. Many
or preventing breakages. companies feel that services provided to customers after the purchase also are an important part of
d. It establishes improved reliability among the stake holders leading to an enhanced reputation. marketing. All of these enterprises production, advertising, transportation, processing, packaging, and
e. Sound Risk Management practices reassure key stakeholders throughout the organization. selling are included in the marketing process.

Summary 1.2.1 NEEDS, DESIRES AND DEMANDS OF CUSTOMERS NEEDS, DESIRES AND DEMANDS OF
• Risk is inherent in the business. Different types of risk exist in the business according to the nature of CUSTOMERS
the business and they are to be controlled and managed. • A need is something basic, elementary that a man requires in order to survive.
• In traditional concept the natural calamities like fire, earthquake, flood, etc. were only treated as risk • A need becomes a desire when it will be connected to a specific product or service.
and keeping the safe guard equipment etc. were assumed to have mitigated the risk. But due to rapid • A demand is related to a specific want and the ability to pay for it.
changes, the various types of risks have emerged viz. Compliance risk, legal risk, country risk,
operational risk. 1.2.2 PRODUCTS AND SERVICES PRODUCTS AND SERVICES – After identifying customers' needs,
• To mitigate the various types of risks, which a business entity faces, a proper risk management process desires and demands, a company must decide what to produce/serve in order to meet them.
should be in force. It is a continuous process and is applied across the organization. It is basically the
identification of risk areas, assessment thereof, evaluating the impact of such risk, develop the risk 1.2.3 INFORMATION – Customers should be informed about the product(s)/service(s) that are offered in
mitigation techniques, establishing the sound internal control process and continuous monitoring the market. As the company informs customers about its offering, it should make efforts to convince them
thereof, setting of standards for each process and abnormal variances to be vetted. to buy/consume the offered product(s)/ service(s) in the market.

CHAPTER 5: ENTREPRENEURIAL MARKETING MIX 1.2.4 EXCHANGE – At the moment when a product is produced and the customer is informed about it,
the company must identify the best way the product reaches the customers.
1.1 INTRODUCTION
• Entrepreneurial marketing activities are essential for every new or established business. This chapter 1.2.5 MARKET – A market is a place where the exchange of products/services happens. Market
focuses on the marketing tools, such as product, price, place (distribution) and promotion. Then, the segmentation focused on a group of customers who can be differentiate by age, gender, education, income,
differences and similarities of traditional and entrepreneurial marketing elements and contents are religion, life style, etc.
discussed. The chapter concludes with a discussion of basic forms of entrepreneurial marketing such
as guerrilla, ambush, buzz and viral marketing. 1.2.6 MARKETERS – Marketers are those, who should identify the customers' needs and desires, provide
products and services in the market, inform customers about products/services offered, choose in which
1.2 NATURE OF MARKETING market to offer these products/services and seek answers about the market's reaction with regards to the
• Kotler and Armstrong define marketing as "social and managerial process by which Individuals and products/services offered in the market.
organizations obtain what they need and want through creating and exchanging value with others".
• American Marketing Association (2013) defines marketing as "activity, set of institutions, and processes 1.2.7 COMPETITION – Competition includes rival companies that offer or can offer the same, similar or
for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, substitute products and services of the respective company
partners, and society at large."
• Hisrich (2000, p. 3) defines marketing as the "process by which the decisions are made in a totally 1.2.8 ENVIRONMENT – The environment includes all the factors, external and internal, which directly and
interrelated changing business environment on all the activities that facilitate exchange in order that the indirectly influence the activity of the company. Environment could be macro and micro. Macro
targeted group of customers is satisfied and the defined objectives are accomplished". environment includes natural, demographic, economic, political, technological, legal and socio-cultural
• Generally saying, marketing is a connecting bridge between the producers and the market (Veseli, factors, while the micro environment includes the company, suppliers, intermediaries, customers,
Ramadani, & Rexhepi, 2010). competition and public
• Whereas, Ries and Trout (2006) define marketing as a war, where two or more competitors fight' to
control customers and unlike military wars, this war never ends. FUNCTIONS OF MARKETING
• Similar explanation was given by J.C. Levinson, our opening profile, where he says: "Marketing is not 1. BUYING - people have the opportunity to buy products that they want. Selling - producers function
an event, but a process. It has a beginning, a middle, but never an end, for it is a process. You improve within a free market to sell products to consumers. Financing - banks and other financial institutions
it, perfect it, change it, even pause it. But you never stop it completely". provide money for the production and marketing of products.
 10
2. STORAGE - products must be stored and protected until they are needed. This function is especially LABELLING – Is closely linked with the packaging, which aims to inform customers about name of the
important for perishable products such as fruits and vegetables. manufacturer, content of the product, date of production and expiration, use and level of product quality
3. TRANSPORTATION - products must be physically relocated to the locations where consumers can (product type A, B or C).
buy them. This is a very important function. Transportation includes rail road, ship, airplane, truck, and
telecommunications for non-tangible products such as market information. 1.4.2 PRICE
4. RISK TAKING - insurance companies provide coverage to protect producers and marketers from loss - Price represents the amount of money, goods or services that have to be provided in exchange for the
due to fire, theft, or natural disasters. possession or the usage of a product/service. Companies must be careful when they set the price of
5. MARKET INFORMATION - information from around the world about market conditions, weather, price products/services. If marketers will opt for a cheap price, the customer may arouse suspicion that they
movements, and political changes, can affect the marketing process. Market information is provided by are low-quality products.
all forms of telecommunication, such as television, the internet, and phone. - Therefore, a price should be acceptable to both sides, for the manufacturer/wholesaler/retailer and the
6. GRADING AND STANDARDIZING - Many products are graded in order to conform to previously customer. Marketers can use several methods to set the products/services’ price.
determined standards of quality.
7. PROCESSING - processing involves turning a raw product METHODS BASED ON COSTS
a. Markup – In determining the selling price, marketers use a certain percentage, called markup. Markup
1.4 MARKETING'S TOOLS/INSTRUMENTS is added to costs or selling price of the product (Fig. 5.1). Marketers have two ways to set the markup,
Marketing is constituted of four main tools or instruments, who are presented by the acronym using:
4P’s (product, price, place and promotion). Today there are tendencies that acronym 4P becomes 7P, • Costs. For example, if the costs of producing a product
where to 4P’s are added elements such as: people, process and physical evidence. 4Ps are viewed of have a value of 82€ and the same is sold for 124€, then
manufacturers/wholesalers/retailers, which use them to influence the purchase of as instruments the markup will be:
products/services by customers. According to Lauterborn, to manufacturers/wholesalers/retailers’ 4Ps • Selling price. For example, if the product is purchased
correspond the customers’ 4Cs. While, according to Thisa Yakorn, today we can discuss as well as for for 124€ (selling price) and sold for 157€, then the
4Vs of marketing, such as: validity, value, venue and vogue markup will be:

b. Break-Even Point Method

• Break-even point represents the point where the total revenues from a particular product are equal to
the total costs made for its production. In other words, this is a situation where the company does not
realize neither a loss nor a profit from production and sale of
1.4.1 PRODUCT a particular product. Breakeven point (BEP) is calculated by
- Product represents the first element of the marketing-mix. A product can be counted everything that is the following formula:
offered in the market in order to satisfy customers’ needs, desires and demands. In marketing, product
is more than something you can see and touch. For marketers, product provides a set of attributes of PRICING BASED ON COMPETITION PRICING BASED ON COMPETITION PRICING BASED ON
tangible and intangible assets, such as: packaging, color, quality, brand, design, warranty, etc. Many COMPETITION
entrepreneurs use Table 5.2 in order to create a clearer picture regarding their product(s)/service(s) in • A company can set the prices of its products and services by following the prices of competitors. It can
terms of their features and benefits that each feature brings to customers set the prices of its products and services under, in the same or above the level of competition prices.
Companies can attract customers by offering lower prices than the competition, or keeping the same
PRODUCT-MIX – Includes the total number of products/services that a company offers in the market. prices, when competition increases them. The company can set even higher prices than the competition,
Product mix has four dimensions: width, length, depth and consistency. Width of the product-mix in situations when its products/services have greater value for the customer, have higher quality, are
represents the number of product’s types offered by the company. Depth of the product-mix is related more prestigious, are more appropriate and more reliable that competitors’ ones.
to the number of product’s variations within a type, in terms of color, taste, size etc. Length of the
product-mix has to do with the number of variants of all products offered by the company. Consistency PRICING BASED ON CUSTOMERS
of the product-mix shows the relationship of products/services in terms of consumption, production • A company during pricing its products can also use their own customers. Companies typically use these
processes, distribution channels and promotional programs techniques because through them, they can see the product value from the customers’ perspective.
Sometimes companies, through these techniques, have set higher prices in comparison with those set
BRAND – Is a name, symbol, design or a combination of all three, through which a product or service by themselves—without consulting customers.
is identified and distinguished from competition’s products and services (McDonald’s, Pizza Hut,
• Among these techniques belong (Jobber & Fahy, 2003, p. 167):
Mercedes, Opel, IBM, Nike, etc.). Brand has its name and trademark.
a. Conjoint analysis – According to this technique, as the characteristics and benefits of a product are
presented and described to customers, from them is required to set a price for that product.
PACKAGING – Is concerned with the design and manufacture of product’s wrappers, which protects
b. Experimentation – A product/service, according to this technique, is distributed across several
the product from any possible damage and makes it more attractive to customers.
locations and offered at different prices.
c. Economic value to customers – The economic value of a product for a customer is usually
associated with the benefits and reduced costs of using that product, compared with competitors.
 11
MARKETERS CAN USE THREE PRICING STRATEGIES: there is no prior planning to purchase them. As most used forms of sales promotion are: discount,
• SKIMMING PRICING STRATEGY - Determination of higher prices compared to the competition. coupons, prize games, gifts (associated with a product purchase
Companies use this strategy mostly in the penetration phase (launching) of the product in the market, 4. PUBLICITY is a non-paid-for form of promotion. Common types of publicity are news stories, comments,
because then the competition is too small or does not exist at all and interviews from various journalists and very often, without consent of the company. Publicity plays
• PENETRATION PRICING STRATEGY - The purpose of this strategy is to penetrate to market in a a positive role, because it is done without knowledge of the company, it is not paid like an advertising
shorter time, generate higher sales and realize a larger market share. activity and customers believe in received information. However, publicity may have negative impact as
• COMPETITIVE PRICING STRATEGY - The competition is fought through the other elements of the well, if the news and stories are detrimental for the company or its products.
marketing-mix, by offering higher quality products/services, by using better distribution channels that 5. PUBLIC RELATIONS. The audience represents every group that has direct or indirect, potential or
enable a faster providing of products/ services to the customer actual impact on the accomplishment of the company’s goals and objectives (citizens, media,
institutions, government, etc.). Public relations involve programs and plans that generate positive
1.4.3 Distribution relations with the general public and protection of the company’s image
• Once a product has been produced and the price has been set, the marketers should find the best way 6. DIRECT MARKETING. Direct marketing represents direct communication, with no involvement of
to distribute the product to customers. Distribution (somewhere treated as ‘place’) includes the providing intermediaries between company and customers. It is realized through websites, interactive TV
of the product/service in the right quantity, right place and right time. Distribution provides utility to the programs, telephone (telemarketing), direct mail, catalogs and kiosks.
consumer; that is, it makes a product convenient to purchase. Products/services can be distributed to 7. EVENTS AND EXPERIENCES. The company can promote themselves by organizing or sponsoring
customers directly and/or indirectly. various sports, cultural, education and similar events and activities. In order promotion activities to be
realized, companies must firstly define the necessary budget for their successful implementation.
Defining the promotion budget is quite challenging for marketers, because there is no standard that
• FOUR TYPES OF DISTRIBUTION CHANNELS:
determines exactly how much should be spent on advertising or personal selling and how much on
(1) zero level channel—the company directly sells its products/services to customers through door to
other promotion forms.
door, internet, mail and telemarketing;
(2) one level channel—includes one intermediary, for example, a retailer;
Five common methods for determination of promotion budget can be used:
(3) two level channel—includes two mediators (wholesaler and retailer)
1. AFFORDABLE METHOD. Base on this method, the company determines the amount of money that
(4) three level channel—includes three intermediaries (wholesaler, retailer and agent)
can afford to spend on promotion. This method is usually used by small businesses. Given the limited
financial means, it is not considered whether the company can achieve the marketing objectives
1.4.4 Promotion
(entering into a new market or increasing the participation in an existing market)
• Promotion is the fourth element of the marketing mix, which primary task is to inform customers about 2. PERCENTAGE-ON-SALES METHOD. This method of promotion budgeting is based on specified
the product’s availability and to persuade them that the respective product is better than those of
percentage of current or anticipated level of sales. For example, a company decides to allocate 10% of
competitors and they should buy it. Promotion enables companies to communicate with customers
anticipated sales on promotion for 2017. If a company anticipates $300,000 in sales, then $30,000
($300,000 X 10%) will be used for promotion.
• Promotion of a product/service can be accomplished through several forms (promotional mix), such 3. FIXED-SUM-PER-UNIT METHOD. This method means that companies determine the promotion
as: budget based on produced/sold units of respective products. For example, a company can allocate a
1. ADVERTISING presents any activity which function is to inform customers about any new fixed amount of $15 for every sold unit of a product. If the company predicts that next year will sell
product/service through mass media and to persuade them to buy/use it. A company pays a certain 10,000 units of that product, then the promotion budget will be $150,000 (10,000 units X $15).
amount of money to media for the space and time used for informing the customers about its products 4. COMPETITION-BASED METHOD. In order to determine the promotion budget, some companies are
and/or services. A well-organized advertising creates a perception that the company offers quality based in the competitors’ budget. They see how much money competitors have allocated for promotion
products and services, increases customer loyalty and leads to continual purchases. and then determine their own budget. It should be mentioned that it is difficult to obtain accurate
information about the competitors’ promotion budget, because almost none of them publishes such
TYPES OF ADVERTISING (CHURCHILL JR & PETER, 2003): data.
a. Product Advertising 5. Objective-and-task method. According to this method, firstly, companies should define specific
b. Institutional Advertising objectives they want to achieve through promotion (e.g., 15% increase of sales); secondly, they should
c. Pioneering Advertising determine forms of promotion that will be used and what tasks each should perform; thirdly, they should
d. Comparative Advertising determine costs of each assigned task; and finally, they collect the costs for each task and the sum of
e. Advocacy Advertising these costs is the promotion budget
2. PERSONAL SELLING enables direct, personal communication between buyers and sellers. This 1.5 Entrepreneurial Marketing - Business and American Marketing Association as the two largest
includes communicating face to face, by phone, e-mail or fax. Personal selling enables immediate professional and academic organizations in these areas, and from 1999 began to publish the first scientific
response from the customer, which allows retailers to adapt communication in accordance to journal that treats es of entrepreneurial marketing, titled as the Journal of Research in Marketing and
customer’s personality, needs and demands. Namely, the salesperson’s ability to adapt is the key of Entrepreneurship (Ionit¸a˘, 2012). The question is where entrepreneurial marketing differs from traditional
success in this form of promotion. Personal selling is one of the most expensive forms of promotion. marketing?!
3. SALES PROMOTION usually enables increase of sales in a short term. It is used for those products to
which customers are not loyal. The customers decide to purchase them in a shop, which means that
 12
Stokes (2000) differs entrepreneurial marketing from traditional marketing in these dimensions: concepts. (Levinson, 1984). It is supposed to be “surprising, efficient, rebellious, infectious, and in the
• In terms of BUSINESS ORIENTATION, it is concluded that, unlike traditional marketing, which is best case even spectacular, thereby bursting through conventional perceptions and leading to a “‘wow
customer-oriented, entrepreneurial marketing is oriented towards entrepreneurs and innovations. More factor’” (Kraus, Harms, & Fink, 2010, p. 31).
specifically, if the traditional marketing’s concept requires assessing market needs before developing a
new product, entrepreneurial marketers start with an idea, which convert it to a new product or service 1.6.2 Ambush Marketing
and then try to find a market for it • The term “Ambush marketing” was coined in 1980s by the marketing strategist, Jerry Welsh, while he
• In terms of collecting information from the market, entrepreneurial marketers are aware of the was working for American Express. It comes from the French word embuschier which means ‘to place
importance of monitoring the marketing environment. But they use informal methods, such as personal in a wood’, while in the marketing expression, it means ‘an attack from a hidden position’. Ambush
observation or gathering information through their networks or contacts. They oppose formal research marketing is closely related to sponsorship of major events and it is most common in sport
methods as a logical consequence of the fact that they do not believe in the ability to predict the future. (Winter/Summer Olympic Games, FIFA World Cups, NFL Super Bowl, etc.). Ambush marketing is
• From a tactical perspective, entrepreneurial marketing does not fit to the model of the 4P’s, because described as intentionally attacking a competitor’s official sponsorship in an “effort to gain market share,
entrepreneurs have developed an interactive marketing approach, which is based on personal and and to confuse consumers as to who is the official sponsor” (Sharma, 2015, p. 12).
direct contacts with customers. Entrepreneurial marketers interact with customers in personal selling • Meenaghan (1994, p. 79) define ambush marketing as “the practice whereby another company, often
and other marketing activities. Important to entrepreneurial marketing are word-of-mouth and a competitor, intrudes upon public attention surrounding the event, thereby deflecting attention toward
references from customers. themselves and away from the sponsor”. It is supposed that ambush marketing was occurred for the
• From a strategic perspective, traditional marketing requires a top-down approach, a clearly defined first time in 1984 at Los Angeles Summer Olympics, where Fuji was the official sponsor, but Kodak,
order of activities, such as segmentation, targeting and then positioning. Entrepreneurial marketers ambushing Fuji, sponsored the event’s TV broadcasts and the official film of the US track team. Today,
practice an opposite approach, i.e., bottom-up. As they identify a potential market opportunity, they test there are many pro and contra opinions toward ambush marketing. Some people say that it is an illegal
it through the ‘trial and error’ process and after that, the company starts to satisfy the needs of some and unethical way of marketing, some others say that it is a creative strategy. These issues are broadly
clients, and then began to expand through direct contact with customers and finds out their needs and discussed in Nufer (2013).
preferences. • The common reasons why some companies use ambush marketing are the following (Agrawal &
Byahatti, 2013, p. 8)
SIX ELEMENTS OF EXTREPRENEURIAL MARKETING a. To create an impression of being an official sponsor without paying for it;
1. Customer-intensity. Customer-intensity includes the enthusiasm, passion, zeal and belief in where b. To counterbalance the Olympic commitment of market competitors;
marketing is attempting to take the company and how will do that. This element strengthens the passion c. To set right the campaigns of the sponsors that are misleading;
for the customer and the employees’ identification with products and services, as the core values of the d. If securing sponsorship rights is too expensive or the category is blocked, ambushing is used;
company. e. To be able to use the money saved by not becoming a sponsor, on advertisements.
2. Continuous innovation. This element has to do with the ability of the company to continuously provide
or produce creative ideas, which will be converted into products, services or new processes. 1.6.3 Buzz Marketing
3. Strategic flexibility. This element is related to the willingness of the company to continuously review • The Buzz marketing is another type of entrepreneurial marketing, where a certain product/service is
and adjust its strategies, action plans and methods of resource allocation, and structure, culture and promoted by one person to another, without the knowledge, order, help or supervision of the company.
management systems of the company as well. It is known as a word-of-mouth communication. According to Morrissey (2007, p. 14), buzz marketing
4. Calculated risk taking. Risk taking involves the willingness to pursue opportunities that have real is “like a virus, it is ideally spread with a predefined target which will relay the message to the people
chances to generate reasonable loss or significant performance inconsistency. An entrepreneurial who love surrounding the same products and services that carry the message.” The idea of buzz
marketer does not take uncontrolled risks that can be fatal for the future of the company, but he takes marketing is to spread information to customers through the organization of an event or an activity, in a
risks that can be calculated and continuously tries to find ways to control the factors that contribute to spectacular, surprising and memorable way. This event or these activities should be closely associated
the risks’ appearances. Simply said, they are too vigilant in decision making. to a brand.
5. Proactiveness. Entrepreneurial marketers do not take the external environment, as a given or as a set
of circumstances in which the company can only be adapted. The environment is perceived as a horizon 1.6.4 Viral Marketing
of possibilities. • Viral marketing is a new form of entrepreneurial marketing that is closely related to the development of
6. Resource leverage. In essence, leveraging means ‘doing more with less’. The word ‘lever’ describes internet. This kind of marketing involves the transmission of information from a person to many others
a metal or wooden stick that allows a person to remove an object that cannot otherwise be moved. via internet. This is the reason why it is usually known as “word-of-mouse” marketing. Through viral
Similarly, entrepreneurial marketers represent an excellent lever for efficient resource management. marketing the information can be disseminated quickly to the wide audience and needs very little efforts.
Viral marketing’s success depends on the desire, will and personal benefit of the customer to further
1.6 ENTREPRENEURIAL MARKETING TYPES distribute the information to his network, such as family, friends, colleagues, neighbors, etc. If
1.6.1 Guerrilla Marketing this ’sparks’, then the company can promote its products or services to a wide audience without any
• As it was mentioned in the opening profile, the term ‘guerrilla marketing’ for the first time was invented costs. It should be mentioned that, as buzz marketing, viral marketing as well can have negative effects
in 1984 by Jay Conrad Levinson—the father of guerrilla marketing. This kind of marketing includes a on company’s image—if the shared message includes information on products or services in a negative
variety of marketing techniques that are attractive, unique, non-traditional, not seen earlier, special, sens
characterized by very low cost and great impact, which enable entrepreneurs to achieve their business
goals. Guerrilla marketing can be considered as a predecessor of other entrepreneurial marketing