ENTREPRENEURSHIP, BUSINESS AND REGIONAL DEVELOPMENT

Doulet P. Peralta

Chapter 1: CONCEPT OF ENTREPRENEURSHIP

A perspective on entrepreneurship.
 Entrepreneurship is a very important component of a capitalist economy like the Philippines. It
thrives in economic systems that support innovation and hard work. When entrepreneurs become
successful, the nation is immensely benefited.

Entrepreneurship and Economic Development

Economic Development – is a scheme aimed at improving the living standards of the nation’s citizenry. To
achieve economic development goals, proper management of the following elements is necessary:
1. Human resources (labour supply, education, discipline, motivation)
2. Natural resources (land, minerals, fuel, climate)
3. Capital formation (machines, factories, roads); and
4. Technology (science, engineering, management, entrepreneurship)

The effective and efficient use of the various resource elements contribute to economic growth.
This happens when the elements of entrepreneurship is performed well by the players.

Factors in Determining Economic Growth

a. The Filipino values and culture
 Love for imported products  The value of time
 Our values of “Bahala Na”  Our values of “hiya”
 Crab mentality  Fiesta and social occasions.
 Manana habit

b. Job Opportunities/Employment
 Employment is one great factor in economic development.
 Income opportunity in the countryside is still subsistence in nature.

c. Availability of needed capital

What is entrepreneurship?
 It is the process of creating something new with value devoting the necessary time and effort in
starting, managing, and assuming the accompanying financial, psychic and social risks and
receiving the resulting rewards of monetary and personal satisfaction and independence. –
Banastao, et al.(2008)
 It is an economic activity of a person who starts, manages, and assumes risk of a business
enterprise. – (Medina, 2014)
 It is the capacity and willingness to develop, organize, and manage a business venture along with
any of its risks in order to make a profit. – (Melville, 2019)
 It is a science of converting processed ideas into a remarkable business venture (Acierto, 2019)
 It is a capacity for innovation, investment and expansion in new market, products and techniques
(Fajardo, 2009)

Four basic aspects of being an entrepreneur

1. Creation of something of value. ENTREPRENEUR:
2. Devotion of necessary time and effort “A crazy person who risks their own money
3. Assumption of necessary risks for freedom, rather that exchanging their
4. Getting rewards freedom for money”
Who is an entrepreneur?
1. An entrepreneur is a creative and innovative person who starts and or operates a business and
willing to bear the risks. – Banastao, et al., (2008).
2. The entrepreneur identifies an economic need, considers offering a business solution, proceeds to
assemble the resources required, and assumes the risk of either succeeding or failing.
3. An entrepreneur is an individual who is alert to profitable opportunities for the exchange of goods
or services.- Acierto, 2019

Example of Entrepreneurship Activity

Entrepreneur’s Concern Problem at Hand Entrepreneur’s Action
Identifying an economic Students are not satisfied with Establish a canteen with affordable
need. the foods provided by the school classy foods that are within the taste
canteen. of students.
Assembling resources Resources must be made Acquire funds, hire people, and
 required available construct buildings and the like.
Assuming risk Venture must be made Prepare project study, advertise, and
maintain good relationship with
employees and customers, among
others.

Personal Entrepreneurial Competencies

1. Opportunity Seeking and Initiative – the ability to seek and identify new or unusual opportunity
and pick-up business ideas from it.
2. Persistence – the readiness to take repeated actions or alternative strategies when faced with
obstacles or failures. Entrepreneurs are not discouraged easily by failures or negative comments.
They learn from past mistakes and criticisms.
3. Commitment to Work Contract – willingness to put extra effort to meet deadlines and achieve
objectives.
4. Demand for quality and efficiency – it is striving to produce a product or service better, faster,
and at the least cost possible. An entrepreneur has no room for inferiority and mediocrity.
5. Risk Taking – the ability to take calculated risks by devising means to minimize risk and control
the outcome.
6. Goal setting – setting short and long-term objectives and communicate them to his subordinates
and consumers.
7. Information seeking – the eagerness to seek information from consumers, suppliers, competitors
and experts.
8. Systematic Planning and Monitoring – ability to develop comprehensive plans, monitor progress,
use feedback in decision making.
9. Persuasion – the ability to employ different strategies to influence and persuade people.
10. Self-confidence – the belief in one’s own ability to get difficult tasks done.

Real Life Situations Where Entrepreneurial Competencies are applied

1. The Entrepreneurial Machinist
He started as an apprentice in a machine shop at age sixteen. By age twenty, he was producing
tools and dies for large manufacturing companies. Then he concentrated in the production of umbrella
parts and moved on to produce fly and mosquito nets when the demand for umbrella parts has gone down
because of cheap imports.

2. The Entrepreneurial CPAs

A group of CPAs has been operating review school for the last 25 years. It includes book authors,
practitioners, college professors, CPA reviewers.

3. The Entrepreneurial Doctors

A group of doctors, most of them with their own specialization, invested money in, and for some
activity run a medical diagnostic laboratory catering to corporate and walk-in patients

4. The Entrepreneurial Lady

She started her business printing materials and examination booklets for the next door university.
In time, her photocopying business grew to a bookstore with a student canteen. After a few more years,
she became a book publisher all run by her children. Meanwhile, she continues manning in its original
sit, the bookstore/student canteen.

5. The Entrepreneurial Dermatologist

She has several cosmetic products patented in her name. To date her company continuously
research for new products that are best suited for the Filipino skin. Her practice as dermatologist has
been her priority even as she was attending to her cosmetic business where she heads the research and
development department.

6. The Entrepreneurial MBA (Master in Business Administration)

He was a young professor in an exclusive girls’ school. That was soon after he graduated from one
of the best MBA schools in Metro Manila. He put up a specialty restaurant which was an instant success.
His classmates, convinced of his track record of making thing happen, were encouraged to make cash
investments in his ventures.

The rewards of entrepreneurship are: Problems of Entrepreneurship:

 Money or material return or profit  Demands hard work
 Freedom  Demands long working hours
 Psychological rewards  May cause emotional stress
Identifying strengths and weaknesses:
Strengths
1. Skill Weaknesses
2. Knowledge 1. Lack of self-confidence
3. Health 2. Inability to speak well and convince
4. Interest people
5. The desire to grow 3. Physical appearance

Cycle of Development Role of Entrepreneurs in the Economy

1. Entrepreneurs Investment 1. Mobilizers of capital
2. Employment and Income 2. Tax payers
3. Savings and Taxes 3. Supplier of product
4. Employers
5. Service providers

Role of Entrepreneurship in Economic Growth

Micro, small and medium enterprises (SMEs) are vital component of the economy. It provide
employment for the Philippine labour force. It is important for the economy to increase the output of the
MSMEs to help the economy moving and growing.
To attain this, the MSMEs should have more access to:
1. Credit
2. Better sources of raw materials
3. Modern technology
4. More marketing information

Government strategies to help MSMEs

a. Provide credit, technology and marketing support to new enterprises
b. Tap overseas workers to invest their earnings in MSMEs
c. Promote greater involvement of LGUs in promoting small business activities by providing
them information on business opportunities, available sources of funds, and the latest
product design.

R.A 9178 – Barangay Micro Business Enterprise (BMBEs) Act of 2002 provides incentives and benefits:
a. Exempts BMBEs from income tax and encourages LGUs to exempt or reduce local taxes imposed
on BMBEs
b. Exempts BMBEs from coverage of the minimum wage law
c. Improves credit delivery to BMBEs
d. Provides for technology transfer, production and management training and marketing assistance to
BMBEs
e. Provides trade and investment promotion to BMBEs

Entrepreneurs in Small and Medium Industries

1. They help provide supply of products to customers. For example, a family needs only a bar of soap
per week and this need is met by the nearby store in the community.
2. They help provide personal service. For example, you need a haircut. This service is provided by
the neighbourhood barber shop.
3. Small and medium scale business serves as a means of earning to an unemployed individual. For
example, the service of Juan dela Cruz, a factory worker, was terminated. From the separation pay
he received, Mr. dela Cruz started a repair shop and earns in the process.
4. The small and medium scale business also provide employment to other people. For example, Mr.
dela Cruz hired workers to help him in the process of providing repair services to his customers.
Thus unemployment in the country is reduced.
5. Small and medium scale entrepreneurs also pay taxes to the government, and such payment
allows the government

Entrepreneurship and Innovation

Innovation is the introduction of a new method, procedure, custom, device, etc. Innovation could
be any of the following:
 New product
 New process of production
 Substitution of a cheaper material in an unaltered product
 Reorganization of production, internal function, or distribution arrangement leading to increased
efficiency, better support for a given product, or lower costs; or
  Improvement in instruments or methods of doing innovation. Innovation also be viewed as the last
stage in an important process consisting of the following:
1. Invention – refers to the discovery or devising of new products and processes
2. Development – the process by which the ideas and principles generated from the stage of
invention are embodied in concrete products and techniques; and
3. Innovation – which refers to the actual introduction of a new product or process

New Ventures and Long-term Enterprises

A new venture cannot remain as such forever. The entrepreneur must develop into a small
business or make it grow into a mature and bigger company if he is to recoup the cost of opening a new
venture and take advantage of the opportunities presented by a mature business.

Stages from a new venture to a successful long-term enterprise

1. Prestart-up stage – entrepreneur starts to question the feasibility of an idea, product or service.
He seeks answers to questions regarding potential markets, production financing. This is a very
important stage that the entrepreneur must consider. If he errors in his evaluation, he will fail
before considerable growth is attained.
2. Start-up stage
a. formation of the business
b. Generation of necessary capital
c. Purchase of facilities and equipment
d. constructing prototype products; and
e. testing the market
3. Early Growth Stage – activities will be on a small scale, i.e., selling to limited markets with limited
resources. If losses occur, it will naturally be limited also. If enterprise is successful at this stage,
the option to move to the next stage can be exercised.
4. The Late Growth Stage – the final stage before the new venture matures into a stable enterprises.
This is when management is structured, long-term financing is established and facilities planning
are undertaken. This is also the stage where the skills of the entrepreneur are less needed.
Instead, the skilled manager begins to take over.

Rewards for Successful Entrepreneurship

The factors of Production and Their Rewards.
Factors of Production Economic Reward Limiting Factor for Rewards Received
Land Rent Supply and demand
Capital Interest Industry rates/Government mandates rates
Labor Wages/Salary Supply and demand legislations
Entrepreneur Profits Skill of entrepreneur

Managerial Skills that Makes a Successful Entrepreneur

 The ability to plan and conceptualize – visualize the direction of the business towards successful
take off.
 The ability to organize the resources of the enterprise – material and physical resources must
be put in place.
 The ability to direct and motivate people in his organization – proper compensation and
motivation of people
 The ability to control – policies and procedures must be carefully disseminated and understood.

The Challenges for Entrepreneurship

 The entrepreneur must be a doer and willing to work hard until he achieves the task he wants for
himself.
 Personal attention and comprehensive awareness for the progress of the business is not trusted on
other people.
 Have a high sense of integrity that he stands firm on his principles and ideals.
 Emotional stability is important factor in making of an entrepreneur.
 The built in self-starting mechanism that drives an entrepreneur to success is his executive ability
to manage people and resources.

The Entrepreneur’s Predicament

 In the race for winning the all-important consumers’ pesos, the business will offer products and
services that have certain advantages over the competition’s wares.
 In the creation of a new venture, the entrepreneur may be successful in offering innovative
products and services. At this stage, he will reap the profits for being ahead of the competitors.
The situation may be temporary because the competitor may attempt to improve his position by
making moves to outpace the entrepreneur in the race.
  The competitor may either imitate or offer better innovations.
 If the competitor is successful, the profits of the entrepreneur will decline.
 To be ahead again, the entrepreneur will consider offering newer and better innovations. The cycle
continues until one or both find a reason to stop.

Innovations and Its Possible Effects on Competing Firms

Year Entrepreneur 1 Entrepreneur 2 Entrepreneur 3
Year 1 Introduce innovative product Inactive Inactive
Year 2 Reap moderate profits Introduce innovative product Inactive
Year 3 Maximize profits Reap moderate profits Introduce innovative product
Year 4 Profits decline Maximize profits Reap moderate profits
Year 5 Introduce innovative product Profits decline Maximize profits

Entrepreneurship and Business Size

 Both small and large businesses are confronted by problems that are entrepreneurial in nature
 To effectively compete, business of whatever size must adapt innovative approaches to its activities.
Examples of innovations are:
A. Offering business services during Saturdays and holidays
B. Manufacture and sale of new products; and
C. Selling on a deferred payment scheme

Reminder to the new Entrepreneur

 Make sure you get things done
 Be close to the customers
 Innovate. Be open to new ideas
 Produce through people. Trust them.
 Be hands-on in running your business.
 Be clear with your values
 Know your expertise. Continue doing it. Stick to what you know best.
 Keep things simple.
 Keep a lean staff.
 Keep firm on directions but at the same time give your people autonomy. Be good at balancing the
two.

Entrepreneurial Qualities and Self-Assessment

Personal Entrepreneurial Characteristics (PECs) that lead to success
 Achievement Cluster – this pertains to the strong desire of the individual to fulfil or to realize
something and takes obstacles as challenges. The following characteristics are dominant in him
 Opportunity Seeker
 Perceives and act on new business opportunities
 Seizes unusual opportunities to obtain financing, equipment, land, work, space or assistance

 Persistent
 Takes repeated or different actions to overcome obstacles
 Makes sacrifices or expends extraordinary effort to complete a task
 Sticks to own judgment in the face of opposition or disappointments

 Committed
 Accepts full responsibility for problems encountered
 Helps own employees to get the job done
 Seeks to satisfy the customers

 Risk-Taker
 Takes moderate risks
 Prefers situations involving moderate risks

 Values Efficiency and Quality Oriented

1. Always strives to raise standards and aims for excellence
2. Strives to do things better, faster, and at a lower cost.

 Planning Cluster – an entrepreneur is clear on what he wants to achieve. He plans his every move
because he knows that he has limited resources and must be used efficiently. He put his plans in
blue print. Such quality of an entrepreneur demands that he be a:
 1. Goal Seeker
1. Sets clear and specific short-term objectives
2. Sets clear and long-term goals

2. Information Seeker
 Personally seeks information on clients, suppliers and competitors
 Uses contacts or information networks to obtain information

3. Systematic in Planning and Monitoring

 Develops logical, step-by-step plans to reach goals
 Looks into alternatives
 Monitors progress and switches to alternative strategies when necessary to achieve goals

 Power Cluster – power does not mean bossing around. This means power to lead, to convince
people of your ideas, the power to make people believe in you or the power to persuade others
especially those with negative perceptions. Therefore, an entrepreneur must:
 Be Persuasive and Good in Networking
a. Uses deliberate strategies to influence or persuade others
b. Uses business and personal contacts to accomplish objectives

 Possess Strong Self-Confidence

a. Believes in self
b. Expresses confidence in own ability to complete a difficult task or to meet a challenge

 Other factors to Consider

1. Personal interest
2. Knowledge/Talents
3. Training/Work Experience
4. Government support/Assistance Programs
5. Rate of growth of business

Summary:
1. Entrepreneurship is an activity that assures the viability and growth of the economy. Through
entrepreneurship, goods and services are produced, employment is provided to many people,
taxes are paid to the government, products and services of suppliers are bought, and future
entrepreneurs are provided with venues for training.
2. The entrepreneur’s task consists of assembling the resources consisting of land, labor and
capital for the purpose of producing goods and services.
3. The entrepreneur is responsible for deciding on the rate of output his venture must produce
and bears the risk inherent to the venture.
4. Innovation is an important aspect of entrepreneurship.

Chapter 2: Entrepreneurial Activities

Types of Entrepreneurial Businesses
1. Trading or merchandising 5. Mining or extractive industry
2. Manufacturing 6. Construction
3. Service 7. Genetic industries
4. Banking and Finance

1. Trading or merchandising is the buying of goods and selling the same without change in form.
When goods are sold in small quantities, it is called retailing. When goods are sold in volume,
it is called wholesaling. A common example of retailing is the “sari-sari” store.

A retail store may be a:

1. Self-service retailer – example: supermarket
2. Limited service retailer – example: dress store
3. Full service retailer – example: cellphone store
4. Specialty store – example: bookstore
5. Department store – example: Robinsons
6. Supermarket – example: SM
7. Convenience store – example: 7-Eleven
8. Combination store – example: Mercury Drug
9. Superstore – example: SM
10. Hypermart – SM Hypermart
11. Discount Store – P99 Store
 12. Factory Outlet – Surplus Shop
13. Door-to-door seller or direct marketer: example: Avon
14. Vending machine – example: coca-cola
15. Social Media
16. Others: Sari-sari

Effects of Trading in Business

1. Trading cannot be avoided. Wherever you go, even in rich countries, people buy in retail.
Turnover of goods is fast, thus, money inflow is also fast. Compare products that have been
standing on the shelves for weeks against products that stood only for a couple of hours and needs
replenishment. The shelf cost is very limited and your cash drawer has plenty of cash.

What is the effect of trading on business?

PRODUCTION SALES
2. Procurement of new materials a. Retail
3. Investment on tools and equipment b. Wholesale

Benefits of Retailing
1. Retailing allows the fast movement of products. Product price is discounted if the buyer will buy
several or in combination with other products to encourage customers to buy.
2. It encourages people to buy more by giving preferential benefit to customers. For example,
increasing the number of quantities at the same price to valuable customers or promotions like
“buy one, take one”.
3. Enhances buyer-owner relationship. This is because some sellers are very friendly and thus
encourage people to buy from them every time they need the product.
4. Low budget families would be able to buy products in small quantities. For example, ½ kilo of
sugar instead of 1 kilo.
5. Retailing is the answer to small buyers whose need is only for a couple of days for a small
family. For example, a family of four will not buy 5 kilos of bananas for their one week
consumption.
6. Retailing is a business strategy. In a grocery stores, slow moving products are packed with a toy to
make the product saleable. Another strategy is the offering of credit cards to be able to move/sell
more goods or services.

Importance of Selling in the Economy

 Selling is the transfer of goods and services from the producer to the customers and the transfer of
money from the customer to the producer.
Producer/Seller Good and Services Customer/Buyer Money

2. Manufacturing is the process of converting raw materials into finished products. The
manufacturer buys the raw materials and make it into a finished product by applying direct
labor and factory overhead. Examples of manufacturers: shoe manufactures in Marikina
Manufacturing Process
Input Process Output
Purchase of Raw Process Raw Materials Direct Labor Factory Sells Finished Goods
Materials Overhead
Feedback

Manufacturing Business – many small scale entrepreneurs convert local raw materials to finished
products. When an entrepreneur decides to go into business, he has to consider several factors:
1. Capital
2. Production space
3. Storage for materials and finished goods
4. Labor cost and labor supply
5. Factory overhead
6. Cost of manufacturing
7. Technology
8. Availability of raw materials
9. Competition

Role of Manufacturing in Economic Development

Aside from selling, manufacturing is the other dimension in economic development. No
product will be sold without producing it. In the process of producing the products, exchange also
takes place. Raw materials will have to be purchased and labor will have to be paid plus all other
expenses. Generally, manufacturing entails the following cost:
Role of Manufacturing in Economic Development
Manufacturing cost or production cost – the sum of the cost of direct materials, direct labor and
factory overhead. The elements of manufacturing cost are:
1. Direct Materials – pertain to all materials which form part of the finished product which can be
measured and charged directly and which can be identified forming part of the product, such as
leather to make bags and shoes, lumber to make tables and chairs, etc.
2. Direct Labor is labor used in manufacturing a product which can be charged directly to that
particular product. Example: wages paid to a carpenter making chairs in a furniture factory.
3. Factory Overhead refers to indirect elements of cost incurred to turn out a finished product which
may be in the form of indirect materials, indirect labor or other indirect expenses.

Examples:
 Indirect materials – nails, sand paper in the manufacture of furniture
 Indirect labor – salaries and wages paid to janitors, timekeepers in the furniture shop
 Other indirect expenses – light and power, rental, insurance, taxes, etc.

Importance of manufacturers
Manufacturers of products are important because of the following reasons:
1. Considering the expenses and receipts of manufacturers, they contribute to the movement of the
economy.
2. Manufacturers provide the supply of products needed by the people like canned milk or powdered
milk, clothes, bags, etc.
3. Manufacturers provide employment and income to households
4. They pay taxes to the government which are used by the government to finance its projects and
pay the salaries of government employees

Why should manufacturers be creative?

Manufacturers need to be creative because of the following reasons:
1. To be competitive
2. To meet the need of customers

How can an individual be creative?

1. Creativity is developed by being observant
2. Creativity is developed by imagination
3. Creativity is developed because of external condition
4. The economic conditions in the country also influence the manufacturer of a product from expensive to
the affordable.
5. The changing seasons also help develop one’s creativity.

Elements in choosing products or services to offer:

1. Personal Interest 6. Personal Exposure
2. Competence 7. Available Resources
3. Competition 8. Market Demand
4. Seasons 9. Business Ethics
5. Capital

3. Service business - it is doing work for others. It is a kind of business that sells services.
Examples:
1. Small business: beauty parlors, barber shop, car repair shop, water stations
2. Large corporations: hotel and restaurants, schools, hospitals, transportation services
3. Professional services: medical-dental services, legal services, accounting services

How to put price to your service?

1. Consider the minimum wage as fixed by law.
2. Determine how long, more or less, it will take you finish the job.
3. Find out your competitor’s price
4. Consider the risks involved
5. Consider the paying capacity of your customers
6. Consider the resources you will put in, aside from your efforts
7. Consider the simplicity or complexity of the job to be performed
 Advantages of establishing a service business
1. Mobility
2. You are your own boss
3. Non-perishable
4. Minimal capital
5. Easy to establish

Importance of service to the economy

The economy moves through the process of exchange; while manufacturers exchange products for
money, service business exchange services for money. Both sectors are helping the economy move
through the exchange of goods and services.

Importance of service to the economy

1. It helps move the economy – it allows people to have jobs and earn income so that they can
participate in the exchange process.
2. It makes life not only pleasant but also comfortable.
3. It makes products available.
4. It allows people to travel and communicate with each other.

4. Banking and Finance

The firms that use money as its main object of business. Money and credit are their products.
Banks, lending institutions, credit companies, pawnshops, savings and loan associations and even
moneylenders provide capital or lend money/grant loans. They all engage in finance.
Banks finance those who need money, and they sell securities and other products for purchase of
those who have excess funds as investments.

5. Mining
Companies that extract natural resources like oil, gas, gold, copper, cement, among others. These
companies deplete these natural resources.

6. Construction
Companies that build houses, buildings, schools, bridges and other infrastructures. Similar to
manufacturing as they start with materials like cement, steel, gravel and sand, wood, among others
and build a totally different finished product.

7. Genetic Industries
Businesses that are involved in the production or multiplication and reproduction of certain
species of plants and animals, either for sale or for reproduction of bio-products like wool, leather,
medicinal herbs, among others. Such production, multiplication or reproduction aim to create wealth.
Examples: agriculture or farming for growing crops; forestry for timber and lumber; fishing where
fishes are grown in ponds and rivers; shrimp and prawn culture; plant nurseries; poultry farming for meat
and eggs; animal husbandry where cattle are raised for milk and leather; breeding farms for pigs and
goats; orchard for harvesting different kinds of fruits.

Chapter 3: How to spot a business opportunity

Suggestions:
1. Identify your own personal skill.
Examples:
a. Baking i. Event planning
b. Bookkeeping j. Hosting
c. Carpentry k. Knitting
d. Carving l. Language translation
e. Cooking m. painting
f. Cross stitching n. photography
g. Dancing o. singing
h. Drawing p. tutorial/teaching

2. Earn from your hobbies and favorite activities

a. Acting h. wood carving
b. Beadwork i. Outdoor sports
c. Collecting objects j. reading
d. Cooking k. gardening
e. Gardening l. Making miniature dolls
f. Hiking and enjoying nature m. paper machine
 g. Jewelry making n. singing

3. Examine existing products or services and figure out ways by which it can improved
example: a pen or bag
1. What can you do to make this product more appealing?
2. What special service can you offer to improve customer’s satisfaction?
3. How can technology promote efficiency in the production of this good or service?
4. How else can customers avail of the product in the most convenient time?
5. Take advantage of your previous work experience.
6. Identify a problem and seize the opportunity by offering solutions.
7. Access to suppliers.
8. Identify unexplored resources.

Where Others See Problems, Entrepreneurs Recognize Opportunities

Anita Roddick was an excellent example of an entrepreneur who started off as a dissatisfied
consumer. She started The Body Shop International because she was tired of paying unnecessary
perfume and fancy packaging when she bought makeup, and she thought other women might feel the
same.
Examples: Zappos.com
When Zapppos.com founder Nick Swinmurn became frustrated by looking for shoes in a San
Francisco mall and online, he saw the opportunity to create an online pure-play e-commerce megastore
that would carry a multitude of sizes, styles, and colors. Swinmurn was three years out of college when he
launched ShoeSite.com, with $150,000, in 1999. Within a month, he launched as Zappos.com. In 2000,
Tony Hsieh of Venture Frog Incubators saw the opportunity in Zappos, investing $1.1 million and joining
Swinmurn. The company has thrived on providing the best selection and service, with a focus on the
“wow” factor and delivering happiness. Zappos.com carries more than 1,000 brands, employs 3,800
people, and has annual revenues in excess of $1.2 billion. Zappos.com has since expanded its product
offerings to include handbags, clothing, and other items and was restructured into 10 separate companies

Examples:
Zhang Xin – Building a Real Estate Empire from Opportunity
Real estate developer Zhang Xin has built a fortune by identifying economic opportunities in China.
She is the cofounder and CEO of SOHO China. As of April 2014, she and her family had an estimated net
worth of $3.8 billion. From her work experience as investment banking, she and her husband, created a
property development firm which they named SOHO China. It is the nation’s largest commercial real
estate developer, with 56 million square feet development. Zhang saw opportunities for modern, high-style
properties in Beijing and Shanghai when others did not.

THE FIVE ROOTS OF OPPORTUNITY IN THE MARKETPLACE

1. Problems your business can solve
2. Changes in laws, situations, or trends
3. Inventions of new products or services
4. Competitive advantages in price, location, quality, reputation, reliability, speed, or other attributes
of importance to customers
5. Technological advances that entrepreneurs take from the laboratory to the marketplace

TRAIN YOUR MIND TO RECOGNIZE BUSINESS OPPORTUNITIES

1. What frustrates me the most when I buy something?
2. What product or service would really make my life better?
3. What makes me annoyed or angry?
4. What product or service would take away my aggravation?

ENTREPRENEURS USE THEIR IMAGINATIONS

1. What is the one thing I would like to have more than anything else?
2. What would it look like? What would its other attributes be like?
3. What would it do?
4. What innovative product or service idea have I been mulling over in my mind?
5. What problem have I encountered in everyday life and thought: “There has to be a better way to do
this?”

HOW DO ENTREPRENEURS CREATE BUSINESS IDEAS?

1. Listen
2. Observe
3. Analyze
ESTABLISHING STRATEGIES
Strategy is a plan for how an organization or individual plans to proceed with business operations
and outperform that of its competitors
Strategic Advantage
Scope of Target Market
Product Uniqueness Low Cost
Industry-wide (Broad) Differentiation Strategy Cost Leadership
Market Segment (Narrow Focus Strategy (Differentiation) Focus Strategy (Low Cost)

PATHS TO SMALL BUSINESS OWNERSHIP

1. Securing Franchise Rights
Franchise is a legal and commercial relationship between the owner of a trademark, service mark,
trade name or advertising symbol and an individual or group seeking to use that identification in a
business.
Factors to consider in franchising:
a. Customers f. Reputation
b. Location g. Royalties/Fees
c. Management control h. Financing
d. Operational control i. Disclosures
e. Marketing

2. Buying an Existing Business

To dos:
a. Perform due diligence – financial condition, reputation and continuing viability.
b. Do a complete, in-depth analysis of the opportunity (history, owner)

3. Licensing Technology

MAKING THE BUSINESS WORK PERSONALLY AND PROFESSIONALLY

1. A business must make a profit to stay in business
2. Profit is the sign that the entrepreneur is adding value
3. Profit results from the entrepreneur’s choice
4. Making the business work personally and professionally
5. A business must make a profit to stay in business
6. Profit is the sign that the entrepreneur is adding value
7. Profit results from the entrepreneur’s choice