GHAPTER A PERSPECTIVE ON ENTREPRENEURSHIP E ay) ; Pha ere cboereurehip a very important component of a capitalist economy like the here It thrives in economic systems that support innovation and hard work. ntrepreneurs become successful, the nation is immensely benefited. Whati bi ; ae ae i entrepreneurship and how does it affect the economic well-being of many people? at is the task of the entrepreneur? This chapter is an attempt to provide answers to concerns like those stated above. Entrepreneurship and Economic Development Economic development is a scheme aimed at improving the living standards of the nation’s citizenry. To achieve economi ‘ onomic development goals, proper management the following elements is necessary: Tee nee nent 1. human resources (labor 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 utilization of the various resource elements contribute to the economic growth. This happens when the element of entrepreneurship is per- formed well by the players. The abundance of natural resources like fertile land, min- erals, fuels and good climate are plus factors but they are not guarantees for positive economic development. There is a need for entrepreneurs to perform the function of harnessing the potentials of any or all of the various elements, determining the right quantity of resources needed, and applying the elements at the right time. however, will depend much on the support ‘The performance of the entreprenew, vernment restrictions provided by the government. Apart from other obstacles, go limit the effectiveness of entrepreneurs. What Is Entrepreneurship Entrepreneurship refers to the economic activity of a person who starts, manages, and assumes the risk of a business enterprise, ‘The person who undertakes entrepre- neurial activities is called an entrepreneur. The entrepreneur identifies an economic Deeds solution, proceeds to assemble the resources required, = succeeding or failing. AN example of these activities is prop’ ing page: considers offering a business and assumes the risk of either erly shown on the succeed-Entrepreneur's ‘Concern Problem at Hand Entrepreneur's Action tifying an economic | 1. High income families . Establish a high * ee are not satisfied with the | standard school for high services provided by school students, high schools in the area. ‘Assembling resources . Resources must be . Acquire funds, hire required. made available. people, construct buildings, and the like, ‘Assuming risk. . Venture must be made. | 3. Prepare project study, advertise, maintain good relationship with em- ployees and customers, among others. The Entrepreneur's Task If all the requirements in a capitalist economy are in place, the entrepreneur can assume his assigned role in the development of the economy. A review of the contr- butions of entrepreneurs will reveal that no business, big or small, started without the hand of the entrepreneur. Even if many of these businesses failed to survive, still a sizable number developed and proceeded to make the capitalist economy a viable concern. This is made possible because the surviving enterprises are responsible for providing the following: 1, _ products and services for customers and producers; employment; taxes; : demand for suppliers’ products and services; and training facilities for future entrepreneurs. PF PYN An inspection of the array of products offered for sale in a typical supermarket reveals a wide choice provided to the consumer. When a consumer is making a deci- sion on which brand of soap he is going to buy, for instance, he will be choosing from as many as 10 different brands. Many years ago, his choice was limited to one or tw brands. Much earlier, soap was not even available for sale, The consumer had to pr” duce his own requirement. What ‘brought the consumer to the situation where he has the luxury of choosing from many options? And this does not refer to soaps alone but other products as well Services which were not previously available are now at the beck and call of th consumer The fastfood canteen at the corner, parcel delivery, communication throug! et cable television, short-term credit through credit card, money remittanc® and the like, are among the many services made possible by entrepreneurs. A review of the Statistical rey : i ports prepared by the government shows that bust hess organized by entrepreneurs employs millions of people.The taxes paid to the government in the form of licenses, fees, and permits applicable to the enterprises, as well as income taxes applicable to the employees and entrepreneurs, easily amount to billions of pesos. The taxes collected are, in turn, Poured into development projects of the government, The entrepreneurs also make sure that the Suppliers will have a ready market for their products and services. The retailers, for instance, assure the viability of big com- panies like San Miguel Corporation and Purefoods Company. Hollow block manu- facturers utilize the output of big cement factories. VCD and DVD shops provide’ the necessary linkage between consumers and Producers of movies and recorded music. Lastly, business enterprises provide a trainin, A number of entrepreneurs were former employe: The Entrepreneur's Task Land Labor Capital (Natural Resources) (Human Resources) (Financial Resources) Entrepreneur ‘th Production Process Figure 1 In the attempt to make profits, the entrepreneur performs the following specific In the at 5, functions: ii ly the necessary capital; 5a Genie production by buying and combining inputs like materials and 2. to orga labor; decide on the rate of output, in the light of his expectation about demands 3. to deci and 4, tobear the risk inherent to the venture. 3ss enterprise must offer products or service to the buyers wh, cers, The products or services that will be sy ae to Any busine: these buyers are consumers or produ the buyers must be bought or manufactured. In any case, there will be a need tg the services of employees, laborers, and managers. Equipment, furniture, and maqy* nery must be acquired. All of the above will need funds which the entrepreneur. produce, in addition to whatever fund reserves are required. The next specific function of the entrepreneur is to assemble a production complete with manpower and equipment, the quality and quantity of which a been predetermined by him. ave The entrepreneur will als the firm must produce. This wil whatever risk is involved in the entrepreneurial activity, he must suf if he fails, but he will enjoy the profits as a reward if, Mu, 0 determine and make decisions on the rate of out Il have to be tied up with demand. Put Finally, the consequence of losses succeeds. Entrepreneurship and Innovation ‘The freedom of competition afforded by the capitalist economy serves to drive the entrepreneur to innovate and get ahead of his competitors lest he is driven out o the market. Buyers of commodities have a tendency to patronize innovative offerings of any kind and if one wants patronage, he must remember this motivation. Innovation may be defined as the introducti tom, device, among others. Innovation could be any of the following: ion of anew method, procedure, cus 1. anew product; 2. anew process of production; 3, the substitution of a cheaper material in an unaltered product; 4, the reorganization of production, internal function, or distribution arrange ment leading to increased efficiency, better support for a given product lower costs; or 5, animprovement in instruments or methods of doing innovation. Innovation may also be viewed as the last stage in an important process consisting 0! the following: a. invention - which refers to the discovery or devising of new products and processes; b. i development - which refers to the process by which the ideas and ptit™ ciples generated from the stage of invention are embodied in concte"’ products and techniques; and © innovation — which : : oe refers to the actual introduction of a new product " Innovation, ifi peepee a pst be made successful, must provide value to the buyers 0v"" arimprove the gered by competitors. To achieve this, innovation m Fe vost ty of products or services offered for sale petreduce coExamples of successful innovations are the following: the cordless microphone; the microwave oven; the cellular phone; the kung fu fight scenes developed by Bruce Lee in the movies; the karaoke music appliance; the use of Laser in the treatment of eye conditions; and the use of computers by engineers and architects in the design of buildings. NOP YN p New Ventures and Long-Term Enterprises A new venture cannot remain as such forever. The entrepreneur must develop it 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. The transition from a new venture to a successful long-term enterprise consists of at least four major stages. The stages are as follows: 1. _ the prestart-up stage 2. the start-up stage 3. the early growth stage 4, — the late growth stage The prestart-up stage happens when the entrepreneur starts to question the feasibility of an idea, product, or service. He seeks answers to questions regarding potential markets, production, and financing. This is a very important stage that the entrepreneur must consider. If he errs in his evaluation, he will fail before considerable growth is attained. In the start-up stage, the following activities are undertaken: 1. formation of the business; . generation of necessary capital; purchase of facilities and equipment; constructing prototype products; and testing the market. No full-scale activity must be undertaken at this stage for the simple reason that feasibility must be established and verified. ishi ibility. Activities will be on The early growth stage follows after establishing feasibility. ; asmall sale Le, selling to limited markets with limited resources. If losses occur, it will naturally be limited also. If the enterprise is successful at this stage, the option to move to the next stage can be exercised. yoR ELThe late growth stage is the final stage before the new venture matures ; stable enterprise. This is when management is structured, long-term fina" established, and facilities planning are undertaken. ‘This is also the stage whe"8 t skills of the entrepreneur are less needed. Instead, the skilled manager begins over. tale Rewards for Successful Entrepreneurship The use of any of the factors of production deserves to receive some form of co, pensation. The factors referred to as “things required for making a commodity” ¢," sist of land, labor, and capital. To make them work, however, a fourth factor becom, necessary and this is the entrepreneur. a When land is used in production activities, the owners of land are paid a con, pensation called rent. The term “rent” refers specifically to the price paid per unit of time for the services of a durable good, which, most often, refers to land or buildings For the effort of laborers, they are paid wages or salaries. Wages may be dete. mined on a piece-rate basis, while salary is based on time-rate. Interest is the compensation paid to owners of invested capital. Wher all the factors of production are properly compensated, whatever is left a profits are regarded as income and they accrue to the account of the entrepreneur The rates of compensation provided to the factors of production are limited to a large extent by either industry norms or market forces. Legislation, however, have modified the rates like the minimum wage rates and mandated interest rates on capital. The profits accruing to the entrepreneur, on the other hand, are limited only by his skill and industry. He may reap huge amounts of profits, but he may also lose large amounts in the exercise. ‘As the landowner earns rent for allowing use of his property, the owner of capital earns interest for'allowing use of his capital. The laborer on duty earns wages for his effort, while the entrepreneur earns profits for deciding how the business shall be run. Ifhe succeeds, he is compensated for his vision, originality, and bold undertaking, Factors of Production | Economic Reward Heute secios for it Land rent supply and demand Capital interest industry rates/ government mandated rates Labor wages/salary supply and demand legislation Entrepreneur profits skill of entrepreneur Figure 2. The Factors of Production and Their RewardsThe Entrepreneur’s Predicament In the race for winning the all-important consumers’ pesos, the business will have to offer products or 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 or services. At this stage, he will reap the profits for being ahead of the competitors. This 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 (Figure 3), To be ahead again, the entrepreneur will consider offering newer and better innovations. The cycle continues until one or both find a zeason to stop. Entrepreneur Entrepreneur Entrepreneur 1 2 3 Year 1 introduce inactive inactive innovative product Year 2 reap introduce inactive moderate innovative profits product Year 3 maximize reap introduce profits moderate innovative profits product Year 4 profits maximize reap decline profits moderate profits Year 5 introduce profits maximize innovative decline profits product Figure 3, Innovation and Its Possible Effects on Competing Firms Entrepreneurship and Business Size To many people, entrepreneurship means running a small business. New busi- ess ventures, however, can also be undertaken on a large scale. Both small and large businesses are confronted by problems that are entrepreneurial in nature. To effectively compete, business of whatever size must adapt innovative ap- proaches to its activities. Examples of innovations are the following: 1, offering business services during Sundays and holidays; 2. manufacture and sale of new products; and 3. selling on a deferred payment scheme.of switching to another business cop, not do the same without spending matt s have started’ to engage in « | skills and is employed by 4° is responsible for crea’ 8 Small businesses have the advantage whenever necessary. Large businesses cani To offset the disadvantage, however, large businesses trepreneurship” where a person with entrepreneuria’ corporation is tasked to launch new products. This person innovation of any kind in the organization. = y ane Entrepreneurship is an activity that assures the viability and growth of the ec, nomy. Through entrepreneurship, goods and services are produced, employment ; provided to many people, taxes are paid to the government, the products and service of suppliers are bought, and future entrepreneurs are provided with venues fo, training. The entrepreneur's task consists of assembling the resources consisting of lang, labor, and capital for the purpose of producing goods and services. The entrepreney, is also responsible for deciding on the rate of output his venture must produce. He also bears the risk inherent to the venture. If the entrepreneur’s task appears to be 2 great burden, the prospect of profits make it bearable. Innovation is an important aspect of entrepreneurship. It is defined as the intro. duction of a new method, procedure, custom, device, among others. New ventures must develop into small business or grow into a mature and bigger company. This is so because the entrepreneur must recover the cost of opening the venture. The transition from a new venture to a long-term enterprise consists of the pr- start stage, the start-up stage, the early growth stage, and the late growth stage. The factors of production are rewarded accordingly and if the entrepreneur is successful, he receives profits. The entrepreneur cannot feel secure of continuous success in his new venture There are competitors he must contend with. cree entrepreneurship is generally regarded as a useful means of running? usiness, itis also conducive in maintaining the growth of large corporations. Questions for Review and Discussion Why is entrepreneurship an important component of economic development? What is entrepreneurship? Who is the entrepreneur? What role does the entrepreneur play? i what ways are entrepreneurs useful to suppliers? fo make pro! i i Why is neo ee Hai entrepreneur? ip activity? What does “innovation” consist of? Noe ep ene8. What stages comprise the transition from a new venture to a successful long-term enterprise? 9. Whats the reward accorded to the successful entrepreneur? What happens if he is not successful? 10. Is entrepreneurship applicable only to small business? Why or why not? Suggested Items for Research 1. Identify a business in your area which became successful due to innovation. Write about the role played by innovation in its success. Prepare a list of five innovative products or services currently introduced in the market.Case 1. Rose Restaurant: What Now My Love? On any given day, Rose Restaurants full of customers. Ite aaron decays, irst, i ion i Tcial ARO Ci : first, its location in the center of the comme! of Sar it, of ie, factors dynamism of its owner and manager, Ms. Rosemarie Ginez, She ig more than happy because she was able to realize he cova of one ores % i ildi: id the lot she used to » Served ; food business. She now owns the building an I sed t in fines air-conditioned function hall are native and Chinese delicacies. The place has ample parking space for 20 cars. It was in the restaurant where she first met her future pusband: He iS a gover, ment employee and is assigned to work ina nearby town, Rose’s fuss rand is a native of San Jose City and his widowed mother is operating a big palay trading firm. 4, art from owning 10 cargo trucks, his mother also owns one and a half hectares of com. mercial land in the city’s business district, Just as Rose was considering opening a branch of her restaurant in Cauayan City, her mother-in-law died. Two weeks later, her husband informed her that being the heir, he needs to move quickly to San Jose City and manage his mother’s business and other properties, Even if her husband operates her mother’s business, Rose could still continue managing her restaurant. Both of them, however, are aware of the difficulty of main. taining the two businesses which are four hours away by car from each other. They will miss each other for days every week if they decide to keep both businesses, Her husband is indifferent, however, on whatever Rose’s decision will be, Rose is now mulling over her family’s chances in Succeeding in business if she decides on maintaining only the palay trading firm. Her decision-making is made more complicated when her assistant Teported a 49% increase in last year’s profits of her restaurant. Guide Questions - 1, Should Rose Stop operating her restaurant? 2. Ifyou were Rose, what additi i i decision? additional information would you need before m; aking aCHartreR ia THE NATURE OF SMALL BUSINESS Business size is one factor that does not prevent one from engaging in entrepre- neurship. Since only a small number of people have capital large enough to start a large enterprise, the bigger number of people with minimal resources are forced to operate on a small-scale basis, if they decide on becoming entrepreneurs, Figure 4 is an illustration of this relationship. People and Their Number of Persons Financial Capacity Possible Engagement in Entrepreneurship Those with large amounts of capital ‘Those with small amounts of capital Figure 4. Financial Capacity and Size of Business Since most new ventures will be small businesses, of the efforts of those involved in the Propagation of enti small business management. it is expected that majority repreneurship will focus on The premise is that if small businesses are managed properly, their chances of becoming large enterprises are increased. Since it is well-known that large enterprises bring certain benefits to the economy, small business management is an activity worth pursuing. But if many small businesses will not develop into large businesses, their contribution is still very significant, What Is a Small Business Small business may be defined by using any of the two approaches: market share or total assets. Under the market share approach, small business may be defined as one which is independently owned and operated and which is not dominant in its field of opera- tion. The term “independently owned” means ownership is by a private individual, a partnership, or a corporation. The term “not dominant” indicates that a small business does not control a sizable share of its market. When the total sales of a business firm is, less than one percent of the total demand for its products, the firm may be considered small business.a II business may be defined under the total gts Pe one ba total aan that fall within a oa ian ie 4 ctallaoate Paley ; : Se i indicates that the v abo, ST apes 5 milliot is approach because it simp! ind implementation of pol ich be it ifies formulation and impl tati Poli this ay icy. i all business, it is inevitable that : ets value bracket assigned to sma inevitable thay secs bite total assets valued at 1.5 million and below will be lassitieg : ent “microenterprises.” ee i ts approach is that asset values, f the disadvantages of the total asset , ff ‘ed ‘by inflation. After so many years, inflation alters the posninal a Of bus, eas abocts ond HEE may be previously considered small business may no longer classified as such. From the point of view of business management, the mee nae AP roach i defining small business is more appropriate. This is so because the target market shay is an objective more basic than other objectives. Kinds of Business According to Size Public Enterprises Private Enterprises Example; Land Bank Example: of the Globe Telecom Philippines Micro Cotta, ge Small Mediu Business Business Business Bushiens ae Figure 5. Kinds of Business According to Size Types of Smal) Business Small business ma se wholesaling, @ real pred into five types: (1) man ) general construction firma Curing, (2) service, (3) 14 .Small Manufacturing Business ____ A manufacturing business is one involved in the conversion of raw materials into products needed by society. Examples of small business engaged in manufac- turing are: bakeries, tricycle sidecar assembly shops, bagoong manufacturers, restau- rants, and others. Small Service Business Service businesses are those that provide service in one way or another. They may be further classified into the following: 1. Business services — those that provide service to other business. Examples are accounting firms, janitorial service firms, security service firms, collection agencies, and the like. 2. Personal services - those that provide service to the person. Examples are tutoring services, massage parlors, voice lesson, among others. 3. Repair services - those that provide repair services to owners of various machinery and appliances. Examples are auto repair shops, watch repair shops, plumbing services, and others. 4, Entertainment and recreation - includes movie houses, resorts, billiard pool centers, and the like. 5. Hotels and motels. 6. Education services — include Montessori schools for children, high school, correspondence schools, among others. Wholesaling Wholesaling refers to the activities of persons or establishments which sell to retailers and other merchants, and/or to industrial, institutional, and commercial users, but who do not sell in large amounts to final consumers. Examples are soft drinks wholesalers in local areas, dealers of supplies and office equipment, grains wholesalers, and the like. A big number of these wholesale businesses are owned by small business operators. Retailing Retailing covers all activities involved in the sale of goods and /or services to the final consumers. The bulk of retailing activities are performed by small businesses. Examples are retail drugstores, fast food shops, appliance stores, and others. General Construction Firms General construction firms are those engaged in the construction of buildings whether for private individuals or firms, or for the government. Many of them per- form subcontracting jobs for the bigger contractors such as installing electrical facili- ties and sewerage. ‘Asa whole, general construction firms employ hund and they operate mostly in the countryside. reds of thousands of people 15Characteristics of Small Business en ‘ Small businesses have their own distinctive characteristics. They are the following 1, 2. Independent management - The owner is also the manager. Small capital requirement - Small business requires only small capital ay this can be supplied by a single or a few individuals. Mostly local operation — Small business usually operates in a certain locality although there are cases when the market is not confined to a local area, Economic Importance of Small Business Small businésses play an important role in the development of our economy, They assume the following functions: Al Providers of economic opportunities for entrepreneurs — People who do not feel comfortable as employees have the option of engaging in small busines operation. Providers of products and services to consumers — The production of many products and services is oftentimes not feasible with-big and medium busi- ness operation. These limited opportunities are naturally fitted for small businesses. Suppliers of products and services to other businesses — Some businesses require raw materials, semi-finished parts, finished components, or even labor, which they cannot economically produce. The smalll businesses per- form this task for them. fF Distributors of products and services of other businesses — turers do not have the ability to distribute their small businesses assume this role for them, Supporters of government - Small businesses su: the taxes they pay, as well as performing other Providers of employment — ployed by small businesses, Some manufac: products and services, Many ‘pport the government with functions, A large proportion of the labor force are em Advantages of Operating a Small Business An followin; 1, 2. 3. individual has’ Vatiou: i i i i ‘ ious options to improve his £conomic lot. They are the be an employee; bea Professional; or bea small business operator (SBO). employiness Disadvantages of Operating a Small Sey seh ass debsicoten ; ae lowing: ch certain advantages accru‘ 5a tie fo tain pacer that must be considered. These @ Teo 1. _ uncertainty of income; : ital i nt; risk of losing your entire capital investme! ge is stal a lower quality of life until the business gets ¢ complete responsibility; having to serve undesirable customers; paperwork and other chotes; and NX 9 eR wD long hours and demanding work condition. Operating a small business does not provide the assurance of an income, Unik, getting employment which offers fixed monthly salaries. Complete independence in making decisions exposes the small business ope tor to the consequences of errors of judgment which in some cases could wipe out ji investment. The high rate of small business failures proves the point. As the small business operator assembles the needed resources, starts actua production, and makes moves to attract customers, income and profit are held jp abeyance, i.e,, if they will ever be realized at all. Until then, the owner experiences ; lower quality of life. The owner-operator will take full responsibility for whatever happens to the business. Ifthe firm is sued for selling unsafe products, for instance, then he suffers and carries whatever burden or penalty is imposed by authorities, He cannot pass the blame to anybody else, Even if the small business operator has freedom in his actions, he is not com Pietely free. He cannot choose his customers. Even if he dislikes @ particular custome! © cannot just send him away or even i ore him. He is bo ive hi satisfactory service even if they are fade Py eeelia giomes A big company can hi 1 i papervorklikeben ire aa Persons to attend to Specific tasks related t0 a a forcedto do tess hine PIM 8 The small busine gy Ttis a well known fact that a sm; all busi roa keep the business going. If it canno business must main i tain long hours of work! t acquire sales volume within ashi ‘ine ae roductio; hes ™MOdate more he monly served by hired yon limits the numb customers. T ersonnel, : T Of activiti be Soa lerharsh working one iat residual functions, eye oe ae 'Patison of employment and small eee borne by the smal ley miSmall Business Economic opportunities for entrepreneurs Provider Provider Products and of services to consumers Funds to the government in the form of taxes Provider of Provider Employment to of the labor force Products and services to other businesses Supplier of vi Products and Distributor services produced oi by large firms id Figure 6. Small Business and Its Importance to the Economy income through the effective practice of his profession. A physician, for example, may set his clinic ina certain area and proceed fo treat patients for a fee. His income, however, is limited by the number of patients he attends to every day as he cannot delegate his skill to others. In addition, although he is useful to the community, his desire to provide employment to more people is mploy four persons as severely limited by the nature of his work. At most, he can ei assistants. The first two options, however, can only be considered depending on certain conditions. Finding a job is not an easy task. The rate of rejection for job aE especially in the Philippines, is just too high. In reality, there are too many people W’ 10 cannot exercise this option. A professional may generate higher iEntering a certain profession is also not an easy task. First, one must unge, long years of study, and second, one must pass a rigorous entrance requiremeng ji" passing the board examination. There are also too many people Who cannot exer! this option. 7 The last option is small business operation. Although entrance requirements ,. not as difficult as the first two options, it does not mean this option is easier to put in practice. A small business operator keeps long working hours and absorbs whatey, damages that happen as a result of his faulty decision-making. However, he is Aaffordeg the following benefits: 1. _ the opportunity to gain control over his own destiny, 2. the opportunity to reach his full potential, 3. _ the opportunity to reap unlimited profits, and 4. the opportunity to make a contribution to society and receive recognition for his efforts. The Opportunity to Gain Control Over His Own Destiny The prospective small business owner can choose from several business oppor. tunities that he would like to take advantage of. If, after a few years, he thinks that the business is not worth operating anymore, then he can dissolve it and open a new one This option is not made available to plain employees and professionals. The Opportunity to Reach Full Potential The employee will do his work based on prescribed targets which may only require less than his full potential. This is not so with the small business operator. His freedom to act is limited only by his potential and he can revise or amend his targets within short notice. The Opportunity to Reap Unlimited Profits If the small business succeeds, all profits, big or small, accrue to the owner. If heis not satisfied, he may exert more efforts to increase his profits. This opportunity is not afforded to the plain employee. The Opportunity to Make a Contribution to Society and Receive Recognition for His Efforts Entrepreneurs who make innovative products available to th i : if 1 public are recog’ ee properly by society. Some of them, like Henry Ford, became billionaires Others, Walter Disney, merited listings in books of eminent personalities, Local counterparts are successful entre} i preneurs like those listed by ” ilip- Pine Entrepreneur” magazine as shown on (Exhibit 1). oe 18Factor ‘Small Business Operation | ___ Employment 1. Income uncertain certain 2. Capital investment risk of losing none required 3. Quality of life lower until business gets _| consistent at a certain established level Responsibility complete/all encompassing | restricted to one’s job a) gain control over present absent his own destiny b) reach his full potential | present absent ) reap unlimited profits | present absent d) make acontribution | present limited to society and receive recognition for his efforts Figure 7. Employment and Small Business Operation Compared Summary Businesses, especially small enterprises, are important segments of our society. ‘A small business is one which is independently owned and which is not domi- nant in its field of operation. Small business may be classified as follows: (1) manufacturing, (2) service, (3) wholeselling, (4) retailing, and (5) general construction firms. Small businesses are characterized by the following: (1) independent manage- ment, (2) smalll capital requirements, and (3) mostly local operation. Small businesses play an important role in the development of our economy. They provide the following: (1) economic opportunities for entrepreneurs, (2) prod- ucts and services to consumers and industrial uéers, (3) services to other firms by way of distributing their products and services, (4) payment of taxes to the government, and (5) employment. Questions for Review and Discussion ’ What is a small business? — ‘What are the types of small business? What examples may be cited? What are the characteristics of small business? Why is entrepreneurship identified with small busf.ess? How important are small businesses to our economy? Whatbenefits are afforded by the entrepreneurship to thesmall business operator? What are the advantages and disadvantages of operating a small business? NQoPpern er 2Suggested Items for Rowoarch 1 Prepare a report on small bustnews tn the Philippines indicating the following: 4 number; b. capitalization; ¢ general location; and d. products or services sold, Prepare a report on small business in terms of business failures and their Causes,Case 2. Angel Ball Construction Supply: Pretend Miss Angelita Ballesteros is currently trying hard to make a decision on whether or not she would continue operating her construction supply business. Angelita was raised by her parents as a God-fearing and decent person. She does not fail to go to mass every Sunday. She graduated valedictorian at the La Salette High School. The University of Santo Tomas awarded her a diploma in Business Adminis- tration with highest honors. It was while studying at UST when she met Hamilcar, a townmate who was also enrolled in the College of Engineering of the same university. He courted her and after some time, she agreed to marry him one year after graduation. On the day of the nup- tial, Hamilcar did not appear. Angelita felt humiliated, but after a few months of des- peration, she bounced back and got a job in a commercial bank. Two years later, she was promoted supervisor and after a'year she became the manager of the branch. She began to think that a job in a bank does not provide her with enough opportunities to prove her real worth. She entertained thoughts about operating a small business. She resigned from the bank and started to make moves to effectively operate a construction supply business. Angelita’s parents own a vacant 1,000-square meter lot at the edge of the town’s business district, Directly in front of the lot is the national highway and at its back is the city road. The place is an ideal site for a construction supply business. Her parents agreed to construct a building to house her business on the condition that she would pay rent. Just a month after she started operating, her assistant informed her of the need to convince a top rated contractor to buy from them. Angelita agreed to meet him. A few days later, when Angelita was in her office, her assistant came rushing to inform her the prospect has arrived to meet her. Angelita was shocked when she saw that the potential customer was her former boyfriend. Hamilcar shook her hand and asked how she was. She tried hard to hide displeasure and said she’s fine. They talked for a few minutes and then he left. wants to avoid the guy, so Once more, Angelita felt a rising anger within her. She ee she is considering shifting to another type of business like # or hospital supplies. uercerennnneencnsninconmeecnststonemrmnenitttanaassch Guide Question What would be your advice to Angelita?CHAPTER THE ETHICAL AND SOCIAL RESPONSIBILITIES OF THE ENTREPRENEUR Every now and then, newspapers file reports on corruption, deception, and illegality committed by various personalities including entrepreneurs. A very common topic of conversation is the involvement of contractors and suppliers in anomalous transactions with government personnel. There are indications that the practice has a tendency to become more intense and destructive. This should not be tolerated for it will ruin the society that provides everyone with a sense of security in an environment of peaceful coexistence. Yet, the said practice is only one of the many that are committed in the quest for improving one’s lot, financially or otherwise. The concern for society’s survival brought into the fore the need to adapt ethical standards and socially responsible actions. The role of the entrepreneur in propagating ethics and social responsibility in business cannot be overemphasized. What Is Business Ethics Ethics is the study of moral obligation involving the distinction between right and wrong. As a consequence, the study of ethics paved the way for the adaption of the general rules of conduct in society. The rules about how entrepreneurs ought to behave are referred to as business ethics, The ethical behavior required of entrepreneurs is determined by the following: 1. the public; 2. interest groups like the Society of Prevention of Cruelty to Animals; 3. business organizations; and 4, _ the individual's personal morals and values. ‘Adherence to ethical standards contributes to the smooth flow of business ex changes. It establishes trust between buyers and sellers and between lenders and borrowers. See Figure 8 (next page) on the effect of adherence to ethical standards. Factors Influencing Ethical Behavior Ethical behavior, whether by a person or a business entity, or a combination of the following: 1, the situation; is influenced by any 2. reward system; 3. individual differences; and 4. — other factors. ‘ a i i s or individuals also vary. For Circumstances vary, and the reactions of firm: aie acai instance, a firm that behaves ethically during prosperous tim times of financial hardships. 27Establishm ‘Adherence to rent of Trust Ethical Standards i ; ~ between buyers and see by Entrepreneurship ~ between lenders and box | Smooth Flow of TOW Business Exchanges Example: selling is faster Figure 8. The Effect of Adherence to Ethical Standards i i itting unethical behavio; ctation of high rewards for commit \ I bel bet 6 it. However, when he thinks that there is a possibility that he wo, ieee, his motivation is diminished. For instance, a person who is consider adulterating his products to increase his profits will be more’ inclined to do ite: s cally if the community does not condemn strongly such acts. Another example is photocopying of the original works of others, r Motiva, People are different from one another and that includes differences in specific situations. For instance, already expired is not bad. Ano want to engage in such activities, reacting a trader may think selling food products which k ther person would think differently and wouldn When person is in competition with others, and he wants to be sure of winnin he is more inclined to adapt unethical behavior, An example is the trader who sprea Tumors to discredit competitors: °- How Ethical Behavior Is Encor uraged i i the entrepreneur believes that business success requires good ethical behavi Th concern would be' io tt4B¢ his people toradapt good ethical behavior lere are certaiy A¥8 of ence i i : i eee ae fain ways of Sncouraging ethical beliavior among employees. The! L adaption of a code of ethics; institution of teward ; sani 5. adaption of intemal pro, es oan 4 coe Programs for Tesolving conflicts; ethics review, i 5. Provision Of training j a p aining in e thic management Support, ne mployees; and pe: 5 aeCode of Ethics The code of ethics is a formal document indicating the entrepreneurship’s adapted principles of appropriate behavior. A code of ethics is very useful to the firm espousing ethical behavior. It serves as a basic reference for employees who make big or small decisions. For example, an employee is confronted with a job offer from a rival company and he thinks he is not yet ready to respond correctly to this type of situation. Although this does not happen often, few persons are equipped with sufficient skills to deal with it. If, on the other hand, the company has a code of ethics, the affected employee will have some basis for his action. A code of ethics can be made effective if the following requirements are met: 1. _ it should refer to specific unethical practices like receiving gifts, avoiding + warranty claims, bid-rigging, making fictitious claims, among others; and 2. _ it must be supported by top management. Support comes in various forms such as providing sufficient funds for its implementation and assigning specific employees to handle ethical infractions of other employees, and the like. Ethical behavior of personnel occurs only when the entrepreneur develops a code of ethics and successfully implements it. Rewards, Punishment, and Ethical Behavior A code of ethics is sufficient for some people if ethical behavior is required. For many people, however, this may not be enough to motivate them to act ethically. If the entrepreneurship wants to have some measure of control over the behavior of its personnel, a system of reward and punishment must be instituted. Punishments could take the form of dismissal, demotion, suspension, or repri- mand. Rewards may be given in the form of cash gifts, promotion, or citation. Internal Programs for Resolving Conflicts Conflicts arise, even when ethical conduct of personnel is concerned. For exam- ple, a subordinate may think his superior is acting unethically regarding promotions. The subordinate may harbor ill feelings toward his superior if the subordinate is not provided with a means to ventilate his grievance. It is important for entrepreneurships to adapt a program of resolving conflicts. For instance, a subordinate may appeal a superior’s decision without exposing him to the concerned superior. Later, a meeting between management and the subordinate is arranged. Ethics Review Committees To encourage ethical behavior, the entrepreneurship may create an ethics seriely committee. This committee is usually composed of company employees as wel Ge some who are not employed by the company. These persons have undergone oe training in ethics. The committee provides advice to the entrepreneur a Ly concerning sensitive ethical issues. Ethics review committees are not yet pop’ 29but it is slowly adapted by government corpo, hip, by g Pippi pd unversies, This nota bad option the entreprengy ‘ o ‘ The trom is employes rrovis! ining in Ethics . Provision of Tx: rinel who are exposed to activities that are ethically charge, Company Perffcient training in ethics. Such training should make the . be provided ae to deal with various ethical issues they would encounter in . ficiently prep! ive workplaces. " respecti «es training is more appropriate for persons occupying sensitive positio,, sone sie disporal personnel, research and development, sales, and purchasing, facturing. t Management Support Se on tioned earlier, it is very difficult for any program or activity to Suey ith fit suficient support from top management. For instance, when unethical ¢o, ductis committed and no sanction is imposed by top management, it can be expect, that more violations of good ethics will be made. Ethical Issues Facing Entrepreneurships Entrepreneurships face ethical questions on a daily basis. These spring fromth following relationships: 1, between the company and the customers; 2. between the company and its personnel and employees; 3, between the company and its business associates; and 4. between the company and the investors and the financial community. Relations with Customers When ethical abuses are committed, the m This is expected beca and the customers, n ‘ost probable victims are customer use of the high frequency of transactions between the compa The se example 2 the Stent Le they come in forms as varied as the transactions.) cellphone, ig unsolicited message to the customers through Entrepreneurs.are : are expect : 3 in ways that will be hawmfey C2 SOC f0 treat their customers fairly and not! “nsumer rights which are as Bien Entrepreneurs should provide support f : the right tobe safe; : = "ght to be informed, the ri i ; ight to choose; and Tight to be heard,The Right to Be Safe. Consumers expect that the products and services that they buy will do them no harm. They also expect to be free from bodily harm when they are inside the entrepreneur's business premises. This concern brought about the passage of laws intended to protect the consumer. For example, manufactured drugs intended for sale to the general public must first pass the standard requirements of the Food and Drugs Administration. The purpose is to provide some guarantee to the public that the drugs are safe to use. The Right to Be Informed. Consumers make purchasing decisions often. The quality of their decisions, however, will depend on whether or not they are properly informed. Advertisements and information printed on labels are some of the ways of providing information to consumers about products and services. The requirement for indicating dates of manufacture and expiry on labels is a result of legislation intended to inform the consumer. The Right to Choose. Firms that intend to adhere to business ethics should strive to protect consumers’ right to choose, what products and services they need and intend -to purchase. However, some traders would violate this right to make huge profits. ‘An example is the trader who cornered the year’s supply of a certain brand of cigarettes. Nobody could buy that brand except from him and he was able to make huge profits by selling at a high price. Another “hot issue” in the Philippines is the question on the right of consumers to choose between branded and generic drugs. The Right to Be Heard. Customers have the right to communicate their concerns to entrepreneurships they patronize. This right may be used to express appreciation about what the company is doing, or to provide information about defects in the pro- ducts the customer bought. To support the customer's right to be heard, some companies install a system of receiving and processing complaints. An example is the information printed on the product's label indicating contact numbers where complaints may be relayed. Relations with Personnel and Employees There is always the possibility that business firms, including entrepreneurships, will commit unethical acts towards their employees. Since entrepreneurs and their staff make decisions on various business activities like hiring, promotion, transfer, compensation, and dismissal, it is not uncommon for ethical lapses to happen every ‘now ad then. An example is the ethical question faced by a manager in deciding whether or not to give hiring preference to a relative of his superior. Good ethical conduct requires entrepreneurs to be aware of their responsibilities to employees. These are the following: 1. workplace safety; 2, quality of life issues; 3. avoiding discrimination; and 4, preventing sexual harassment. 31Workplace Safety. The ethical entrepreneur is one who makes sure that the lace is safe for employees. He sees to it that adequate measures are adapted ss bis idents from happening in the factory and in the office. Sufficient ventila. Foon aye maintained. Fire exits must be provided. Machines and chemicals muy be handled by properly trained personnel. Quality of Life Issues. Many employees are burdened by problems about main. taining a good balance between work and family. Caring for children and the elderly are two of the most common responsibilities that make life difficult for any employee, ‘The more difficult it becomes if the employee aS ingle parent. Many years ago, such concems are taken for granted because most Filipinos have extended families and there is someone who would take care of the children and the elderly. However, the situation has changed since then, $a As a remedy to the above concern, progressive companies provide day-care facilities for the children of employees. Housing is provided near the work sites. If measures like those are not feasible, entrepreneurships can still provide assistance in locating or facilitating arrangements with private day-care and housing facilities. Entrepreneurships can go further in helping its workers improve their quality of life by offering flexible work arrangements. For example, the husband may be given an option to work at hours different from his wife so there will be an adult in their house at any given time. The company may also redesign jobs, whenever applicable, so employees may be allowed to work at home, or work part-time, or work with short- ened work weeks. Avoiding Discrimination. Everyone has the right to work in a place where dis- crimination is not practiced. Factors like age, sex, race, religion, political beliefs, and the like must not be allowed to affect any person’s chance of getting employed or pro- moted. Preventing Sexual Harassment. Sexual harassment refers to unwelcome sexual advances, requests for sexual favors, and other verbal or physical contact of a sexual nature. Entrepreneurs have the moral responsibility of keeping the workplace free from sexual harassment and where everybody is treated fairly, In preventing sexual harassment, the entrepreneur needs to do the following: 1. _ issue a specific policy statement prohibiting sexual harassment; 2. develop a complaint procedure for employees to follow; 3. create a work environment th report their experiences; at encourages sexually harassed employees to 4. establish a committee to investigate sexual hi 5. ish ac arassment claims; and take disciplinary actions against harassers, Relations with Business Associates Entrepreneurships operate in conjuncti t i njunction with t i aud various types of middlemen. In the course of ee sal pple, agents players mentioned and the fir ms may actions between the MS, i i ome ethical questions may come into fore, A sup- 32plier who badly needs a contract, for instance, may attempt to bribe the company’s purchasing officer. Another example would be the company’s sales manager extend- ing favors to a trader by giving priority to delivery of orders, in exchange for personal favors. The practices like those stated above are unethical and must not be allowed to happen in a company that upholds good ethical conduct. Relations with Investors and the Financial Community The country’s financial system survives partly because investors and other play- ers have placed a certain degree of trust in firms they deal with. The degree of trust is maintained at a high level if the investors and the financial community feel that busi- ness firms practice good business ethics, especially if they think that their investments are well protected. If that is so, the desired level of investment is maintained. Trust and confidence, however, are eroded by wrongdoings of some firms. The investment scams perpetrated by some scheming persons do not provide good exam- ples of ethical firms. It is to the best interest of companies including entrepreneurships to continue to be blessed with a stable financial system. This will only be possible if companies behave ethically. Misrepresentation concerning the financial health of firms, land swindles, embezzlement and misleading reports about non-existent as- sets are only some of the unethical and illegal practices that undermine our country’s financial stability. Summary The survival of society is expected to be the highest priority concern of every- body including business firms. This can only happen if in quest for profits, business firms do not jeopardize the welfare of the society. A way of pursuing this objective is the adherence to the rules of conduct which is generally referred to as “business ethics.” The ethical behavior required of entrepreneurs is determined by the public, inter- est groups, business organizations, and the individual's personal morals and values. Certain factors influence the ethical behavior of firms and individuals and these are the situation, the reward system, the individual differences, and other factors. The ethical behavior of employees may be encouraged through the adaption of a code of ethics, the institution of rewards and the punishments concerning, tical behavior, the adaption of internal programs for resolving conflicts, the reation of ethics review committees, the provision of training in ethics among employees, the top management support. Ethical issues confronting entrepreneurships arise from thes eelationahipe with their customers, their employees, their business associates, the , financial community. 33Case 3. Fina’s Xerox: Right or Wrong? The photocopying business is thriving in Dagupan City. Miss Josefina “Fina” Datu is the owner and operator of the biggest copying firm in the city. Fina has been in the business for more than 20 years and because of her daring and enterprise, she was able to put up three branches in each of the capital towns of three adjoining provinces, namely Nueva Ecija, Tarlac, and Pangasinan. She is planning to operate in Nueva Vizcaya and Isabela in the near future. This business actually involves using machines to copy documents, books, maga- zines, and other materials. Fina employs six young ladies per branch. A big dealer in Manila supplies her with the latest copying machines, paper and ink. Fina has an open credit line with the dealer. Fina personally trains new employees in the firm’s main office in Dagupan. After a month of training, the new employees are deployed in the various branches. New employees are paid daily wages depending on output. They are also entitled to free board and lodging. The firm’s customers consist of teachers, students, government employees, and some others, Just a week ago, the dean of a big school in the city proposed to her the copying of books to be sold to students. The dean indicated that she will take care of selling the books to students in her school. For the service, the dean was expecting a 20 percent commission. Fina thinks the proposal is a sound one and it will yield good profits. She is not yet fully convinced, however, if the proposal is ethically right. Fina considers seeking the advice of someone who should be informing her about the right thing to do before she makes a decision. ——— ae Guide Question If you were consulted by Fina, what would you advise her? Why?za ENTREPRENEURIAL PERSONALITY Operating a business enterprise is a very challenging occupation. The rate of fail- ure among those who dared to make attempts is high. Only a small number of them become successful and the levels of their success differ, Some of them become highly successful and the rest are cither moderately or slightly successful. Those who fail also differ in terms of degree of failure, Clearly, entrepreneurship is not for everyone. But how do we know, beforehand, that a person is a good prospect? What is it that determines success or failure? It is important for those interested in entrepreneurship to know the answers to those questions. Some guides provide clues and one of them indicates that there are two complementary factors that determine success or failure in an entrepreneurship. These factors are: 1. __ the environment, and 2. _ the personality of the entrepreneur. The Environment as a Factor An entrepreneurship will survive and grow in an environment that is friendly or akin to it. Nature provides us with examples of what happens to entities living in certain environments. For instance, giant clams thrive in the ocean, but not in the river. The coconut palm will grow in the Philippines but not in Sweden. These are so because giant clams were designed by nature to survive in saltwater, and freshwater tiver will be hostile to it because it is not its natural habitat, Coconut trees grow natu- rally in the tropics and because Sweden has a cool, temperate climate, they will not survive there. In the same light, entrepreneurships will survive and grow only in economic environments of free enterprise. Full blooming entrepreneurships cannot be expected to flourish in economies that are not fully supportive of free enterprise. In terms of support to entrepreneurships, economic environments differ from place to place. To facilitate discussion, economic environments may be classified as follows: 1. _ those fully supportive of entrepreneurships; 2. those moderately supportive of entrepreneurships; and 3. those not supportive of entrepreneurships. Economies that fully support entrepreneurships make it easy for entrepreneurs to succeed, The exact opposite may be expected in economies that are not supportive of entrepreneurships (Figure 9). 39‘Types of Economic The Entrepreneur's Environment Task ace ee oe) emerge cn. Figure 9. Economic Environment and the Entrepreneur Those fully supportive of entrepreneurships Those moderately supportive of entrepreneurships Those not supportive of entrepreneurships The Entrepreneur’s Personality Every person has a Personality that is unique and different from others, Each personality type has a corresponding type of job that fits it. A certain personality, how- ever, may fit in more than one type of job, although the level of fitness will be different with each job. A given Personality, for instance, may perfectly fit the entrepreneur's job, moderately fits the teacher's job, but is not fitted for the engineer's job (Table 1). Table 1 Personalities and Job Fit Personality Types | Entrepreneur’s Job] Teacher's Job Engineer's Job A perfect fit moderate fit unfit B unfit perfect fit moderate fit Cc moderate fit unfit Perfect fit aa What Is Personality Personality refers to the pattern of characteristics that distinguish from another. It includes the person's ae traits, values, attitudes, emotional Teactivity, abilities, self-image, intel] motives, genetic blueprints, patterns, ligence, and visible behavior Psychologists have made P is Breat advances in research about ersonali in- teresting study is that one made by John L. Holland (Ivancevich, 2001), ‘Hs a el indicates six personality types. They are as followe Ties haar Beppe 40the conventional type. brief description of the foregoing personality types is presented in Table 2. 1. _ the realistic type; 2. the investigative type; 3. the artistic type; 4, — the social type; 5: _ the enterprising type; and 6. A Table 2 ABrief Description of Holland's Personality Types 1. Realistic. 2. Investigative. 3. Artistic. 4, Social. 5. Enterprising. 6. Conventional. This individual prefers activities involving aggressive behavior and physical exertion requiring skill, strength, and coordination. Examples: farming and mining. This individual prefers to be analytical, curious; methodical, and precise, Examples: crime investigator and arson investigator. This person is expressive, nonconforming, original, and introspective. Examples: songwriter and novelist. This person enjoys working with and helping others and purpose- fully avoids systematic activities involving tools and machinery. Example: social worker. This person enjoys verbal activities to influence others and tg attain power and status. Examples: manager and entrepreneur. This person enjoys the systematic manipulation of data, filing of records, or reproducing materials. Examples: accounting, finance. Characteristics of Entrepreneurs Successful entrepreneurs possess certain characteristics th ferent from those having other occupations. Based on research by experts, at are unique and dif- the follow- ing traits are considered vital to a successful career in entrepreneurship: 6. reasonable risk taker; 1, drive; 2. thinking ability; 7. self-confident; 3. human relations ability; 8. goal setter; 4, ability to communicate; 9. accountable; and 5, technical knowledge; 10. innovative. 41Drive Success in entrepreneurship becomes possible when the entrepreneur is sel, tivated enough to pursue his chosen course without relenting even in the face ofl veaty. Reaching a goal, however, soften achieved through a series of moves Iti ae for entrepreneurs to succeed with just a single stroke. If he fails in his first attempt he makes another attempt. He repeats the attempts, maybe with some improvements until he succeeds. This will happen if the person has drive. The tension that coun, when a need is not met is called drive. Richard Branson is an Englishman who is a fine example of a person “with bucket loads of entrepreneurial drive” (Ros Jay, 2001), and became a successful entrepreneur, ‘Asa child, he made his money growing ‘Christmas trees. At 16, he started publishing a tnagazine. At19, he set up a mail order business. Drive enabled him to own businesses ma Fverse as banking and soft drinks, condoms and airlines, and became a billionaire in the process. ‘Thinking Ability ‘The entrepreneur's job involves solving he finds the correct solutions to problems that confront him a that are implemented, he comes closer to realizing his goals. If for instance, the entrepreneur is asked to make the final decision in the promo- tion to vice president of one of three qualified managers, he needs to use his thinking ability and that ability must be sufficient to guide him to make the best choice. ‘A man with superior thinking ability can see through the maze of information (or disinformation) brought before him. That ability is an ingredient of successful entrepreneurship. Reading the biographies of successful entrepreneurs provides insight on how these people used their intelligence to succeed in their business endeavors: A good example is Jeff Bezos who founded Amazon.com, an online shopping site. Asa child, Jetf was extremely bright. When he grew older, he used his thinking ability to make his company generate sales of $1.92 billion in 2000, just five years since the founding of his company (Ros Jay, 2001). problems and making decisions. When ind then makes decisions Human Relations Ability Three types of persons will determine the survival and growth of business firms: (1) the customer, (2) the employee, and (3) the third party with interest in the firm. __ The customer makes the decision whether to patronize the firm or not. His de cision, however, will depend on what he thinks of the firm. Perception ‘on customer relation will definitely be a factor. ‘ hal ae euvleyes on be productive and loyal to the firm. He can help avoid pr” luction delays and shortages, wasteful consumption of company res issatis: Bad clones and FE x y resources, dissa! fe des mers, and the like. He can be an asset depending on what his superiors doThird parties with various interests regarding the firm can also be made to be more cooperative and accommodating. This will depend, however, on how the com- pany relates to them. The internal revenue service personnel and the police, for in- stance can be less accommodating to the firm and they can make business operations difficult. All of the interests cited above can be useful partners of the firm, but this will depend to a large extent on the ability of the entrepreneur to relate with them. Bbility to Communicate Communication skill is a very important characteristic an entrepreneur must have if success is expected. The ability to understand and be understood makes it easier for the entrepreneur to transact business with customers, bankers, and govern- ment officials. When the entrepreneur gives orders that are easily understood, wastages in time and materials are minimized. An entrepreneur who has little ability to communicate tends to demoralize and alienate his staff. What usually happens next is low produc- tivity and high employee turnover. Technical Knowledge Operating an entrepreneurship requires the performance of major and minor tasks. In running a restaurant, for instance, important tasks may include the following: recruitment of personnel, purchasing of materials, bookkeeping, sanitation, cashier- ing, cooking, and others. The restaurant entrepreneur must at least be familiar with and possess some technical knowledge about how the various tasks are performed. It will be easier for him to devise a strategy on how he will manage his firm to effectively compete with others. Reasonable Risk Taker When a person starts a new venture, he has already begun to assume the risk of business failure, Entrepreneurs, however, normally do not assume unreasonable tisks, Theoretically, ventures with zero risks yield zero benefits. Those who aspire for benefits like profits must reckon with possible losses. There are instances, however, when the possibility of benefits far outweighs the risk involved. It is the function of the entrepreneur to determine when this is so. The entrepreneur must calculate a reason- able trade-off between risks and benefits. Entrepreneurs are expected to be reasonable risk takers, not conservative but also not gamblers. They assume risks but only after they are convinced that they have the skills and resources to overcome the difficulties inherent ina new venture. ae 3 indicates how the entrepreneur as a risk taker is compared with other types of ris takers.Table 3 The Entrepreneur Compared with Other Risk Takers ‘ Expected L Types of Risk Taker | Level of Risk Taken z ee salaried employee low low entrepreneur moderate moderate gambler high high Self-Confident A person cannot achieve much unless he has sufficient confidence in himset, any undertaking, including entrepreneurship, a person's belief in his ability leads hi to actual performance and eventual success. When a person has self-confidence, | does his job without inhibition. ‘ Self-confidence is best exemplified by successful entrepreneurs who have phy: cal disabilities. One such person is Mr. Aurelio Dagdag whose diminutive stature d not prevent him from establishing his own business, J.A.C. Footwear. The compar is currently doing well. It is able to provide employment to'as many as 100 perso: (Entrepreneur, Jan.-Feb. 2008). Goal Setter Goals are very useful motivational tools, especially those related to accomplis! ing the objectives of entrepreneurs. A goal performs the following functions: 1. _ itdirects one’s attention to a specific target; 2. — itencourages one to exert effort toward achieving something specific; 3. _ it encourages persistence; and 4, itfosters the creation of strategies and action plans. It is easy to understand that persons who are goal setters would make entrepr neurs of high success potentials. Accountable The success of an enterprise will depend much on the willingness of subord nates to comply with the wishes of the entrepreneur. Compliance can be expected the entrepreneur is accountable enough to take responsibility for whatever happet to the firm. id Innovative A free enterprise economy like i aA: like ours allows business enterpri ist This will depend, however, on how well the public is convinced (3 patios et Buyers will have to be persuaded to buy from the entrepreneur's firm rather th? from competitors. The innovati problem, ‘ovative entrepreneur, however, will be able to handle thiInnovation may be the only way the entrepreneur can achieve the following: 1. _ penetrate the market; 2. improve employee turnover; 3. reduce manufacturing cost; and 4, improve collection rate. Walter Disney is an example of a highly innovative entrepreneur. He developed and incorporated new technology and new ideas to draw customers. Some of his ac- complishments in entrepreneurship consist of Mickey Mouse, Disneyland, and Walt Disney movies (Ros Jay, 2001). What Motivates People to Become Entrepreneurs Not everyone desires to be an entrepreneur. Those who do, however, are moti- vated by any or all of the following: 1. _ the desire to be one’s own boss; 2. _ the desire for financial rewards; 3. _ the desire to create one’s own job security; and 4, the desire to improve one’s quality of life. Desire to Be One’s Own Boss There are times when an employee sees some good opportunities for his em- ployer’s business. When he recommends action to be undertaken and is ignored, the employee may just proceed to take the opportunity and organize his own business. For instance, a professor in a university thought that it’s time for his employer to open branches in several locations. His recommendation to the president was ignored. He could not convince his boss about the importance of expansion. He decided to be his own boss by establishing a school for elementary students in the nearby town. Desire for Financial Rewards Getting employed is the desire of most people. This is understandable because " many people want sure monthly income. Some people, however, don’t get satisfac tion from a fixed monthly income which, most often, is inadequate. Some think that they deserve to be properly rewarded for their skills. The means open to them is entre- preneurship. Although entrepreneurship is a very serious proposition, still some people are attracted to it. This is so because of the prospect of high financial rewards. The finan- cial rewards reaped by successful entrepreneurs are enough to motivate the would-be entrepreneur. Desire to Create One’s Own Job Security Some employees feel that their jobs are not secure. They think they could be fired for a variety of reasons. For instance, when a company decides on downsizing its operations, employees are the first to be affected. When management makes serious errors and it affects the company’s viability, the jobs of the employees are compromised. 45as Persons who cannot bear to worry about job security may just decide to beg, entrepreneurs. Even if the venture fails, the entrepreneur knows that itis the reg, ir % il his poor performance. Desire to Improve One’s Quality of Life Oftentimes, employees do not have control over their work schedules. ‘As a resy they could not fulfill some important family responsibilities. A nursing mother, instance, will have to consider other less desirable options in providing for the nee, of her baby. The same predicament confronts those who care for elderly relatives, Persons-who travel daily to work also sacrifice valuable time that could be spey with their families. To some people, engagement in entrepreneurship provides them with some con trol over their work schedules. An entrepreneur can choose a type of business that wi] be compatible with the quality of life he desires. Specifically, the business location an, the type of products sold can be chosen to jibe with the personal and family needs c the entrepreneur. ‘The Entrepreneur and the Manager Distinguished The terms “entrepreneur” and “manager” are sometimes used interchangeabl Although both jobs are useful to the economy, each performs distinct functions. ‘The difference between the entrepreneur's and the manager's job may be pointe outin Chapter 1’s discussion about the stages by which the enterprise must get throug before it becomes stable (Figure 10). Enterprise Stage Factor Emphasis I. Prestart-up business idea full human resource none capital none Il. Start-up business idea none human resource limited capital limited Ill. Early growth business idea none human resource escalating capital escalating IV. Later growth business idea none human resource full : capital full V. Stable enterprise business idea huma an an in resource full Lee BOSON mice s|feeceep tal full Figure ity Emphasis of New Ventures 46For the firm to get along in the first three stages, the entrepreneur's skill is required. The last two stages require the skills of the manager (Figure 11). Enterprise Stage Activity Entrepreneur's Involvement Manager's Involvement 1. Prestart-up Il. Start-up II. Early growth IV, Later growth V. Stable enterprise Feasibility of an idea, product or service, among others, is scrutinized. Business is formed, necessary capital is generated, facilities and equipment are purchased, prototype of products are built, market is tested. With limited resources, selling is undertaken in limited markets. Structured management, long-term financing, and facilities planning are established. With bigger resources, recurring sales and profits, selling is under- taken in bigger markets full full full declining none none none none partial full « Figure 11. The Entrepreneur's Task vs. The Manager's Task A major distinction between the entrepreneur and the manager is about orienta- tion, The entrepreneur (also alternatively called promoter) feels confident of his ability to seize a business opportunity regardless of the resources under his current control. The manager (also alternatively called the trustee) emphasizes the efficient utilization of resources. Figure 12 on the next page illustrates the complementary roles of the entrepre- neur and the manager as they confront competition. Note: At the prestart-up stage, the only activity of the entrepreneur is identifying a good business idea. When he decides on a business idea, he starts operating with limited human resource and capital. He does not consid ideas from start-up to stable enterprise. As the business 5 ‘i resource and capital. New business ideas may only be considered whey venture fails. 47 jer new business grows, so does human n theaN Business Competitors Activity ctivity Identify and Competitor iy seize f--------4 is unaware opportunity Competitor Entrepreneur's Step Assemble |_______] slowly becomes Turf 2 resources aware Competi Step Stati be ceases become fully 3 operation ‘aware Competitor Step Expand [o_o + makes decision 4 operation to operate Competitor Manager's Step starts Turf operation Competitor Step Mek. ops, fare shares in industry 6 | ‘competition profits Figure 12. Competition and the Complementary Functions of the Entrepreneur and the Manager Summary The environment and the entrepreneur’s Personality are the complementar factors that determine whether or not the new bi usiness venture will succeed, In an environment hostile to any type of business, expected to thrive. In a friendly environment, new busi ‘Ontend with the personalities of their own respective The entrepreneur's task will be e. Rot impossible in entrepreneurships are no ness ventures will have t entrepreneurs, ile environ net i friendly environment and very hard, i a hostile environment, Among the six Personality types, the enterprisi, i for entrepreneurial ventures, PING {Peis the most appropri