Lesson

What I Know Recognize a Potential Market

1

Let’s check first what you already know.

True or False. On the space provided before the number, write T if the statement is What’s In
true and F if the statement is false.
_____ 1. An entrepreneur enters a business because of its profitability.
In the previous lesson, you already know about the difference between a
_____ 2. New business ideas provide business opportunities.
businessman and an entrepreneur. Knowing all the entrepreneurial concepts will not
_____ 3. The entrepreneurial process starts with identification of entrepreneurial
assure a person of becoming a successful entrepreneur and not all business people
opportunities.
are entrepreneurs. Some say being an entrepreneur is a calling; a lot of qualities must
_____ 4. Not all changes in the external environment provides business opportunities.
be possessed to be considered successful and sustainable. So, if you are given a
_____ 5. Discovery and advancement in the use of technology are additional good
great opportunity to venture into the field of entrepreneurship, it may be a long process
sources of business opportunities.
to undertake and you must have the willingness to take a risk. Also, you’re not only
_____ 6. Interest and hobbies of the people are possible good sources of
the one who’s in progress but at the same time, you’re helping for the development
entrepreneurial ideas.
growth of our economy.
_____ 7. The industry environment of the business is under technological discovery
and advacement sources of opportunities.
esson 1
_____ 8. The variables in the physical environment include the economic forces. What’s New
_____ 9. Entrepreneurial heart flame refers to the ability of the entrepreneur to
FIX ME
sense without using the five senses.
Direction: Arrange the scrambled letters to form a correct word.
____ 10. Entrepreneurial mind frame permits the entrepreneur to see things in a very
1. PSIERSPL ________________ 6. UTSBETIUST ________________
positive and optimistic light.
2. NISSUBES ________________ 7. ICEVERS ________________
_____11. The business operates in the industry environment.
3. KERTAM ________________ 8. PECITIONMTO ________________
____ 12. Opening a Halo – halo business during summer season is ideal.
4. EDICRRSTO ________________ 9. IMCLTEA ________________
____ 13. Environmental scanning is conducted only when a new business is opened.
5. SUTEMOSRC ________________ 10. NTERTSAN ________________
____ 14. When the barriers to the competitive forces are high, the effect to the growth
of the business is likewise high.
_____15. Entrepreneurs need not observe and evaluate the priorities of the
What is It
government.
Entrepreneurial Ideas
The creation of an entrepreneurial idea leads to the identification of
entrepreneurial opportunities, which in turn results in the opening of an entrepreneurial
venture.

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 The entrepreneurial process of creating a new venture is presented in the a. Climate – the weather conditions.
diagram below. (Nick L. Aduana, Etrepreneurship in Philippine Setting for Senior High b. Natural resources – such as minerals, forests, water, and fertile land
School, 2017, C&E publishing page 46, Aduana, 2017). that occur in nature and can be used for economic gain.
c. Wildlife – includes all mammals, birds, reptiles, fish, etc., that live in
the wild.
Creation of Identification of Opening of 1.2 The Societal environment includes the various forces like
entrepreneurial entrepreneurial entrepreneurial
Ideas Opportunities Venture a. Political forces – includes all the laws, rules, and regulations that
govern business practices as well as the permits, approvals, and
Figure 1. The Entrepreneurial Process of Creating New Venture licenses necessary to operate the business.
Essentials in Entrepreneur’s Opportunity – Seeking b. Economic forces – such as income level and employment rate.
These are the basic foundation that the entrepreneur must have in seeking c. Sociocultural forces – customs, lifestyles and values that
opportunities: characterize a society.
Entrepreneurial mind frame. This allows the entrepreneur to see things in a d. Technological environment – new inventions and technology
very positive and optimistic way in the midst of difficult situation. Being a risk - taker, innovations.
an entrepreneur can find solutions when problems arise.
1.3 The Industry environment of the business includes:
Entrepreneurial heart flame. Entrepreneurs are driven by passion; they are a. Competitors
attracted to discover satisfaction in the act and process of discovery. Passion is the b. Customers
great desire of an entrepreneur to achieve his/her goals. c. Creditors
Entrepreneurial gut game. This refers to the ability of the entrepreneur of d. Employees
being intuitive. This also known as intuition. The gut game also means confidence in e. Government
one’s self and the firm belief that everything you aspire can be reached. f. Suppliers
Sources of Opportunities For example, one factor in the physical environment that can easily change
There are many ways to discover opportunities. Looking at the big picture, is the climate. The temperature is very high during summer but very low during the
some have noticed the emerging trends and patterns for business opportunities. While rainy season. An individual with entrepreneurial drive can be extremely imaginative
others are trying to find out their target market. The following are some sources of and inventive in identifying opportunities. He/she can venture on a business that
opportunities: responds to the needs of the people during summer and rainy season.

1. Changes in the environment 2. Technological discovery and advancement

Entrepreneurial ideas arise when changes happen in the external environment. A person with entrepreneurial interest sees possibility of business opportunities
A person with an entrepreneurial drive views these changes positively. External in any new discovery or because of the use of latest technology.
environment refers to the physical environment, societal environment, and industry For example, an individual with knowledge in repair and installation of a
environment where the business operates. machine engine discovers additional engine parts that considerably reduce fuel
1.1 The Physical environment includes consumption.

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3. Government’s thrust, programs, and policies 1. Buyers
The priorities, projects, programs, and policies of the government are also good The buyers are the ones that pay cash in exchange for your goods and services.
sources of ideas. One example is the influence of the price or in the bargaining strategy. The buyer has
For example, the use of firecrackers to celebrate New Year’s Eve is strictly a strong and magnified bargaining power. The threat of its bargaining power will be
prohibited. People without entrepreneurial interest will view the ordinance as a plain less if the following factors are noticed:
restriction. However, for an entrepreneur, it is a business opportunity to come up with a. There are several suppliers available in the market.
a new product that will serve as a substitute for firecrackers. b. The buyer has the potential for backward integration.
c. The cost of switching the supplier cost is minimal.
4. People’s interest d. The product represents a high percentage of the buyer’s cost.
The interest, hobbies, and preferences of people are rich sources of e. The buyer purchases large portions of the seller’s product or services.
entrepreneurial ideas, like the increasing number of Internet Cafés at present could 2. Potential New Entrants
lead to the strong attachment of young people to computers. A new entrant is defined as companies or businesses that have the ability to
penetrate or enter into a particular industry. For example, in the level of capital
requirements, if the business requires huge capital, new entrants should decline to join
5. Past experiences the business. This gives a threat to the business. This can be noticed if there is the
The expertise and skills developed by a person who has worked in a particular presence of the following factors:
field may lead to the opening of a related business enterprise. a. Substantial capital requirement
For example, an accountant who has learned the appropriate accounting and b. Strict government policy
management skills and techniques in a prominent accounting firm can start his/her c. Difficulty in accessing distribution channels
business venture by opening his/her own accounting firm. d. Economies of scale
e. High cost of product differentiation
Forces of Competition Model f. High switching cost
It is also known as the “five forces of competition”. An industry environment is 3. Rivalry among Existing Firms
a competitive environment. Regardless of what product or services you have, Rivalry is a state or situation wherein business organizations are competing
competition is always present. with each other in a particular market. For example, it depends on the marketing
Competition – it is the act or process of trying to get or win something. strategy of your competitor, like giving freebies and special offers. The intensity of
For example, the prices are lower when there is a competition among the rivalry among existing firms is characterized to the following factors:
stores. a. Diversity of rivals
These are the five forces competing within the industry: b. Number of competing firms
 Buyers c. Characteristics of the products or services
 Potential new entrants d. Increased capacity
 Rivalry among existing firms
e. Amount of fixed costs
 Substitute products
f. Rate of industry growth
 Supplier

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4. Substitute Products
Substitute is one that serves the same purpose as another product in the
market. For example, the consumers decide to use margarine as a substitute for What’s More
butter. In case the price of butter increases, preferably the consumer will gradually
switch to margarine.
WORD HUNT
A substitute product can give a big threat in the industry environment if the following
Look for words in the puzzle related to the topic may it be horizontally, vertically, or
factors are noticed:
diagonally. Write the words on the space provided below.
a. Switching cost is low
V E N T U R E A B C D E F A B C D E F S
b. Preferences and tastes of the customers easily change
A B N P O H W Q G S D L O S J E T U E Q
c. Product differentiation is highly noticeable
B C T R P R O D U C T S R L R E H R B E
d. The quality of substitute products dramatically improves
C V R E P G O Y T R E P T G S T V A C N
e. The price of substitute product is substantially lower
V H E N O V R F D A B C U D E I O G V T
5. Suppliers
H K B E R C T K R F G E N H C J R K H R
The Suppliers are the one that provide something that is needed in business
K I C I T H U L V D E O C E U A T U K E
operations such as office supplies and equipment. In an example where supplies and
services being offered is unstable the intensity of the threat is strong in this kind of the I D V D U K N S J Y I R Z O Q E U Y I P

competitive force in the industry. This can be noticed if there is the presence of the D G H G N O U A O F G T U X N X N D R

following factors: G L K L I P W L R E P U R E P O J O G E

a. The supplier has the ability for forward integration L H Z H T S P K L I O N H L I O M E L N

b. Suppliers in the industry are few, but the sales volume is high H A X Q I M I L G C V R I V A L R Y H E

c. Substitute products are not readily available in the market A D S J E T U R E A B B S T I T U H A U

d. The switching cost is very high S S U B S T I T U T E S J E T U R F J R
e. The product or service is unique V T U R E A B Q R S J E T U T U R E A B

1. ____________________ 6. ____________________
2. ____________________ 7. ____________________
3. ____________________ 8. ____________________
4. ____________________ 9. ____________________
5. ____________________ 10. ____________________

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 What I Can Do

What I have Learned Activity 3:

COMPLETE ME
Complete the table below by supplying it with products that you consider similar. Write
Definition of Terms
the product and not the brand in their respective columns. Then describe and
differentiate its characteristics and uses.
Buyers – are the ones who pay cash in exchange for your goods and services.
Primary Product Substitute Product
No.
Competition – it is the act or process of trying to get or win something. ( Product name ) ( Product name )
Example Butter - expensive price used Margarine – lesser price also used as
Entrepreneurial process - can be defined as the steps taken in order to begin a new as bread spread. bread spread
enterprise. It is a step-by-step method one has to follow to set up a business. 1.

Entrepreneurial ideas - an innovative concept that can be used for financial gain that 2.
is usually centered on a product or service that can be offered for money. 3.
Essentials of entrepreneur’s opportunity – seeking – these are the basic
4.
foundation that the entrepreneur must have in seeking opportunities, such as
entrepreneurial mind frame, heart flame and gut game. 5.

External environment - refers to the physical environment, societal environment, and

industry where the business operates.
Government - refers to the local government (municipality, city, or provincial) or the
national government and its branches. Post Assessment
New entrants – the one who enters something.
Opportunity – seeking – the process of considering, evaluating, and pursuing Direction: Encircle the letter of your choice.
market-based activities that are accepted to be beneficial for the business. 1. It is the process of considering, evaluating, and pursuing market-based
Rivalry – is a state or situation in which people or groups are competing with each activities that are believed to be advantageous for the firm.
other. A. Opportunity – seeking C. Opportunity – screening
Sources of opportunity - can be attained by assessing and looking at changes in the B. Opportunity – seizing D. Sources of opportunity
environment; technological discovery and advancement; government’s thrust,
programs, and policies; people’s interest, and past experiences. 2. This is essential to opportunity – seeking which allows the entrepreneur to see

Substitute – anything that takes the place or function of another. things in a positive and optimistic light in the midst of crisis or difficult

Suppliers – are the ones who provide something that is needed or wanted. situations.
A. Entrepreneurial mind frame C. Entrepreneurial heart flame
B. Entrepreneurial gut game D. Entrepreneurial heart frame

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3. It is the ability of entrepreneur that can sense without using the five senses, B. Number of competing firms
also known as intuition. C. Characteristics of the products or services
D. The product represents a high percentage of the buyer’s cost
A. Entrepreneurial mind frame C. Entrepreneurial heart flame
10. The following are the forces competing within the industry except one:
B. Entrepreneurial gut game D. Entrepreneurial heart frame
A. Potential new entrants and Substitute Products
4. One of the essetials of entrepreneur’s opportunity – seeking that refers to the
B. Buyers and Suppliers
driven passion of an individual.
C. Rivalry among Existing Firms
A. Entrepreneurial mind frame C. Entrepreneurial heart flame D. Needs and Wants
B. Entrepreneurial gut game D. Entrepreneurial heart frame 11. Which of the following good sources of entrepreneurial ideas determine the
5. What variable of societal environment includes income level and employment interest, hobbies and preferences of people.
rate? A. Changes in the environment C. People’s enterest
B. Technological discovery D. Past experiences
A. Economic forces C. Political forces
12. Societal environment includes the following, except:
B. Sociocultural forces D. Technological forces
A. Economic forces C. Political forces
For questions 6 and 7 refer to the following statements:
B. Sociocultural forces D. Natural resources
A. Preferences and tastes of the customers easily change. 13. Which among the following is the result of identifying entrepreneurial
B. The buyer has the potential for backward integration. opportunities?
C. The cost of switching the supplier cost is minimal. A. Creation of entrepreneurial ideas C. Sources of opportunity
D. Product differentiation is highly noticeable. B. Opening of entrepreneurial venture D. Entrepreneurial process
6. Which are the factors of the substitute product that pose a great threat in the 14. What entrepreneurial idea will you recognize, if you consider the new discovery
industry environment? and advancement of technology as source of opportunity?
A. A, B, C, D C. A and D A. Changes in the environment
B. A and C D. B and C B. Technological discovery and advancement
7. Which are the factors that influence the buyer to have a less threats because C. Government’s thrust, programs, and policies
of the bargaining power? D. People’s interest
A. A only C. A and D 15. A source of entrepreneurial idea where expertise and skills developed by a
B. A and C D. B and C person from its previous work can lead to the opening of a related business
8. They are the ones who pay cash in exchange for your goods and services. enterprise.
A. Buyers C. Sellers A. Government’s thrust, programs, and policies
B. Competitors D. Suppliers B. Past experiences
9. The intensity of rivalry among existing firms is characterized to the following C. People’s interests
factors except one: D. Technological discovery and advancement
A. Diversity of rivals

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 Additional Activities

Conduct a short interview of any successful entrepreneur in your locality. Ask the
following questions:
 What is the nature of your business?
 Who are your customers?
 What industry are you operating?
 How much was your starting capital?
 How many years has your business been in operation?
 How much manpower was involved from the start of operation until now?

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