Entrepreneurship

Quarter 2 – Module 6

4 M’s of Production

and
Business Model

3 CO_Q2_Entrepreneurship SHS
Module 6
 4 M’s of Operations in Relation to the
Lesson
Business Opportunity and Developing a
1
Business Model

What’s In

In your previous lesson, you learned about the 7P’s of Marketing

Mix; Product, Place, Price, Promotion, People, Packaging and Positioning in
relation to business opportunity, wherein marketing is about creating
and accumulating customers. Marketing plans are intended to capture a
market portion and to setback competitors.
Brand name was also introduced, where it is a name, symbol, or
other feature that distinguishes a seller’s goods or services in the
marketplace. Your brand is one of the greatest assets because your brand
is your customers’ over-all experience of your business.
Experts believe that a good brand can result in better loyalty for its
customers, a better corporate image and a more relevant identity.
 What is It

An entrepreneurial venture may either be a sole proprietorship, a

partnership, or a corporation, engaged in merchandising, manufacturing,
or service. Nevertheless, whatever type and nature of business ventures
is opened to exploit different business opportunities, innovation or
creativity defines the distinction between an entrepreneur and an ordinary
business person.
Thus, the concept of innovation or creativity must, in almost all
instances, be introduced and practiced. An entrepreneur finds way to
introduce innovation from the production process to the marketing stage,
while an ordinary businessperson simply imitates business practices and
procedures.
The concept of innovation or creativity can easily be practiced and
highly noticeable in a manufacturing operation since raw materials are
transformed to finished goods through the production process. Innovation
can be introduced from the production phase up to packaging and
delivery.
The three important elements in the production system are; the
input, the transformation of production process and the output.

Production
Input Output
Process

Figure 1.1. The Three Important Elements in the Production System

The Input includes the following:

1. Manpower
2. Materials
3. Machine
4. Design
5. Instructions
The Production process, also referred to as the transformation or
conversion process, is the stage of production where the materials are
transformed into the final product with the aid of manpower and machine.
 The output represents the final product from the production
process and distributed to the customers.
4 M’s of Production
The most serious issues in the whole production system are the inputs and
the transformation process. Their quality determines the quality of the output.
The factors involved in the input and the production process are
usually referred to as the Four M’s of production, namely Manpower, Method,
Machine, and Materials.

Four M’s

 Manpower
 Method
OUTPUT
 Machine
 Materials

Figure 1.2. The Four M’s in the Production System

Manpower

Manpower talks about human labor force involved in the manufacture

of products. It is measured as the most serious and main factor of
production. The entrepreneur must determine, attain and match the most
competent and skilled employees with the jobs at the most appropriate
time period.
Educational qualifications and experience, status of employment,
number of workers required, skills and expertise required for the job are
some of the manpower criteria that must be highly considered by the
entrepreneur.

Materials

It simply refers to the raw materials necessary in the production of a

product. Materials mainly form part of the finished product. Just in case
the resources are below standard, the finished product will unsatisfactory
as well. The entrepreneur may consider cost, quality, availability,
credibility of suppliers and waste that the raw materials may produce.
Machine

Machine is about manufacturing equipment used in the production of

goods or delivery of services. In the process of selecting the type of
equipment to purchase, the entrepreneur may consider types of products
to be produced, production system to be adopted, cost of the equipment,
capacity of the equipment, availability of spare parts in the local market,
efficiency of the equipment and the skills required in running the
equipment.

Method

Method or production method is the process or way of transforming

raw materials to finished products. The resources undergo some stages
before it is finalized and become set for delivery to the target buyers. The
selection of the method of production is dependent on product to produce,
mode of production, manufacturing equipment to use and required skills
to do the work.
MAN MACHINE METHOD
Skill Design
Technology Installation Schedule
Organization
Improve
Resources Supplies Procedure
Process Communications

Equipment
Design Budget
Attribute
Quality Demands

MATERIAL OTHER
Figure 1.3. Illustration of Four M’s in the Production System

The product is the physical output of the whole production process.

It should be valuable and beneficial to the consumers and should satisfy
their basic needs and wants. A product can be heterogeneous or
homogeneous. A heterogeneous product has dissimilar characteristics,
parts, and physical appearance. It can be easily
identified from other products. Entrepreneurial ventures that produce
heterogeneous products include makers of furniture, bags, and home
decors.
On the other hand, a homogeneous product has a physical
appearance, taste, or chemical content that can hardly be distinguished
from that of the other products. Businesses that produce homogeneous
products include makers of soft drinks, and medicines.
After knowing the production process and system, and how the
product is being processed, not it is important to know about product
description, wherein product description promotes and explains what a
product is and why it’s worth buying. The purpose of a product description is
to provide customers with details around the features and benefits of the
product so they’re obliged to buy.
Know who your target market is, focus on the product benefits, tell
the full story, use natural language and tone, use power words that sell,
and use good images. These are guidelines for you to have a good
product description; since some customers are very particular with it since
they consider the welfare of their family, if it is safe to use.
Prototype is created before the massive production of such product;
an entrepreneur must consider prototyping. One of the important early
steps in the inventing process is making a prototype. A prototype is a
duplication of a product as it will be produced, which may contain such
details as color, graphics, packaging and directions. Benefits are the
reasons why customers will decide to buy the products such as
affordability, efficiency or ease of use. The features of the product or
service merely provide a descriptive fact about the product or service.
Most importantly, it is better to test your product prototype to meet
customers’ needs and expectations; and for your product to be known and
saleable. Pretesting of the product or service is similar to a sample of the
product or service given to the consumer free of cost in order that he/she
may try the product before committing to a purchase.
The entrepreneur’s main concern is the satisfaction of a customer,
for they are the life blood of the business. Without them, all the efforts,
will be wasted as well as the chance to venture into a new business.
 In a manufacturing venture, the supplier plays a vital role. They are
your business partners, without them your business will not live. You need
them as much as you need your customers to be satisfied. But as an
entrepreneur you have to
choose a potential supplier who has loyalty and values your partnership: a
supplier who would lead you to the fulfillment of your business objectives,
mission and vision. This entity is part of a supply chain of a business,
which may offer the main part of the value contained within its products.
Certain suppliers may even involve in drop shipping, where they ship
goods directly to the customers of the buyer.
How do supply chain management systems coordinate planning,
production, and logistics with suppliers?
Supply chain management systems automate the flow of
information among members of the supply chain so that they can use it
to make better decisions about when and how much to purchase,
produce, or ship.
Value chain is a method or activities by which a company adds value
to an item, with production, marketing, and the provision of after-sales
service. The main goal and benefit of a value chain, and therefore value
chain analysis, is to make or support a competitive benefit.
A supply chain is a structure of organizations, people, activities,
data, and resources involved in moving a product or service from supplier
to customer.
The main objective of supply chain management includes
management of a varied range of components and procedures, for
instance, storing of raw materials, handling the inventory, warehousing,
and movement of finished product from the point of processing to the
point of consumption.
When value chain management is implemented effectively, the flow
of products and materials is improved through the accurate forecasting of
sales and demand as well as improved inventory management. Delays are
also minimized and products are visible and traceable throughout the
supply chain.
Supply chain management decreases purchasing cost. Retailors
depend on supply chains to quickly distribute costly products to avoid
sitting on expensive inventories. Any delay in production can cost a
company tens of thousands of pesos. This factor makes supply chain
management ever more important.
Value chains help increase a business's efficiency so the business
can deliver the most value for the least possible cost. The end goal of a
value chain is to create a competitive advantage for a company by
increasing productivity while keeping costs reasonable.
 Business Model

Business model describes the factors of how an organization creates,

delivers, and captures value in economic, social, cultural or other
contexts. The development of business model construction and variation
is also called business model innovation and forms part of a business plan.
It is a company's plan on how it will make revenues and make a profit.
It describes what products or services the business plans to manufacture
and market, and how it plans to do so, as well as what expenses it will
incur.
There are important phases in developing your business model,
namely: identifying the specific audience; establishing business process;
recording business resources; developing strong value proposition;
determining key business partners; and creating demand for today’s
generation strategy and being open for innovations.
After developing a business model, we will proceed in developing a
business plan. To be able to successfully complete this module, you need
to prepare a business plan and operate your plan and finally keep records
of your business transactions.

Business Plan
What is a Business Plan For?
Entrepreneurs who plan to enter any business endeavor must have a
business plan on hand to guide them throughout the process. Different
business plans are prepared for different purposes. There are business
plans written prior to setting up an enterprise, which are similar to a
prefeasibility study and a feasibility study. Many new enterprises need to
convince prospective business investors about the soundness and
potential of their business.
 There are business plans that are written during the first few years
of the enterprise in order to guide the entrepreneur on which strategies
would be most beneficial for the enterprise to take. And there are
business plans that are focused on bringing the enterprise to a higher
level of growth, a period where the enterprise has already reached its
peak and would want to enter into another endeavor by creating and re-
establishing itself.
Clearly, a business plan serves many masters. First, it serves the
entrepreneur who must set a navigational course. Second, it serves
investors and cautious financiers. And third, it serves the managers and
staff of the organization so that they will know the strategies and
programs of the enterprise.
Read the different scenarios below to fully understand the
importance of having a business plan.
Scenario 1:
“Jessie is the eldest of the five children of Mr. & Mrs. Natividad. The family is
having difficulty to support their everyday needs. Because of this, Jessie tried selling
banana cue and with his dream to make his business grow, he put up many stalls in
the community without considering the advises of his friends to make a business
plan before implementing his decision. After a few months his stalls shutdown.”
Scenario 2:
“Mercy is the youngest in the family. She found out that she loves to cut hair
and apply make up on her friends. Until such time that her friends introduced her to
their friends too for haircut and make up when there are occasions. A few months
after, Mercy was told by her friends to put up a beauty parlor in their place. So she
asks her mother who is also a businesswoman to teach her how to make a business
plan and eventually ended with a successful business.”
Scenario 3:
“Monna is a diligent student: because of her knowledge gained from school
about business plan she was able to enhance her skills in business and finally found
herself into her laundry shop business.”
Each scenario taught us that a business is not just about how much
income or profit you can get, but it’s about the life of your business. And
in having a business, you also have to consider Technological forces,
Social forces, Political forces, Cultural forces, Economic forces and Legal
forces.
 The following are the components found in a Business Plan.
 Introduction - this part discusses what is the business plan all about.
 Executive Summary - is part of the business plan which is the first
to be presented but the last to be made.
 Management Section - shows how you will manage your business and
the people you need to help you in your operations.
 Marketing Section - shows the design of your product/service;
pricing, where you will sell and how you will introduce your
product/service to your market.
 Financial Section - shows the money needed for the business, how
much you will take in and how much you will pay out.
 Production Section - shows the area, equipment and materials
needed for the business.
 Competitive Analysis - is the strategy where you identify major
competitors and research their products, sales and marketing
strategies.
 Market – refers to the persons who will buy the product or services
 Organizational chart - is the diagram showing graphically the relation
of one official to another, or others of a company.