CHAPTER 2

STARTING A BUSINESS
 2.1 Turning ideas into reality

What kind of business is easy to start and is guaranteed

to be successful?
Launching a successful business venture depends on
several factors: capacity as an entrepreneur, trends in the
business and developments in the national and global
economy.
Many successful ventures were not built from new ideas
but from what was lacking in the marketplace.
Some may come in the form of problems that people
usually encounter in their daily activities.
As a future entrepreneur, you need to learn how to asses
your abilities and know-how, your inspiration for getting
into business and your proposed business strategy. It is
also critical to assess talents, skills, experiences and
contacts and then find our if these could be turned into a
successful business enterprise.
2.2 What factors should you consider before
starting your own business?

1. Decide first on a trade business name

It is important to choose a business name that is appropriate to
the product, easy to read and remember.
2. Register it with DTI and local government
Secure the necessary permits in the locality where the business
would operate. This includes Barangay clearance, business
permit from Mayor’s Office
3. Register with SEC, BIR, DOH, DENR depending on the
nature of the business.
2.3 What kind of legal structure should you
choose?

THREE MAJOR TYPE OF LEGAL STRUCTURES:

1. Sole Proprietorship
 the easiest legal structure.
Fewer formalities and legal restrictions
Complete control over the business and the sole recipient of
the profits.
Fully liable for all debts of the business
Not easy to raise capital
2. Partnership
Companionship as well as the enhanced ability to raise money
and recruit and motivate key people.
Losing control of the venture, losing wealth, being stuck with
the other owners, being accountable to others.
Try to find a partner who complements your strengths and
weakness.
Seek out someone you trust, compatible with and can
communicate easily
3. Corporation
Owned by shareholders and run by a board of directors
elected.
Limits a stockholder’s liability to the extent of their investment
If shareholders are active in operating the business, they are
considered employees and must be paid a reasonable wage
It must pay tax on income as a separate legal entity
It shield shareholders from the claims of creditors.
2.4 Planning, Organizing, and Managing your
business enterprise

2.4.1 – Planning your business enterprise

Planning – simply means thinking ahead about objectives,
strategies, finances, production, marketing, profit prospects,
and growth possibilities.
Business Planning – involves how to attain your goals and
the ways to accomplish such goals. Setting a time frame is
essential in achieving goals. The business planning should
be a continuous process to ensure that consumer
satisfaction is maximized and sustained.
 Basic Principles in Planning

1. Planning must be realistic – it must be based on

available resources – human, financial and physical.
2. Planning must be based on felt needs – your objective
as an entrepreneur should fit the needs of the people in
the community. It can be identified through careful
observation, personal interviews or through the conduct
of a survey.
3. Planning must be flexible – Resources, needs and
economics conditions change so the plans should be
responsive to the change in the tastes and preferences of
the consumers.
4. Planning must start with simple projects – the most
appropriate project to undertake is a micro business as it
requires simple management and technology as well as
minimal amount of resources such as materials, equipment
and funds.
2.4.2 Organizing your business venture.

Organization – is composed of two or more persons who

work together to achieve a common set of goals and
objectives.
Organizing – is the process of combining and coordinating
resources and activities to accomplish efficiently and
effectively and organization’s goals and objectives. Its more
important role is “the appropriate development of human
resources”.
The form and expansion of the organizational structure will depend
on the size of the business.
2.4.3 Managing your business enterprise

Without effective and efficient management, an organization

cannot survive.
Basic function of Management:
1. Establish the goals of the enterprise and develop
plans to attain these goals – making strategies in
achieving and maximizing profits.
2. Organize people and other resources to achieve
goals – resources and activities must be grouped to
ensure efficiency and economy.
3. Lead and motivate people toward the goals of the
enterprise – an entrepreneur must be a good leader and
effective motivator.
4. Maintain sufficient control systems to ensure that the
enterprise is moving well toward its goals – evaluate
and regulate business activities to ensure that the
enterprise achieve its goals. Activities should not deviate
from the standards.
2.5 Financial Management, Production and
Marketing for your business enterprise

2.5.1 Financial Management

Financial capital or funds are essential resources of the
business and its lifeblood.
As an entrepreneur, money is needed to start a business
and for development and expansion.
The ability to manage the fund is also important. There is
a need to plan well and control the finances of the
business.
Financial Management – refers to the activities that are
concerned with securing funding and using it wisely. The
entrepreneur as a financial manager must determine the
best ways to raise money and use it to realize the goals of
the enterprise.
Finance – is the art and science of managing financial
resources. It involves both individual skills and methods of
acquiring and using financial resources.
2.5.2 Production of Goods and Resources

Production – is simply the creation of goods and services.

These goods and services are produced to satisfy human
needs and wants.
- it is also a process of converting economic
resources into goods and services. In this process, the
principal actor is the entrepreneur as he decides on the
proper combination of resources, such as the application of
labor or use of machinery. The entrepreneur decides what
to produce, how to produce and to whom the products are
to be sold
Producing a product or service which is new in the market
begins from an idea. This is then developed into a product
or service by the entrepreneur. This is part of the
entrepreneur’s role as an innovator and creator.
For every product produced, there is a corresponding cost
incurred by the enterprise. This is called as Cost of
production. The costs incurred affect the ability and
willingness of entrepreneurs to produce more.
It must be noted that when the production cost is high, the
price of the goods sold will also be high. The higher the
price of the goods produced, the lower the demand for
such product will be, since a higher price means lower
purchasing power.
To lower the cost of production, entrepreneurs must
choose resources that are abundant because it will mean
cheaper price than scarce resources.
In the production of goods, an entrepreneur should bear
in mind the quality of the products created.
Quality control is essential to every business. It refers to
the process of insuring that goods and services are
produced in accordance with their design and
specifications.
The products should always meet or even exceed set
standards.
2.5.3 Marketing your business

Marketing – refers to the set of activities directed at

facilitating and accomplishing exchange between sellers
and consumers of goods and services.
Marketing is not simply about selling. Marketing is a broader
concept that includes the integration of various functions
such as market research, product development, advertising,
customer service, distribution and selling.
It is always important for business to have a marketing plan.
This is an outline of actions designed to achieve a specific
set of goals. It must be compatible with marketing resources
and the external environment of the business enterprise.
Battles Should Win as an Entrepreneur

1) Strategy
2) Environment
3) Corporate Social Responsibility (CSR)
4) Business Ethics
A. Strategy
What is strategy?
1. Direction – where your business is trying to get in the
long run
2. Market(s) – place(s) where your business would compete
in
3. Scope – activities involved in the market(s)
4. Advantage(s) – area(s) where your business can perform
better against competitors in the market(s)
5. Resources – necessary skills, assets, finances, facilities,
technical competence and connections among others,
needed for your business to become competitive
What is strategy?

6. Environment – external factors that affect

your business’ ability to compete.
7. Stakeholders – people who have power and
expectations in and around your business.
B. Strategy at different Levels of a
Business
1. Operational strategy – is concerned with how each
part of your business is organized to deliver the
corporate and business unit level strategic direction.
2. Business unit strategy – is concerned more with how
your business competes successfully in a particular
market.
3. Corporate strategy – is concerned with the overall
purpose and scope of your business in order to meet
stakeholders’ expectations.
C. Strategic Management
• Three Main Components of Strategic Management
Process:
1. Strategic analysis – is about looking at, analysing, and
understanding the events happening outside your
business organization.
2. Strategic choice – is about selecting the appropriate
business strategy for your business organization.
3. Strategic implementation – is about translating your
selected or chosen business strategy/strategies into
organizational actions.
D. Strategic Thinking versus Strategic
Planning
Strategic thinking is:
Your VISION of what your company/business will look like in
the future.
Very much like painting a picture.
The picture that will guide the direction, nature and focus of
your business.

Strategic thinking attempts to establish WHAT your

business organization should look like while strategic planning
focuses on HOW your business organization will get there.
E. Winning Strategy
 Pursue your VISION with PASSION and PERSISTENCE.
 The best strategy is to aim for a business environment without
competition. CHANGE THE RULES OF THE GAME IN YOUR
FAVOR.
 If competition is inevitable, do not outwork it. Instead, TILT the
playing field to your advantage.
 The essential DIFFERENCE between winners and losers is their
ability to think strategically, to implement those strategies and to
change the rules of the game in their favor.
 DARE to think outside the box.
 DARE to dream the unthinkable.
F. Red Ocean versus Ocean Strategy

• Blue Ocean Strategy is a business strategy book written by W.

Chan Kim and Renee Mauborgne in 2005. The book illustrates
the high growth and profit an organization can generate by
creating new demands in an uncontested market space, or a
“Blue Ocean”, than competing head to head with other suppliers
for known customers in an existing industry.
• The metaphor of “red” and “blue” ocean describes the “market
universe”. Red ocean refer to all industries in existence today (the
known market space). Blue oceans, in contrast, are all the
industries not in existence today ( the unknown market space).
G. Elements of Business Strategy from
Sun Tzu’s the Art of War
ELEMENTS BUSINESS IDEAS BUSINESS EXAMPLES
Mutual Philosophy Shared ideas bind people Team spirit, employees’
and purpose of the together into cohesive identification with the brand,
group team. YOU WORK AS A believing in the company’s
TEAM. vision-mission statement,
mutual trust among staff and
management.
Environment The prevailing conditions Economic cycle, financial
determine the plans that crisis, recession, depression,
you undertake. These bankruptcy.
conditions are too big and
general to be controlled
by people.
G. Elements of Business Strategy from
Sun Tzu’s the Art of War
ELEMENTS BUSINESS IDEAS BUSINESS
EXAMPLES
Situation This is similar to environment How much products do you
but on a smaller scale. produce?
How do you produce these?
Leadership It allows you to craft good Clear description, duties
plans because of your and responsibilities, division
perception, foresight, of work.
emotional intelligence and
objectivity.
Art This is the skill and ability to Versatility, determination,
implement your strategy. results-oriented mindset.
Preparation and coordination
are essential here
 II. Environment

• The environment of your business consists of the

conditions, circumstances, and influences that affect your
business ability to achieve its goal and objectives.

A. Internal vs. External Environment

The internal environment exists within your business
organization.
The external environment lies outside your business
organization.
B. Elements of Internal and External
Environment
 C. SWOT Analysis
• A SWOT analysis is a simple framework that you can identify, describe, and
analyse the strengths, weaknesses, opportunities and threats facing your
company or business.
III. Corporate Social Responsibility

Corporate Social Responsibility (CSR) talks about your

business’ responsibilities to the society where it is located
or where it operates. CSR referred to as:

Corporate or business responsibility

Corporate or business citizenship
Community relations
Social responsibility
IV. Business Ethics

• Business Ethics also known as corporate ethics is a

form of applied or professional ethics that examines
ethical principles and moral or ethical problems that arise
in a business environment. It applies to all aspects of a
business and is relevant to the conduct of individuals and
business organization as a whole.