ENTREPRENEURSHIP

MODULE UNIT V

OVERVIEW
A new business project is not limited to the substantial capital requirement. If one has a
good idea worth pursuing in a business and the person concerned has that entrepreneurial
attributes, the pursuit on sourcing the capital should be the concern to finance the future. Once the
business has been organized, the process continues with the creation of products and services that
will satisfy community needs. Likewise, the entrepreneurial goal of increased profit earnings
requires an understanding and application of financial management that may provide guidelines in
making financial decisions.
This Module 4 focuses on the study of the entrepreneurial process which encompasses
new venture creation and the emphasis on entrepreneurial thinking and value creation applicable
to all types of organization. Provided herein are the concepts of financial and production
management which are fundamental in ensuring the proper operation of business enterprises and
organizations.

OBJECTIVES
At the end of the unit, the students are expected to:
 Identify the sources of capital and minimize costs and expenses at start-up stage
 define marketing and marketing management
 explain the responsibilities of the marketing ma ager in relation to production and
pricing
 discuss functions of financial manager, uses of funds, and financial record keeping

SUBJECT OUTLINE

Unit V. Entrepreneurial Ventures Page

Lesson 1. The Philippine Context 111

Lesson 2. Global Trends in Business 136

Lesson 1. The Philippine Context

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 Introduction
The success of business enterprises largely depend on the skill and motivation of human
resources. If people work as a team, the competitive stance of the organization will be enhanced,
making it easier to accomplish business objectives. A systematic approach to personnel
management resources is a necessity.
Todays’ organization is different from that of yesterday. Current business environment
entails a lot of challenges. There might be resources at hand – machine, technology, and money.
These factors are secondary for business to be able to maximize its profits. Customer satisfaction
must be first maximized in terms of product quality and service. This can be made possible if
personnel are efficient and people-oriented.

Learning Outcomes
At the end of the lesson, the students are expected to:
 discuss ways of motivating people; and
 illustrate a vivid picture of successful people and enterprise;

Warm-Up Activity
Think of words that you can correlate with the concept of “success”

Success

Content Input

BUSINESS SUCCESS THROUGH PEOPLE DEVELOPMENT

All over the world there are successful entrepreneurs who do not wait for opportunity to come but
have created conditions that give them opportunities. Along this line, Filipino entrepreneurs
possessed values and qualities such as innovativeness, risk-taking, hardworking and extremely
strong will to succeed. Their challenges have
created goods and services which changed the
economy into a modern globalized economy.

Motivating People
People perform in accordance with the
expectations of their superiors. If they are told that
they are winners, they become winners. Label
employee inefficient, and he will start acting like
one. As research show, that self-perception affects
performance. Successful enterprises design systems

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to motivate people through positive reinforcement. This system is not only tailored to create
winners, but also reward and celebrate the winning through monetary and nonmonetary
incentives.
As B.F Skinner says, “we are all product of the stimuli we get from the external world.”
Positive reinforcement produces desirable behavior intended to produce good results.

Employees’ Expectations from Management

 Security of tenure
 Opportunities for advancement as business grows
 Treatment with respect and dignity
 Participation in decision-making
 Sharing of authority and responsibility
 Open and sincere communication
 Rewards for achievement
 Opportunities for personal growth
 Infusion of a sense of pride in a job well-done
 Involvement in setting precise goals

Features of Excellent Enterprises

1. They solve their own problems. The standard operating procedure is “Do it, fix it, try
it”. When there is a big problem, the best senior executives study the problem, come
up with an answer, and implement it. In testing ideas on customers, several small
groups, instead of one big group, are formed. They employ several practical devices in
solving the problems of the enterprise.
2. The customer is No.1. The customer is always the first priority, and is always right.
Excellent enterprises learn from their customers, and in response provide quality,
reliability, and service to their customers.
3. They develop the spirit of entrepreneurship. They encourage risk-taking and
innovation in their business organization. There is a substantial tolerance for failure.
4. Productivity through people. Employees are considered as the most valuable asset.
Employees are treated with dignity and respect, well-trained and they get abundant
monetary and nonmonetary rewards. Firms want their employees to be happy so that they
become productive.
5. The philosophy of the enterprise. Excellent companies expect and demand superior
performance from their people. Top executives of these enterprises spent most of their
time in the field talking with employees and customers.

Here are some modified basic values of excellent companies:

 A belief in being the best
 A belief in doing the job well
 A belief in the importance of
people
 A belief in informal and
friendly atmosphere to
enhance communication

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  A belief in the importance of
economic growth and profits
 A belief in corporate social
responsibility
6. They stick to business in which they are competent. To stay close to business they
know, where they have skills, competencies, and experiences.
7. Simplicity. Companies have central staff that is small, that enhances flexibility. They
utilize tasks forces, project centers, and other temporary schemes to get fast results.
New division are created only when there are expanded activities.
8. Simultaneous centralization and decentralization. They provide maximum individual
independence, but strictly require compliance to their core values, such as excellent
quality and service, respect for individuals, the sovereignty of the customers, and
others.

Success Techniques of Famous People

Positive Affirmative Dynamic first

Assumption Repetition impressions

Bulldog
Visualization
Tenacity

Good Character Creates Success

Integrity. This is the key to our character. People can be hardworking and efficient, but
without integrity they will not have permanent success. Employers want individuals who are
honest, dependable, fair, and honorable. This also applies to business dealings
Faith. This is a positive attitude of the mind. It makes the difference between success and
failure. Those who firmly believe that they can achieve prosperity and happiness, gets them. Faith
moves mountains.
Enthusiasm. It radiates energy, happiness, optimism, and inspiration. An entrepreneur
who lacks enthusiasm cannot motivate his workers and customers. Without this, it is difficult to
transform a good idea into a successful reality.
Discipline. Our minds and emotions are the sources of our success or failure. If we know
how to control our actions from it, then we have discipline.
Appreciation. People like to be appreciated for their good work,
. They like also to be respected and to feel important. Evidently, business success depend on
others – employees, customers, and suppliers. An entrepreneur must be good in human relations.

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ENABLING and DISABLING FACTORS

Table 1. A summary of the enabling and disabling factors that influence the different resilience
levels identified from the empirical data.
(Source: ecologyandsociety.org/vol22/iss1/art1/table1.html)

ENABLING FACTORS DISABLING FACTORS

Socioeconomic resilience Technical capacity and Lack of practical technical

knowhow capacity
Policy-science integration Education distant to real issues
Micro-governance Power games and political self-
arrangements interest
Inclusive participation Unsustainable public preferences
Accountability Focus on physical structures rather
True costs accounting than capacity related

External hazard resilience Awareness of climate and Lack of financial and other
disaster risk resources to handle beyond normal
Win-wins between Lack of knowledge of what
effectiveness of daily increases hazard resilience
operations and hazard High value of cost effectiveness
preparedness, vulnerability
and hazard reduction

Social-ecological resilience Across scales: Inter- Local increases of resilience

institutional coordination; reduce resilience at regional level
long-term regulation and Lack of knowledge on ecosystem-
policy based measures favoring local
Integrated formal and structural solutions
informal urban planning Lock-ins, favoring rapid
frameworks (e.g., linking

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 upstream downstream areas) urbanization and economic growth

Integrated formal and

informal urban planning
frameworks (e.g., linking
upstream downstream areas)

Factors that Stimulate Entrepreneurship in the Philippines

(Source:https://brainly.ph/question/2205696#:~:text=These%20factors%20play%20a%20significant, thriving
%20and%20is%20steadily%20growing.)

Addressing widespread poverty is the single most important policy challenge facing the
Philippines. Not only is poverty high when benchmarked against countries in Asia, but also the
rate of poverty reduction has been slow. While the Philippine economy has grown at an average
of 6 percent for the last five consecutive quarters (since 2012), poverty incidence remains above
20 percent of the population. The critical challenge is to spread the payback of this huge
economic turnaround among the people, especially the poorest of the poor. They should feel the
benefits of the growing Philippine economy.
The Philippine Development Plan (PDP) further reinforces the thrust on entrepreneurship
through trade and investment to achieve the government’s goal of economic development and job
creation. Based on the plan, measures for macro-economic stability, employment, trade and
investment, agribusiness, power-sector reforms, infrastructure, competition, science and
technology, and anti-corruption are being pursued to strengthen Philippines’s competitiveness and
contribute to job creation. In 2011, there were approximately 830,000 business enterprises in the

Philippines. Of these, 99.6 percent are classified as micro, small, and medium sized enterprises
(MSME) which are responsible for 38 percent of total job growth.

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 As entrepreneurship provide the solution by creating wealth, jobs, and social
empowerment. If we are to address the issue of poverty with some degree of success, history tells
us we have no choice but to actively encourage entrepreneurial ventures.

The factors that play a significant role in stimulating entrepreneurship in the Philippines

are government support, strong tourism industry, security, and hospitable culture,
entrepreneurship in the Philippines is thriving and is steadily growing. Entrepreneurs are ready
and are willing to build and or start enterprising is they see that the government is backing them
up and that they see they secured. Moreover, the tourism industry and the hospitable culture that
the Filipinos have, play a significant role in terms of acquiring foreign entrepreneurs thus
helping entrepreneurship in the Philippines grow.

Enterprise Development and Competitiveness

(Source:ipe.org/resources/entrepreneurship-philippines-opportunities-challenges-inclusive-growth/

Enterprise development in the context of competitiveness not only entails the ability to
produce products that can be accepted globally but also the level of support given to enterprises to
help them produce, innovate, and gain market access.
While relatively mature and free, enterprise development in the Philippines is beset with
critical challenges. These challenges are found within the context of pillars identified by the
United Nations Development Programme in its report Unleashing Entrepreneurship: rule of law,
physical and social infrastructure, domestic macro environment, and global macro environment; a
level playing field, access to financing, and access to skill development and knowledge.
If the challenges remain unresolved, gaps in enterprise development have the potential to
thwart the country’s competitiveness and ability to effectively function within global production
networks.
Rule of Law
Rule of law, which encompasses regulatory structures, policy environment, and
enforcement of regulations, is one of the more important dimensions in assessing the
competitiveness of Philippine enterprises. According to the World Bank’s 2013 Doing Business
Survey, the Philippines ranks 138 of 185 economies with regards to the ease of doing business.
Except for the indicator “trading across borders” where the Philippines fared in the top third of the
rankings (#53), the country sits at the bottom third in all other enterprise development indicators
such as starting a business (#161), dealing with construction permits (#100), registering property
(#122), getting credit (#129), protecting investors (#128), paying taxes (#143), enforcing contracts
(#111), and resolving insolvency (#165). Along these lines, it can be clearly noted that the
Philippines’ regulatory environment for enterprise development is still weak and needs further
reform, harmonization and standardization.

Taking the case of business start-ups for instance, when entrepreneurs draw up a business
plan and try to get under way, the first hurdle they face is complying with the procedures
required to incorporate and register the new firm before they can legally operate. The Philippines
requires at least 15 procedures and takes some 30 or more days to start a business. Malaysia

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requires nine procedures and 24 days while Taiwan requires eight procedures and 48 days. The
rest of the Southeast Asian region averaged 8.7 procedures and 46.8 days to start a business.
Access to credit
Another important dimension is access to financing. While specific laws such as the
MSME Magna Carta and Barangay Micro Business Enterprises (BMBE) development
specifically mandate financing for enterprises, obtaining said funds is a different story. Most
lending portfolios require collateral accompanied by tedious documentation and other technical
requirements that are difficult for MSMEs to comply with.
An enterprise survey conducted by the Universal Access to Competitiveness and Trade
(U-ACT) in 2008 revealed that access to capital and financing are two of the most problematic
issues for enterprises, primarily MSMEs. Seventy-two percent of the total respondents, or nearly
three out of four, observed that investment and/or capital are currently difficult to obtain. On the
other hand, five out of 10 surveyed MSMEs regarded access to and cost of credit as problematic,
in
relation to their businesses. In fact, 14 percent strongly stressed that credit availability and cost
pose a serious problem to the operation of their businesses.
Internationalization and global production networks
The rapid integration of economies and globalization of markets has influenced the
evolution of entrepreneurship over the years. Thus, from the traditional concept of supporting the
various factors of production, entrepreneurship now entails the capacity to see an opportunity,
come up with an idea, and organize the capital, knowledge, partners and managerial skill needed
to develop and sustain business activities through internationalized value chains.
Taking advantage of liberalized trading environments is an emerging challenge for
Philippine enterprises. This is compounded by the reality of limited opportunities for productivity
and innovation. The World Economic Forum (WEF) Global Competitiveness Index identified
infrastructure, labor market efficiency, innovation, technological readiness, intellectual property
protection, R&D spending by private companies, and availability of scientists as key areas in
business and enterprise development where the Philippines is lagging.
Enterprises need to be supported by strong social and physical infrastructure, which
include among others, labor productivity, laboratories, business incubators, business planning,
marketing and branding, and conformance to international standards. All these should be linked to
the supply chain while at the same time economic clusters found in local economies need to be
developed to allow specialization and product complementarity.
Role of Enterprise Networks
In addressing the above mentioned challenges, there is a need to rally behind national
advocacy to push entrepreneurship to the next level. This means nurturing micro-entrepreneurs
from purely “survival” into “opportunity and innovation driven” enterprise owners. This puts a
premium on the role of enterprise organizations such as chambers of commerce, industry
associations and dedicated enterprise networks.

The OECD Working Party on SMEs and Entrepreneurship in its 2009 study on “Barriers
and Drivers to SMEs Internationalization” undertaken by Kocker and Buhl points out that
institutionalization of networks/social ties and supply chains is a key driver of SME international
competitiveness. The study noted “the importance of network/social ties and supply chain links in
triggering an SME’s first internationalization step and extending internationalization processes.”

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 In the Philippines, apart from institutions like chambers of commerce and industry clubs,
entrepreneurship advocacy is mainstreamed by the creation of enterprise networks like the
Philippine Center for Entrepreneurship (PCE). PCE’s concrete goal is to spawn the creation of so-
called “Go Negosyo Communities” everywhere. These are communities where the academic,
business and government sectors are drawn into a triangle of almost seamless collaboration. In
such an ecosystem, there is constant networking, mentoring and cooperation among professors,
entrepreneurs, industry experts and venture capitalists, with the government providing support
through a viable policy infrastructure. Every “Go Negosyo” community is distinguished by its
ability to produce a continuous stream of start-up ventures.
PCE also seeks to embed strong entrepreneurship lessons into the school curriculum. If the
goal is to develop a culture of enterprise and cultivate tomorrow’s competitive entrepreneurs, they
must start at a young age. Primary and secondary schools can teach the values and develop the
mindsets of an entrepreneur. At the college level, enterprise networks are looking at how to assist
in the area of curriculum enhancement, providing manuals, training the teachers, and involving
real entrepreneurs in the learning process.
Nurturing the Entrepreneurship Paradigm
Entrepreneurship is more than just an economic term — it is a way of thinking. Creating
jobs, empowering people, and giving individuals access to better lives for themselves and their
children is a wonderful gift. Today, it has become a dynamic, developing part of the economy
promoting inclusive growth. Entrepreneurship is a way of inspiring creative individuals to pursue
opportunities despite its risks.
The challenge for countries like the Philippines is to accelerate both the political and
economic leadership that can muster social reforms through entrepreneurship. Entrepreneurs have
the power to achieve great things. Entrepreneurs will emerge as the well-oiled wheels that will
keep the economy going and the society efficiently running.

SMALL-MEDIUM ENTERPRISES MODELS

(Source: http://beta.entrepreneurship.org.ph/2020/02/21/uplifting-micro-small-and-medium-enterprises-msmes-
in-the-philippines-thru-dtis-7ms-suggested-policies-for-implementation/)

In the Philippines, SMEs are defined as any enterprise with 10 to 199 employees and/or

assets valued from P3 million to P100 million. SMEs and micro enterprises combined make up
99.6% of establishments in the country. The categories are the following:

 Micro-enterprises: 1 to 9 employees.
 Small enterprises: 10 to 49 employees.
 Medium-sized enterprises: 50 to 249 employees.
 Large enterprises: 250 employees or more.

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 Micro, small and medium enterprises (MSMEs) are the backbone of the PHL’s economy
since they serve as critical drivers of our economic development, particularly in fostering growth,
employment, and income. The government, as it continues to put its economic plan in place is an
indication of recognizing the importance of MSMEs in our country. Armed with this mission,
effective and efficient actions such as implementation of policy provisions is essential to carry out
the plans in addressing, sustaining and expanding the programs and services of the MSMEs which
will undoubtedly contribute to the country’s GDP and growing labor force.

           In 2017, the MSMEs accounted 99.52 % of the total establishments in the Philippines and
employed 62.9% of its workforce who are expected to be empowered and competitive in the
domestic and global markets.  The top five (5) industry sectors that include (1) Wholesale and
Retail Trade, Repair of Motor Vehicles and Motorcycles; (2) Accommodation and Food Service
Activities; (3) Manufacturing; (4) Other Service Activities; and (5) Financial and Insurance
Activities, accounted for about 83.62% of the total number of MSME establishments.
(Department of Trade and Industry, 2020). Evidently, majority of the business establishments in
our country are MSMEs which signify that the largest bulk of our workforce belong to this sector.

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            With the renewed thrust of recognizing MSMEs as substantial contributor to our country’s
economic growth and employment, improved and innovative initiatives from the government
have been crafted including convergence of available development resources and coordination
among stakeholders to ensure MSMEs’ sustainable growth and accelerate the achievement of our
country’s economic goals. Among the initiatives of the government is the DTI’s 7Ms which aims
to help Filipinos to set up their own business and be smarter entrepreneurs.  With the planned
projects in attaining the seven-point strategy that includes Mindset, Mastery, Mentoring, Markets,

Money, Machines, and Models of Business, the Department of Trade and Industries hopes that
these ways can make a difference in the market which will consequently contribute to the larger
cause of sustaining the Filipino entrepreneurship revolution (Department of Trade and Industry,
2018b).

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FRANCHISING

As a way of doing business, franchising lessens the risk for a neophyte entrepreneur
because he is buying an established brand and customer-ready base. There is lesser worry in
building the business from scratch. Franchising originated from the French word Franchir, which
means “for free”. It is an innovative method of distributing goods and services in the marketing
concept. The franchiser license trademarks, and tried and proven methods of doing business to a
franchisee, in exchange for recurring payment, and usually a percentage piece of gross sales or
gross profits, as well as the annual fees. Various tangible and intangibles such as national or
international advertising, raining and other support services, are commonly made available by the
entity licensing the “chain store” or franchise outlet, The franchiser generally requires audited
books, and may subject outlet to periodic and surprise spot checks. Failure of such test typically
involves non-renewal or cancellation of franchise rights.

Business Format Franchising Models

The first two categories are often referred to as product under a common name franchises.
These include arrangements in which franchisees are granted the right to distribute a
manufacturer’s product within a specified territory, or at a specific location, generally with the use
of the manufacturer’s identifying name or trademark, in exchange for fees or royalties.

1. Manufacturer- Retailer Relationship. It is where the retailer, as franchisee, sells the

franchiser’s products directly to the public (e.g. New motor vehicles dealership).

2. Manufacturer -Wholesaler Relationship. It is where the franchisee under license,

manufactures and distributes the franchiser’s products (e.g. Soft drink bottling
arrangements).

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 3. Wholesaler-Retailer Relationship. It is where the retailer, as franchises, purchases
products for retail sale from a franchiser-wholesaler (frequently a Cooperative of the
franchisee retailers) who have formed a wholesaling company through which they are
contractually obliged to purchase (e.g. hardware and automotive product stores).

4. Retailer-Retailer Relationship. It is where the franchiser markets a service or product

under a common name and standardized system through a network of franchisees. This is
a classic business format.

The Business format differs from product and trade name franchises through the use of
format, or a comprehensive system for the conduct of the business, including such elements as
business planning, management system, location, appearance and image, and quality of goods.
Standardization, consistency, and uniformity across all aspects are hallmarks of the business
format franchise. Business format franchising requires a unique relationship between the
franchiser (the owner of the system) and the franchisee (owner of the individual outlet) which is
commonly referred to as a “commercial marriage”. This ongoing business relationship includes
the product, service, and trademark, as well as the entire business concept itself from marketing
strategy and plan, operational standard systems, and format to training, quality control, and
ongoing assistance, guidance, and supervision.

Advantages of Franchising

 There is a proven business system that is passed on to the franchisee

 Business set-up mistakes are minimized
 The franchiser mentors the franchisee throughout the term of the franchise
 The franchisee rides on an established and successful brand.
 There is a reduction of risk you will be taking for your investment
 They get better deals on supplies
 They often get instant recognition f4om customers

Franchise Agreement

It is a contract that binds the franchiser and franchisee to the franchise relationship, and
indicates the terms and conditions of the franchise. The Franchise Agreement (FA) is a legal
document which details the rights and obligations of the contracting parties, including the length
of term, the start and end periods of the agreement, the renewal provisions and end of contract.

The documents provide the following:

 Terms of Agreement explaining in detail the type of relationship a franchisee is
entering into with the franchiser.
 Renewal period grants the franchiser the chance to review the FA, thus, enabling him
to decide whether to renew the agreement or not. The franchisee’s good performance

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 is the most common of all criteria. However, a renewal does not guarantee the
retention of the original terms and conditions of the agreement
 Investment Amount and Fees which may be non-refundable, is paid at the start of a
franchise relationship thus giving the franchises the right to engage in the business
using the franchiser’s name and business system.
 Royalties are usually a percentage of the franchisee’s sales and are typically paid
weekly, biweekly, or monthly.
 Marketing contributions are also based on the percentage of franchisee’s sales.
 Training and support
 Purchase of products and supplies used in the franchise system should maintain
consistency. The FA specifies that the franchises may only buy from suppliers
accredited by the franchiser.
 Territory determines the geographical boundaries a franchisee may operate, or which
no other unit of the franchisor’s business may compete.
 Termination. The FA carries in it the grounds for termination of the contract. In some
cases, violations of such conditions may still be remedied, however if repeated over
time or failure to act on them will lead the termination of the contract.

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E-COMMERCE

It is a byword in business for the 21st century and beyond. It consists primarily of
distribution, buying, selling, marketing, and servicing of products over electronic networks. The
information technology industry sees it as an electronic business application aimed at commercial
transactions. It can involve the following:
 Electronic funds transfer
 Supply chain management
 E-marketing
 On-line marketing
 On-line transaction processing
 Electronic data interchange (EDI)
 Automated inventory management system

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It typically uses the following electronic communications technology such as internet, extranet, e-
mail, e-book, database and mobile phones.

When firms reconfigure its marketing operations around the interactions made by its web
connections, engaging in electronic commerce. This is a sophisticated network that can link a
large number of firms at different levels of a distribution channel in what is called extranet.
Extranet allows business partners access to highly sensitive data about current operations,
as well as future plans. Thus, they require strong relationship and a high level of trust. In return,
they speed up decision-making with the result tat products get to market more quickly and at a
lower cost.

The Philippine Commerce Law

E-commerce in the Philippines started when Republic Act 8972, known as the Philippine
Commerce Law. Some of the salient features of the law are:
1. It gives legal recognition of data messages, electronic documents, and electronic
signatures.
2. It allows the formation of contact in electronic form.
3. It makes banking transactions done through ATM switching networks once
consummated.
4. Parties are given the right to choose the type and level of security method that suit
their needs.
5. Provides the mandate for the electronic implementation of lading, non-negotiable
seaway bill, charter party bill of lading;
6. Mandates implementation of the RP Web which is a strategy that intends to connect all
government offices to the Internet and provide universal access to the general public.

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E-Commerce Business Models

Business-to-Consumer

It involves interaction and transaction between a company and the consumer, focus is
place on selling goods and services and marketing to the consumer. Business-to Consumer e-
Commerce sales provide extraordinary opportunities for most corporations to sell products and
services 24 hours a day, or reduce cost associated with retail space, personnel, and supplies, and
to increase market share.

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20
Business-to-Business
This implies selling of products and services between corporations and the automation of
systems involved. Usually transactions occur between suppliers, distributors, manufacturers, and
stores but happen directly between two systems. It offers an excellent medium of transferring
applications, time-sensitive information, and a variety of platforms, therefore less time spent on
pushing paperwork, phone calls, taxes, and tracking of all these information. Through the
Internet one can keep track of current stocks, shipment status of goods, and total costs becomes
timely.

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22
Government-to-Business

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(Source:https://managementmania.com/en/g2b-government-to-business#:~:text)

It is a term that refers to the relationships between organizations (subjects) of public

administration and enterprises (businesses). The designation can be used for any relationship
between the subject of public administration and the enterprises as one of the basic e-
Government models.
 G2B, government agencies and business use websites, procurement marketplaces,
applications, web services. Examples of G2B / B2G services are: government procurement.
electronic procurement marketplaces. In G2B model the initiative comes from a government
organization and businesses are the target group.
The model covers an electronic exchange of any information between businesses and the
government, usually using internet so the cooperation or communication is more efficient than is
usually off the internet. In G2B, government agencies and business use websites, procurement
marketplaces, applications, web services.
The relationship may refer the demand for information from the enterprises in any life
situation or a transfer of an official document to the statutory body.
The model is usually used to refer to the ICT solution that converts such communication to the
electronic form or to describe a solution that simplifies the communication between public
administration and enterprises (e.g. internet portal of the procurement authority or electronic
solutions for purchasing).
Some sources distinguish also B2G (Business to Government) where the initiative comes
from businesses, while other sources consider both G2B and B2G as equal without important no
significant difference.
Examples of G2B / B2G services are:

 government procurement
 electronic procurement marketplaces
 electronic auctions
 e-learning
 electronic incorporation forms
 updating corporate information
 sending filled-out electronic forms (e.g. tax forms, social insurance forms)
 sending electronic payments
 sending / receiving answers electronically
 on-line meetings
 project management cooperation
 data centers

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 Wrap-Up Activity

Search the web and read on the selling strategies for online business.
(Source: https://digitalupstarts.com/5-selling-strategies-for-online-businesses-in-2019/)

Post answer to the question below in the MVLE Assignment portion createdd for this
lesson.

1. How will you start business on websites? Discuss the process.

___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
______________________________________________________

Lesson 2. Global Trends in Business

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 Introduction
Operating a small business may not be confined exclusively to local markets. The global
market, may have segments which are inadequately provided and served. These foreign segments
may be more profitable than the local markets currently served by a particular business. These
may open ways for small businesses to engage in international business. In this case, exporting
and importing are most appropriate for small business. The related concern however would be to
determine the profit potentials of the aforementioned means when applied by the firm.
Globalization is the process by which the exchange of goods, services, capital,
technology, and knowledge across international borders becomes increasingly interconnected.
Globalization creates new opportunities for businesses to increase profits by expanding markets
and by allowing wider access to resources. On the other hand, globalization also opens domestic
markets to new competitors, decreasing demand for local products. A wider market and customer
base means the opportunity to sell more goods and services and therefore increasing profits.

Learning Outcomes
At the end of the lesson, the students are expected to:
 explained the impact of ASEAN integration to the Philippines; and
 observed the trade system on the neighboring ASEAN countries
Warm-Up Activity

Write the names of imported products that you use regularly or patronize.

Product Local Imported

beverage clothing
canned goods dairy product
cellphone
clothing
dairy product
frozen meat products
snack food (biscuits)

Content Input
THE SUPPLY CHAIN
A supply chain is the network of all the individuals, organizations, resources, activities
and technology involved in the creation and sale of a product. A supply chain encompasses

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everything from the delivery of source materials from the supplier to the manufacturer through to
its eventual delivery to the end user. The supply chain segment involved with getting the finished
product from the manufacturer to the consumer is known as the distribution channel.
Examples of supply chain activities include farming, refining, design, manufacturing, packaging,
and transportation.
Supply chain management (SCM) is the oversight of materials, information and finances
as they move in a process from supplier to manufacturer to wholesaler to retailer and then to the
consumer. The three main flows of the supply chain are the product flow, the information flow
and the finances flow. These occur across three main stages: strategy, planning and operation.
SCM involves coordinating and integrating these flows both within and among companies.

The Supply Chain Management (SCM) is important because it increases competitiveness

and customer satisfaction. In this day and age, SCM plays an integral part of a firm's success.
Efficiently running supply chains allow firms to quickly deliver products to the end-user for a
low cost. Today thanks to the global economy the supply chain looks more like a web with the
manufacturer in the middle of the web. Supply and logistics are the backbone of every business. It
can affect the success of a business and unfortunately also be the downfall of a business. Without
a strong supply chain management model in place a business will not thrive. Depending on the
functions the supply chain management systems perform, they are classified into two categories,
namely, supply chain planning systems, and supply chain execution systems.

Steps in the Supply Chain

The fundamental steps of a supply chain in order are as follows:

 Sourcing raw materials.
 Refining those materials into basic parts.
 Combining those basic parts to create a product.
 Order fulfilment or Sales.
 Product delivery.
 Customer support and return services.

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 INTERNATIONAL BUSINESS

International business refers to “the buying, selling, and trading of goods and services
across national boundaries. With the availability of modern facilities and technology,
entrepreneurs can find ways to profit from the various opportunities available. The importance of
international business is emphasized by the numerous trading activities undertaken throughout the
world.
Small firms engage in international business for any of the following reasons:
1. nonexistent or limited local demand for the firm’s outputs, or
2. a local demand which cannot be satisfied by any local firm.
A small firm may be able to create a product or service at lower costs than those produce
abroad. Even if there is a local market but with demand that is limited, firms may opt to go
international through exporting.

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 Exporting refers to “producing goods in one country and selling them in another country.
Philippine businesses of various sizes and types are currently involve in exporting. Exporting may
be done through any of the following”

1. Indirect Exporting is when a firm sells its locally produced goods in a foreign country
through an intermediary. A small firm involve in indirect exporting is afforded the
following benefits:
a. The least amount of commitment, like no strict quota for
production volume.
b. Less risky because the intermediaries buy the exported
goods and take title to these goods.
c. It can open up new markets for the small firm without
special expertise or investment
Indirect exporting has certain disadvantages consisting of the following:
 it is less profitable than direct exporting,
 direct feedback from users and the dealers of the products or services is not availed of,
and
 the firm’s control over market selection and marketing strategy is very limited.

2. Direct Exporting happens when the exporter sells directly to distributors or final
consumers rather than trading companies or intermediaries. The manufacturer performs
the export tasks of market contact, market research, physical distribution, export
documentation, pricing.
The advantages of direct exporting are as follows:
 the possibility of greater sales,
 greater control over international marketing activities
 better market information, and
 the development of expertise in international marketing.

Securing Payments for Exports Sales

One of the main concerns of an exporting firm is how to get paid for exporting goods
overseas. The following methods are the means of securing payments:

1. A letter of credit is a financial instrument issued by the importer’s bank that obligates
the bank to pay the exporter a specified amount once certain conditions are met.
Before an exporter ships his products, he receives a letter of credit from the buyer.
After the buyer receives the products, the exporter then converts the letter of credit to
cash in his own bank.
2. A sight draft is a written order signed by one person or firm (the buyer) requesting
another person or firm (the bank) to pay a stated sum of money to a third party (the
exporter0 upon representation. This arrangement makes a sight draft a way of paying

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 an exporter for goods delivered. A time draft is one that is payable at a fixed or a
determinable future time.
3. A consignment sales refers to an arrangement between an exporter and a foreign
distributor where payment is due only to the exporter when the distributor sells to a
third party. Thus method may be used when the foreign distributor is responsible and
the foreign government is stable.
4. An open account sales is an agreement between the exporter and the foreign buyer for
the purchase of goods on credit (usually unsecured) based on an estimate of the
buyer’s general ability to pay. At a certain point, the buyer is billed for payment of
some accounts.
5. A cash in advance sale is good for the exporter especially if the amount involved is
small or buyer is unknown. It is used primarily ‘when the risk of not receiving
payment is quite high.” A current practice is made by foreign buyers who pay
Philippine exporters part of the total value of their export orders in advance before
shipment.
6. Factoring is a means of advancing credit whereby the factor purchases at a discount
and without recourse the accounts receivable of a firm. The factor assumes complete
responsibility for the credit investigation and collection. Promissory notes of any kind,
including letters of credit and drafts may be assigned by the exporter to a factor which
will provide him with cash and will assume collection of the account.

EXPORTING Trading Company

Export Management
Company
Indirect
Export
Piggyback

Foreign Distributor

Direct
Export
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 Overseas
Marketing
Subsidiary

Figure 1. Means of Exporting

Agent

Importing refers to the purchase of products and raw materials to another nation. The biggest
imported products in the Philippines are machinery (electric and non-electric), appliances, and
fuel. A simple market analysis will provide the small business importer with the clues as to what
products to import. Local firms prefer foreign goods over local goods for the following reasons:
1.price,
2. quality,
3. unavailability of items locally
4. faster delivery and continuity of supply, and
5. better technical service,
6. more advanced technology,
7. a marketing tool,
8. a tie-in with foreign subsidiaries, and
9. competitive clout.

When a trade agreement between two countries include reciprocal buying (i.e., one can
only export to another if it also imports from the same country) the exporting small firm may use
that agreement as an effective marketing tool.
When a local franchise or licensee has excess output, it may have an agreement (a tie-in)
with its foreign franchisor or licensor to buy from the local firm. There are instances when a
foreign

firm wants to maintain its competitive clout. It does so by supplying local firms with products at
lower prices so that, in turn, this will be sold at lower prices to consumer.

The Import Broker

Importation requires a certain degree of expertise in dealing with institutions and
documentation that a small firm may not be able to perform. In this case, the services of an import
broker is required.
An import broker is an individual who works for an importer by obtaining various
governmental permissions and other clearances before forwarding necessary paperwork to the
carrier that will deliver the goods from the dock to the importer.

Warm-Up Activity
Post answer to the following questions in the Assignment portion created for this topic.

32
 1. What possible reasons motivate small business operators to engage in international
business?
2. Explain the possible reasons why local firms prefer foreign good over local goods.

1.________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
________________________________________________________________2.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
__

REFERENCES
Allen, Louis A. Management and Organization. Tokyo: McGraw Hill.

Alvaro,Cuervo, Domingo Ribeiro y Salvador Roig. Entrepreneurship: Concepts, Theory

and Perspective, Introduction. 2 Universidad Complutense de Madrid 2 Universitat de Valencia

Asor, Winefreda B. Entrepreneurship in the Philippine Setting. Manila: Rex Bookstore,

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Fulmer, Robert M. Principles of Professional Management. London Collier McMillan
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Kimmons, Ronald. What are the Basic Concepts and Characteristics of

Entrepreneurship?
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Medina, Roberto G. Entrepreneurship and Small Business Management. Rex Bookstore,

Manila, Philippines, 2003.

Orcullo, N.A.,Jr. Contemporary Entrepreneurship. Academic publishing Corporation,

Philippines, Copyright, 2000.

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ARTICLES RETRIEVED

https://saylordotorg.github.io/text_the-sustainable-business-case-book/s09-01-overview-of-
entrepreneurship.html

https://www.tuko.co.ke/283663-theories-entrepreneurship.html

20 Small Business Ideas in

the Philippines for 2020
https://www.google.com/
search?hl=en-
GB&sxsrf=ALeKk03-

CmlI_3aPoYSS1HoJP72k2nCoDA:1603855665515&q=what+is+the+best+small+business+to+start+in
+philippines&sa=X&ved=2ahUKEwi519r5q9bsAhVbIqYKHRCWBdAQ1QIoAHoECBYQAQ&biw=1366
&bih=657

David Jones, VP of Marketing, AODocs ViewPoints Equipping your remote workforce for success
during the pandemic—and beyond July 31, 2020
https://www.kmworld.com/Articles/Editorial/ViewPoints/Equipping-your-remote-workforce-for-success-during-
the-pandemic-and-beyond-142149.aspx

https://businessjargons.com/pricing-in-marketing.html

A profile of the Filipino Entrepreneur

https://business.inquirer.net/69655/a-profile-of-filipino-entrepreneurs

https://epale.ec.europa.eu/en/blog/equipping-young-entrepreneurs-life-after-lockdown

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