12

Entrepreneurship
Quarter 1 – Module 2
Recognize a Potential
Market

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universities. We encourage teachers and other education stake holders to
email there feedback, comments, and recommendations to the Department of
Education at action @deped.gov.ph

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Department of Education ● Republic of the Philippines

Introdu What I Need to Know

Welcome to the second module of entrepreneurship. This module will allow you to
learn independently the knowledge and skills in recognizing a potential market. It will guide
you to identify the market problems to be solved or the market needs to be met; and let you
propose solution/s in terms of product/s and service/s that will match the need using
techniques on seeking, screening, and seizing opportunities. Also in this module we are going
to identify the market problem and propose solutions with regards to products and services, to
continue discover the ideal buiness you are going to offer to your community. Basically, in
return to your hard time of selling your product you can generate profit.

In this module, you will know the following:

 Associate the market problem to be solved or the market need to be met;
 Look solution/s in terms of product/s and service/s that will meet the need using
techniques on seeking, screening, and seizing opportunities:
 Break down the market need;
 Detect the possible product/s or service/s that will meet the need of your
locality.
 Screen the proposed solution/s based on viability, profitability, and customer need
in developing a Business Plan.
 Choose the best product or service that will meet the market need.

This is your guidelines on how to develop a Business Plan. By identifying and

appealing to particular group of consumers you need to check on the possible product needed
in your locality.
Business industries offers products and services. The activity of making, buying, or
selling goods or providing services in exchange of money is called business. Product is
something that is made or grown to be sold or use, or something that is result of a process.
Services are those intangible products where there is a skill involve and has a value.
After completing this module, you need to:
 Learn and understand the sources of opportunities for business.
 Determine the essentials in the entrepreneur’s opportunity seeking
 Identify market problems and propose potential products or services that will meet
the market needs.
 Know the problem in which a business opportunity arises from.
 Identify, screen and proposed solution to meet the problem
 Select the best product or service that will meet the market’s need with a
consideration of generating profit.

What I Know

Lets check first what you already know.

True or False. On the space provided before the number write T if the statement is true
and F if the statement is false.
_ 1. Entrepreneur enter a business because of its profitability.
_ 2. New business ideas provide business opportunities.
_ 3. Entrepreneurial process starts with identification of entrepreneurial
opportunities.
_ 4. Not all changes in the external environment provides business
opportunities.
_ 5. Discovery and advancement in the use of technology are additional good source
of business opportunities.
_ 6. Interest and hobbies of the people are possible good source of
entrepreneurial ideas.
_ 7. Industry environment of business is under technological discovery and
advacement sources of opportunities.
_ 8. The variables in the physical environment include the economic forces.
_ 9. Entrepreneurial heart flame refers to the ability of the entrepreneur to sense
without using the five senses.
 10. Entrepreneurial mind frame permits the entrepreneur to see things in a very
positive and optimistic light.
11. The business operates in the industry environment.
12. Opening a Halo – halo business during summer seasons.
13. Environmental scanning is conducted only when a new business is
opened.
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
government.

What’s In

In the previous lesson, you already know about the difference between businessman
and entrepreneur. Knowing all the entrepreneurial concepts will not assure a person of
becoming a successful entrepreneur and not all business people are entrepreneurs. Some says
being an entrepreneur is a calling; a lot of qualities must be possessed to be considered
successful and sustainable. So, if you are given a great opportunity to venture into the field
of entrepreneurship, it may be a long process to undertake and the willingness to take a risk.
Also, you’re not only the one who’s in progress but at the same time, you’re helping for the
development growth of our economy.

esson 1 What’s New

FIX ME
Direction: Arrange the scrambled letters to form a correct word.
1. UPSIERSPL 6. UTSBETIUST
2. NISSUBES 7. ICEVERS
3. KERTAM 8. PECITIONMTO
4. EDICRRSTO 9. IMCLTEA
Lesson
Recognize a Potential Market
1
5. SUTEMOSRC 10. NTERTSAN

What is It

Entrepreneurial Ideas

The creation of an entrepreneurial ideas leads to the identification of entrepreneurial

opportunities, which in turn results in the opening of an entrepreneurial venture.
The entrepreneurial process of creating a new venture is presented in the diagram
below. (Aduana, 2017)

Creation of entrepreneurial Ideas Opening

Identification of entrepreneurial of entrepreneurial Venture
Opportunities

Figure 1. The Entrepreneurial Process of Creating New Venture

Essentials in Entrepreneur’s Opportunity Seeking

These are the basic foundation that the entrepreneur must have in seeking
opportunities:
Entrepreneurial mind frame. This allows the entrepreneur to see things in a very
positive and optimistic way in the midst of difficult situation. Being a risk - taker, an
entrepreneur can find solution when problems arise.
Entrepreneurial heart flame. Entrepreneur's driven passion, they are attracted to
discover satisfaction in the act and process of discovery. Passion is the great desire of an
entrepreneur to achieve his/her goals.
 Entrepreneurial gut game. This refers to the ability of the entrepreneur of being
intuitive. This also known as intuition. The gut game also means confidence in one’s self and
the firm believes that everything you aspire can be reached.
Sources of Opportunities

There are many ways to discover opportunities. Looking at the big picture some have
noticed the emerging trends and patterns for business opportunities. While others are trying
to find out their target market. Some are the following sources of opportunities:

1. Changes in the environment

Entrepreneurial ideas arise when changes happen in the external environment. A
person with an entrepreneurial drive views these changes positively. External
environment refers to the physical environment, societal environment, and industry
environment where the business operates.
1.1 The physical environment includes
a. Climate- the weather conditions.
b. Natural resources- such as minerals, forests, water, and fertile land 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.
1.2 The Societal environment includes the various forces like
a. Political forces- includes all the laws, rules, and regulations that govern
business practices as well as the permits, approvals, and licenses
necessary to operate the business.
b. Economic forces- such as income level and employment rate.
c. Sociocultural forces- customs, lifestyles and values that characterize a
society.
d. Technological environment- New inventions and technology innovations.
1.3 The industry environment of the business includes:
a. Competitors
b. Customers
c. Creditors
 d. Employees
e. Government
f. Suppliers
For example, one factor in the physical environment that can easily change is the
climate. The temperature is very high during summer but very low during the rainy
season. An individual with entrepreneurial drive can be extremely imaginative and
inventive in identifying opportunities. He/she can venture a business that responds to the
needs of the people during summer and rainy season.

2. Technological discovery and advancement

A person with entrepreneurial interest sees possibility of business opportunities in any

new discovery or because of the use of latest technology.
For example, an individual with knowledge in repair and installation of a machine
engine discovers that additional engine parts that considerably reduce fuel consumption.

3. Government’s thrust, programs, and policies

The priorities, projects, programs, and policies of the government are also good
sources of ideas.
For example, the use of firecrackers to celebrate New Year’s Eve is strictly prohibited.
People without entrepreneurial interest will view the ordinance as a plain restriction.
However, for an entrepreneur, it is a business opportunity to come up with a new product that
will serve as a substitute for firecrackers.

4. People’s interest
The interest, hobbies, and preferences of people are rich source of entrepreneurial
ideas. Like the increasing number of Internet Café at present could be lead to the strong
attachment of young people to computers.

5. Past experiences
 The expertise and skills developed by a person who has worked in a particular field
may lead to the opening of related business enterprise.
For example an accountant who has learned the appropriate accounting and
management skills and techniques in a prominent accounting firm can start his/her business
venture by opening his/her own accounting firm.

Forces of Competition Model

It is also known as the “five forces of competition,” An industry environment is a
competitive environment. Regardless of what product or services you have, competition is
always present.

Competition – it is the act or process of trying to get or win something.

For example, the prices are lower when there is a competition among the
stores.

These are the five forces competing within the industry:

 Buyers
 Potential new entrants
 Rivalry among existing firms
 Substitute products
 Supplier

1. Buyers
The buyers are the one that pays cash in exchange to your goods and services. For
example, the influenced of the price or in the bargaining strategy. The buyer has a strong and
magnified bargaining power. The threat of its bargaining power will be less if the following
factors notice:
a. There are several suppliers available in the market.
b. The buyer has the potential for backward integration.
c. The cost of switching the supplier cost is minimal.
d. The product represents a high percentage of the buyer’s cost.
e. The buyer purchases large portions of the seller’s product or services.
2. Potential New Entrants
A new entrant is defined as the one who enters something. For example, the level of
capital requirements, if the business requires huge capital, new entrants should decline to join
the business. This gives a threat to the business. This can be notice if there is the presence of
the following factors:
a. Substantial capital requirement.
b. Strict government policy.
c. Difficulty in accessing distribution channels.
d. Economies of scale.
e. High cost of product differentiation.
f. High switching cost

3. Rivalry among Existing Firms

Rivalry is a state or situation in which people or groups are competing with each
other. For example it depends on the Marketing strategy of your competitor, like giving
freebies and special offers. The intensity of rivalry among existing firms is characterized to
the following factors:
a. Diversity of rivals.
b. Number of competing firms.
c. Characteristics of the products or services.
d. Increased capacity.
e. Amount of fixed costs.
f. Rate of industry growth.

4. Substitute Products
Substitute means anything that takes the place or function of another. For example
the consumers decide to use margarine as a substitute for butter. In case the price of butter
increases, preferably the consumer will gradually switch to margarine.

A substitute product can give a big threat in the industry environment if the following factors
are notice:
 a. Switching cost is low.
b. Preferences and tastes of the customers easily change.
c. Product differentiation is highly noticeable
d. The quality of substitute products dramatically improves.
e. The price of substitute product is substantially lower.

5. Suppliers
The Suppliers are the one that provide something that is needed or wanted. For example
if the supply and services being offered is unstable or keep. The intensity of the threat is
strong in this kind of the competitive force in the industry. This can be notice if there is the
presence of the following factors:
a. The supplier has the ability for forward integration.
b. Suppliers in the industry are few, but the sales volume is high.
c. Substitute products are not readily available in the market
d. The switching cost is very high.
e. The product or service is unique.