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 for 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 needs;
• 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 needs.

This is your guide 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
Let’s 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
advancement 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 ________________
5. SUTEMOSRC ________________ 10. NTERTSAN ________________
 Lesson
Recognize a Potential Market
1

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 Identification of Opening of

entrepreneurial entrepreneurial entrepreneurial
Ideas Opportunities Venture

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.
g.
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.
 What’s More

WORD HUNT
Think of words or terms related to the topic and find the words in the grid horizontally,
vertically, or diagonally. Write the words or terms on the space provided below.

V E N T U R E A B C D E F A B C D E F S

A B N P O H W Q G S D L O S J E T U E Q

B C T R P R O D U C T S R L R E H R B E

C V R E P G O Y T R E P T G S T V A C N

V H E N O V R F D A B C U D E I O G V T

H K B E R C T K R F G E N H C J R K H R

K I C I T H U L V D E O C E U A T U K E

I D V D U K N S J Y I R Z O Q E U Y I P

D G H G N O U A O F G T U X N X N D R

G L K L I P W L R E P U R E P O J O G E

L H Z H T S P K L I O N H L I O M E L N

H A X Q I M I L G C V R I V A L R Y H E

A D S J E T U R E A B B S T I T U H A U

S S U B S T I T U T E S J E T U R F J R

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. ____________________
 What I Have Learned

Definition of Terms

Opportunity seeking - Process of considering, evaluating, and pursuing market

based activities that are accepted to be beneficial for the business.
Entrepreneurial process - can be defined as the steps taken in order to begin a new
enterprise. It is a step-by-step method; one has to follow to set up a business.
Entrepreneurial ideas - an innovative concept that can be used for financial gain that
is usually centered on a product or service that can be offered for money.
Essentials of entrepreneur’s opportunity seeking - These are the basic foundation
that the entrepreneur must have in seeking opportunities, such as entrepreneurial
mind frame, heart flame and gut game.
Sources of opportunity - can be attain by assessing and looking at changes in the
environment; technological discovery and advancement; government’s thrust,
programs, and policies; people’s interest, and past experiences.
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.
Competition – it is the act or process of trying to get or win something.

Substitute – anything that takes the place or function of another.

New entrants – the one who enters something.

Suppliers – are the one that provide something that is needed or wanted.

Buyers – are the one that pays cash in exchange to your goods and services.
Rivalry – is a state or situation in which people or groups are competing with each
other.
 What I Can Do

Activity 3:
COMPLETE ME
Complete the table below by supplying it with products that you consider similar. Write
the product and not the brand in their respective columns. Then describe and
differentiate its characteristics and uses.
Primary Product Substitute Product
No.
( Product name ) ( Product name )
Example Butter - expensive price used Margarine – lesser price also used as
as bread spread. bread spread
1.

2.

3.

4.

5.

Assessment

Direction: Encircle the letter of your choice.

1. It is the process of considering, evaluating, and pursuing market-based
activities that are believed to be advantageous for the firm.
A. Opportunity seeking C. Opportunity screening
B. Opportunity seizing D. Sources of opportunity

2. This is essential to opportunity seeking which allows the entrepreneur to see

things in a positive and optimistic light in the midst of crisis or difficult
situations.
A. Entrepreneurial mind frame C. Entrepreneurial heart flame
B. Entrepreneurial gut game D. Entrepreneurial heart frame
3. It is the ability of entrepreneur that can sense without using the five senses,
also known as intuition.

A. Entrepreneurial mind frame C. Entrepreneurial heart flame

B. Entrepreneurial gut game D. Entrepreneurial heart frame
4. One of the essentials of entrepreneur’s opportunity seeking that refers to the
driven passion of an individual.

A. Entrepreneurial mind frame C. Entrepreneurial heart flame

B. Entrepreneurial gut game D. Entrepreneurial heart frame
5. What variable of societal environment includes income level and employment
rate?

A. Economic forces C. Political forces

B. Sociocultural forces D. Technological forces

For questions 6 and 7 refer to the following statements:

A. Preferences and tastes of the customers easily change.

B. The buyer has the potential for backward integration.
C. The cost of switching the supplier cost is minimal.
D. Product differentiation is highly noticeable.
6. Which are the factors of the substitute product that pose a great threat in the
industry environment?
A. A, B, C, D C. A and D
B. A and C D. B and C
7. Which are the factors that influenced the buyer to have a less threats
because of the bargaining power?
A. A only C. A and D
B. A and C D. B and C
8. They are the one that pays cash in exchange to your goods and services.
A. Buyers C. Sellers
B. Competitors D. Suppliers

9. The intensity of rivalry among existing firms is characterized to the following

factors except one:
A. Diversity of rivals.
 B. Number of competing firms.
C. Characteristics of the products or services.
D. The product represents a high percentage of the buyer’s cost.
10. The following are the forces competing within the industry except one:
A. Potential new entrants and Substitute Products
B. Buyers and Suppliers
C. Rivalry among existing firms
D. Needs and Wants
11. Which of the following good sources of entrepreneurial ideas determine the
interest, hobbies and preferences of people?
A. Changes in the environment C. People’s interest
B. Technological discovery D. Past experiences
12. Societal environment includes the following, except:
A. Economic forces C. Political forces
B. Sociocultural forces D. Natural resources
13. Which among the following is the result of identifying entrepreneurial
opportunities?
A. Creation of entrepreneurial ideas C. Sources of opportunity
B. Opening of entrepreneurial venture D. Entrepreneurial process
14. What entrepreneurial idea will you recognized, if you consider the new discovery
and advancement of technology as source of opportunity?
A. Changes in the environment
B. Technological discovery and advancement
C. Government’s thrust, programs, and policies
D. People’s interest
15. Source of entrepreneurial idea where expertise and skills developed by a person
from its previous work can lead to the opening of a related business enterprise.
A. Government’s thrust, programs, and policies
B. Past experiences
C. People’s interests
D. Technological discovery and advancement
 Additional Activities
Conduct a short interview of any successful entrepreneur in your locality. Ask the
following question:
• 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 in operation?
• How many manpower involved from the start of operation until now?

Great job! You have completed Module 2. Learn more about

Recognizing and Understanding the Market in Module 3.