RELEVANCE OF ENTREPRENEURSHIP CONCEPTS, PRINCIPLES AND ENTREPRENEURIAL IDEAS

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Nature and concept of Entrepreneurship

ENTREPRENEUR originates from the French word “entreprendre” which means “to undertake”
Which signifies the start of a new business undertaking, refers to a person practicing or engaging in
entrepreneurship. He is a person who organizes, operates and assumes the risk of business ventures.
He is a person who strongly advocates and correctly practices the concepts and principles of
entrepreneurship in operating and managing the self-owned business venture. The venture is called
ENTERPRISE.

ENTREPRENEURSHIP defines as the art of observing correct practices in managing and operating a
self-owned, wealth-creating business enterprise by providing goods and services that are valuable to
the customers.

Entrepreneurship as an art of correct practices:

The development of entrepreneurship through the years is a proof that it is an art that continuously
evolves the responds to the changing needs of the people. Entrepreneurship is dynamic. By the
moment the economic activity changes, the political, social, and entrepreneurial activities will
eventually change. Entrepreneurship is closely related to creativity. By creativity, there is a constant
change or evolution that contributes towards the enhancement of the enterprise. Creativity results to
NEW IDEAS which are the backbone of entrepreneurship. Entrepreneurs keep on searching for
something NEW. They find ways to transform new ideas into entrepreneurial opportunities. Creativity
should always be applied to entrepreneurial undertakings by regularly evaluating the market and the
environment and responding to the changes in them. As new ideas are created, new entrepreneurial
ventures are open. The entrepreneur, however, has to perform entrepreneurial activities correctly
regardless of whether they are undertaken easily or not. What is important in entrepreneurship is that
the business activities are performed correctly.

Entrepreneurship is a Wealth-creating Venture.

In business people equate wealth with the term PROFIT. Profit represents the excess income or
revenue from the cost and expenses. Although profit may be a good indicator of wealth, it can be
measured in different ways. As an entrepreneur, therefore, you should open your own business as a
wealth-creating venture and not solely as an income–generating venture. The business venture
improves the life of the entrepreneur in terms of economic, financial , social, moral and psychological
aspects. The creation of wealth must gradually accelerate and benefit both the owner and the
community. The wealth created by the enterprise or business must improve the life of the owner and to
the development of the local economy and eventually to the country.

Entrepreneurship provides Valuable Goods and Services

The owner of a business, in most instances is engaged in the sale of goods and services.
Entrepreneurship creates economic wealth by providing goods and services to the consumers. These
goods and services must have the value in order to create wealth. Valuable goods and services highly
satisfy the target buyers in terms of quality and price. The entrepreneur convinces the consumers that
they gain more benefits than what they pay for the goods and services. Value , therefore, is subjective.
Not every person considers the same things as valuable. Business that offer goods and services that
are valuable from the buyer’s perspective are operating within the concept of entrepreneurship. When
consumers are satisfied with the products and services offered by an entrepreneur, they tend to
patronize the business and even endorse it to others. Thus, in simple analysis, wealth is created. It is
really important that you analyze your target consumers in the field of entrepreneurship. They should
be studied since everyone can become your potential customer.

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Entrepreneurship entails opening and Managing the Self-owned Business Enterprise
This feature highlights the two important elements; The concept of opening a self-owned enterprise
and the concept of managing it. The entrepreneur opens his/her business under the principle of
entrepreneurship. In entrepreneurship, the owner of a business must also be the manager of the daily
operations of the entrepreneurial venture. In managing a business enterprise, Planning is an important
principle in management. It refers to the process of setting the goals of the business. The
entrepreneur, being the owner and manager, must clearly set the goals of his/her business. In other
words, he/she should establish a clear direction of his/her entrepreneurial venture. As future
entrepreneur, you have to constantly plan for your entrepreneurial endeavour. Planning does not cost
anything but the benefit you will gain from exercising it can be rewarding.

Entrepreneurship is a Risk-Taking Venture

The basic concept of risk in entrepreneurship can be expressed in this statement; “Risk is inherent in
an entrepreneurial venture”. Once an entrepreneurial venture is born because of new ideas and
opportunities, Risk comes simultaneously with the venture. The risk in entrepreneurship is called the
business risk. Wherever the business goes, there will always be business risks. Hence, an
entrepreneur should face risks intelligently. He/ She must find ways to minimize the effects of the risk.

Importance of Entrepreneurship
1. Entrepreneurship affects the lives of the Filipinos, the local community, and the Philippine
economy.

2. Entrepreneurship makes the following contributions to the lives of the Filipinos:

a. Provides guidelines in their wealth-creating ventures
b. Helps improve their financial and social life
c. Helps broaden their creativity
d. Helps make their lives happy, fruitful and successful

3. Entrepreneurship makes the following contributions to the local community:

a. Provides employment in the community.
b. Creates new demand in the market
c. Makes substantial contribution to the raising and collection of taxes
d. Facilitates the movement of the factors of production
e. Creates new business opportunities
f. promotes a peaceful and loving community
g. Increases constructive competition.

4. Entrepreneurship makes the following contributions to the Philippine Economy:

a. encourages competitiveness and thereby challenges entrepreneurs to keep
improving their products and services
b. Helps find an entrepreneurial niche in the world market
c. Helps hasten the economic recovery process of the Philippines during financial
turmoil or crackdown.
d. Facilitates the smooth flow of money in the local market
e. Assists the national government in its desire to have favourable economic
ratings in the world market.

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Entrepreneurship Theories:

Theory is a generalization that explains a set of facts or phenomena. It is not an absolute truth.
It can be supported by another observation or proven to be otherwise.
Some theories of entrepreneurship includes the following:

Innovation Theory contributed by Joseph Schumpeter , Austrian economist and political scientist.
This theory regards Economic development as the product of structural change or innovation..
innovation as the primary factor affecting development. It becomes the primary role of the entrepreneur
to introduce innovation in any of the following forms:
a. New product c. New Market e. New industry structure
b. New production method d. New supplier

Keynesian Theory developed by John Maynard Keynes., a British economist. Attributes economic
growth especially during depression to the government. This theory put so much emphasis on the role
of the government in the entrepreneurial economic development most especially when the economy
was experiencing depression.

Alfred Marshall Theory developed by Alfred Marshall, an English economist, generalizes that the
organization plays the most significant role among the different factors of production. Strongly asserted
the four factors of production (land, labor capital and organization) og goods and services in the
economy, he also considered organization as the coordinating element. He also suggested that an
entrepreneur must be able to foresee possible changes in the future supply and demand pattern.
Entrepreneur must possess the necessary skills and abilities .

Risk and Uncertainty-Bearing Theory conceptualized by Frank Hynemann Knight, an American

economist, states that an entrepreneur faces the risk of uncertainty in the process of connecting the
supplier and the buyer. He considered uncertainty an important factor in the production of goods and
services. He believed that the entrepreneur must anticipate possible random events to happen while
shouldering the risk at the same time. The entrepreneur would be eventually rewarded with high
profits.

Weber’s Sociological Theory asserted by Max Weber. The sociological theory of weber asserts that
social cultures have significant contributions to the entrepreneurship. The entrepreneur is expected to
perform the role of a good constituent by executing his/her entrepreneurial activities in line with good
customs and traditions, religious beliefs and morals.

Kaldor’s Technological Theory developed by Nicholas Kaldor. He considered modern technology

as an essential factor in production of goods and services. The technological theory gives importance
to the advancement of technology as an element of production. Entrepreneur is expected to keep
abreast with modern technology to find ways to apply the same in the entrepreneurial endeavour.
Proper application of technology will promote efficiency in the production of goods and services.

Leibenstein’s Gap-Filling Theory developed by Henry Leibenstein. Advocates that

entrepreneurship fills the gap in any economic activities. Entrepreneurship is responsible for
recognizing trends in the market. The entrepreneur is expected to possess abilities that will connect
the different markets. He or she must extend assistance to entrepreneurial ventures experiencing
failures and deficiencies.

Kirzner’s Learning- Alertness Theory proposed by Israel Kirzner . Learning-alertness theory

focuses on learning-alertness as the primary attributes of entrepreneurship. The entrepreneur must be
alert in recognizing entrepreneurial opportunities. He / she must immediately find appropriate remedy
to correct the error or wrong perception.

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ENTREPRENEURIAL IDEAS
After knowing the common principles, concepts and the importance of entrepreneurship to the Filipino
people, the local community and the Philippine economy, let us now identify the possible sources of
entrepreneurial ideas. The creation of an entrepreneurial idea 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:

a. Creation of entrepreneurial ideas
b. Identification of entrepreneurial opportunities
c. Opening of entrepreneurial venture

As a future entrepreneur, always remember that a business must be firmly established on existing
business opportunities, and that there can be no business opportunities in the absence of an
entrepreneurial idea.

Basic need to identify the sources of entrepreneurial ideas:

1. Changes in environment
2. Technological discovery and advancement
3. Government’s thrust, programs and policies
4. People’s interests
5. Past experiences

1. CHANGES IN THE ENVIRONMENT

Entrepreneurial ideas arise from changes that happen in the external environment with external
environment with entrepreneurial implications. He or she determines what business opportunities they
may provide.

EXTERNAL ENVIRONMENT refers to:

Physical Environment, Societal Environment, and Industry Environment.

Physical Environment
a. Climate b. Natural Resources c. Wildlife

Societal Environment
a. Economic Forces b. Socio-cultural Forces
c. Political Forces d. Technological Environment

Industry Environment
a. Government b. Competitors c. Supplier
d. Customers e. Creditors f. Employees

As an entrepreneur, you ust keenly observe and be vigilant to the reactions of the people to the
changes in external environment, You must determine, therefore, what changes have entrepreneurial
indications.

2. TECHNOLOGICAL DISCOVERY AND ADVANCEMENT

Discovery and advancement in the use of technology are another good source of entrepreneurial ideas
and opportunities. A person with entrepreneurial interest looks at the possibility of business
opportunities in any new discovery or advancement in technology.

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3. GOVERNMENT’S THRUSTS, PROGRAMS AND POLICIES
The term “Government” in this lesson refers to the local government(municipal, city or provincial) or the
national government and its branches and agencies. The programs and agenda of the
Philippine government intuitively address the needs of the Filipino people. There are also
instances when the national government responds to the call of international agencies or the
World Market. Whenever there are changes in the policies and programs of the government,
new entrepreneurial ideas are likely born.

4. PEOPLES INTERESTS
The interests, hobbies and preferences of people are a rich source of entrepreneurial ideas. However,
an entrepreneur must be keen in identifying the cycle of interests and trends of his /her target market
since the trend to continuously change. He/she must be ready to address the change properly and
immediately to avoid possible negative effects on the operations of the business venture. As a future
entrepreneur, your business venture should be adaptive to the interests and hobbies of the people to
protect and sustain your business. Keep evaluating the interests of your target customers.

5. PAST EXPERIENCES
Past experiences and exposures are also a good source of entrepreneurial ideas . the expertise and
skills developed by a person who has worked in a particular field may lead to the opening of a
related business enterprise. Thus, his/her relevant job experiences in the past can lead to that
entrepreneurial venture.