Topic 3 - Starting a Business in the Philippines Flashcards
Ability to develop something original, particularly an idea or a representation of an idea, with an element of aesthetic flair
creativity
change that add value to an existing product or service
Innovation
Truly novel product, service, or process that, though based on ideas and products that have come come before, represents a leap, a creatiom truly novel and different.
Invention
What are the five stages of creativity?
Preparation
Incubation
Insight
Evaluation
Elaboration
Involves investing a chosen field of interest, opening your mind, and becoming immersed in material, mindset, and meaning.
Preparation
Refers to giving yourself, and your subconscious mind in particular, time to incorporate what you learned and practiced in the preparation stage
can take short or long time
Incubation
“illumination” a term for the “aha!” moment — when solution to a creative problem suddenly becomes readily accessible to you conscious mind.
Insight
purposeful examination of ideas
Evaluation
actual production
Release of a “minimum viable product” — function well enough that you can begin to market it while still elaborating on it in an iterative development process.
elaboration
defined as the change that adds value to an existing product or service
innovation
The concept of pain point was developed to____
to describe a feeling of dissatisfaction among customers
a persistent recurring problem that frequently inconveniences or annoys customers
Pain point
key point about innovation is that it is a response to both changes ________ and changes from ________ (Peter Drucker).
Within markets, outside markets
Two types of sources of innovative opportunity
Internally focused
Externally focused
Seven Sources for Innovative Opportunity (Drucker, 1985 as cited in Kuratko, 2016)
The unexpected
Incongruities
(Innovation bsed on) Process need
Industry and Market Structures
Demographics
Changes im Perception, Mood, and Meaning
New knowledge
Unforeseen circumstances that may come as hindrance
• Unexpected failure (penicillin)
• Unexpected success
• Outside events (COVID-19 pandemic)
The unexpected
a difference exists between expectation and reality
Incongruities
process gaps or bottlenecks where an answer is required
Process need
changes caused by consumer attitudes, advancements in technology, etc.
Industry and Market Structures
age, status, race, sex
demographics
uniqueness of every individual creates a differentiation of the offered good and services
Changes in Perception, Mood, and Meaning
Both scientific and non-scientific (knowledge-based concepts)
New knowledge
Types of innovation
Incremental innovatiom
Pioneering innovation
Disruptive innovation
Social innovation
truly novel product, service, or process that, though based on ideas and products that have come before, represents a leap, a creation truly novel and different
inventions
a process or a device which has never been made before
Developing invention
Known and the “unknown”
Sources
different sources of the “known”
- Education/Research
- Experience/skill
- Family(business/tradition)
Source of the “unknown” (outside of our education, skills, experience)
- Information from friends
- Brainstorming (friends,work, schoolmates,family)
- Tips information from various sources (socialmedia,articles, magazines, government plans - CLUP/CDP, seminars/conferences).
creates significant value for customers and offers significant profit potential to the entrepreneur (Jeffrey Timmons, 2004 as cited in Harvard Business Review, Entrepreneur’s Handbook, 2018).
Entrepreneurial opportunity
it can also be said that there exists an entrepreneurial opportunity when a gap exists between supply (amount and characteristics of the product produced) and demand (consumers’ desire for the product).
Entrepreneurial opportunity
Key Aspects of Evaluating opportunity
- Competencies
- Competition
- Sustainability
- Profitability
- Financing
Questions under competencies
• Do I have substantial knowledge and skills?
• Do I know someone who has advanced knowledge and skill who I can trust to be a partner or employee?
• Do I have connections inside the industry who can help me?
Questions under competition
• How many competitors are there in the area? in the industry?
• What are their strengths and weaknesses?
• How are you going to be different?
Factors in evaluating sustainability
• Threat of new entrants
• Threat of substitute/s
• Bargaining power of supplier
• Short lived trend/fad
Factors in evaluating profitability
• Net income
• net profit margin
• break-even point
• payback period
• return of investment
Factors in evaluating financing
• Compute for capital requirement
• check if this can be funded by your
savings
What should be a first step or priority in evaluating profitability and financing?
establish the price and the demand forecast using your target market segment
Contributing factors of a successful opportunity recognition
Prior knowledge of markets and customer problems
Entrepreneurial alertness
Networks
where do we gain prior knowledge of markets and customer problems?
Education
Experience
Two types of experiences
personal experiences
work experience
Pathways to New Ventures
Creating the New Venture
Acquiring an Existing Venture
Joining a Family Business
Obtaining a Franchise
Legal Forms of Business Ownership
• Sole Proprietorship
• Partnership
• Corporation
• Cooperatives
A business that is owned by one person. Simplest form of business ownership and the easiest to start.
Sole proprietorship
The most popular form of business ownership
Sole proprietorship
What kind of business form is this?
no special forms required
ends when proprietor dies or leaves business
unlimited liability
minimal legal requirements
full control of managements and operations
not a separate taxable entity; taxes are paid through owner’s personal tax returns
funding mostly derived from owner
sole proprietorship
Advantages of sole proprietorship
ease of formation
greater control and flexibility
no separate tax return
profit is taxed as personal income to owner
business losses can offset personal income
Disadvanatge of sole proprietorship
Unlimited liability
Potential difficulty in borrowing money
A voluntary association of two or more persons to act as co owners of a business profit
Less common form of ownership that sole proprietorship or corporation
no legal limit on the maximum number or partners
Large accounting, law, and advertising partnerships have multiple partners
usually a pooling of special talents or the results of a sole proprietor taking on a partner
partnership
What kind of business ownership is this?
partnership agreement is recommended
ends upon death or withdrawal of a partner unless otherwise provided for in partnership agreement
unlimited liability
minimal legal requirements
roles specified in partnership agreement; partners generally have equal voice
not a separate taxable entity; taxes paid through owner’s tax return
Funding raised through partner contributions
partnership
a business co-owned by 2 or more general partners; default arrangement; simplest to form; made up of general partners
general partnerships
a person who has full or shared responsibility for running the business; they have unlimited liability
general partners
A business co-owned by at least one general partner and one limited partner.
limited partnerships
Limited liability (only liable for the amount they invested in business). Do not operate business, they provide the capital.
Limited partners
Advantages of partnerships
More owners to contribute capital and effort
Shared managerial and financial responsibility
Utilize complementary skills
Easy to form
Business losses can offset personal income
Profit taxed as personal income of the partners
Disadvantages of partnerships
Must share control — and profits
Need the right partner
Differences in opinion on company’s direction
Unlimited liability (general partners only)
What constitutes a partnership agreement?
capital contributions
responsibilities of each partner
decision-making process
shares of profits or losses
departure of partners
addition of partners
Is a legal entity, separate from its owners. Owned by stockholders.
Corporations
What kind of business ownership is this?
Incorporation must be filled with state and federal agencies
Separate entity; existence not dependent on owners, founders; ownership transfered easily
Owners are not personally liable for debts of corporation
Must have board of directors, corporate officers, annual meeting, and annual reporting
Shareholders elect board of directors, which provides strategic management or corporation; board appoints senior managment
Not a separate taxable entity; taxes are filed through owner’s personal tax return
Capital is raises through sale of stock and debt issue
Corporations
What are the special elements of a corporation?
Stock
Stockholder/Shareholder
Dividend
Board of Directors
Closed (private) corporation
Open (public) corporation
The shares of ownership of a corporation
stock
2 types of stocks
Common stock (voting privileges)
Preferred stock (no voting rights, dividends paid first)
A person who owns a share or shares of a corporation’s stock
stockholder/shareholder
A portion of the corporation’s profit (earnings) that is distributed to stockholders
Dividend
The governing body of the corporation, elected by stockholders and appointed corporate officers
board of directors
A corporation whose stock is owned by relatively few people and is not sold to the general public
closed (private) corporation
A corporation whose stock is bought and sold on security exchanges and can be purchased by any individual
open (public) corporation
Advantages of corporations
limited liability
extended life and ownership transfer
raising capital
tax benefits
Disadvantages of corporations
reporting requirements
can be difficult and costly to form
corporations have their own special taxes
double taxation
It is when corporations pay a tax on their profit; stockholders who receive a divided also have to pay a tax
double taxation
a corporation with a single stockholder, who must be a natural person, trust, or an estate.
one person corporation (OPC)
Where is OPC institutionalized or written?i
Title XIII (Special Corporations) of Republic Act No. 11232, also known as the “Revised Corporation Code”
an autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic and cultural needs and aspirations by making equitable contributions to the capital required, patronizing their products and services and accepting a fair share of risks and benefits of the undertaking in accordance with the universally accepted cooperative principles.
cooperative
