Pbo Reviewer

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PBO REVIEWER (MODULE 3)

Entrepreneurship - is the attempt to create value through recognition of business opportunity, the
management of risk taking appropriate to the opportunity and through the communicative and
management skills to mobilize human, financial and material resources necessary to bring a project to
fruition.

Entrepreneur - is a person who buys factor services at certain prices with a view to selling its product at
uncertain prices.

ENTREPRENEURSHIP

Essential Characteristics of Successful Entrepreneurs (Core competencies)

1. Initiative
2. Experience
3. Credibility
4. Planning
5. Problem Solving

Risks of Entrepreneurship

Competitive risk – it is a risk of business facing competition from its rivals. They face competition
because there are substitutes easily available to the market. In order to minimize this, a proper SWOT
analysis must run to counter competition.

Technological Risk – new technologies are constantly emerging at a rapid pace. To be competitive, a
new business may have to invest heavily in new system and processes.

Political and legal risk – risk is everywhere especially in the case of businesses that run in uncertain
environments. This includes the changing political scenario in the changes in laws and regulations.

Economical Risk – this risk includes the changes in the cycle that includes periods of high prosperity and
recession. 5. Financial risk – the risk of running out of finances. They need to manage cash flow, predict
demand and supply so financial decisions should be taken properly.

Employee Risk – there is always the risk of a key employee deciding to switch or not reporting to work
on an important day. Some of these can be controlled, but most of the time, it cannot be solved easily.

Strategic risk – is the risk of strategy failing due to one reason or another. An entrepreneur should have
business plan properly. Some of them may not have knowledge about every aspect of business so they
must seek help to other relevant departments

Health and Safety Risk – this risk involves how business functions. It is the duty of business owners to
provide right environment to its employees.
SMALL BUSINESSES /SMALL SCALE INDUSTRY (SSI)

• The definition of small scale industry varies from one country to another and from one time to
another in the same country depending upon the pattern and stage of development, government policy
and administrative set up of the particular country.

• Micro, Small and Medium Enterprises (MSMEs) as Beneficiaries (RA 9501) - MSMEs shall be
defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether
single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those
arising from loans but exclusive of the land on which the particular business entity's office, plant and
equipment are situated, must have value falling under the following categories:

Total Assets

micro: not more than P3,000,000 small: P3,000,001 - P15,000,000 medium: P15,000,001 - P1000,000,00

A small unit is generally a one-man show. Even if SSI is run on partnership or company, the activities are
carried by one of the partners or directors; the others are as sleeping partners.

The gestation period i.e., the period after which return on investment starts is relatively lower when
compared to large units.

Factors to be considered when Starting a Business

Decision to be self-employed: This is the most crucial decision a person has to take, shunning wage
employment and opting for self-employment or entrepreneurship.

Analyzing strengths, weaknesses, opportunities and threats (SWOT analysis): The potential
entrepreneur has to analyze his strengths, weak- nesses, opportunities and threats, while deciding to go
for entrepreneur career. This analysis enables him to know what type and size of business would be the
most suitable.

Scanning of business environment: It is always essential on the part of the entrepreneur to study and
understand the prevailing business environment. In order to ensure success of his enterprise,
entrepreneur should scan the business opportunities and threats in the environment. He should study
the administrative framework, procedures, policies, rules and regulations and other formalities
implemented by the government.

Training: Before going to start the enterprise, the potential entrepreneur must assess his own
deficiencies which he can compensate through training.

Product selection: The most important step is to decide what business to venture into, the product or
range of products that shall be selected for manufacture and in what quantity. The level of activity will
help in determining the size of business and thus form of ownership.

Market survey: It is always convenient to manufacture an item but difficult to sell. So it is rational on the
part of the entrepreneur to survey the market thoroughly before embarking upon production. Market
survey implies systematic collection of data by the entrepreneur about the product for manufacture,
demand-supply lag, extent of competition, frequency of demand, pattern and design of demand, its
potential share in the market pricing, distribution policy, etc.

Form of organization: A firm can be constituted as proprietorship, partnership, limited company


(public/private), cooperative society, etc. This will depend upon the type, purpose and size of
entrepreneur’s business.

Project report preparation: After deciding the form of the ownership, location, technology, machinery
and equipment, the entrepreneur should be ready to prepare his project report or the feasibility study.
The economic viability and the technical feasibility of the product selected have to be established
through a project report.

Project appraisal: Ordinarily, project appraisal implies the assessment of a project. It is a technique for
ex-ante analysis of a scheme or project. While preparing to set up an enterprise, the entrepreneur has
to carefully appraise the project from the standpoint of economic, financial, technical, market,
managerial and social aspects to arrive at the most socially-feasible enterprise.

Project Feasibility Study/Business Plan

Project feasibility analysis is carried out to ensure viability of project.

 Market feasibility is concerned with two aspects the aggregate demand for the proposed
product/service, the market shares of the project under consideration. For this market analysis
requires variety of information and appropriate forecasting methods.
 Management feasibility deals with the organization and suggests a clear and precise
identification of the key officers and key personnel, basic considerations in forming an
organization, form of ownership, organizational chart, project scheduling, and job analysis.
 Technical analysis seeks to determine whether prerequisites for successful commissioning of
the project have been considered and reasonably good choices have been made with respect to
location, size, and so on.
 Financial analysis is necessary as ascertain whether the propose project is financially viable in
the sense of being able to meet the burden of servicing dept. and whether the propose project
will satisfy the return expectations of those who provide the capital. The aspects to be looked
into while conducting financial appraisal are as follows.
 Economic/Social Cost-benefit Analysis - concerned with judging a project from the larger social
point of view, where in the focus is on social costs and benefits of a project, which may often be
different from its monitory costs and benefits.
 Ecological Analysis - environmental concerns assured a great deal of significance and hence
ecological analysis should be done, particulars for project which have significant ecological
implications like power plants and irrigation schemes and for environmental polluting industries
like chemicals, leather processing etc.

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