12

Entrepreneurship
Quarter 1 – Module 5:
Nature and Type of
Entrepreneurial Venture
LEARNING COMPETENCY:

Select the best product or

service that will meet the
market need
 LESSON 4: Nature and Type of Entrepreneurial Venture
INTRODUCTION

The business environment is broadly divided into the external or macro

environment and the internal or micro environment. The macro environment is
further divided into several layers. Several available environmental scanning tools
are used in the conduct of environmental scanning of both external and internal
environments. External environment scanning is conducted to determine the
availability of raw materials, the sustainability of the business to location, the cost
involved, the growth of the industry, and the possible position of the business in the
market.

In this module, you will learn about the nature and type of entrepreneurial
venture. Are you up for this new learning? Then, let us get started and enjoy in doing
the tasks given while learning.

LEARNING OUTCOMES

At the end of this lesson, the learner should be able to:

1. describe the forms of the entrepreneurial venture;

2. classify the business according to nature;
3. discuss the four Ms in the production system; and
4. select the best product or service that will meet the market need.

[Link]!

Instructions: Write TRUE if the statement is correct, otherwise write

FALSE.

1. A sole proprietorship may be owned by at least two persons.

2. A partnership is easy to form compared to corporation.
3. A corporation is owned by at least ten but not more than
twenty persons.
4. Input includes materials, manpower, and machine.
_5. The Four Ms in the production operation are the materials,
manpower, machine, and money.

Hi! I am Teacher Mae! I wish to congratulate you!

Please check your answers at the answer key section. If you got a perfect score of 5, you may skip
 REVIEW

Internal environment scanning is conducted to determine the possible target

market and the business competency in taking advantage of available opportunities.
On the previous topic, we have known two internal environment scanning tool –
SWOT Analysis and BCG Analysis Matrix.

ACTIVITY 1

Instructions: As a student, think of what innovations you can do to

produce your own product that is different and competitive in the
market. Write it in a clean paper and share your output in the class.

KEEP THIS IN MIND

There are two significant factors that must be considered by the

entrepreneur before opening a business. These are the competency of
the entrepreneur and the competency of the business after conducting
the environmental scanning.

At this point, the entrepreneur must be able to answer the following questions:

1. Do I have the entrepreneurial competency to exploit the buiness opportunity?

2. Have I critically scanned and evaluated the environment to determine the
 a. availability or suffieciency of raw materials,
b. suitability of the project to the location,
c. cost involved,
d. groth and barriers in the industry,
e. possible position of the business,
f. target customers, and
g. required business competency?

Once these questions have been properly answered, the entrepreneur must
determine the most appropriate business to open in terms of form and nature.

FORMS OF ENTREPRENEURIAL VENTURE

The classification of entrepreneurial venture according to form refers to category

of the business according to the number of owners. The classification of the
business ventures according to form are as follows:

1. Sole proprietorship
2. Partnership
3. Corporation

Sole Proprietorship

A sole proprietorship is a business venture by one person only. Most of the

small businesses operating in th Philippines are sole proprietorship, which is highly
encouraged among entrepreneurs.

The characteristics of sole proprietorship are as follows:

1. It is easy to form and manage.

2. It is a simple business operation.
3. It has a limited pool of resources.
4. Its growth is limited.
5. The owner has unlimited liability.

The primary advantage of a sole

proprietorship is the ease in its formation and
management. However, compared to a
partnership and corporation, a sole
proprietorship has limited capital which usually
leads to its limited growth in the industry. [Link]
Under the concept of unlimited liability, the
creditor may go after the personal properties of the entrepreneur in the event that the
liability or financila obligation of a sole proprietorship is more than the total resources.
 Partnership

A partnership is a business venture that is owned by two or more persons. The

owners are usually called partners. Whatever profit or loss that results from the
entrepreneurial operation is divided between or among others. All the partners may
contribute money, property, or industry, and their contributions become a common
fund of the partnership.

The partners are held personally liable for the

partnership’s liabilities in the event that the
partnership does not have the ability to settle its
financial obligations. The life of the partnership is
easily dissolved compared to a corporation,
particularly for the following reasons:

1. Death of one of the partners

2. Admission of a new partner in an existing
partnership
3. Personal insolvency of one of the partners
[Link] 4. Permanent withdrawal of the investment of a partner
create-a-great-marketing-partnership/
Corporation

A corporation is an entrepreneurial venture formed by at least five but not

more than fifteen persons. A corporation can either be stock or non-stock, profit or
non- profit, and domestic or foreign. The persons originally forming the corporation
are called incorporators.

A corporation is classified as a stock corporation when its is authorized to

issue shares of stock to stockholders. A non-stock corporation, on the other hand,
is not authorized to issue share of stock to the members. The owners of a stock
corporation are called stockholders or shareholders; while the owners of a non-
stock corporation are called members. The certificate of stock is an evidence of
ownership of a corporation. A domestic corporation is organized under the laws of
the Philippines. On the other hand, a foreign
corporation is organized under the law of the
foreign country but has the authority to operate
in the Philippines.

Large businesses are usually organized

as corporations. Its management is entrusted
to the board of directors who are elected by
and from its group of stockholders.

[Link]
NATURE OF ENTREPRENEURIAL VENTURE

An entrepreneurial venture may also be classified according to its nature. The

term nature simply refers to whether the business is simplify selling a product,
manufacturing a product, or rendering a service to customers.

The classifications of entrepreneurial venture according to its nature are as follows:

1. Merchandising
2. Service
3. Manufacturing
4. Agriculture
5. Hybrid business
6. Special corporation

Merchandising

A merchandising business is engaged in the buying and selling of products

or goods. It does not alter the appearance of the product purchased from the seller.
The entrepreneur engaged in a merchandising venture buys the product in a certain
form and sells in the same form. There is no alteration made in terms of physical
appearance, mechanical parts, or chemical content. Grocery stores, and dry goods
stores are examples of merchandising ventures.

Service

A service business provides services to customers. The primary sources of

income are the different services rendered or provided to customers. Technically,
service entrepreneurial ventures classified as non-professional service and
professional service.

Non-professional service ventures include laundry shops, car repair shops,

beauty parlors, educational institutions, and banking institutions. On the other hand,
professional service ventures include law offices, medical clinics, and auditing and
consultancy services.

Manufacturing

A manufacturing venture is a producer of goods or products. It is engaged in

buying raw materials and supplies to be processed into finished products. The
salient feature of manufacturing business is the conversion process that takes place
from the time a raw material is purchased up to the time it is sold as a finished
product.

Manpower, method, machine, and materials, or the so-called “four Ms” in

production operations are applicable to manufacturing ventures such as furniture
shops, bakeshops, rattan factories, flour producers, and beverage companies.
Agriculture

An agricultural entrepreneurial venture I engaged in the production of

agricultural goods and animals. It may sell its products as raw materials or as
finished goods.

Entrepreneurial ventures engaged in mushroom production, potted

ornamental plants, hog fattening and dispersal, poultry products, and fishpond
ventures are examples of agricultural business.

Hybrid Business

A hybrid entrepreneurial venture possesses the characteristics and nature

of combined types of business entities. It is inherent in the business to produce and
sell goods and at the same time provide services to customers. Restaurants and
fast-food chains are classified as hybrid businesses because their very nature is to
process and sell food and at the same time to provide excellent services to
customers. Restaurants and fast-food chains have the attributes of a manufacturing
business and a service entity.

Special Corporation

Special types of business may include cooperatives, joint ventures, and non-
profit organizations.

WHAT BUSINESS TO OPEN

There are no strict entrepreneurial rules in choosing the type and form of
business to open. However, after critically scanning the macro and micro business
environments, the entrepreneur must consider highly the following two important
factors: the competency of the entrepreneur and the competency of the business.

An entrepreneurial venture may either be a sole proprietorship, a partnership,

or a corporation engaged in merchandising, manufacturing, or service. Nevertheless,
whatever type and nature of business venture is opened to exploit different business
opportunities, innovation or creativity defines the distinction between an entrepreneur
and an ordinary businessperson.

Thus, the concept of innovation or creativity can easily be practiced and highly
noticeable in a manufacturing operation since raw materials are transformed to
finished goods through the production process. Innovation can be introduced from
the production phase up to packaging and delivery.
PRODUCTION SYSTEM

The three important elements in the production system are

1. the input,
2. the transformation or production process, and
3. the output.

Input

The input includes the following:

1. Manpower
2. Materials
3. Machine
4. Design
5. Instructions

Production Process

The production process, alse referred to as the transformation or

conversion process, is the stage of production where the materials are transformed
into the final product with the aid of manpower and machine.

It involves the following activities:

1. Procurement or acquisition of raw materials and manufacturing supplies

2. Inspection of materials and supplies upon receipt at the receiving section
3. Storage of acquired materials and supplies
4. Issuance of materials and supplies to the production line
5. Inspection of damaged or broken goods and assessment of losses
6. Rework or repair of defective goods
7. Transfer of finished gods to the storeroom

Output

The output represents the final products from the production process and
distributed to the customers.

FOUR Ms OF PRODUCTION

The term manpower simply refers to the human workforce involved in the
manufacture of products. It is considered as the most critical and important factor of
production. The entrepreneur must determine, acquire, and match the most qualified
employees with the jobs at the most appropriate time period.

Some of the manpower criteria that must be highly considered by the

entrepreneur are as follows:

1. Educational qualifications and experience required for the job

2. Status of employment, whether permanent or temporary
3. Number of workers required for the job
4. Skills and expertise required for the job
5. Appropriate time the worker is needed
6. Conduct of background checking and issuance of requirements
7. Amount of salary or wages and other mandatory benefits
8. Availability of potential workers in the community

Method

Method or production refers to the process or technique of converting raw

materials to finished products. The raw material undergoes several stages before it
is completed and becomes ready for delivey to the target consumers.

The selection of the method of production is dependent on some factors, namely,

1. product to produce
2. mode of production
3. manufacturing equipment to use, and
4. required skills to do the work.

Machine

Machine refers to the manufacturing equipment used in the production of

goods or delivery of services.

In the process of selecting the type of equipment to purchase, the entrepreneur may
consider the following important elements:

1. Types of products to be produced

2. Production system to be adopted
3. Cost of the equipment
4. Capacity of the equipment
5. Availability of spare parts in the local market
6. Efficiency of the equipment
7. The skills required in running the equipment

Materials

The term material simply refers to the raw materials needed in the production
of a product. Materials basically form part of the finished product. For example, wood
or lumber is a raw material used to produce a table or a chair. In case the raw
materials are poor quality, the finished product will be of poor quality as well.

The entrepreneur may consider the following important factors in the selection of raw
materials:

1. Cost
2. Quality
3. Availability
4. Credibility of suppliers
5. Waste that the raw material may produce

ACTIVITY 2

Instructions: Write T if the statement is correct. Otherwise write F and

st ate your reason briefly.

1. A sole proprietorship is easily formed but with unlimited capital.

2. When sole proprietorship is unable to pay its liabilities, the creditors

may go after the personal property of the owner.

3. A bakeshop is classified as a merchandising entitiy.

4. A corporation is easily dissolved compared to a partnership.

5. Schools are manufacturing entities.

APPLICATION

Instructions: In a long bond paper, write at least ten businesses

existing and operating in your local community. Classify them as to form and nature.
Follow the format below. Then share your findings in class by answering these
questions.

1. What is the most common form and nature of entrepreneurial ventures in your
community?
2. What do you think are the probable reasons?

ASSESSMENT

Instructions: Get 1 whole sheet of paper and answer the

questions that follow.

1. Differentiate the three forms of entrepreneurial venture. (9 pts.)

2. Describe the different businesses according to nature. (9 pts.)
3. Identify the three important factors in the production system. (6 pts.)
4. Explain the 4Ms in the production of goods. (8 pts.)
5. What are the things to consider in opening a business. (3 pts.)
 REFERENCES

Aduana, Nick L. 2016. Entrepreneurship in Philippine Setting for Senior High

School. Quezon City: C&E Publishing, Inc.

Sharma, Akshay. 2017. “LinkedIn.” 8 Impotant Needs and Importance of

Environmental Scanning. February 9. [Link]
importance-environmental-scanning-business- sharma#:~:text=Environmental%20scanning%20is
%20necessary%20because,strength%20weakness
%2C%20opportunities%20and%20threats.

Handlin, Amy. 2019. “bizfluent.” The Importance of the Target Market. July 30.
[Link]

DISCLAIMER

I do not own or license any copyright in the texts, images, photographs, graphics, and other con
Prepared by: Brenda S. Señara
Special Science Teacher I (SHS)
Mandaue City Comprehensive National High School