TABLE OF CONTENTS

PART 1: SESSIONS, ACTIVITIES, EXERCISES

MODULE I: ENTREPRENEURSHIP

TOPIC1: ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

TOPIC2: ETHICS IN ENTREPRENEURSHIP

MODULE II: THE ENTREPRENEUR

TOPIC 3: ROLE OF ENTREPRENEURS IN THE PHILIPPINES

TOPIC 4: CHARACTERISTICS AND COMPETENCIES OF THE ENTREPRENEUR
TOPIC 5: RISKS AND REWARDS OF THE ENTREPRENEUR

MODULE III: ENTERPRISE PLANNING

TOPIC 6: OPPORTUNITY IDENTIFICATION

TOPIC 7: MARKET ASPECT
TOPIC 8: OPERATIONS ASPECT
TOPIC 9: ORGANIZATIONAL AND MANAGEMENT ASPECT
TOPIC 10: FINANCE ASPECT
TOPIC 11: PRESENTATION ESSENTIALS

MODULE IV: ENTREPRISE IMPLEMENTATION: SETTING UP; INTEGRATION AND EVALUATION;

BUSINESS LIQUIDATION AND CESSATION

TOPIC 12: SETTING UP, LAUCHING, AND OPERATING AN ENTERPRISE

TOPIC 13: INTEGRATION AND ASSESSMENT
TOPIC 14: BUSINESS CONTINUATION OR CESSATION

PART II: CONCEPTS AND THEORIES FOR ENTREPRENEURSHIP EDUCATORS

The Foundation of Human Development

Entrepreneurship Education: Response to Pillars 2 and 3 of Human Development
Enterprise Sustainability
The Tertiary Level Student in the Entrepreneur Course
The Education Helps Students Become Who They Want to Be
Tools the Entrepreneurship Educator Can Use
How Do We Know That They Have Learned?

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PART 1
Sessions, Activities, Exercises
Part 1 contains topic that are essential to entrepreneurship training.

It consists of modules, which are each divided into topics. A topic can constitute a session to be
handled by the faculty member or it can be divided into sub sessions, depending on the needs
of the students enrolled in the class. The topics can therefore be expanded and other activities
and exercises can be added by the faculty member depending on his or her sources and stock
knowledge. Additional activities and exercises will also depend on the emphasis that faculty
member wants to give to a topic. Resource articles are available at the end of each module for
the faculty member to reflect on, for additional information, and for pointers on how to
improve delivery.

Each topic has a set of behavioral objectives to guide the faculty member in selecting the
outcomes to be expected of the students. Then, each topic has Discussion Points, which
constitute the conceptual bases of the topic being discussed. Within each topic are activities to
choose from, expand, or contract, depending on the time available and the needs of the
students.

Activities and exercises are provided to deepen the students’ learning and to encourage them
to actually apply what they have learned to real life situations. Sometimes, an activity can be
held at the beginning of a session, sometimes, in the middle, or even at the end of the session.

In Module I, Entrepreneurship, Topic 1 provides an overview of entrepreneurship and its role in

economic, social, and human development. Topic 1 also discusses globalization and its effect on
the entrepreneurial perspective in the Philippines. Topic 2 discusses ethics in entrepreneurship
to lay out right from the start the guide’s stand in the matter of values and ethics when
someone decides to start a business of one’s own.

Module II tackles topics surrounding the concept of who an entrepreneur is, the roles played by
the entrepreneur in the Philippines society, the characteristics and competencies of an
entrepreneur and the risks and reward awaiting the entrepreneur in real life.

Module III contains the most exciting part of any entrepreneurship course, ENTERPRISE
PLANNING. Everybody likes to do a stimulation of how an enterprise is put up, the steps
involved in the process, the resources, and materials one needs to actually set up an enterprise,
probably a small one, at the start. The topics include opportunity identification, the marketing

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aspect, the operations aspect, the organization and management aspect, and the financial
aspect. The Enterprise Plan that the students will come up with after throwing these topics will
usually be presented to a panel faculty members interested in coaching the students to
improve what they have done. Presentation Essentials, the last topic in this module will guide
the faculty member on how to organize the activities surrounded the Presentation of the
Enterprise Plan.

Finally, Module IV gives the faculty member plenty of ideas on Enterprise implementation,
which includes Setting up; Integration and Evaluation; and Business Continuation or Liquidation
and Cessation. This module rounds up the convergence of theories, interventions, and real-life
application in the entrepreneurship education of the students.

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MODULE I: ENTREPRENEURSHIP
 Topic 1 provides an overview of entrepreneurship and its role in economic, social, and
human development. Topic 1 also discusses globalization and its effects on the
entrepreneurial perspectives of the Philippines.
 Topic 2 discusses ethics in entrepreneurship to lay out right from the start the guide’s
stand in the matter of values and ethics when someone decides to start one’s own
business.

___________________________________________________________________________

TOPIC 1: ROLE OF ENTREPRENEURSHIP IN THE ECONOMIC DEVELOPMENT

Description

This topic focuses on the theories and concepts of entrepreneurship, as well as its
important role in the economic, social, and human development of nations in general and
the Philippines in particular.

OBJECTIVES

This topic will enable the students to:

 enumerate four theories that explain economic growth

 discuss the meaning of entrepreneurship
 present current developments related to entrepreneurship worldwide and various
aspects of globalization
 explain the relationship between entrepreneurship and economic growth as well as
the socio-economic benefits of entrepreneurship in the community
 discuss the factors that affect entrepreneurship in the Philippines

Discussion Point 1: Four theories that explain economic growth

Theory 1: The theory of mercantilism was the first major economic theory known in the world.
It drove the economic system during the 16 th to 18th centuries in the “known” world. It was
based on the idea that a nation’s wealth will increase only if government regulated all the
nation’s commercial interests. The government, according to mercantilism, should take care of
all the economic activities of a country. The Theory of Mercantilism holds that the wealth of a
nation can be measured by its ready supply of capital, generally held in the concrete form of
gold or silver. Mercantilism state that the global supply of wealth is a fixed amount, and that
therefore any gains of wealth by one nation most necessarily represent a loss by another.

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National strength was based on limiting imports through high tariffs and exporting as many
goods as possible. Due its system of “me first” and “no import.” Mercantilism could not be
maintained forever, because the reality was that it led to a stagnant global economy. Each
country wanted to export and no one wanted to import. After some time, many people began
to revolt against the idea of mercantilism and stressed the need to conduct free trade among
nations. The continued pressure resulted in the implementation of laissez faire economics in
the nineteenth century, Mercantilism therefore in many ways opposes the later laissez-faire
capitalism promoted by economist such as Adam Smith.

Theory 2: Toward the 18th century, Adam Smith wrote “An inquiry into the Nature and Causes
of the Wealth of Nation” where the documented industrial development in Europe. He
expounded the need to minimize the role of government intervention and taxation in the free
markets, saying that an “invisible hand” guides supply and demand, reflecting the concept that
each person, by looking out for herself, creates the best outcome for all. Smith called this the
laissez-faire theory, which along with other philosophers, claimed, “It is not from the
benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from
their regard for their own interest.”(Filed on February 26, 2009, Filed under Adam Smith,
Finance/Economics Pioneer, Microeconomics, Supply and Demand.), by selling their products,
the butcher, brewer, and baker will make money. If they meet the customers’ needs, they will
be rewarded financially, which is the point of being in business. While engaged to enterprises to
earn money, they provide the products that people need and want. According to Smith, this
creates wealth not only for the people in the business, but also for the whole country where
the citizens work to provide for themselves and others and where they take care of their own
financial needs.

Theory 3: Meanwhile, Karl Max disagreed with Adam Smith and the laissez faire theorists. He
interpreted human history as a class struggle between workers and employers. He declared
that free enterprise (laissez faire) would lead to increasingly severe losses and would eventually
bring about revolution by the workers. They called for an economy where the government
owned all the property and distributed everything equally among all the people through
socialism.

Theory 4: Today, experts realize that there is not one single theory that can explain economic
growth.

In 1934, an economist named Joseph Schumpeter explained that economic growth is started by
people (whom he called entrepreneurs) who produce goods not only for personal profit but
also for the good of everyone around them. He called entrepreneurs the backboned of the
economy. Entrepreneurs, according to him, are people, who find joy in creating or producing
goods; who find self-fulfillment in getting things done; and who have a strong need for

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achievement. This entrepreneur-centered theory is widely used to answer the need for socio-
economic development.

Activity 1

1. Organized the class into four groups:

a. Group 1 will look up the theory of mercantilism and prepare their points in favor of
this theory of economic development.
b. Group 2 will look up the laissez faire theory and prepare their points in favor of this
theory.
c. Group 3 will look up Karl Max’s theory of socialism and prepare their points in favor
of this theory.
d. Group 4 will look up the theory of socio-economic development started by
Schumpeter and prepare their points in favor of this theory.
2. Designate a day when all four groups will meet to discuss these theories in a historical
debate. If possible, have the members of the class dress in costumes of the historical
period they represent.
3. Discuss the pros and cons of each theory and come up with conclusions.

Discussion Point 2: Entrepreneurship as a concept

Entrepreneurship is the “process of creating or seizing an opportunity, and pursuing it

regardless of the resources currently controlled. “This definition is propounded by Howard H,
Stevenson, Sarofim-Rock Professor of Business Administration and the Harvard Business School.
Stevenson, who has steered the study of entrepreneurship at Harvard Business School through
the past 30 years, has been quoted by Rick Goossen as saying, “At Harvard, we define
entrepreneurship as the pursuit of opportunities without regard for the resources controlled.”

Professional Stevenson, who has co-author one of the leading textbooks in the field, New
Business Venture and the Entrepreneur, through six editions (Roberts, Stevenson, Sahiman,
Marshall and Hamermesh, esd. New York: McGraw-Hill/Irwin, 2005), spell out four tenets on
entrepreneurship. These are as follows:

1. Entrepreneurship flourishes in communities where resources are mobile.

2. Entrepreneurship is greater when successful members of a community reinvest excess
capital in the projects of other community members.
3. Entrepreneurship flourishes in communities in which success of other community
members is celebrated rather than derided.
4. Entrepreneurship is greater in communities that see change as positive rather than
negative.

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As quoted from Rick Goossen’s interview with Stevenson, three tenets or basic philosophies of
teaching entrepreneurship should hold true:

“One of Stevenson’s three tenets of teaching entrepreneurship at Harvard is to convey to

students that entrepreneurship is an opportunity focused orientation to general management,
one which is applicable in many situations, regardless of near term career aspirations. He
encourages students that an entrepreneurial career may be a more interesting alternative to a
standard-issue investment banking or management-consulting job. According to his philosophy,
students can learn that “controlling your own life is an entrepreneur does.” Stevenson believes
students need to be exposed to an entrepreneur-friendly culture and positive entrepreneurial
role models. Finally, entrepreneurship is like having children: it requires a moment of
enthusiasm, followed by decades of hard work, in order to be successful. As Stevenson
expresses, Harvard Business School teaches three simple attitudes: “Every situation can be
improved; you can make a difference, no matter how minimal your power or your current
resources; and, experts and experience may be wrong.

“While the world has its share of the problems, if solve them for other people, I will make money—and
just because I don’t presently have the resources, doesn’t mean I shouldn’t try to solve the problem.
“Don’t tell me what you would do if you were God; instead, what are you going to do to as a product
manager with inadequate power and resources?” He also advises students, “If somebody tells you it
hasn’t been done that way before, treat that as good news rather that bad news.”

Stevenson lists in the matrix below the key business dimensions and the difference between the
entrepreneur and the administrator.

Table 1. A Process Definition of Entrepreneurship

ENTREPRENEUR KEY BUSINESS DIMENSION ADMINISTRATOR

Driven by Perception of Strategic Orientation Driven by Resources Currently
Opportunity Controlled
Quick Commitment Commitment to Opportunity Evolutionary with Long Duration
Multi-stage with minimal Commitment Process Single-Stage with Complete
exposure at each stage Commitment Upon Decision
Episodic use Rent of Required Control of Resources Ownership of Employment of
Resources Required Resources
Flat with Multiple Informal Management Structure Formalized Hierarchy
Networks
Value Based & Team Based Reward System Resource-Based; individual and
Promotion Oriented

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Howard H. Stevenson’ s Coleman White Paper delivered at the USASBE Plenary Address of February
17,2000, lists as references all the previous theorists and economists who have shaped studies in
entrepreneurship from Maximillian Karl Emil “Max” Weber ( 1904, The protestant Ethic and the Spirit of
Capitalism. New York: Routledge), Joseph Schumpeter (1911; rpt 1934, The Theory of Economic
Development. Cambridge, MA: Harvard University Press) and peter Drucker 1985, Innovation and
Entrepreneurship, Practice and Principles. New York Harper & Row).

Activity 1

Divide the class into four groups of five students each and let each group discuss one of stevenson’s
tenets on entrepreneurship. If there are more students, assign one statement to two or more groups.
Let each group report on their understanding of the statement assigned to it and give examples for each
one. Let the group give the judgment on whether or not they see this statement working in their
community and give reason’s for their observations. From these observations, ca the group predict if
entrepreneurship will flourish in their community? Let each group defend their observations.

Group 1 – Entrepreneurship flourishes in communities where resources are mobile.

Group 2 – Entrepreneurship is greater when successful members of a community reinvest excess capital
in the projects of other community members.

Group 3 – Entrepreneurship flourishes in communities in which success of other community members is

celebrated rather than derided.

Group 4 – Entrepreneurship is greater in communities that see change as positive rather than negative.

Activity 2

1. Divide the class into small groups. Let each group watch a TED presentation of their choice
from among the suggestions below. Students may watch other presentations listed below if
they have time to do so.
2. Let the students discuss the salient points after watching the presentations, focusing on how
the talk affects the students’ lives and how it may influence them to take on the challenge of
entrepreneurship.
3. After watching the video presentations, let the members of each group present their
observations and learning points to the rest of the class.

TED Presentation 1

Theme- Global Entrepreneurship Matters Sarasota, FL, United States

http//www.ted.com/tedx/events/7141 “Global Entrepreneurship matters”

 Creativity Matter- Entrepreneurship Matters. Global Thinking Matters

 Creativity matters because it is an essential element of self-directed lifelong learning.

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 Creativity matters because it enables us to adapt to rapidly changing economic, civic, and
cultural circumstances, generate a shift in thinking and behavior and to
 Creativity matters to innovate and engage, to generate a shift in thinking and behavior and to
share ideas worth spreading that change attitudes, lives, and ultimately the world for the better.
 This event drew together two live presenters- unique passionate individuals from various
backgrounds involved in the businesses. In keeping with the 2012 theme- “Creativity Matters”
they explored ways in which technology and human behavior has adapted to global
entrepreneurism and innovation as economic boosters in this region.

TED Presentation 2 Theme- 3Es- Education, Environment, Entrepreneurship Louisville, KY, United
States http//www.ted.com/tedx/events/4196

 The event was designed as a conversation about the future, skills needed in a global economy
(Education), the habitat of tomorrow (Environment), and the enterprising spirit to make it
happen (Entrepreneurship), the event theme was 3Es for the Future.

TED Presentation 3 Theme- Entrepreneurship – does it pay? Krakow, Poland

http//www.ted.com/tedx/events/4034

 In this cinema event, the organizers considered the subject of entrepreneurship, what is it? Are
entrepreneurs born or can they be made? What are the benefits and drawbacks of a life of
entrepreneurship? KaslaScisel and local entrepreneur (and TEDxKrakow 2010 speaker) Richard
Lucas lead the discussion.

TED Presentation 4 Theme- Entrepreneurship Kyiv, Ukraine http://www.ted.com/tedx/events/2659

 The 5th TEDxKyiv Conference of ideas worth spreading celebrated Entrepreneurship in Ukraine.
There were 18 speakers, who shared stories, ideas, theories and practices on how to boost the
culture, inspire and sustain entrepreneurial spirit in our city, country, region and the world, in
every one of us.
 We see entrepreneurship in a very broad perspective- from personal active positon of a citzen
who sees the opportunities in obstacles- and to successful enterprises with sustainable nature
that add value to society.
 We want to inspire transition from passive indifferent position to active responsible steps, from
consumption style of living to the creation, from scarcity to abundance mindset, from narrow
thinking to holistic system thinking. Every human being is born to create. We want to inspire
businesses that create the world and the future we want to be part of.

TED Presentation 5 Majora Carter- 3 stories of local eco-entrepreneurship

http://www.ted.com/talks/majora_carter_3_stories_of _local_ecoactivism.html

 The future of green is local- and entrepreneurial. In her talk, Majora Carter brings us the stories
of three people who are saving their own communities while saving the planet. Call it
“hometown security” (Filmed at TEDxMidWest)

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TED Presentation 6 Theme- Innovation and Entrepreneurship Lecce, Italy
http://www.ted.com/tedx/events/6451

 The theme of TEDxLecce is “Innovation and Entrepreneurship” where selected speakers shared
their ideas and experience with the aim of inspiring the local people to change their lives and
the place where they live for the better.

TED Presentation 7 Theme- Entrepreneurship Dhahran, Saudi Arabia

http://www.ted.com/tedx/events/5369

 This event is about the entrepreneurship and speakers are from the university.

Discussion Point 3: Current development related to entrepreneurship worldwide and the various
aspects of globalization

At present, we are experiencing an economic phenomenon called “global capitalism” commonly called
globalization. What. Is globalization and what brought about this phenomenon? Globalization is
characterized by free circulation of capital worldwide and regulation by market forces or “free trade”
where there is an easy or “free” flow of goods from one country to another because the taxes coming
into a country has been lowered or even removed.

It is common knowledge that people from other countries like the USA ( Ford), Japan ( Toyota), and
Nestle ( Switzerland), to name a few, cone to the Philippines, bring in their capital and technical
knowledge, and establish businesses here with Filipinos as partners or co- investors. In a similar manner,
some Filipino companies have opened up branches abroad such as San Miguel Corporation, which has
set up a brewery in Hong Kong, Jollibee, which recently opened a branch in China. These are a few of the
examples that show what is meant by, “free flow of capital” and, of course, globalization.

On the other hand, when someone shops at the nearest supermarket and department store, even the
tiangge, one will find many items such as food, clothing, and many household items from places like
Australia, China, Korea, Thailand, Indonesia, Taiwan, the United States of America, and Europe. The
coming in so many goods from other countries is another effect of free trade, which points to
globalization, because taxes on many of these items have been considerably lowered if not eliminated
making it easy for these goods to enter the Philippines.

This surge of a global economy was made possible by loosening and even suppressing the regulations
established by most countries to control trade, investments, and financial transactions. Deregulation is
accompanied by “privatization” or the transfer to private hands of publicly owned corporations,
industries, banks and other services, leading to globalization.

Globalization was initiated in the 1950s in the United States, then it swept through Europe in the 1970s,
Asia in the 1980s, and it is still progressing. Indeed, in the matter of trade and exchange of goods, the
world has become much smaller. Following are the reasons for the fast development of globalization:

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 Globalization has emerged because of the advances in information, communication, and
transportation, (ICT) Technologies.
 There are new techniques of production and new forms of organization that have given
flexibility to the location of industrial activities and reduced the share of wages in production.
 In the international scene, the most influential organizations, notably the International
Monetary Fund (IMF), the World Bank, (WB), and the World Trade Organization (WTO) are
promoting the emergence of a global market.
 Politically, the United States dominates the world scene and the dollar is the international
currency. The collapse of the Soviet Union and the unification of Germany have removed
obstacles to the spread of capitalism.

This situation made the world” smaller” not physically but in the sense that travel time of information
and transportation have been made faster. For example, with the use of the telephone, mobile phone,
and internet, you can communicate with another person in any part of the world in a matter of seconds.
That is why news travels very fast. One can see television events in another part of the globe as they
unfold. In addition, travel time has become shorter because airplanes, boats, trains, and other modes of
transportation have become faster. About 15 years ago, it took 20-24 hours by plane to reach Western
Europe like Frankfurt, Germany from the Philippines. Now, one can reach the same destination in
12hours by commercial airplane.

All these developments have dramatically reduced the geographical barriers for the emerging
international class of entrepreneurs, managers, and financiers. The cost of economic and financial
transactions that crisscross around the world at remarkable speeds have been greatly reduced. Trade
transactions as well as speculative ventures are now possible without physical anf time constraints.

 Labor is becoming a dispensable commodity. A mobile phone might be designed in London,

made in Finland with parts produced in Canada, Phi, and the USA. Clothes may be manufactured
in the Philippines but the thread comes from China, the cloth from Korea, and the lace from
Belgium. It is easy for multinational companies to close down its factory in one country and
transfer to another country.
 The feeling pervades that the process of globalization and economic integration is unavoidable.
In many societies, the politicians, the ordinary citizens, and to some extent, the intellectuals
share the conviction that the economy and its current evolution are the forces shaping human
affairs and the future of humanity.

The statistical evidence of the rise of global capitalism is staggering. During the last 20 years, the volume
of work trade was twice as fast as the world output. Exports represented 6% of the world’s gross
domestic product (GDP) in the 1950 and 16% in 1992. The value of world exports jumped from US$16
billion in 1950s to US$3,447 billion in the 1990s. There were US$5billion foreign direct investment (FDIs)
in 1960 and US$171 billion in 1992. Foreign exchange transactions grew from US $15 billion per day at
the beginning of 1975 to an astonishing US$900 billion per day at the beginning of the 1990s.

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Activity 1

Using the following sentence, “The world has become smaller in terms of travel time (fast
transportation), exchange of information, and availability of common goods.” Let the students give
examples that indeed the world has become smaller. Perhaps some of them have traveled and some
have relatives and friends from other countries that they are in touch with constantly, how can this
happen today? You can use the following matrix that can help individuals or groups structure their
answers.

Countries Experienced Students’ Comments on Students’ Comments on Students’ Comments on

by Students Exchange of Information Travel Time Availability of Goods

Country A

Country B
Country C

Country D

Add other countries as

needed below

Activity 2

1. Discuss the need for the students to learn more about the Philippines’ Asian neighbors. Students
must learn to be very familiar with these countries because of their proximity and influence in
the globalization of entrepreneurship.
2. Let the students (individually or in groups) select an Asian country to search for data and facts
using internet and other sources on the level of entrepreneurship in their selected country.
3. Some students might have parents or relatives working in other Asian countries. They can
interview or write to their parents or relatives to inquire about entrepreneurship in those
countries. If some of the students have visited parents or relatives in an Asian country, let them
display pictures taken in the country and let them talk about their interactions with the local
people in that country.
4. On the day of the reporting, the students can wear costumes traditionally worn in these
countries, if this is possible. Students can show YouTube or other films and videos so the class
can have a feel about the entrepreneurial atmosphere in the country they have selected.

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5. Besides economic data, the students can report on the culture, society education, and other
aspects of their selected country.
6. Here are some suggested countries and initial sources for the student’s research work. The
faculty member can assign other countries besides the ones listed below.
a. Cambodia Sources- http//www.internationalentrepreneurship.com/asia/Cambodia/
https//www.cia.gov/library/publications/the-world-factbook/geos/cb.html
b. Laos Sources- http//gloserver.cn/en/laos/economy
https//www.cia.gov/library/publications/the-world-factbook/geos/la.html
c. Thailand Sources- http//www.indexmundi.com/Thailand/economy_profile.html
http//globserver.cn/en/Thailand/press/thailands-manufacturing-growth-slows-exports-
ease-floods-hurt-demand
http//www.cia.gov/library/publications/the-world-factbook/geos/th.html
http//www.internationalentrepreneurship.com/asia/Thailand/
d. Vietnam Sources- http// www.internationalentrepreneurship.com/asia/vietnam/
http//www.cia.gov/library/publications/the-world-factbook/geos/vm.html
e. Taiwan Source- http//www.internationalentrepreneurship.com/asia/Taiwan/
f. Singapore Source- http//www.cia.gov/library/publications/the-world-factbook/geos/sn.html
http//www.internationalentrepreneurship.com/asia/Singapore/
g. Indonesia Source-- http//www.internationalentrepreneurship.com/asia/Indonesia/
http//www.cia.gov/library/publications/the-world-factbook/geos/id.html

Discussion Point 4: The relationship between entrepreneurship and economic development as well as
the socio-economic benefits of Entrepreneurship in one's family in the larger community

Entrepreneurship is a key factor in assuring improvements not only in the personal life of the
entrepreneur, but also in the lives of other people: the family, the community and the country.

The business in the community, if taken as a whole, become a sort of huge basket that supports all lives
of the people there. These businesses provide the people with all the goods they need to carry on with
their lives, while making their money circulate and grow within the community as well as within the
country, or region, and the whole world. Entrepreneurship improves the well-being of all.

Entrepreneurship helps provide the following:

 Product and necessities that sustain life;

 Freedom from servitude, ignorance, social deprivation, and misery; and
 Self-esteem for the entrepreneur: to be a person with a sense of self-worth and self-respect,
and being of service to the community.

Enterprises and communities need each other to survive. Enterprises in the community often help each
other too. For example, the product of one enterprise can be the raw material needed by another
enterprises. Thus, money circulates. The combined efforts and cooperation of everyone in the
community create more opportunities for citizens to work and earn.

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National well-being brings about development because people are assured of having the necessary
goods on time, within reach, as needed, even as money circulates and entrepreneurs make profit.

Enterprises are a big factor in any country’s development and national well-being. People get to have
job, pay taxes, improve the circulation of money, and have goods to buy and share.

The following are indicators providing that a country has reached national well-being and true
development:

1. Owners live within the community where their enterprise is located.

2. Enterprises serve the needs of the residents for products and services and make a living from
doing this.
3. The community has an adequate supply of raw materials that the enterprise would need.
4. The community offers the enterprise a steady source of labor and in turn is provided gainful
employment by the business.
5. The community willingly patronizes the enterprise and its products and services.
6. Local government executives are supportive of the business enterprises.
7. Local government executives are considerate and friendly to business owners.
8. Local government executives assure the businesses peace and order at all times.
9. There is an abundance of water and power supply.

True development takes ca4 of the whole person, enabling the person to find the richest possible
expression of self. The lives of the entrepreneur and those of the people around the entrepreneur are
improved by proper development. Entrepreneurship makes development possible.

Activity 1

1. Let the students take an imaginary walk around their neighborhood. Let them notice the many
enterprises that beckon people to buy from them, to eat their food, or to have a manicure or
pedicure in their parlor.
2. Now, let the students imagine their community without its business enterprises. Let them
imagine what would happen if the people selling all those goods were not there. Let them
imagine what would they see? What will happen to everyone? People will have to trap animals’
food, plant their own rice, and sew their own clothes. Each one will have to do all that now
because there’s no one who will do it for them. There are no enterprises selling all the things
that the people need.
3. Now, let the students come back through time and see and feel their community again. Let
them imagine the noise, people talking aloud, and haggling, laughing, buying, and selling goods
in the market. Ask the students, “which picture do you prefer a town without enterprises or a
town with enterprises?”

Activity 2

1. Divide the class into small groups of 5 to 6 members and ask them to recall what they ordinarily
see in their barangay when they go around it daily. Ask them to recall how many businesses (it

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doesn’t matter what type at this time) they see on their way to school from their homes. Some
will be flourishing, some will be just average, while others are starting to deteriorate and die.
2. Let each group classify their observations in a matrix (see sample on the next page).

Name of Enterprise and Product/Service Specialties Impressions and Remarks

Name of Owner (optional) (example- flourishing,
average, deteriorating, etc.)

3. Let each group discuss what they remember from the past when there were not so many
businesses in the community. Let the members recall how life was probably 5 years ago
compared to the present. For example, perhaps in the past 5 years, their parents had to go to
Manila to buy supplies for the house but today they do not have to do that anymore. Let them
list their observations in a matrix like the one below.

Sample Common Activities 5 or more years ago… Today…

Shopping
Going to school
Going for medical check up
Going for dental check up
Others…

4. Let the members of the group discuss the possible reasons for these changes. Let them discuss
what entrepreneurship (people setting up businesses in their locality) has done to the
community.

Activity 3

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1. Using the figure on the next page, students can think of the ways by which entrepreneurship
becomes beneficial to the entrepreneur as well as to the whole community.
2. Let them fill in the boxes as they see appropriate.

16
17
Discussion Point 5: Factors that affect entrepreneurship in the Philippines

The Department of Trade and Industry’s Bureau of Micro, Small, and Medium Enterprise Development
(BMSMED) describes the following factors that affect entrepreneurship in the Philippines:

1. Top global executives believe that the growing number of consumers in emerging markets will
be the most important factor for global business during the next five years.
2. With the AFTA and tariffs near zero, the Filipino entrepreneurs market has grown from 92
million Filipino to half a billion Southeast Asians. A huge market opens many opportunities.
3. Filipino enterprises will be exposed to intensive competition from lower-cost imports and locally
based foreign firms.
4. With trade liberalization, there is no such thing as a domestic market alone. Either an enterprise
has to rise up and competes or it dies.
5. Competitiveness depends on two major factors:
a. The business environment in the country ( which is beyond the entrepreneur’s control)
and
b. The controllable conditions within the enterprise.
6. Entrepreneurs must do something to improve the conditions under their control.
7. Entrepreneurs must be more focused in building their niche markets.
8. Entrepreneurs must be more adaptive than their competitors are.
9. Entrepreneurs must be able to use appropriate technology. All these lead to productivity, which
helps the Filipino enterprise to compete in the global market.

Activity 1

Let the students identify enterprises in the locality that display the factors discussed in Discussions Point
5. For each enterprise, let them predict whether their selected enterprises will survive in today’s
entrepreneurial world. They can use the suggested matrix below.

Name of Enterprise Product or Services of Yes, it will survive. No, it will survive.
the Enterprise Reasons Reasons

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Resource Article 1

ENTREPRENEURSHIP IN THE GLOBAL AND LOCAL SETTINGS

By Melchor C. Morandarte, AFBE, Arlene E. Liberal, and Paz H. Diaz, Ph.D.

GLOBAL SETTING: INTERNATIONAL INSTITUTIONS

World Trade Organization (WTO)

The WTO is the international organization that deals with the global rules of trade between nations. Its
main function is to ensure that trade flows as smoothly, predictably, and freely as possible.

This is expected to bring about a more prosperous, peaceful, and accountable economic world. Virtually
all decisions in the WTO are taken by consensus among all members-countries and they are ratified by
members’ parliaments. Trade friction is channeled into the WTO's dispute settlement process, which
interprets agreements and commitments, and how to ensure that countries trade policies conform to
them. That way, the risk of disputes spilling over political or military conflicts is reduced.

By lowering trade barriers, the WTO's system breaks down other barriers between peoples and nations.

At the heart of the system--- known as the multilateral trading system--- are the WTO's agreements,
negotiated and signed by a large majority of the world’s trading nations, and ratified in their respective
parliament. These agreements are the legal ground rules for international commerce. Essentially, they
are contracts, guaranteeing members countries important trade rights. They also bind governments to
keep their trade policies within agreed limits to everybody’s benefit.

The agreements are negotiated and signed by governments. But their purpose is to help producers of
goods and services, exporters, and importers conduct their business. The goal is to improve the welfare
of the peoples of the member’s countries.

World Bank

The World Bank offers an array of instruments including loans and grants to finance poverty reduction
and economic development efforts around the world. The Bank has two types of lending instruments:

Instrument Loans finance goods, works, and services in support of economic and social development
projects in a broad range of sectors. They typically run for five to ten years. Originally concentrated on
financing hardware, engineering services, and bricks and mortar, investment lending has come to focus
more on institution building, social development, and developing the public policy infrastructure needed
to facilitate private sector activity.

Projects are categorized according to the following:

 Urban poverty reduction (involving private contractors in new housing construction)

 Rural development (formalizing land tenure to increase the security of small farmers)

19
 Water and sanitation (improving the efficiency of water and utilities)
 Natural resource management (providing training in sustainable forestry and farming)
 Post-conflict reconstruction (reintegrating soldiers into communities)
 Education (promoting the education of girls) and
 Health (establishing rural clinics and training health care workers).

Development Policy Loans provide quick-disbursing external financing to support policy and institutional
reforms. They typically run for one to three years. Originally designed to provide support for
macroeconomic policy reforms, including trade policy and agriculture, development policy loans have
evolved to focus more on structural, financial sector, and social policy reform, and on improving public
sector resource management.

ASEAN

The Association of Southeast Asian Nations or ASEAN was established on August 8. 1967 in Bangkok by
the five original member countries, namely: Indonesia, Malaysia, Philippines, Singapore, and Thailand.
Brunei Darussalam joined on January 8, 1984, Vietnam on July 28, 1995, Laos and Myanmar on July 23,
1997, and Cambodia on April 30, 1999.

The ASEAN Declaration states that the aims and purposes of the ASEAN are:

 To accelerate the economic growth, social progress, and cultural development in the region
through joint endeavors in the spirit of equality and partnership in order to strengthen the
foundation for a prosperous and peaceful community of Southeast Asian Nations.
 To promote regional peace and stability through abiding respect for justice and the rule of law in
the relationship among countries in the region and adherence to the principles of the Un5
Nations Center.

AFTA

At the Fourth ASEAN Summit in Singapore in January 1992, ASEAN initiated the ASEAN Free Trade Area,
or AFTA, which laid out a comprehensive program of regional tariff reduction, to be carrried out in
phases up to 2008. This deadline was subsequently moved into 2003. Over the course of the next
several years, the program of tariff reductions was broadened and accelerated, and a host of “AFTA
Plus” activities were initiated, including efforts to eliminate non- nontariff barriers and quantitative
restrictions, and harmonize customs nomenclature, valuation, and procedures, and develop common
product certification standards. In addition, ASEAN later signed framework agreements for the intra-
regional liberalization ofi trade in services, and for regional IPR cooperation.

When the AFTA agreement was originally signed, ASEAN had only the original six members (Brunei,
Indonesia, Malaysia, Philippines, Singapore, and Thailand). The other countries which joined ASEAN later
(Vietnam in 1995, Laos and Myanmar in 1997, and Cambodia in 1999) also signed the AFTA agreement
in order to join ASEAN. They were given longer time frames in which to meet AFTA’s tariff reduction
obligations.

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APEC

The Asia-Pacific Economic Cooperation, or APEC, I the premier forum for facilitating economic growth,
cooperation, trade, and investment in the Asia-Pacific region. It is the only inter-governmental grouping
in the world operating on the basis of non-binding commitment, open dialogue, and equal respect for
the views of all participants. Unlike the WTO or other multilateral trade bodies, APEC has no treaty
obligations required of its participants. Decisions made within APEC are reached by consensus and
commitments are undertaken on a voluntary basis.

APEC has 21 members--- referred to as member economies --- that account for more than a third of the
world’s population (2.6 billion people), approximately 60% of the world GDP (US$ 19,254 billion), and
about 47% of world trade. It also proudly represents the most economically dynamic region in the world
having generated nearly 70% of global economic growth in its first ten years.

APCE’s 21 members--- economies are Australia; Brunei Darussalam; Canada; Chile; People’s Republic of
China; Hong Kong , China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand; Papua
New Guinea; Peru; The Republic of the Philippines; The Russian Federation; Singapore; Chinese Taipei;
Thailand; United States of America; and Vietnam.

APEC was established in 1989 to further enhance economic growth and prosperity for the region and to
strengthen the Asia- Pacific community. It has worked to reduce tariffs and other trade barriers across
the Asia-Pacific region, creating efficient domestic economies and dramatically increasing exports. Key
to achieving APEC’s vision are what are referred to as the “Bogor Goals” of free and open trade and
investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies.
These goals were adopted by national leaders at the 1994 meeting in Bogor, Indonesia.

World Bank Report:

World Economy: some bright spots and a few dim ones

The World Bank monitors the growth and development of the countries around the world and predicted
that over the medium period growth will taper and level off but most economies will remain solid. See
chart below.

21
World Bank reports that by 2030, the middle class of many countries will be a major force that will
influence the direction of the economic growth of each country.

Global trends reshaping business strategy

 Many opportunities now derive from doing business in fundamentally new ways; that is,
*through developing knowledge-based services and technology-intensive goods.
*through exploiting the internet and electronic commerce and
*through combining assets with competitors in global mergers and joint ventures.

 Today, sectors based on information and communications technologies (ICT) are driving
productivity growth across the world.
 Tomorrow, sectors related to biotechnology or advanced materials may be the top performers.
 The global industry has evolved towards more knowledge-based activities, the predominance of
services, and a greater role for smaller firms.
 Industrial activities in knowledge-based economies are more directly based on the production,
distribution, and use of knowledge and information.
 The mastering of new technologies and their application is crucial to competitiveness.
 Strategic business thinking has shifted away from products, inventories, and tangible assets to
customers, employees, and intangible assets.
 Enterprises are adopting new organizational and managerial practices to better deploy and
adapt technology, particularly ICT.
 Since the world economy depends on natural resources that are being severely degraded,
reducing consumption and waste creates new opportunities for businesses to grow through the
innovation of less wasteful process (green technology) and with life-enhancing goods and
services.
 Industry is moving from lower value-added activities.

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 Even traditional manufacturing sectors such as chemicals and steel are shedding less
sophisticated product lines and emphasizing more technology-intensive goods and services.

FINDING BY GLOBAL ENTREPRENEURIAL DEVELOPMENT INDEX (GEDI) IN 2012

 The drivers of productive entrepreneurship have deteriorated globally. On a scale of 0.0 to

1.0, the quality of the drivers of productive entrepreneurship declined from 0.67 to 0.60,
about 10% drop between 2010 and 2011.
 While entrepreneurship has fallen in most countries, it has fallen less in the United States
and therefore the U.S leads the index in 2012. However, the world as a whole is operating at
about 30% of its entrepreneurial capacity.
 In almost all countries, high-growth entrepreneurship has suffered the most. If a country
would focus on improving high impact entrepreneurial capacity by improving institutions
and organization building, that country could greatly increase economic growth.

Table 2. Top 10 Entrepreneurial countries in 2012 and their Ranking in 2011

Country GEDI 2011 Rank 2011 GEDI 2012 Rank 2012

United States 0.64 3 0.60 1

Sweden 0.59 5 0.57 2

Australia 0.51 11 0.56 3

Iceland 0.67 6 0.55 4

Denmark 0.67 1 0.55 5

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Canada 0.65 2 0.54 6

Switzerland 0.56 7 0.54 7

Belgium 0.50 12 0.49 8

Norway 0.53 10 0.49 9

Netherland 0.54 8 0.48 10

Taiwan - - 0.48 10
Source- Global Entrepreneurial Development Index (GEDI) http//www.thegedi.org/

Data reported by the Global Entrepreneurship Monitor (GEM)

The Global Entrepreneurship Monitor (GEM) project is an annual assessment of the entrepreneurial
activity, aspirations, and attitudes of individuals across a wide range of countries. Initiated in 1999 as a
partnership between London Business School and Babson College, the first study covered 10 countries;
since then nearly 100 “National Team” from every corner of the gl3 have participated in the project,
which continues to grow annually. In 2011, the project had an estimated global budget of nearly US$9
million.

GEM is the largest ongoing study of Entrepreneurial dynamics in the world.

GEM explores the role of Entrepreneurship in national economic growth, unveiling detailed national
features and characteristics associated with entrepreneurial activity. The data collected is “harmonized”
by central team of experts, guaranteeing its quality, and facilitating cross-national comparisons.

Donna Kelly, lead author of the GEM report for 2011 (published in 2012), has said, “We now have nearly
400 million entrepreneurs starting and running the businesses in the 54 economies. Even better needs is
that over 140 million of these entrepreneurs expect to add at least five new jobs over the next five
years. These figures and growth projections affirm that entrepreneurial activity is flourishing across the
globe and that entrepreneurship, as an economic engine, is the best hope for reviving a weakened world
economy.”

As such, programs are constantly being crafted to promote entrepreneurship in almost all economies.
Substantial support and programs for entrepreneurship have resulted in the growth of small and
medium enterprises (SMEs) into big enterprises.

According to the 2011 GEM report, despite positive trends in business performance metrics,
entrepreneurs’ productivity to start a new business has decreased in the past 18 months, as shown by
the following examples:

 Since June 2010, a downward trend has been noticed in the percentage of entrepreneurs who
report a willingness to start a new business In the current environment (-23%).
 Despite a global decrease in the willingness to start nee businesses, Latin America/Caribbean
leads all regions at 79%, with Canada close behind at 70% start-ups.

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 While Europe and the Middle East (58%) lag behind all regions, the United States (63%), South
Asia (63%), and Asia Pacific (61%) all reflect the global average.

Beliefs about access to capital are positive overall, as more entrepreneurs globally report greater
ease of access rather than difficulty in accessing capital, as shown by the following observations:

 Among all regions, Canada (59%) and Asia Pacific (46%) report the greatest ease of access to
capital.
 South Asia (37%) and Latin America and the Caribbean (39%) report the greatest difficulty in
accessing capital.

ENTREPRENEURIAL ACTIVITY IN EUROPE

 The Economist, in its July 28, 2012 issue, has pointed out that some cultures in
Europe are inhospitable to entrepreneurs. Total Entrepreneurial Activity average for
the region is only 6.63% where Montenegro has the highest average at 14.9% and
Belgium has the lowest average with 3.4%. On the other hand, according to GEM, in
2010, early stage entrepreneurs made up just 2.3% of Italy’s adult population,
4.2%of Germany’s and 5.8% of France’s. European countries are below these
averages in many cases. These figures explain why European countries were able to
produce only 12 new big businesses in 57 years (1950-2007).
 Except for Iceland (11.4), Macedonia (11.3), and Montenegro (14.9) who all hit a
double figures entrepreneurial activity average, the rest of the members of the
European countries poorly performed in the span of ten years.
 Competitiveness, fear of failure, and risk aversion are some of the reasons why the
Eurozone is in trouble compared to the Americas, Africa, and Asia. This may be due
perhaps to its culture of being “inhospitable to entrepreneurs; where wanting to
grow a start-up into a behemoth is quite countercultural as piercing and
performance art.” (The Economist, July 28, 2012)
 As a result, in Europe, no start-ups would like to take the risk of engaging in business
for fear that blowing up of their business is big deal, which will leave a lasting mark
as if it were a moral failure. This is why aspiring entrepreneurs would leave their
country for others with friendlier entrepreneurial policies.

ENTREPRENEURIAL ACTIVITY IN THE AMERICAS

 Other countries’ failure to provide support, policies, and programs for

entrepreneurial activities is an opportunity for others such as the U.S Latest data
show that there are around 50,000 Germans and an estimated 500 start-ups whose
founders are French that conduct their businesses in Silicon Valley.
 The U.S and other countries in Central and South America have friendly policies and
support programs for entrepreneurship. The average of total American

25
entrepreneurial activity showed a 16.24% growth covering the period from 2001-
2010. Note that in the U.S, total early entrepreneurial activity (TEA) showed
substantial increase in 2011 despite being high already in the 2010.
 Some key findings of Kauffman Index of Entrepreneurial Activity in the U.S in 2011
 The rate of business creation in the U.s declined from 340 out of 100,000 adults in
2010 to 320 out of 100,000 adults in 2011. These 0.32 business creation rate
translates into approximately 543,000 new businesses being created each month.
 Although the entrepreneurship rate decline in 2011, it remained more than 5%
higher than before the recession that started in 2007. Over the past decade and a
half, the business creation rate fluctuated within the range of 0.27% to 0.31%. a
separate measure also calculated in the report shows that from 2007 to 2010, the
quarterly employer establishment birth rate dropped from 0.13% to 0.11%. These
opposing trend may be due to the Great Recession pushing many individuals into
business owner ship because of high rates of employment. These individuals were
more likely to become self-employed or to start sole proprietorships.
 Both men and women had slightly declining rates of entrepreneurial activity among
Latinos went down by 0.04% (from 0.56% to 0.52%). It remained on a high level
however compared to previous years. Asian activity rate also slightly went down by
0.05% (from 0.37% to 0.32%).
 Immigrants were more than twice as likely as were the native born citizens to start
businesses each month in 2011. Both immigrant and native born entrepreneurial
activities have decline.
 Significant results, however, showed that age 20-24 and 45-54 groups increased
entrepreneurial activities, whereas, those aged 35-44 decreased in entrepreneurial
activities.

ENTREPRENEURIAL ACTIVITY IN AFRICA

 Africa has contributed the term ”parallel entrepreneur” the continent’s expression for those
folks who create a note work of several firms across a number of different sectors of the
economy. This is according to research conducted by EMONEY, a think tank based in Ghana,
Nigeria, and Kenya who owned average, six businesses each.
 In a 2010 report by McKinse Global Institute (MGI), lions on the move: the progress and
potential of African economist, written by Charles Roxburgh, Norbert Door, Acha Leke,
Amine Tazi-Riffi, Arend van Wamelen, Susan Lund, Mutsa Chrironga, Tarik Alatovik, Charles
Atkins, Nadia Terfous, and Till Zeino-Mahmalat, Africa’s growth acceleration was analyze.
The authors said that 27 of Arica’s 30 largest economist began to expand more rapidly after
2000.

26
THE AUTHORS FURTHER claimed:

 “All sectors contributed, including resources, finance, retail, agriculture, transportation, and
telecommunication. The natural resources directly accounted for just 24 percent of the
continents GDP growth from 2000 through 2008. Keys to Africa’s growth surge were
improved political and macroeconomic stability and microeconomic reforms.
 “Future economic growth will be supported by Africa’s increasing ties to the global
economy.”
 “Rising demand for commodities is driving buyers around the world to pay dearly for Africa’s
natural riches and to forge new types of partnerships with producers. And Africa is gaining
greater access to international capital; total foreign capital flows into Arise rose from
$15billion in 2000 to peak of $87billion to 2007.”
 “Africa’s economic growth is creating substantial new business opportunities that are often
overlooked by global companies.”
 “NGI projects that atleast four groups of industries-consumer-facing industries, agriculture,
resources, and infrastructure-together could generate as much as $2.6 trillion in revenue
annually by 2020, or $1 trillion more than today.”
 “Today the rate of return on foreign investment in Africa is higher than in other developing
regions.”
 “Early entry to African economies provide opportunities to create markets, establish brands,
shape industry structures, influence customer references, and establish long-term
relationship. Business can help build the Africa of the future.”
 “The rise of African urban consumer also will fuel long-term growth.”
 “Today, 40 percent of Africans live in urban areas, a portion flows to China’s and continuing
to expand. The number of households with discretionary income is projected to rise by 50
percent over the next 10 years, reaching 138 million. By 2030, the continents top 18 cities
could have combined spending power of $1.3 trillion.”

ENTREPRENEURIAL ACTIVITY IN SOME COUNTRIES IN SOUTHEAST ASIA

Entrepreneurial activities in Southeast Asia have lifted millions of people out of subsistence agriculture
into manufacturing and service industries, increasing wealth and alleviating poverty in most areas.

Cambodia

International Entrepreneurship (http://www.Internationalentrepreneurship.com/) says, “Cambodia is

growing very fast and within ten years will be a very different country.” Its GDP is $2,400 (2012 est.) per
capita and most families (75%) still rely on the agricultural sector for employment. Through the country
enjoyed a 6.6% (2012 est.), fears of renewed political Instability and rampant corruption help keep
direct foreign investment low. Long-term economic development remains a daunting challenge.

27
Laos

The CIA World Facebook describes the government of Laos as being one of the few remaining one party
communist states in the world. Laos began decentralizing control and encouraging private enterprise in
1986. The results, starting from an extremely low bas, were striking --- growth -averaged 6% per year
from 1988-2008 except during the short-lived drop caused by Asian financial crisis that began in 1997.
Laos's growth exceeded 7% per year during 2008-2012. Despite this high growth rate, Laos remains a
country with an undeveloped infrastructure, particularly in rural areas. It has a basic, but improving,
road system, and limited external and internal landline telecommunications. Electricity is available in
75% of the country. Laos economy is heavily dependent on the capital-intensive natural resource
exports.

Thailand

International Entrepreneurship (http://www.Internationalentrepreneurship.com/asia/thailand/) says

that entrepreneurship has long been the main vehicle of Thai economic growth. However,
entrepreneurship in Thailand is hampered due to ineffective enterprise education and a lack of qualified
management. The economic crisis in the mid 1997 had serious negative impacts on the Thai economy.
Thus, the go3 and other related agencies initiated several projects and activities to help strengthen and
promote entrepreneurship in the country.

According to GEM, Thailand has one of the highest rates of women entrepreneurship activity, which
stood at 18.5% in 2002. In the early 11990s approximately 20,000 new enterprises were registered
annually with the Ministry of commerce. This number declined at the height of the Asian crisis in 1997-
98 and rebounded when the economy recovered in 2001. The current number of registered new
enterprises is approximately 32,000.

Vietnam

Vietnam joined the World Trade Organization in January 2007, which has promoted more competitive,
export-driven industries. Vietnam became an official negotiating partner in the Trans,-Pacific Partnership
trade agreement in 2010. Agriculture's share of economic output has continued to shrink from about 25,
% in 2000 to less than 22% in 2012, while industry’s share increased from 36% to nearly 41% in the same
period. State-owned enterprises account for roughly 40% of GDP. Poverty has declined significantly, and
Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than
one million people every year. The global recession hurt Vietnam’s export-oriented economy, with GDP
in 2012 growing at 5% the slowest rate of growth since 1999. In 2012, however, exports increased by
more than 18%, year on year; several administrative actions brought the trade deficit back into balance.
Between 2008 and 2011, Vietnam’s managed currency, the doing, was devalued in excess of 20%, but its
value remained stable in 2012.

28
Taiwan

The spirit of entrepreneurship is growing in Taiwan. Taiwan’s economic development since World War II
has been fueled by over one million small and medium sized enterprises, which resulted in Taiwan’s
inclusion as one of four East Asian Tiger economies. Most small-scale start-ups are funded by family and
friends and managed as family businesses. Qualified human resources are readily available in a nation
where the literacy rate is over 99.5%. The Taiwanese government actively supports the development of
small and medium sized high-tech enterprises by publicly finding incubator centers in partnership with
institutions of higher education.

Indonesia

The Indonesian government has realized that entrepreneurial activities increase economy
efficiency. Small and medium enterprise (SMEs) play a dynamic role in Indonesian economy.
The number of Indonesian SMEs was 42.4 million and they contribute to 56.7% of GDP, account
for 19.4% of total export, and employed 79 millions of work force. There is a strong tradition of
women’s entrepreneurship in micro and small enterprises; however, women are less likely than
men are to be owners of medium-large-scale enterprises. Despite their small numbers, women
entrepreneurs in Indonesia have good reputation.

Singapore

Singapore has a highly developed and successful free-market economy. It enjoys a remarkably
open and corruption-free environment, stable prices, and a per capita GDP higher than that of
most developed countries. The economy depends heavily on exports, particularly in consumer
electronics, information technology products, pharmaceuticals, and on a growing financial
services sector.

Real GDP growth averaged 8.6% between 2004 and 2007. The economy contracted 0.8% in
2009 because of the global financial crisis, but rebounded 14.8% in 2010, on the strength of
renewed exports, before slowing to 5.2% in 2011 and 1.3% in 2012, largely a result of soft
demand for exports during the second European recession.

Entrepreneurial activity and innovation have become increasingly pervasive in Singapore in the
past five years. Quoting the “2005 Global Entrepreneurship Monitor” report, entrepreneurial
activity in Singapore has risen from 2.1% in 2000 to 7.2% in 2005 (Economic Development
Board), referring to the proportion of adults aged 18 to 64 that have engaged in starting up or
running their own new businesses in the last three and half years. In the same year, 2005, the

29
World Bank Report (“Doing Business in 2005”) ranked Singapore 3 rd in the ease of doing
business in Asia.

ENTREPRENEURIAL ENVIRONMENT IN THE PHILIPPINES

Micro, Small, and Medium Enterprise Development Council (MSMEDC)

In the Philippines, the Micro, Small, and Medium Enterprises Development Council or MSMEDC
(Source: http://www.dti.gov.ph/dti/index.php?p=419) is specifically tasked to stimulate the
growth and development of MSMEs through assistance and facilitation of national efforts in
promoting the viability and growth of micro, small, and medium enterprises. The MSMEDC was
created by virtue of Republic Act (RA) No. 9501, otherwise known as the Magna Carta for
MSMEs. Relevant agencies, both local and foreign, are being tapped by MSMEDC to promote
the use of relevant programs, and seek ways to maximize the use of Filipino labor and
economic resources.

Private Sector representation in the council is drawn from the MSME sector of country’s major
island groups, Luzon, Visayas, Mindanao, and from the labor sector who are appointed by the
President. A representation is also drawn from the private banking sector. Provincial Micro,
Small, and Medium Enterprise Development Councils (PMSMEDCs) are responsible for the
promotion, growth, and development of mSMEs in the province.

The MSMED Council

Chairman: DTI Secretary

Vice-Chairman: Private Sector Representative

Members:

Department of Agriculture (DA) Secretary

Department of interior and Local Government (DILG) Secretary
Department of Science and Technology (DOST) Secretary
Department of Tourism (DOT) Secretary
Small Business Corporation (SB Corp.) Chairman

Private Sector Representatives:

MSME Sector in Luzon

MSME Sector in VIsayas

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MSME Sector in Mindanao

Banking Sector

Labor Secto

Pursuant to Executive Order 793 dated 24 April 2009, the membership of the MSMED Council
has been expanded to include following heads of four (4) agencies:

Cooperative Development Authority (CDA)

National Livelihood and Development Corporation (NLDC)

People’s Credit and Finance Corporation (PCFC)

University of the Philippines-Institute for Small Scale Industries (UP-ISSI)

The Bureau of Micro, Small, and Medium Enterprise Development (BMSMED) serves as the
secretariat of the MSMED Council.

The Micro, Small, and Medium Enterprises Development Council has classified micro, small and
small, medium and large enterprises in the Philippines according to Table 3 below:

Table 3. The Philippines mSME Sector

Percentage Percentage
Number of of Total of
Category Asset Size Employees Registered Employment Value
Firms in 2008 Generated Added
Micro PHP 3 million Below 10 91.77%
and below
Small PHP 10 to 99 7.50% 70% 32%
3,000,000,001
TO PHP 15
Million
Medium PHP 100 to 199 0.36%
15,000,000,001
TO PHP 100
Million
Large PHP 200 above 0.37% 30% 68%
100,000,001
and above

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In terms of employment generated, the large firms contribute about 30% to employment
whereas the combined firms of micro, small, and medium contributed 70% of total
employment. In terms of value added, the combined firms of micro, small, and medium
enterprises contribute only 32% compared to the 68% of the large firms.

The Philippine Government is very supportive of micro, small, and medium enterprises as
exemplified by the Magna Carta for Micro, Small, and Medium Enterprises the legal framework
which was enacted way back in 1991 as RA 6897 then amended in 1997 as RA 8289. In 2007,
the law was once again amended as RA 9501. This law created the Small Enterprises
Development Council to discuss and prepare the policies and programs for implementation by
various agencies involved in mSME development.

Distribution of establishments in the Philippines

As shown in the 2009 data (National Statistics Office) in Table 4 on page 27, the Philippines is a
country of micro entrepreneurs.

Of the three island groups, Luzon had the most number of micro, small, and medium
enterprises with 517,788 or 68% of total mSMEs. Visayas had 106,930 or 14% while Mindanao
had 137,718 or 18% of total mSMEs, based on 2009 data.

The National Capital Region, Region IV-A (CALABARZON), and Central Luzon lead with the most
number of mSMEs. The Autonomous Region in Muslim Mindanao (ARMM), CARAGA Region,
and the Cordillera Administrative Region (CAR) lag behind with the least number of mSMEs.

DTI 2008-2010 Road Map

The Department of Trade and Industry, the secretariat of the MSMED Council, prepared the DTI
Road MAP as follows:

 Promote services exports and nurture the capabilities of competitive exporting

enterprises that produce high quality products.
 Sustain a more focused and aggressive export promotion campaign to maintain if not
expand existing, as well as target new and emerging, markets.
 Realize foreign market access arising from bilateral, regional, and multilateral
negotiations.
 Improve the business environment that directly impact on exporters.
 Pursue a country-imaging program to promote the Philippines as a source of quality and
competitive products and services.

What the Philippines sold to the world

32
Table 5 on page 27 shows the economic activity in the Philippines that resulted in the export of
goods in 2005 and in 2006. Home furnishings and housewares experienced the highest
percentage of growth (86.90%) while machineries and transport apparatus experienced the
largest decline in exports (-6.37%). The semi-conductor industry posted the highest export
(US$M20, 207.00 in 2005 and US$M22, 193.00 in 2006), with 9.83% growth.

Doing business with Southeast Asian neighbors

Based on the World Bank’s indicators on the ease of doing business, Philippines is behind its neighboring
countries in Asia when it comes to reducing the number of steps and procedures in business
registration. By far, the most serious obstacle to putting up a business in the minds of aspiring
entrepreneurs is the lack of access to financial sources. Entrepreneurs face financial barriers, which refer
to cost of doing business and access to capital of potential and start-up entrepreneurs. Table 6 on page
28 compares indicators of doing business in the Philippines, Indonesia, Malaysia, Singapore, Thailand
and Vietnam.
Table 4. Distribution of Establishment, by Region and Firm Size (2009)

Region/Province Total Number Micro Small Medium Total Large

of mSMEs
Establishment
Philippines 780,437 710,822 63,529 3,006 777,357 3,080
NCR 212,052 180,816 28,438 1,394 210,648 1,404
CAR 14,107 13,267 784 33 14,084 23
Region1- Ilocos 42,260 40,441 1,724 59 42,224 36
Region 2- Cagayan 23,736 22,858 839 21 23,718 18
Valley
Region3- Central 79,445 73,592 5,439 220 79,251 194
Luzon
Region 4A- 114,676 106,555 7,163 419 114,137 539
CALABARZON
Region 4B- 22,498 21,477 994 15 22,486 12
MIMAROPA
Region 5 Bicol 27,460 25,866 1,507 52 27,425 35
Region 6 Western 45,524 41,907 3,319 156 45,382 142
Visayas
Region 7 Central 45,710 41,026 4,161 240 45,427 28
Visayas
Region 8 Eastern 18,029 16,974 993 37 18,004 25
Visayas
Region 9 24,288 23,172 1,039 39 24,250 38
Zamboanga
Peninsula
Region 10 28,553 26,176 2,204 94 28,474 79
Northern

33
Mindanao
Region 11 Davao 36,828 33,395 2,603 141 36,689 139
Region 12 24,980 23,502 1,353 54 24,909 71
SOCCSKSARGEN
CARAGA 12,300 11,471 779 20 12,270 30
ARMM 7,991 7,777 190 12 7,979 12
Note- the 2009 List of Establishments was based on Field Updating conducted by the office on
supplemental lists from different secondary sources and updates from feedbacks on the
surveys undertaken by the office.

Source- National Statistic Office (http//www.census.gov.ph/search/node/2009%20list

%20%establishment)

Table 5- Philippine Exports (2005-2006)

Product 2005 (In Million 2006 (In Million %Growth

US Dollars) US Dollars)
Total 41,255 46,977 13.87
Home Furnishing, House ware 442 826 86.90
Marine product 410 465 13.59
Other Wearable’s 67 76 12.66
Garment & Textiles 2,557 2,843 11.22
Gift & Holiday Decors 187 207 10.62
Food 1,179 1,303 10.51
Semi-conductors 20,207 22,193 9.83
Motor Parts 717 784 9.30
IT Manufactures 7,091 7,339 3.49
Construction Materials 187 181 (2.81)
Organic Products 69 67 (2.74)
Machineries/Transport Apparatus 1,835 1,718 (6.37)
Others 6,306 8,966 42.19
Source- national Statistics Office as processed through BETP-managed TRADELINE Philippines
database.

Table 6. Doing Business Indicators

Number of Time to start Cost to start Cost of Number of

Start-up a Business a Business getting Tax
Procedures (In Days) (% of GNI pc) Electricity Payments
(% of GNI pc) Per Year
2005 2011 2005 2011 2005 2011 2005 2011 2005 2011
Philippines 17 15 47 35 23.9 19.1 - 762 48 47
Indonesia 12 8 151 45 101.7 17.9 - 1,379 51 51
Malaysia 10 4 37 6 26.6 16.4 - 95.5 35 13
Singapore 6 3 6 3 0.9 0.7 - 31.1 5 G5

34
Thailand 8 5 33 29 9.2 6.2 - 77.6 35 23
Vietnam 11 9 50 44 27.6 10.6 - 1,343 32 32

Total Trade Opportunities (TOR) of the Philippines

In 2006, the Philippines has shown high possible revenue streams from fashion with 136 Total
TOR received while coconut products organic products and motor vehicle parts received the
lowest at 13 Total TOR each received. See Table 7 below.

Table 7. Business Opportunities and Prospects (2006)

REVENUE STREAMS Total TOR

1. Fashion 136
2. Food 106
3. Home Furnishing 51
4. Construction Materials 49
5. Giftware and Holiday Decors 47
6. Marine Products (including Carageenan) 36
7. IT Products 27
8. Mineral Products 21
9. Coconut Products 18
10. Organic Products 13
11. Motor Vehicle Parts 13
12. Others 28
Total Trade Opportunity Reports (TOR) 545
Received

Entrepreneurial activity in the Philippines as reported by GEM (Philippine Report 2006-

2007)

 For out of 10 adult Filipinos aged 18-64 are engage in business ̶ equivalent to 19 million
of the whole country’s population. As a result, the Philippines ranks second among
countries with the most individuals owning a business.
 About 9.5 million comprise the established businesses (EB) in the country. This
prevalence rate makes the Philippines rank No. 1 globally among those with high EB
levels.
 For every Total Early Stage Entrepreneurial Activity (TEA), one is likely to survive as an
established business.
 Philippines ranked 6th globally among those with high rates of discontinued business.
 Globally, the country has the least gender gap among business owners – women are
more active in starting a business than men.
 Attitude and outlook is bullish – ranked 5th globally and highest in Asia in this aspect.
 Eight out of 10 adults are also considering starting a business as a desirable career
choice.
Entrepreneurial challenges

35
 Most businesses remain small in scale and are motivated by necessity.
 Low start-up capital – only PHP 10,000.00 or less with capital dipping at less than PHP
1,000.00.
 There is a dearth of “angel investors” – only 1% of the country’s whole population is
classified as non-owner investors.
 There is a lack of entrepreneurial education and training.
 There is a lack of support from concerned government agencies.
 There is the lack of access to financing.
Barriers to Entrepreneurship Development

Entrepreneurs, especially in the rural areas face the following non-financial barriers:

 Difficulty in finding information on local regulations, taxation, and environmental laws

 Inadequate infrastructure facilities
 Lack of support from local and national government
 Issues of graft and corruption
 Resistance to technological advancement
 Inadequate digital connections and internet facilities
Some positive developments in the Philippines

“Sharma (1977) found that entrepreneurs in the Philippines were independent and highly
motivated to take risks, with a great desire to maximize their potentials. The same study also
asserted that the “Filipino entrepreneur is college educated and hails from the business-oriented
family.”(p.23) More than a decade later, El-Namaki, (1988), reported a declining level of small
business self-employed in the Philippines. According to Zwierczek and Jatusripatak (1994), who
examined cultural features of entrepreneurship in the Philippines, entrepreneurs in this country
appear to have greater advantages than elsewhere in Southeast Asia. The Authors described
their samples as technically skilled, innovative, and opportunistic.

“Chen (1997) focused on small-scale retailers in the country. While the ethnic Chinese in the
Philippines have been very active in small business development, indigenous Filipinos have
tended to exhibit a lesser incidence of entrepreneurship. Since the 1980s, several measures
have been taken to broaden the appeal of entrepreneurship to assist Filipino entrepreneurs.
Despite efforts to promote and finance business ventures, several constraints have hindered
small enterprise development in the Philippines.”

The unequal regional development shows gaps in infrastructural and support services for
entrepreneurial activities at the regional level. This problem should be addressed by
government executives who have access to development funds.

This unfortunate scenario explains why people in the countryside leave for the cities, believing
that the metropolis is heaven, only to be frustrated to find no promised land. Had there been
jobs in the countryside, these people will not take the risk of going to parts unknown.

Local communities: We are in this together

E.F Schumacher (Small is Beautiful, 1973) stated that developing the countryside is the best
way for a country to grow in a sustainable way. For his part, former Tanzanian President Julius
Kambarage Nyerere has said, “Development is people development, (development) of
themselves, their lives, their environment… It will not occur unless governments are absolutely

36
committed to attacking poverty as its roots in the rural areas… power and development will
occur, if and only if, the people can organize their power in their own interests. If real
development is to take place, the people have to be involved” (From Nyerere’s book Uhuru na
Maendeleo (Freedom and Development), 1973).

The One Town One Product (OTOP) program of the DTI is an example of developing
communities at the grassroots. It advocates the promotion of local tourism and the town’s
products. The concept of OTOP-Philippines is adapted from Japan’s successful One Village
One Product (OVOP) project, which was started in 1979 by Governor Morihiro Hiramatsu of Oita
Prefecture as a form of people’s participation in the regional development of that country.

Table 8. One Town One Product (OTOP) Sample Products

Region Province Town Products

CAR Kalinga Tabuk Roasted coffee
I La Union Rosario Wood furniture
II Cagayan Bagao Home furnishing
III Nueva Ecija Cabiao Gift, house ware,
decors
IV a Laguna Paete Woodcarving and
paper mache
IV b Marinduque Torrijos Woven buntal
V Albay Tiwi Ceramics
VI Iloilo Maasin Bamboo
VII Bohol Inabanga Woven raffia
VIII Samar Jiabong Mussel
IX Zamboanga del Sur Pagadian City Seaweed
X Bukidnon Impasug-ong High value
vegetables
XI Davao Davao City Banana chips
XII North Cotabato Makilala Banana
CARAGA Agusan del Sur La Paz Oil palm

TOPIC 2: ETHICS IN ENTREPRENEURSHIP

DESCRIPTION

In real life, entrepreneurs encounter ethical problems all the time. This is why it is good to
discuss ethics early on in the budding entrepreneur’s life. Entrepreneurs are faced with complex
moral problems related to basic fairness, costing and pricing dilemmas, distribution choices, and
even personal relationships. Although it is difficult to give clear-cut and outright answers to
these ethical questions, airing these ethical dilemmas would be a good first step to making the
students aware of they will encounter in real life.

OBJECTIVES

This topic will enable the students to:

 Explain how ethics is a key ingredient to their success as entrepreneurs

 Discuss examples of unethical practices that can undermine their entrepreneurial
careers

37
 Discuss why socio-economic development must happen in an ethical way
Discussion Point 1:

The Importance of ethics in business

David McClelland, (McClelland D.C.: 1961, The Achieving Society, D. Van Nostrand, New York)
was among the first contemporary scholars to ask serious ethical questions about
entrepreneurship issuing a call for more study. McClelland observed, “We do not know at the
present time what makes an entrepreneur more or less ethical in his dealings but obviously
there are few problems of greater importance for future research.”

Entrepreneurs are today urged to look seriously into ethics because more and more people
realize that the saying “We are our brother’s keeper” is true. Capital and money in the
enterprise becomes depleted but the character of the entrepreneur outlasts these material
resources.

Ethics is internally imposed by the character of the entrepreneur. Honesty cannot be imposed
from outside the person; honesty is part of the person’s character, carried over from the
person’s upbringing and character development.

Without ethics the person will fall under the weight of corruption, which in some readings, is
termed lack of conscience or lack of character.

Government can impose laws and organizations can draw up a code of conduct for the
employees. But these are intended for people who violate them. Those who have integrity
obeys these laws and ordinances as part of their character, of who they are.

Doing the right thing works from an internal core and forms an upright character. External
codes and laws can force people to do right but fail to change the internal core of one’s
character.

Activity 1

1. Ask the students to discuss what they understand about the term “character.”
2. Cite examples of people whom you think have “character.” You can also explore movies or
TV Series that show people who have “character.” What makes this people different from
others? What makes these people different from other? What makes them who they are?
What problems do they face which tempt them to lose their character and become unethical
in their relationship with others?
3. Discuss why ethics is difficult to maintain in society. What makes it easy for people to
practice ethics? Can ethics be learned by children? How?
4. Make the students list unethical and ethical practices that lead to wrong and right socio-
economic development in the community and in the entire country.
Discussion Point 2:

Reasons why ethical entrepreneurs are important for the right and sustainable
development of a country

We do not only want to grow and develop; but to grow and develop in the right way, which is
the sustainable way. Sustainable development is centered not on science, not on technology
but on man. Human beings (employees, customers, suppliers, the members of the community

38
where the business is located) need to live healthy, dignified and productive lives in harmony
with nature.

Thus, an entrepreneur must run his business taking into account his responsibilities not only
towards himself but also towards others and towards the gifts of nature that he often utilizes for
his business.

In other words, he must run his business based on high ethical standards.

Consider an entrepreneur who exploits his employees, overworks them, under-pays them. Will
these workers gives their best efforts in producing goods and services? How long will they stay
in their jobs?

Or take a quick-buck operator, a business person out to earn a lot of money in one or two deals
by cheating customers through overpricing and deceptive product information. Do you think
such an entrepreneur will thrive in business for long? How can that be possible when buyers
eventually lose their interest due to the poor quality of the goods being sold, failure to deliver on
promises, shoddy service, short-lived demand, and other negative reasons?

Again, consider an entrepreneur who makes profit at the expense of environmental

degradation. He may be a fisherman who uses dynamite, a logger who depletes the forest
cover, a manufacturer who has no qualms throwing chemical waste by the riverside. If the law
does not catch up with him, nature has a way of claiming retribution. Soon there will be no fish
to catch, no trees to cuts, and no customers to buy what they say. Soon people will be angry
with the entrepreneur for the pollution (and disease) he has caused.

Doing business the ethical way builds consumer loyalty, keeps good employees and makes
them happy and productive, and creates a stable environment that minimizes unexpected
problems.

A country, whose base of job-generating, income-producing entrepreneurs stick to high

standard of conducts, is likely to sustain its socio-economic growth because it maximizes the
country’s prosperity, harmony, productivity, and natural resources.

Activity 1

Ask the students, individually or in groups, to go to a supermarket or big grocery store. Ask
them to look at competing consumer products (e.g., soy sauce, patis, cooking oil, bottled
bagoong, canned goods, etc.), compare their prices, and their content in weight and volume.
Do they see some brands seemingly priced lower but are actually more expensive because
they contain less of the stuff than the other brands? Ask the students what they think about the
pricing strategies being used and which of the brands would they buy if they were a customer?

Activity 2

Ask the students, individually or in groups, to interview an employee of any company. Let them
ask the employee if he is happy or proud to belong to his company and why. Let them probe
into how the company is treating the employee and his co-workers as well as its customers.

Activity 3

39
Let the students form a group and imagine that they are about to form a corporation. Then ask
them to list down the values that their company would uphold as priorities. You may also ask
them to write a brief code of conduct for their imaginary company or the beginning of a code.

Activity 4

1. Ask the students why they think you are discussing ethics in entrepreneurship studies.
Collate the answers and in groups let the student responds to these reasons.
2. In group let your students to go to Google search and key in the words “unethical
entrepreneurship.” Make the students give their analysis and reasons why unethical
practices exist and why ethics is important for entrepreneurship to prosper in a country.
You and your students may find the following examples and many others in the Google
search results:
a. Questionable Ethics and the Next Generation of Entrepreneurs
http://www.siliconvalleywatcher.com/mt/archives/2011/04/unethical_found.php
b. Research into unethical behaviour by entrepreneurs and investors
http://www.maastrichtuniversity.nl/web/Main/Sitewide/PressRelease/ResearchintoUnethi
calBehaviorByEntrepreneursAndinvestors1.htm
c. The impact of perceived unethical behaviour by entrepreneurs and investors
http://www.vlerick.com/en/research-and-faculty/knowledge-items/knowledge/the
%20impact%20of%20perceived%20unethical%20behaviour%20on%20conflicts
%20between%20entrepreneurs%20and%20investors
3. Ask students to add “Philippines” to their Google search and they will find the following
examples and more:
a. Dutch experts warn vs. unethical spa practices
http://www.sunstar.com.ph/cebu/business/2012/11/12/dutch-experts-warn-vs-
unethical-spa-practices-252977
b. Hypnotic Selling at iba pang Maduming Pangagantso ng Ilang MLM
http://www.sulit.com.ph/index.php/view+topic/id/68285/Hypnotic+Selling+at+iba+p
ang+Maduming+Pangagantso+ng+Ilang+MLM?
referralKeywords=unethical+practices+in+the+philippines
c. EY/Ethics Hotline
The EY/Ethics Hotline is a method for reporting conduct that may be unethical, illegal, in
violation of professional standards, or otherwise inconsistent with the Ernst & Young
Global Code of Conduct. Their instructions for reporting unethical practices are as
follows:

Before contacting EY/Ethics, we encourage you to consider whether you can

directly raise your concern with someone Ernst & Young.

If you do not feel comfortable doing so, or do not know whom to contact, you can
make a report to Ernst & Young on this website or alternatively by calling
your vocal EY/Ethics Hotline number.

Your web-based report will be routed initially to Ethicspoint, an independent third

party host for the EY/Ethics Hotline. It will then be promptly forwarded by
Ethicspoint to the appropriate Quality and Risk Management
personnel or internal legal counsel at Ernst & Young for review and
investigation. Calls to EY/Ethics may be answered by Ethicspoint or by
EY Hotline personnel, depending on the country of contact.

40
Further information on how to use this website and how Ernst & Young will
respond to your report can be founded in Meeting your expectations.
http://www.ey.com/PH/en/About-us/EY-Ethics-hotline

Activity 5

In groups, make the students write their group manifesto on ETHICAL

ENTREPRENEURSHIP.

Resource Article 2

ETHICS IN ENTREPRENEURSHIP:
BEING GOOD IS GOOD BUSINESS
By Myrna R. Co
In all social interaction, ethics or simple honesty makes for the most stable foundation. It
is the basis for satisfying and lasting friendships, marriages, and other relationships.

The same is true when conducting business with people and institutions you deal with –
your employees, your customers, your suppliers, other business associates, the
government and the larger community and society.

Henry Kravis (founder of the American private equity firm Kohlberg Kravis Robert or
KKR) sums it up very well: ‘If you build that foundation, the moral and ethical foundation,
as well as the business foundation, and the experienced foundation, then the building
won’t crumble.”

In his blog, Early to Rise, entrepreneur Clayton Makepeace wrote on July 12, 2010 (The
Moral of the Story): If a product you’re promoting isn’t as good as your sale copy says it
is, try to improve it. If you can’t make it live up to your copy, change the copy. If you
can’t succeed with diminish claims abandon the product altogether.
(http://www.earlytorise.com/the-moral-of-my-story/The Moral of My Story... by
Clayton Makepeace 07/12/2010)

Defining ethics

To define ethics, it is important to understand first the closely related concepts of

“values” and “morality” with which ethics often confused.

Values are the qualities or ideas which each of us cares about, upholds and considers
important. They can be morally or ethically based, or simply based on our natural wants
and needs.

They can be good or bad, reasonable or unreasonable. We tend to act according to the
things we value.

Examples of an individual’s values are family, money, career, love, friendship. In the
case of business, these may be efficiency, innovation, accountability, service
excellence, and empowerment of workers.

41
Morality is one’s individual perception of right and wrong, good and evil. The 16th century
philosopher Immanuel Kant believes that the moral law is within each of us, guiding us
in our actions. While one’s perception of morality does not directly affect others, it does
influence the attitudes and values of society.
Ethics is a set or system of behaviour based on moral ideas. It is a product of society;
no wonder may ethical issues deal with the relationship between individual and the
group.

Some of the most basic ethical concepts includes honesty, integrity, justice, equality,
and respect. Application of the principles implied by these concepts is not uniformly
simple; in some cases, it can be tricky and complicated.

Ethics differentiated from the law

Behaving ethically is often confused with behaving lawfully. They are closely related but
not quite the same. Ethics is about what is right and what is wrong. Law is about what is
lawful and what is unlawful.

A law is made with ethics as a guiding principle; it is ethics “codified” for the purpose of
regulating and maintaining order in society.

We can always wish that all ethical behavior would be upheld by law. But this does not
always happen. Someone can produce and sell good-quality products at a very
reasonable prices, consistently giving his customers good value for their money. But if
he neglected to register his business with the appropriate agencies of government, this
otherwise ethical entrepreneur is breaking the law.

Ethics will not punish anyone who breaks its rules. The law will go after violators and
mete out sometimes too harsh penalties, penalties that may break ethical standards.

Why ethical business is good business

Once again now:

At its most basic, ethics are moral guidelines that govern good behavior.

So behaving ethically is doing what is morally right.

Behaving ethically in business is widely regarded as good business practice.

A company that cheats its customers, exploits its workers, and avoids paying taxes, for
example, may thrive for a while but will be hard pressed to survive over the long run.

The advantages of ethical behavior in the business are cited by Brian Hill writing for the
Chron website (http//smallbusiness.chron.com) and adapted here…

 Building consumer loyalty—Consumers are getting increasingly educated and

aware of their rights. They may let company take advantage of them once, but
will not tolerate being treated shoddily and unfairly again. They would write
letters, e-mail, make a phone calls, complain to the DTI (Department of Trade
and Industry), and post their bad experience on Facebook and other social

42
media. Conversely, a good experience with a business can easily spread by
word of mouth and online. Remember that companies need a broad base loyal
customers, repeat customers attracted to the business because they have been
served efficiently and give a good deal, for what they pay. A reputation for doing
ethical business will help build this large and loyal customer base.
 Keep good employees--- Employees, the efficient and talented ones, will stay
long with a company only if they believe in it, are proud of it, and are happy in it.
They would want to be compensated fairly for the work and commitment they put
in they would want their managers to be transparent and truthful about what
going on in the business that would affect them. They would want to stick with a
company with a prestigious name. Entrepreneurs who observe good ethical
practices have a better chance of retaining the most talented and hardworking
people.
 Improve productivity in the workplace--- When employees are well compensated
and happy and proud to belong to a company, morale in the workplace rises.
People are motivated to do their best and to cooperate willingly in all the
company’s productivity programs. Only happy employees can make customers
happy-- an application of the principle “You cannot give what you do not have.”
 Avoid legal problems – In its eagerness to make profit, a business may ignore
worker safety, underpay their employees or refuse to give them legally
mandated benefits. Or it may violate environmental regulations such as having a
proper waste disposal system. Or possibly ignore proper labelling and packaging
laws. Or install “jumpers” to reduce their utility costs. The penalty for these
violations may be severe, including fess, fines and sanctions and even
imprisonment, not to mention a severely blemished reputation that would be very
hard to erase from the public’s mind.

Entrepreneurs, especially new ones, will be faced with a dilemma whether to go for quick and
short term gain and long term sustainability that can only be built slowly and patiently. An ethical
business builds in the long run a stable environment that minimizes unexpected problems and
maximizes harmony, prosperity, and productivity.

Henry Ford is quoted to have said, “A business that makes nothing but money is poor kind of
business.”

So, it makes good business sense to be good, or as Anita Roddick (of Body Shop fame)
asserts, “Being good is good business.”

Business ethics concepts- Applications

The most basic business ethics concepts are there—honesty, integrity, and fairness.

Honesty – Honesty should be the hallmark of a company’s dealings with its employees,
customers, and other publics.

It should communicate with its employees internal developments that will affect them such as
layoffs, reorganization moves, and austerity programs.

Honesty to customers and the public is manifested through truthful and ethical advertising,
proper labeling and naming of what goes into a product, and charging a reasonable cost for the

43
quality of the product or service it sells. It is also keeping its word to everyone it deals with and
in everything it does.

Honesty applies to every part of running a business while making a profit.

Integrity – Integrity in doing business covers a wide range of applications, including corporate
social and environmental responsibility.

Integrity is related to honesty. A person with integrity keeps agreements and promise. Whether
an employer promises a raise to an employee or a vendor agrees to supply top quality
merchandise, the basic business ethics concepts that are used in all aspects of business from
serving customers to hiring and firing employees.

Integrity is saying “no” to graft and corruption. It is avoiding giving expensive gifts, secret
commission, kickbacks, and payoffs to politicians, bureaucrats and other officials in the
government or among suppliers in exchange for contract, to facilitate a process or otherwise
give business some undue advantage.

Integrity may also be manifested by companies by increasingly empowering their people.

An integrity perspective may mean a shifting away from forcing employees to act in certain ways
to more freedom to take initiatives, from authoritarianism to share responsibility and power.
Such a perspective will recommend frequent use of delegation when organizing a company.

Fairness – Fairness is paying employees just wages for their work and dedication, giving clients
and customers value for their money and not overcharging them nor sneakily downsizing the
product that is sold to them. It is paying their suppliers on time and giving them support when
they need it.

Fairness is encouraging a healthy competitive atmosphere in the market. It is not engaging in a

cutthroat competition and in attempts to malign and spoil the image of competitors by foul
means.

The ethical business concept of fair play includes the fact that profit must be made, but not
through deceptive acts.

Fairness in the business dealings means being objective and interested in creating a win-win
situation for both Parties whether that is employer-employee or company-client or company-
supplier, or business verse=us its competitors.

In business relationships, fairness means never taking unfair advantage of others through
manipulation, concealment, abuse of privileged information, misrepresentation of material
facts or any other unfair dealing practice.

Ethics and corporate social responsibility

Ethics and social responsibility go together like horse and carriage.

44
A socially responsible firm is often an ethical firm just as an ethical firm is often socially
responsible.

But not always.

There are companies running big and well-publicized social responsibility programs found to be
engaged in ethically dubious acts. These companies may be out gain brownie points in public
relations and image building but not sincerely committed to ethical business practices.

What is good for the business is not always good for society.

Take the case of a liquor or tobacco business. Producing and selling these products do not
necessarily violate business ethics but is it socially responsible? The same applies to casinos and
other companies that make a business out of gambling.

Business code of ethics

To ensure that all its employees, managers, directors, shareholders and other stakeholders act
ethically, a business will do well to adopt and implement a code of ethics otherwise known as a
code of practice.

Ethical codes a wide range of business aspects, including production, marketing, human
resource management, and finance.

To give example, a marketing code of ethics would typically include-

 Offering gifts to client (“Must not give or offer to give any gift that is more than token
value or that goes beyond the common courtesies”)
 Receiving gifts from clients (“Must never request or ask for gifts, entertainment or any
other business courtesies”)
 Business communication (“should take care to avoid exaggeration, colorful language,
guesswork, etc.”)

Business ethics and mSMEs

Can a company be too small to afford to practice good practice business ethics?

In their early start-up stage, some small companies may try to cut corners by ignoring
established ethical practices, thinking these could be handled later when their business shall
have stabilized. The premise here is that complying with a high standard of business ethics is

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expensive or even wasteful or unnecessary. Another premise is that new and struggling
businesses are exempt from strict standards and rules while they are trying to get established.

Ethics is not “sometime” thing, but an “all the time” imperative. According to George May
International. Fairness, honesty, and integrity apply in all aspect or stages of any business.

As discussed earlier in this chapter, “being good” is good for business. It is not expensive over
the long run. Why? Because ethical products made by ethical companies are more appealing to
the local and export markets. They are also more attractive to joint-venture partnerships and
strategic business alliances.

Principles leadership as key

Personal ethics is a foundation for running an ethical business. An entrepreneur with high
ethical standards in his personal life will run a shop or a factory with the same principled
leadership.

Basic business ethics should flow down from the top to the rank and file. These will also
influence how the company deals with customers, suppliers, and other stakeholders.

It is sometime tough to follow one’s own ethical guidelines. Competitors may seem to be doing
everything---by hook or by crook--- just to get the business. Employees do whatever they think
is necessary to protect their job.

Business proprietors and CEO’s will do well to remember they are their own best change agent.
Their people—from the managers and supervisors to the humblest clerk—look up to them for
cues. If they see their leader cutting ethical corners, they will think that it is okay to be similarly
lax and compromising.

Expectation of the entrepreneur must be made clear and in writing, if the company doesn’t
have a code of conduct yet, these expectations in terms of ethical behavior and decision-
making must be included in an employee handbook that everyone in the company must read
and take to heart.

Policies must be enforced indiscriminately. Ethical breaches must be noted and penalized,
regardless who does it—a top performer or an ordinary worker. Unethical behavior will likely
be repeated and multiplied when others see that it is tolerated or ignored.

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