Considered favorable indicators for doing business in that particular location

12 Department of Education National Capital Region SCHOOLS DIVISION OFFICE MARIKINA CITY ENTREPRENEURSHIP Recognize th

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Department of Education National Capital Region SCHOOLS DIVISION OFFICE MARIKINA CITY

ENTREPRENEURSHIP Recognize the Potential Market First Quarter-Module 3

Writers:

Sheila Mae A. Malesido, MBA, LPT Richelle Requinala, MBA, LPT

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This module was designed and written with you in mind. It is here to help you develop knowledge, skills, and attitudes in the course of Entrepreneurship. The scope of this module permits it to be used in many different learning situations. The language used recognizes the diverse vocabulary level of students. The lessons are arranged to follow the standard sequence of the course. But the order in which you read them can be changed to correspond with the textbook you are now using. The module is divided into two lessons, namely:

• •

Lesson 3 – Recognize a potential market Lesson 4 – Select the best product or service that will meet the market need.

After going through this module, you are expected to:

1. 2. 3. 4.

identify the potential market discuss the nature and concept of market identification describe the types of market segmentation, and determine the process of target marketing

Shade the (4) four types of market segmentation that you can find in the table below (diagonally, horizontally and vertically). B E C R U I T E M H C

E D C O U F M E A A E

H T L P U G J W R S M

A E I F K R P U K C D

V A M E S E D A E H H

I C A V U R S C T H C

O H T C F E P A S V K

R E E E A R C H E N D

A R S V A B R D G M E

L P F T C V Y T M F V

C Y B U N P R T E L E

R A N U L N A M N F L

K U P

C N T

K O N

E T E

M E F L M E

L A G

M F C I A N

U G A

N D O L M L

G E O G R A P Y T C O

S Y R U L I T Y A W P

B H W R U T N K T C M

G E O G R A P H I C A

R T O U W S N O O R N

K H V K M E Y M N S T

M A R C I H P A R G O

R A O H E V

I C E

L Y L

E S D

R P I

M E D

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Lesson

3

Recognize a Potential Market

The entrepreneur must acquire the required competency in order to gain competitive advantage. After assessing his/her entrepreneurial competency and the business competency of his/her chosen venture, the entrepreneur now determines his/her market or customers. His potential market. Why is there a need for the entrepreneur to clearly identify and define the customers of his/her proposed business venture? The reason is very simple: Not all will become customers of the business venture.

How does the Mercury Drug started? Just like other entrepreneur success stories, Mariano found opportunities for entrepreneurship after World War 2. Mariano had been working in a local drugstore when the war destroyed several businesses in the city.

This Photo by Unknown Author is

Mariano saw the need to supply sulfa drugs, which were used to treat bacterial infections. He started to buy sulfa tablets and sold them at affordable prices. Soon, other people followed and adapted Mariano’s strategy. However, only Mariano sold high-quality sulfa tablets, which ensured him a steady clientele. With his hard work and dedication to build up savings, he was able to put up his first drug store in 1945, which he named Mercury Drug. The Roman god Mercury is known for speed. He also carries the caduceus, which is a symbol in the medical industry. Mariano invested his earnings into the company and introduced many innovations in the service. Among these innovations were a drug-delivery service to clients and locations that are open 24/7 because he knew people would be needing medicines any time of the day. By the time Mariano opened his second Mercury Drug at the newly constructed Ayala shopping center in Makati, he had invested in technological innovations, such as biological refrigerators and computer-guided controls.

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Mariano’s dedication to his business has allowed Mercury Drug into 700 stores and a widely recognized name for quality pharmaceuticals. In the success story of Mariano Que tells us that a prospective entrepreneur needs to come up with a good idea. This will serve as the foundation of the new venture. Sometimes an entrepreneur sees a market need and has an idea for a product or service to fill it. Other times an entrepreneur gets an idea for a product or service and tries to find a market for it. In his story, how did he find the need to put up a drug store? Is he able to recognize immediately his potential market for the said business venture?

What is a potential market? The market you need to look at is your potential market, not the actual market served, the one that's limited to your existing customers. Your target market is much wider than just the people you already reach. It's the people you might someday reach, or people you could reach, that you need to be concerned about. The size of a potential market helps a company understand the level of investment it should make further in the market, while taking into consideration other factors. If the potential market is very small, it means there is a very small fraction of the total population showing any interest in the product or category. This means that it is better that the company doesn’t invest further in the product or category because people won’t buy it. If the size of the potential market is large, it means that there is a huge fraction of the total population which is showing interest in the product, so further investment can be made on the product development or modification, marketing, promotions etc. The size of the potential market gives an estimate of what all a company should do and how much it should invest. For example, you want to calculate the potential market for laptops. For this, the entire population is divided into different segments which show interest in the product and then all the segments are added up. So, for laptops, the users who might be interested to buy are the students who are about to join residential campuses, students who simply want a laptop to differentiate it from the desktop at home, users of desktops who want to switch to a more portable version and office going people. The numbers in each of these segments of how many people are interested is found

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out through a market forecast and all the numbers are added up to get the size of the potential market. It's your plan--and every plan is different--so you need to know as much as you can about your potential market. GETTING THE INFORMATION The information sources that will help you conduct a market analysis are different for every business plan. For example, you might need local information you can get from your local chamber of commerce. Or you might be able to find your market information in every barangay or you might also need to find other government statistics, or other commercial statistics, so you may be conducting some internet searches to track down the information. Not all the information you need is going to be publicly available, and you may have to settle for educated estimates. Sometimes you'll have to extrapolate information from different sources to get the information you're seeking. Some good market research come from telephone directories, catalogs, industry association statistical compilations, real estate information and density maps. The following are the sources of data or information that could help us track down information of our potential target market: 1. The Philippine Statistics Authority – for information on population, housing, industry and trade. 2. The Land Transportation Office – for records of vehicles, cars, trucks, motorcycle, jeeps and the like. 3. The Department of Education and its regional offices, and schools, colleges, and universities (public and private) – for enrolment and graduate records. 4. The Supreme Court and all lower courts or justice – for records of judicial cases are kept. 5. All police agencies and offices – for records of criminal cases 6. The Securities and Exchange Commission – for all trade, industrial and commercial establishments and other organizations, profit or non-profit records. 7. All other departments, offices and entities of the government and private organizations, entities or offices – where different kinds and classes of data and information are registered. MARKET IDENTIFICATION Market identification is a strategic marketing approach and process that is intended to define the specific customer of the product. There are three strategic marketing approaches that will assist the entrepreneur in defining the specific market of the product.

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1. Market segmentation 2. Market targeting;

1. SEGMENTATION Now that you searched information on your potential target market, you should next try to divide it into useful slices or segments. Dividing the market into these segments helped the entrepreneurs address the more specific market needs, media, pricing patterns and decision criteria in each of their different market segments. This will also help pinpoint the specific customers who are willing and are able to buy the proposed product/s. This could be done through the process of segmentation.

1. Demographic Segmentation is a process of dividing the whole market based on age, gender, status, religion, and the like. The purpose is to limit the market into their similarities and finding the best strategy to satisfy their needs and wants. 2. Geographical Segmentation is a process of dividing the whole market based on geographical locations. It focuses on satisfying the needs and wants of the customers based on their identified location. There is a need to consider the variables such as climate, dominant ethnic group, culture, density (either rural or urban) and classification of the geographical unit (e.g. first class, second class, etc.) when the entrepreneur divides the total market into a smaller segment using geographical segmentation. 3. Psychological Segmentation is that the market is divided in terms of what the customers think and believe like the needs and wants, attitude, social class, personality traits, knowledge and awareness, brand concept and lifestyle.

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4. Behavioral Segmentation is that the market is divided based on the variables such as perceptions, knowledge, reactions, benefits, loyalty and responses. Market segmentation is a strategy that can assist the entrepreneur in identifying the particular homogenous segment to serve. After all the consumer population in its entirety basically has different attitudes, perceptions, inclinations or responses. The following are the important factors must be considered in segmenting the market. 1. Accessibility of the market segment. The market segment must be accessible to the business 2. Size of the market segment. The market segment must be large enough to provide wealth to the entrepreneurial venture. 3. Distinction of the market segment. The market segment must be easily differentiated.

2. MARKET TARGETING Market targeting is a stage in market identification process that aims to determine the set of buyers with common needs and characteristics. In the market targeting phase, the entrepreneur has already divided the total market and is now in the process of 1. Evaluating each market segment and 2. Selecting the target market segment or segments to serve MARKET SEGMENT EVALUATION After segmenting the market, the entrepreneur does not simply select any market segment to serve. He/she must instead conduct a proper and critical evaluation of every segment with the following important factors: 1. Size of the segment and expected growth 2. Existing and probable structure of the segment 3. Capability of the business. SIZE AND GROWTH OF THE SEGMENT The size of the segment or its growth are the two frequently asked details every time a new business is about to be opened. The size and growth of a segment are considered favorable indicators for doing business in that particular location.

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For example, if local homeowners are part of your target market, then you should be able to count them. You need to know whether you have 500 people in your market, or 200,000, or 2 billion. Be able to show what the total market is for your business. Small entrepreneurs’ ventures in terms of capital base may find such environment unfavorable even though the size of the industry is large enough and the segment is growing. The entrepreneur therefore has to critically evaluate whether it is good to compete in a market segment where several other businesses in it becomes too competitive. Market size is dependent on the number of qualified customers and the frequency of purchase. Qualified customers are customers who need or may need the product, have the purchasing power to pay, and the authority to buy an available product. Qualified customers within a market would have the following characteristics with the acronym N-P-A: 1. Need The need characteristic answers the question “How many percent of the market would need the product?” To know this, a floor polisher marketer can hire a market research agency to conduct a survey and ask question like “To what extent would you be interested in owning a floor polisher?” If two out of every ten surveyed say they are definitely interested, then 20% of the total number of consumers would be the potential market. 2. Pay There must enough purchasing power for the consumer to be able to pay for the product. The higher the price of the floor polisher, the lesser the number of people who can afford it. To overcome this dilemma, some companies such as Waters Philippines (water purifiers) and many others offer installment terms to make it more affordable for customers to pay for their products and to expand their potential market even further. 3. Authority and Availability Persons below 18 years of age, for example are not a legal market for cars and alcoholic beverages. They have no authority to use these products. Men are obviously not the typical consumers to buy bikinis, so they constitute another category of those without “authority unless they were given the “authority” as in the case of 7-11 Japan where men buy pantyhose on the behest of their wives. STRUCTURE OF THE MARKET SEGMENT In evaluating the present and future structures of the segment, the entrepreneur may use Michael Porter’s five forces of competition and address the following questions:

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1. What is the level of competition in the market segment? Are there strong and aggressive competitors? 2. Are there existing and potential substitute products? Are the barriers to substitute products strong? 3. Who are the present and potential buyers in the segment? Is the bargaining power of the buyers strong in the segment? 4. How strong is the bargaining power of the suppliers in the segment?

MARKET TRENDS You need to understand what's going on with your market. What marketing trends and fashions do you see having an influence on your market segments? If you're selling cars, for example, is there a trend that shows people responding to higher gasoline prices or more environmental concerns? In computers, is there a trend toward more power and lower prices? How does the increase in TV recorder equipment affect your market? The questions that affect target markets will be different for every business, and these are just examples. What's important is that as you create your business plan, you become aware of the market trends that affect your specific market.

MARKET SEGMENT SELECTION

Individual or oneon-one marketing Products are tailored to the needs of individual consumers

Entrepreneurial Marketing Strategies Segmentation Marketing Differentiated Concentrated marketing marketing Several segments Only one or few are covered and segments are products are covered, but the designed to suit product is the specific needs designed for the of a particular majority of the segment consumers in the segment market.

Mass or undifferentiated marketing Products are mass produced for the whole market where consumers are not differentiated.

Application of Entrepreneurial Marketing Strategies in Selected Segments

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Individual or oneon-one marketing • Tailoring shops • Furniture manufacturers

Entrepreneurial Marketing Strategies Segmentation Marketing Mass or undifferentiated Differentiated Concentrated marketing marketing marketing • Different • Rolls Royce • Production of toothpaste refined sugar • Different milk products

Examples of Entrepreneurial Marketing Strategies in Selected Segments

Match the variables in column A with the method of segmentation in column B. Write the letter as your answer in the space provided before the number. Column A ________1. Brand concept ________2. Income ________3. Culture ________4. Knowledge ________5. Climate ________6. Social class ________7. Lifestyle ________8. Loyalty ________9. Family size ________10. Density

Column B a. Demographic segmentation b. Geographic segmentation c. Psychological segmentation d. Behavioral segmentation

Answer the following questions briefly. Write your answer on the spaces provided. 1. Identify the three ways of identifying the intended market. __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ 2. Discuss the concept of market segmentation and how the total market is segmented. __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________

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Your output will be rated by using the scoring rubric below: Areas of Assessment Ideas and Content

Unsatisfactory (2) Content is incomplete or not clear

Needs Improvement (3) Major points are addressed but not well supported

Satisfactory

Outstanding

(4) Major points are stated

(5) Major points are stated clearly and are well supported

Activity 1.1 Do the following tasks: Watch and observe three products being advertised or promoted on television. Evaluate the segmenting methods used by the producers of the particular products. Write your answers on the table below. Product brand name Product 1

Method used for segmenting

Product 2 Product 3

A. Select the best answer by writing the letter on the space provided before each number. _________1. It is the strategic marketing approach and process that is intended to define the specific customer of the product. a. Market identification b. Market segmentation

c. Market size d. Market growth

__________2. It is a strategy that can assist the entrepreneur in identifying the particular homogenous segment to serve. a. Market identification b. Market segmentation

c. Market size d. Market growth

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__________3. Maria and Jose want to start their restaurant business focusing on grilled foods. Jose is thinking of idea on limiting the market into their similarities in religion since certain religions prohibit eating specific species. He wants to find the best strategy to satisfy their needs and wants. If you were Maria, what would you recommend to Jose? a. Demographic segmentation b. Geographic segmentation

c. Behavioral segmentation d. Psychological segmentation

__________ 4. A telephone company is providing unlimited call and text services throughout Mindanao. The features of these services for consumers in Cotabato may be different from those for consumers living in Cagayan de Oro. If you are the manager of the company, what segment method will you choose to make sure that the services of your company will fit the needs of the respective market? a. Demographic segmentation b. Geographic segmentation

c. Behavioral segmentation d. Psychological segmentation

___________5. Avon used segmentation by personality (and profession) in coming out with different fragrances in the past. They classified women into five groups: energetic, romantic feminine, experimental, elegant charming and fresh. What method did Avon used? a. Demographic segmentation b. Geographic segmentation

c. Behavioral segmentation d. Psychological segmentation

B. Write True if the statement is correct. Otherwise write False and state your reason briefly. ___________1. The entrepreneurial venture can serve all the requirements of the total market. ____________________________________________________________________ ___________2. Market segmentation applies only to small entrepreneurial ventures. ____________________________________________________________________ ___________3. In geographic segmentation, the total market may be divided based on the income of the population. ____________________________________________________________________ ___________4. Demographic segmentation involves dividing the total market based on the gender of the customers. ____________________________________________________________________ ___________5. When a wider geographical are has been selected as the target market, it will be beneficial if the products are localized. ____________________________________________________________________

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___________6. It is a must for the entrepreneur to segment the market. ____________________________________________________________________ ___________7. All the information you need for your segment is publicly available. ____________________________________________________________________ ___________8. Your potential market is your actual market. ____________________________________________________________________ ___________9. The size and growth of a segment are considered favorable indicators for doing business in that particular location. ____________________________________________________________________ ___________10. After segmenting the market, the entrepreneur must conduct a proper and critical evaluation of every segment. ____________________________________________________________________

OFFLINE ACTIVITY A. Think of a product with several product lines that you wish to manufacture, for example, furniture such as tables and chairs. Determine the segmenting approach that you deem appropriate to use. See the first table as an example. Example Cosmetics Lipstick Face Powder Eyeliner

Method used for segmenting Psychological segmentation Behavioral segmentation Psychological segmentation

Method used for segmentation 1. 2. 3.

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B. Give examples of business that uses entrepreneurial marketing strategies in selected segments.

1.

Entrepreneurial Marketing Strategies Segmentation Marketing Differentiated Concentrated marketing marketing 1. 1.

Mass or undifferentiated marketing 1.

2.

2.

2.

Individual or oneon-one marketing

2.

Glossary of Business Terms

Bargaining power - In negotiating, capacity of one party to dominate the other due to influence, power, size, status, or through a combination of different persuasion tactics. Competition - the rivalry between companies selling similar products and services with the goal of achieving revenue, profit, and market share growth. Market - a group of actual and potential buyers with similar needs and wants interacting with sellers offering various products or services to satisfy those needs and wants Market potential / potential market - what a whole market segment might buy under ideal conditions Market segment - a fairly homogenous group of customers who will respond to marketing mix in a similar way Market segmentation - the process of dividing the total market into several groups seeking similar benefits from a product or service and requiring separate marketing mixes Market trends - changes and developments in buying and selling in the market Product – the tangible offering of a firm that satisfies customer’s needs and wants Strategic marketing – identification of one or more sustainable competitive advantages a firm has in the markets it serves (or intends to serve), and allocation of resources to exploit them. - is the process of recognizing the various leads a company has in the market it serves or seeks to serve and allotting resources to exploit this leads.

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Books

Aduana, Nick L. Entrepreneurship in Philippine Setting for Senior High School, 2017, C & E Publishing Inc., Quezon City Baltazar, William B., et. al. In Depth: A Guide to Successful Business Planning, 2017, Unlimited Books Library Services & Publishing Inc., Manila Go, Josiah. Fundamentals of Marketing in the Philippine Setting, 2010, Josiah and Carolina Go Foundation, Inc. Online Source https://china.usembassy-china.org.cn/wpcontent/uploads/sites/252/2016/12/principles_of_entrepreneurship_.pdf https://www.entrepreneur.com/article/78002 https://tycoon.ph/top-10-successful-entrepreneurs-philippines-story/2/ https://www.mbaskool.com/business-concepts/marketing-and-strategyterms/12221-potential-market.html https://www.bing.com/images/search?view=detailV2&ccid=TjckJd8e&id=09318C5 6AA8C694F5B4510320B040F697C0FF362&thid=OIP.TjckJd8eRKBIkEC0gxZGMgH aCz&mediaurl=https%3a%2f%2fwww.biggerplate.com%2fmapImages%2fxl%2fPpgJI csK_Market-Segmentation-types-mindmap.png&exph=284&expw=750&q=behavioral+segmentation&simid=60798599276 1411193&ck=A50030E7DA306E1A3CE164CF830E463C&selectedIndex=110&FOR M=IRPRST&ajaxhist=0 http://www.businessdictionary.com/definition/strategic-marketing.html http://www.alloutdigital.com/2012/08/what-is-the-definition-of-strategicmarketing/ http://www.businessdictionary.com/definition/bargaining-power.html https://www.collinsdictionary.com/dictionary/english/market-trends

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Development Team of the Module Writers:

Sheila Mae A. Malesido MBA, LPT (SEHS) Richelle C. Requinala MBA, LPT (CIS)

Internal Reviewer:

Dunhill Jan E. Elmido (NHS) Eva Montaña (MHS) Sylvette G. Sabaupan (NHS) Emily C. Santos ( Public Schools District Supervisor)

External Reviewer:

Kervin Rey G. Torente, Ateneo De Manila University

Cover Illustrator/ Layout Artist:

Sheila Mae A. Malesido MBA, LPT (SEHS)

Management Team: Sheryll T. Gayola Assistant Schools Division Superintendent OIC, Office of the Schools Division Superintendent Elisa O. Cerveza Chief, Curriculum Implementation Division OIC, Office of the Assistant Schools Division Superintendent Emily G. Santos Public Schools District Supervisor Ivy Coney A. Gamatero EPS– Learning Resource Management and Development System

For inquiries or feedback, please write or call:

Schools Division Office- Marikina City Email Address: [email protected] 191 Shoe Ave., Sta. Elena, Marikina City, 1800, Philippines Telefax: (02) 682-2472 / 682-3989

Is are considered favorable indicators for doing business in that particular location?

What is the most critical indicator in doing business?