Module 5:

Contemporary
Economic Issues
Facing the Filipino
Entrepreneur
 Jean Baptiste Say (1767 – 1832)

•French economist
•Came up with the word
entrepreneur
•He is better known for his theory,
(Say’s law of demand)
 Characterstics of Entrepreneurship
•Entrepreneurship includes more than providing
work and getting compensated for it.

•It involves evaluating how much of the other

three inputs should be utilized and in what way.
Wheras the return of land is rent, the return on
labor is wage, and the return in capital is
interest, the return on entrepreneurship is profit.
Difference between entrepreneur and
business owner
•For instance, Sole proprietors, who are
considered as business owners. While
entrepreneurs can be sole proprietors, not all
sole proprietors are technically entrepreneurs.
•Some entrepreneurs may also be in
partnerships or registered as corporations.
•Entrepreneurs in IT-related industries are more
commonly referred to as start-ups.
• Entrepreneurship largely entails putting up a
business and assuming all risks. This Characteristics
makes entrepreneurs similar to business owners.
But in addition, entrepreneurs are more like
innovators. Entrepreneurs focus on spotting a gap in
the market or a business opportunity and think of
ways to exploit it.

• Following a trend and creating a product similar to

an existing one typically describes a business
owner. In contrast, an entrepreneurship tries to come
up with a new product or service. Entrepreneurs are
considered visionaries.
• Futhermore, having a new and untested idea – as is
often the case for entrepreneurs – means a greater
amount of risk. The potential return is likewise high if
the entrepreneur is able to make the idea into a
tangible product and successfully market it to
customers. The uncertainty of the success of a new
ideas make entrepreneurs more significant risk takers
compare to typical business owners.

• All entrepreneurs can be considered as business

owners, but not all business owners can be considered
as entrepreneurs,
 Innovation Strategies of
Entrepreneurs
• Creation of a new product or service – in response to a consumer
need.
• Improvement of an existing product – to keep up with evolving
consumer needs and preferences while at the same time a new
market is created.
• Process improvement –Enterprising individuals can be
entrepreneurs by coming up with an idea or service that will make a
process more efficient or will provide a more cost-effective
alternative to how it is usually done.

Entrepreneurs do not only focus on end consumers. Innovation can

also target businesses.
 Disruptive Innovation
• Which includes products and ideas that totally break
existing market structures.

• Is defined as a process that, as the name implies,

“disrupts” or changes the structure of an existing one. It
challenges the status quo by gradually gaining a
substantial customer base. It is the brainchild of Clayton
Christensen, a Harvard Business School professor and
founder of the Clayton Christensen Institute.
 The Filipino Entrepreneur

• Filipinos can be very enterprising. It is not a surprise

that some of the most successful Filipinos today
were once struggling entrepreneurs who started
with only an idea and an intense drive to succeed.
They took huge risks and preserved, and all their
hard work eventually paid off.
 Governance and Support
• The Department of Trade and Industry (DTI) governs entrepreneurs and
business in the Philippines. The agency is in charge of business
registrations and trade policies. It regularly hosts programs on regional and
national levels that aim to educate and encourage Filipinos to put up a
business.

• Republic Act No. 10679, also known as the Youth Entrepreneurship Act,
was passed in July 2015. The act aims to support the development of
young individuals (18 – 30 years old) in the fields of finance and
entrepreneurship by integrating financial literacy and entrepreneurship
programs in education curriculums. The program will be implemented by an
Entrepreneurship Education Committee (EEC)
 Type of business Structures
• Sole proprietorship – refers to a business having a
single owner. The owner and the business are
taken as the same entity, which means the profit of
the business is also the income of the owner.

• Partnership – refers to a business having more than

one owner. The owners and the business are also
considered as one entity, but the profit of the
business is divided among the partners.
• Corporation – refers to the business type where the
owner and the business are considered as separate
entities. Because ownership varies, the profit of the
business is not equivalent to the owner’s income. The
owners of a publicly traded corporation are its
stockholders. Additionally, a conglomerate refers to two
or more corporations under the same ownership or
parent company
 New Business Registration
• Registration of a sole proprietorship generally
takes shorter than setting up a corporation
because of fewer requirements. A sole
proprietorship business registration has eight
steps based on published procedure on the
national government’s Web site while a
corporation on average takes 15 steps to register
based on the Doing Business 2015 of World Bank.
Steps in sole-proprietorship business
registration in the Philippines
1. DTI Register Business name.

2. Barangay Secure Barangay Clearance.

3. Municipality Get a Business permit.

4. BIR Apply for tax identification

number (TIN); secure
authority to print receipts;
have ledgers and invoice
stamped.
5. SSS Apply as self-employed
owner.
 Issues and Challenges Facing the Filipino
Entrepreneur
Investments, Interest, and financing
• Financing a business idea is common issue that hinders
individuals from taking the entrepreneurial route. Where will
they get the money to make a prototype and conduct research
and experiments? Grant and loans may be awarded to
qualified individuals under the Youth Entrepreneurship Act. But
for those who are ineligible, an Entrepreneur has to decide
how to finance his/her idea.
An entrepreneur can choose from two sources of financing
1. One’s own funds
2. External financing

Crowdsourcing – is a term that describes solicitation of funds

and outsourcing services or ideas to people via the internet.
Crowdsourcing is an innovation in itself and it has gained
popularity in recent years mostly outside the country
Rent
For Business that require a physical store, rent is one of the highest
costs that drive down operating income. Business rent is driven by
several factors such as ever-increasing real estate price, location, foot
traffic, among others. An entrepreneur must decide on the most
strategic location to put up his or her business to maximize potential
returns.
Minimum wage
Another factor that drives up a business operating expense is wage.
Higher wage rates translate to lower profit because the companies
have to pay workers more. Conversely, lower wage rates potentially
result in higher business income. A business owner would want to
avoid being involved in messy and expensive labor lawsuit
Taxes
How does tax affect entrepreneurs? In the financing stage,
a higher income tax means less disposable income
available for the business. Then once the business is in
operation, there are local and national taxes to settle.
The most common business taxes paid by
entrepreneurs are percentage tax, value
added tax (VAT), capital gains tax, and
income tax
• Percentage tax - range from 3% to 15%
• VAT – 12%
• Capital gains tax – Real estate tax is at 6%,
tax on gains from the sale ranges from 5% to
32%