Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Graduate School
Master of Science in Industrial Engineering and Management
Society

IEM 633: Management of Technology

Entrepreneurship:
Characteristics of Entrepreneur
Barriers to Entry
Private Investors

Prepared by:

Elbenson P. Rescober

Submitted to:
Engr. Ben Andres, DEM, PECE, ACPE
2nd Semester, A.Y. 2017-2018
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society
Objectives:

 Understand the role and characteristics of an Entrepreneur

 Explain how economies of scale and the control of natural resources led to
the necessary formation of legal monopolies
 Analyze the importance of trademarks and patents in promoting innovation

Entrepreneurship is considered as the act of assuming the risk and the tasks of
an entrepreneur.

Other Definitions:

1. Kuratko D F and Hodgetts RM – “The process of organising, managing

and assuming the risks of a business.”

2. Koontz & Fulmer – “The ability of a person to see business opportunity,

to get together the capital needed to take advantage of the opportunity,
and to start a business, taking the risk of failure in the hope of reaping the
rewards of success.”

3. Nathaniel H Leff – “Entrepreneurship is the capacity for innovation,

investment, and expansion in new markets, products and techniques.”

4. An expert ‘ “The act of starting a business

 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society
Entrepreneur

Takes the key role in controlling and administering the firm in all its aspects and
functions. He is the one who takes most of the risks (as when he loses his shirt and
faces scorn) and receives most of the rewards (as when he gets rich and reaps
recognition. (DTI – YOUR GUIDE TO STARTING A SMALL ENTERPRISE)

Definition from TESDA Online Program

Ang entrepreneur ay ang individual na may maliit o malaki na negosyong ipupundar

o naipundar na. Basta't nakapagsimula na ng isang kalakalan, ang isang individual
ay matatawag ng entrepreneur o negosyante

Role of Entrepreneur

1. The entrepreneur plans, organizes, and puts together all the resources required
to start a new enterprise and to run and operate it on a sustained basis

2. The entrepreneur takes risks

3. The entrepreneur innovates

4. In the process of starting, running and growing their business, small

entrepreneurs help build the nation.

 Bring about employment

 Improve the quality of life

 Contribute to a wider distribution of income

 Utilize resources for national productivity

 Generate social benefits through government

 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society

Personal Characteristics of Entrepreneur

 Opportunity Seekers

 Persistent

 Committed to work

 Risk-takers

 Demanding in terms of quality and efficiency

 Goal Setters

 Information seekers

 Good in planning and monitoring

 Persuasive and good in networking

 Confident

 Creative
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society
BARRIERS TO ENTRY

Barriers to entry are the legal, technological or market forces that discourage
or prevent potential competitors from entering a market.

The existence of barriers to entry make the market less contestable and less
competitive. The greater the barriers to entry which exist, the less competitive
the market will be. Barriers to entry are an essential aspect of monopoly
markets.

MONOPOLY

In some cases, barriers to entry may lead to monopoly. In other cases, they may
limit competition to a few firms. Barriers may block entry even if the firm or firms
currently in the market are earning profits. Thus, in markets with significant
barriers to entry, it is not true that abnormally high profits will attract new firms,
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society
and that this entry of new firms will eventually cause the price to decline so that
surviving firms earn only a normal level of profit in the long run.
There are two types of monopoly, based on the types of barriers to entry they
exploit. One is natural monopoly, where the barriers to entry are something
other than legal prohibition. The other is legal monopoly, where laws prohibit (or
severely limit) competition.

Natural Monopoly

1. Control of Physical Resources. Economies of scale occur when

increased output leads to lower average costs. Therefore new firms, with
relatively low output, will find it difficult to compete because theirs average
costs will be higher than the incumbent firms benefiting from economies of
scale. The prospect of higher average costs may deter entry.
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society

2. Natural / Geographical Barriers: Another type of natural monopoly

occurs when a company has control of a scarce physical resource.

LEGAL MONOPOLY legal prohibitions against competition, such as regulated

monopolies and intellectual property protection.

 Patent, trademark, and copyright

A patent gives the inventor the exclusive legal right to make, use, or sell the
invention for a limited time

A trademark is an identifying symbol or name for a particular good

 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society
A copyright, according to the IPO, “is a form of protection provided by the
laws of the United States for ‘original works of authorship’ including literary,
dramatic, musical, architectural, cartographic, choreographic, pantomimic,
pictorial, graphic, sculptural, and audiovisual creations.”

Summing Up Barriers to Entry

Table 1 lists the barriers to entry that have been discussed here. This list is not exhaustive,
since firms have proved to be highly creative in inventing business practices that
discourage competition. When barriers to entry exist, perfect competition is no longer a
reasonable description of how an industry works. When barriers to entry are high enough,
monopoly can result.

Barrier to Entry Government Role? Example

Government often responds with

Natural monopoly Water and electric companies
regulation (or ownership)

Control of a physical
No DeBeers for diamonds
resource

Post office, past regulation of

Legal monopoly Yes
airlines and trucking

Patent, trademark, and Yes, through protection of

New drugs or software
copyright intellectual property

Intimidating potential Predatory pricing; well-known

Somewhat
competitors brand names

Table 1. Barriers to Entry

 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society

Private Investors

A company or individual that takes their own money and uses it to help another
business or individual is known as a private investor.

They invest in small or large start-up businesses, as well as businesses that

have been operating, but have run into hard financial times.

Some private investors also help individuals who cannot secure a mortgage or
loan through a bank. The investor will negotiate the terms of the investment.

Businesses are looking for private investors because of the following: (1)
Securing business funds from large banks is usually difficult and (2) Business
make less revenue
 Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Graduate School
Master of Science in Industrial Engineering and Management
Society

REFERENCES

Department of Trade and Industry. (2015). Retrieved from dti.gov.ph:

https://drive.google.com/file/d/0B0ilL7KAK3i5dG9iUWZqSWhaY3c/view

Taylor, T. (1997). Rice University. Retrieved from Principles of Economics:

https://opentextbc.ca/principlesofeconomics/chapter/9-1-how-monopolies-
form-barriers-to-entry/