SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

Second Semester
A.Y. 2020-2021

CORRESPONDENCE LEARNING MODULE

ENTR 1013 – The Entrepreneurial Mind

Prepared by:

MARY ANN C. BARTOLOME

Reviewed by:

Recommended by:

ALICIA S. TULIAO
Academic Dean

Approved by:

EMMANUEL JAMES PATTAGUAN, Ph.D.

Vice President for Academics

ENTR 1013 – The Entrepreneurial Mind| 1

 NEOLMS LEARNING MODULE
ENTR 1013 – The Entrepreneurial Mind
AY 2020-2021

Lesson 1: Introduction to Entrepreneurship

Topic: Entrepreneurship Defined

Learning Outcomes: At the end of this module, you are expected to:

1. Define 'entrepreneur' and 'entrepreneurship'

2. Describe characteristics required of successful entrepreneurs
3. Explain the importance of factors of production and enterprise in becoming an entrepreneur
4. List several types of entrepreneurs and provide examples of each
5. Summarize the role that entrepreneurs play in the economy

LEARNING CONTENT

Introduction:

Entrepreneurship is an important engine of growth in the economy. In this lesson, you'll learn about what an
entrepreneur is and the key characteristics and skills that a successful entrepreneur possesses. Some
examples of entrepreneurs will also be given.Entrepreneurs also fill a vitally important role in market
economies. In this lesson, you'll also learn about the importance of entrepreneurship, different types of
entrepreneurs and how they add value to an economy.

ENTR 1013 – The Entrepreneurial Mind| 2

Lesson Proper:

Entrepreneurs - Risk Takers

Meet Eddie. He's an entrepreneur, which is a person who starts a business. Eddie recently graduated from
college with a degree in computer programming and has developed an app that he believes will make him a
small fortune. So, instead of working nine to five for a software company in Silicon Valley, he decides to start
his own. He wants to challenge himself and work the way he wants to without answering to a boss. He's using
a small inheritance to fund the start-up. As an entrepreneur, Eddie is not only starting a business, but is risking
his personal wealth to establish it.

Eddie is also trying to convince some friends from school to form an entrepreneurial team with him.

It is a group of people that help spread out the risk of the new venture
Entrepreneurial Team
and also bring in different talents and skill sets to it.

Eddie has a friend who majored in accounting and another who majored in marketing. He's hoping they may
come along with him and bring their skills and some cash. If he can build the right team, he can create a
synergy, where the group can achieve more together than they can apart.

Examples of Entrepreneurs
Eddie hopes that his entrepreneurial gamble will pay off as well as the gambles of other well-known
entrepreneurs, such as:

Bill Gates Steve Jobs Mark Zuckerberg

 Bill Gates, founder of Microsoft. There are probably not many people that have not been touched by
one of his products, such as Microsoft Windows, Microsoft Office and Internet Explorer.
 Steve Jobs, co-founder of Apple computers, which produces Macs, iPods and iPhones, as well as
Apple TV.
ENTR 1013 – The Entrepreneurial Mind| 3
  Mark Zuckerberg, the founder of Facebook.
 Pierre Omidyar, founder of eBay.
 Caterina Fake, co-founder of Flikr, which hosts images and videos on the Internet.

Characteristics & Skills

Entrepreneurs are like gamblers, and like any gambler, their chances of winning increase if they have the right
cards. Let's look at some characteristics and skills that help an entrepreneur succeed.

a. A tolerance for risk-taking is a necessary attribute for entrepreneurs. You can think of risk-taking as
pursuing an activity even if there is a chance of a negative consequence. Starting a business is risky,
and even more so when you're using your own money. Sometimes you can spread the risk by
convincing investors to come along on your new venture or by forming an entrepreneurial team, like
Eddie is trying to do. But, at the end of the day, you can't avoid risk if you are going to start a new
business and innovate.

b. Entrepreneurs also need creativity. Think about Steve Jobs and Mark Zuckerberg; these two
entrepreneurs brought innovative products to the market that changed the way we live. Successful
entrepreneurs innovate in one of two ways. They can bring an entirely new product or service to the
market, like the first cellular phone. On the other hand, they can radically improve upon something in a
dramatic way, just like the iPhone changed the world of smart phones.

c. Initiative is also required. Entrepreneurs lead. If you are not willing to start without being pushed, your
new business will never get off the ground. For example, Eddie had an idea fresh out of college and
took the initiative to start his business venture. No one had to convince him to act; he just acted.

d. Independence is also a paramount attribute for entrepreneurs. Nobody holds an entrepreneur's hand,
and they don't want any hand-holding. Successful entrepreneurs must be willing to go it alone and
succeed or fail on their own effort without relying much on the other people.

e. Entrepreneurs also need excellent problem-solving skills. Successful entrepreneurs often provide a
service or good that solves a problem for potential customers. But problem solving doesn't stop with
product design. Running a business is all about problem solving. You have to figure out how to start
your business, how to obtain financing, how to market your product and how to manage employees,
just to name a few problems that the average entrepreneur will encounter.

f. Organizational skills are necessary. Running a business is complex and time consuming. Without
organization skills, a business may unintentionally break laws, productivity could fall short or it could be
unprepared for unexpected situations and problems. Entrepreneurs need to constantly juggle and
multitask because they often wear the hats of owner, manager, accountant, and salesperson.

g. Communication is essential. Entrepreneurs must be able to effectively communicate with potential

lenders, investors, business partners and customers. Sooner or later, most businesses will need capital
to grow. Entrepreneurs must make their pitch to lenders or investors to get the funds needed to take
their business to the next step. And of course, if you can't convince your prospective customers of the
value of your product or service, your business is doomed to fail.

ENTR 1013 – The Entrepreneurial Mind| 4

Entrepreneurship Defined

Now let’s define the term entrepreneurship.

Meet Ernie. Once upon a time he, like most people, punched
a clock for a wage. When he wasn't working, he was pursuing
his hobby of gourmet cooking. After a particularly trying day
at work, Ernie decided to take the leap and become an
entrepreneur.

An entrepreneur is a person who takes a risk to start and operate a business. Not everyone is cut out to be an
entrepreneur. You need to have entrepreneurship:
- which is the ability and willingness to take the risk to develop and operate a
business for profit or a non-profit organization to serve the needs of a particular
group.

Factors of Production

A successful business typically needs to utilize all factors of production, which is just a fancy way of referring to
resources necessary to provide a good or service. Take Ernie's new restaurant for example. He'll need all the
classical factors of production, which includes land, labor and capital. He needs to either purchase or lease
property on which his new restaurant will sit. He'll need to hire people to help him prepare and serve meals.
He'll also need capital to finance the new restaurant.

In addition to the 'classic' factors of production, he needs one final factor of production, which he will supply
himself - enterprise.
Enterprise is the ability to take all other factors of production and use them to
create goods or services.
Entrepreneurs, like Ernie, provide the enterprise to an economic activity.

Types of Entrepreneurs

Entrepreneurs don't always fit into one neat little category. Let's take a look at different types of entrepreneurs.
In her book, Launching New Ventures, Ernie identifies different types of entrepreneurs:

 Home-based entrepreneurs are people that establish businesses in the comfort of their home. An
example of a home-based entrepreneur is a freelance writer or novelist who works from home.

 Cyber entrepreneurs are people that conduct business completely online. People that sell crafts,
antiques or used books on auction sites, such as eBay, are a prime example.

 Serial entrepreneurs enjoy the thrill of starting a new business, but they don't want to stay around and
operate it. Once the new venture gets off the ground, they move on to another start-up.

 Traditional entrepreneurs are people like Ernie who take the risk to start a business with the intention
of owning, operating and obtaining profits from it.

 Non-profit entrepreneurs start non-profit organizations to serve a specific group. Contrary to popular
belief, non-profit organizations can generate a tremendous amount of profits. The distinction between a
for-profit and a non-profit is that a non-profit organization is not permitted to distribute its profits to its

ENTR 1013 – The Entrepreneurial Mind| 5

 members. Instead, profits are retained and invested to further the goal of the non-profit. A classic
example of a non-profit is a non-profit hospital.

 Corporate venturers are people who work in large companies but are charged with finding new
opportunities for the companies. They often operate in skunk works, which operate fairly autonomously.
One of the most famous skunk works is at Lockheed-Martin, where advanced aircraft for the military are
developed.

Engine for Growth & Innovation

Entrepreneurs, like Ernie, are vital for economic growth and innovation. Entrepreneurs are willing to take the
risk to bring their ideas into reality. They often create new products and entire new industries. Examples of
entrepreneurship creating new products and services include Internet search engines, smart phones, computer
tablets and social media sites. These new products and services help grow the economy and create new jobs.
They can even change the face of society. Just remember the iPhone, and you'll see a good example of this.

Creating a new product and being brave enough to

try and sell it can lead to exciting things for an
entrepreneur. Lastly, in this lesson, we'll learn the
four common forms of entrepreneurship and their
characteristics.

MEET SKIP!
Skip has recently invented a new product for schools that he thinks will be a huge
hit. While he has not mentioned his product to anyone else, Skip feels it might be
time to start his own business selling his product. Now, anyone can start a
business selling products that are already on the market that are loved and
needed by consumers everywhere. But, starting a business selling a product that
is new and never been sold before, is a whole other story.

You see, if Skip decides to start and run a new business selling a new innovation
and takes on all of the risks and rewards, he would be considered an
entrepreneur. Before Skip decides to take a leap and start his business, he first
wants to do some research on the different forms of entrepreneurship. Come
along as Skip learns which form is best for him and his new school product.

Basics of Entrepreneurship

Let's learn the basics of entrepreneurship first. Keep in mind that entrepreneurial ventures are generally started
by an individual who usually has very limited resources to operate the business. Many times, they revolve
around new, innovative products but not always. The owner takes on all of the planning and the risks of the
business at the beginning. And, should the business succeed, they reap all of the rewards. Sometimes
investors are brought on board to share risks and rewards. Skip knows he is ready for the rewards, but is a bit
concerned about all of the risks he would be taking on himself

In order to continue with his new business, he knows he has to be willing to stake everything on his product -
including both his finances and his time. He will need to find the materials needed to make the product, the
money to finance his business, and the possible employees. Entrepreneurial ventures also need to do their
own marketing and have to generate their own sales and distribution. But, if the product takes off and is a huge
success, Skip could see sky-high returns.

ENTR 1013 – The Entrepreneurial Mind| 6

Forms of Entrepreneurship

Now, Skip has decided to compare the following four forms of entrepreneurship to better understand where his
new product and business best fits.

A. Small Business Entrepreneurship

There are many small businesses today. If Skip were to become a small business entrepreneur, he
would typically hire local employees and family members to run his own business, and would likely only
produce very small profits. Small business entrepreneurs often just operate to make ends meet and not
to make huge profits and become a multi-million-dollar business. It's common for small business
entrepreneurs to fund their company with the help of family and friends. This is because getting an
investor or financial backer is hard to do when the company is small and may seem unattractive to the
large investor. Some examples of small business entrepreneurship include small local grocery stores or
hair salons.

B. Scalable Startup Entrepreneurship

Skip learns that this type of entrepreneurship allows for growth. Those that fall into this form start a
company with the idea that their new product or service will make an impact on a large scale. Scalable
startup entrepreneurial companies are able to gain investments from venture capitalists and often look
to hire top notch employees with great skills. Once the entrepreneur finds a business model that can
grow, they attract more financial backing to expand. Examples of popular scalable startup
entrepreneurship can be found in Silicon Valley.

C. Large Company Entrepreneurship

Skip finds that unlike other forms of entrepreneurship, large company entrepreneurship is bigger in size
and offers new products to meet the needs of their customers. In order to maintain the business, large
company entrepreneurship needs to understand how the needs of customers change. They need to be
able to incorporate any new technology that has evolved. And, they need to be aware of their
competition so that they can make products that are equally attractive to win over customers from other
companies. The idea is to constantly offer products that are innovative and exciting so that customers
continue to come back. Some examples of large company entrepreneurship are Domino's and Red
Bull, who both started with one idea and made changes to reach more customers.

D. Social Entrepreneurship
The last form for Skip to consider is a social entrepreneurship. Social entrepreneurship seeks to bring
about positive change for the world. They want to make products that can solve problems and crises
and make their community and world a better place. Social entrepreneurship has a mission to fulfill and
are often innovative in finding funding and resources for their product. They want to make a difference
and are not motivated by profits. Some examples of social entrepreneurship would be things like
teaching homeless children or finding ways to feed the hungry.

ENTR 1013 – The Entrepreneurial Mind| 7

 Lesson 2: Introduction to Entrepreneurship

Topic: Innopreneurship: Entrepreneurship and Innovation

Learning Outcomes: At the end of this module, you are expected to:

1. Define Entrepreneur and Innovator

2. Be knowledgeable of the Relevance of Studying Entrepreneurship and Innovation
3. Understand Why be an Entrepreneur?
4. Identify The 4-Gate Model to prosperity
5. Understand the 12 M’s Entrepreneurship Journey Map

LEARNING CONTENT

Introduction:

Entrepreneurial Mind

Entrepreneurial Mindset is a term applied to a way of thinking. It’s about creativity, design thinking, and
development of innovative solutions to problems. While these ideas can be applied to business development,
the entrepreneurial mindset can be applied to any situation in which ideas, creativity, and focus on stakeholder
needs can be used to solve real world problems.

Watch this short video about 'Entrepreneurial Mindset' by

KauffmanFoundationhttps://www.youtube.com/watch?v=8NBnoVrLFPU

ENTR 1013 – The Entrepreneurial Mind| 8

Lesson Proper:

InnoPreneurship: Innovation + Entrepreneurship

Entrepreneurs: Innovators or creative minds that can make things happen.

“Making things happen is not the same as making new things happen.”

 An owner of a business who invests his/her resources to bring idea to life, setting the direction that
transforms that idea into reality, thus providing and gaining value that balances effort, purposes and
profit.
 Different from a corporate entrepreneur who does everything like an entrepreneur but does not have a
financial stake in the business.

THE RICHEST PEOPLE IN THE PHILIPPINES ARE MOSTLY ENTREPRENEURS.

Check out these eight individuals, all of them are successful Filipino entrepreneurs,
https://business.inquirer.net/273445/eight-successful-filipino-entrepreneurs-who-started-small

You could study well, work for others forever, but you might miss the opportunities to do more for yourself and
for your family. You only have one life to live and leave a legacy. What will you choose to do?

5 Components of an entrepreneur

1. Owner who invests resources – risk taking

2. Brings an idea to life – idea may or may not come from the entrepreneur, but turning an idea into
revenue maximization entails defining the best options.
3. Setting direction – getting quality information and making choices from these pieces of information
ENTR 1013 – The Entrepreneurial Mind| 9
 4. Making things happen – ensure all the interdependent elements are in harmony
5. Adding value – entails financial understanding

A person who introduces a new process, product, services or a

Who is an Innovator? business model to the marketplace that becomes commercially
successful.
2 Elements
1. New
2. Commercial success – requires customer acceptance

An innovator is different from an inventor who creates something new but has not attained commercial
success.

Business + Personal Plan: A firm need to have a business plan

1. Written document (for outside inventors)

2. Simpler outline of a business model (for internal guidance)
3. It provides the direction where the firm is going.

Prosperity for All: Profit is a requisite for a business.

Wealth Conversion Principle: 3 elements to create profit for a business idea:

 Business starts with an idea (based on the vision of the proponent). Then, investment of cash (or the
equivalent of cash) is needed to bring the idea to life.
 The cash is used to buy Inventories
 Inventories are sold, often with some credit terms, and when these Receivables are collected, they are
converted back to cash.
 It is a cycle with each cycle adding greater value to the firm.

3 S’s Requisites to prosperity

To make the wealth conversion principle come alive

1. Squad - form a team, which includes your choice of business partners.

2. Spread – need to ensure that products are sold are priced higher than the cost.
3. Speed – create a system to manage account receivables effectively.

Key Factors to Successful Entrepreneurship

ENTR 1013 – The Entrepreneurial Mind| 10

 1. Commitment – a strong drive to achieve goals and objectives through focus and pro-active follow-
through
2. Coordination – the organization of different people or groups coming from various functions to attain
efficiency, effectiveness and/or impact.
3. Competency – having a combination of ability, attitude and behavior to do particular role or job
repetitively well.

4-Gate Model to Prosperity (House of Prosperity)

1. Preparation Gate
2. Marketing Gate
3. Execution Gate
4. Self-leadership Gate

Gatekeepers – screens the potential entrants along the way.

CEO (Customers, Employees and Owners) – he/she needs to find a good balance of all three constituents and
ensure each of these three parties gets a compelling based on what is valuable to them.

Gates Interest and Expectations Gatekeepers

Preparation Profit and Dividends Owners and Stockholders
Marketing Quality and Good Price Customers
Execution High Pay and Work-Life Harmony Employees
Self-Leadership Fulfillment Self

12 M’s to Successful Entrepreneurship

Gate 1: Preparation (IQ - Intelligence quotient: capacity to think and reason)

1. Money – cash component

Success Story:

Butch Salvador was broke and had Php10 left, just enough to make photocopies of his business leaflet.
He knew a car repairman and uses the parking lot of a mall for prospecting and left his marketing
leaflets on windshields of ten cars with dents, which clearly needed some repair. He decided on this
strategy due to lack of resources. One out of ten came and the next customer saw them repairing car
dents outside the car owner’s house. From this, Car Magic was born.

2. Model – the business model or the big picture plan to generate sales revenue profit, cash flow, growth, and
how to scale up.

3. Mentors – are the experienced advisers who can add value to the entrepreneur by giving sound guidance to
increase the competency, lessen the risks, and help open more opportunities for the entrepreneur to succeed.

Example: International furniture designer Kenneth Cobonpue was encourage by his mother (who was
already in the furniture business) to build his own toys when he was a child.

Gate 2: Marketing (CQ- Creativity quotient: the capacity to innovate)

1. Mindset – is about beliefs. That being an innopreneur is better than being just an entrepreneur.

ENTR 1013 – The Entrepreneurial Mind| 11

 -one must have a mindset to find a novel differentiation or Unique Selling Proposition (USP) that solves
a real problem, by not selling the same thing as everybody else.

-That it is possible to earn dollars not just as an OFW but as an exporter.

2. Market – a set of buyers that an entrepreneur focuses attention on.

-it also includes the channel where the target market can see what is being offered.

Example: AHEAD tutorial focused on students doing well instead of students having low grades when
they started. To change the negative perception to tutorials as a last resort for students who were
failing in school. By focusing on achievers, they were able to change perception, gained status and
made tutorials something students looked forward to.

3. Message - brand positioning that will be communicated to persuade a target customer to buy.

(Example: Iphone vs Myphone)

Gate 3: Execution (EQ- Emotional Quotient: the capacity to sense and to emphatize)

1. Machinery- it is about an organization structure that can deliver the value planned; hence, the organizational
structure can only be identified after the value proposition is formulated.

2. Methods – are about systems and processes that allow the entrepreneur information and control.

3. Management Skills – about the ability to carry out the plans through people, rewards and leadership.

Gate 4: Self-Leadership (AQ- Adversity Quotient: the capacity to recover and make progress)

-it is needed when problems and obstacles are experienced because of the nature of entrepreneurship, where
risks and uncertainty is expected.

Example: Billionaire Jack Ma, founder of Alibaba.

 Started from when he failed a key primary test twice, and failed three times while in middle school.
 He also applied to study in Harvard and rejected ten times.
 Got rejected 30 times in applying for a job.
 25 people applied in KFC and they accepted 24 except him.
 Five people applied for a police job and they accepted four except him.

But he persisted, not giving up on himself. When faced with adversity, stop giving excuses and start finding
solutions to keep improving.

Not just leadership in business but also in one’s personal life.

1. Moving forward – having the grit to continue the business despite obstacles.

2. Mission – about purpose or the reason why the business exists beyond making a profit.

Example: USLT providing hundreds of scholarships to students

3. Mastery – building capabilities, knowing the self, the environment as well as the operations.

ENTR 1013 – The Entrepreneurial Mind| 12

ENTR 1013 – The Entrepreneurial Mind| 13
Entrepreneurship Key Factors Matrix

Key Factors for

Success / 4-Gate
Model Preparation Marketing Execution Self – Leadership
Commitment Money Mindset Machinery Moving Forward
Coordination Model Market Methods Mission
Competency Mentors Message Management Skills Mastery

An entrepreneur needs four different types of commitment:

1. Money – Commitment to maximize return on investment.

2. Mindset – Commitment to have an innovation mindset.
3. Machinery – Commitment to create an effective organization.
4. Moving Forward – Commitment to keep iterating toward objectives and goals.

An entrepreneur needs four different tasks of coordination:

1. Model – Coordinate the inter-dependency of a business model.

2. Market – Coordinate choice and penetration of the target market.
3. Methods – Coordinate processes needed to routinize operations.
4. Mission – Coordinate the establishment and fulfillment of a company’s mission.

An entrepreneur needs four different groups of competencies:

1. Mentors – Competency related to sense making and risk assessment that can be provided or guided
mentors.
2. Message – Competency related to customer-focused communication, expressed in terms of a
positioning or a message.
3. Management Skills – Competency related to initiative and resource management and influencing
people skills as part of critical management tasks.
4. Mastery – Competency related to adaptability and grit resulting to mastery of strategy and change, as
well as customer understanding and self-transformation.

Is Entrepreneurship for Everyone?

- It can be learned but it is not for everybody.

- Passion is not enough. A person needs an eye to satisfy unmet needs of a group of prospects that can be
large enough to have a differentiated, growing, profitable, scalable and sustainable operation.

ENTR 1013 – The Entrepreneurial Mind| 14

 7 competencies of an Entrepreneur

Competencies – combination of abilities (technical skills like knowledge and expertise) and behavior
(like people skills or motivational level)

1. Risk appetite – sees rewards for taking on opportunities that have potential positive (or negative)
consequences.
2. Sense-making – scanning the environment to detect and interpret what is happening today in order to
connect and take actions on potential future outcomes.
3. Customer-Focus – choosing, initiating and sustaining relationships with customers.
4. Initiative – being proactive in taking prompt actions to attain objectives.
5. Influence – ability to use personal branding and interpersonal styles to gain buy-in from constituents.
6. Adaptability – adjusting to external changes while initiating internal changes to attain objectives.
7. Grit – persistent to attain long-term goals despite adversity.

4 Competencies of an Innovator

1. Creativity – forming a mental image or new idea about the future.

2. Critical Thinking – offering unique ways to solve defined problems
3. Collaboration – developing relationships with the right partners to attain objectives.

Communication – engaging constituents to make them understand and accept your

message.

ENTR 1013 – The Entrepreneurial Mind| 15

 Lesson 3: Gate-1 Preparation

Topic: Money, Model and Mentors

Learning Outcomes: At the end of this module, you are expected to:

1. Understand the importance of Money, Model, and Mentor through the Wealth Conversion Principle.
2. Analyze ways on how to have the right business model in order to maximize revenue while pursuing
cost efficiency.
3. Identify how mentors can give appropriate pieces of advice for the entrepreneurs to avoid mistakes,
accelerate the learning curve or even open windows for opportunities.
4. Create an ecosystem appropriate for a business during the preparation stage.

LEARNING CONTENT

Introduction:

Starting an enterprise entails four ‘gates’ to reach the ‘House of Prosperity’. Each gate has its unique
requirements. Like a race, entering one gate and finishing that stage is not an assurance the next one will
readily be open. It is only when all tasks in the four gates are successfully accomplished that prosperity and
success can be attained.

The first gate in the entrepreneurship journey is the preparation gate. Here, the entrepreneur looks into money,
model (business model) and mentorship. The wealth conversion principle states that wealth is created by
converting money or cash (or its equivalent) into inventories, and back to cash when sold at a profit.If credit
terms have been granted, it should be collected. Having the right business model is indispensable in order to
maximize revenue while pursuing cost efficiency. Mentors can give the appropriate pieces of advice for the
entrepreneurs to avoid mistakes, accelerate the learning curve or even open windows of opportunities. The
entrepreneur also needs ample knowledge /intelligence or IQ, while building an ecosystem appropriate for
his/her business during the preparation stage.

ENTR 1013 – The Entrepreneurial Mind| 16

Lesson Proper:

An entrepreneur must be aware of the important task of doing a feasibility study.

What’s your big idea?

Elements of a good idea.

Money Model Mentors

4 basic questions that is important to investors

1. Who is your target market? – it gives an indicator of how big the markets.
2. What is being offered? – this answer what’s in it for the target market, addressing the pain points of the
consumer. Pain points can be conscious (actual demand) or unconscious (latent demand) that can be
pointed out by the seller.
3. Why is the offer relevant or unique? – this answer why the offer is compelling to the target market.
4. How will this make money for the firm? – this answer how the firm can win in the marketplace and
what’s in it for the investors.

3 Levels of Strategy

Corporate Level: What industry

do we enter / exit and why?
What’s the potential value
capture?

Business Level: What is (or could be) our

competitive advantage?

Functional Level: What is the compelling reason for consumers

and customers to buy our products and/or services and prefer us
over competition?

Strategy can be formulated at three levels, namely, the corporate level, the business level, and the functional
level. At the corporate level, strategy is formulated for your organization as a whole. Corporate strategy deals
with decisions related to various business areas in which the firm operates and competes. At the business unit
level, strategy is formulated to convert the corporate vision into reality. At the functional level, strategy is
formulated to realize the business unit level goals and objectives using the strengths and capabilities of your
organization. There is a clear hierarchy in levels of strategy, with corporate level strategy at the top, business
level strategy being derived from the corporate level, and the functional level strategy being formulated out of
the business level strategy.

1. Corporate Level

Corporate level strategy defines the business areas in which your firm will operate. It deals with aligning the
resource deployments across a diverse set of business areas, related or unrelated. Strategy formulation at
this level involves integrating and managing the diverse businesses and realizing synergy at the corporate
level. The top management team is responsible for formulating the corporate strategy. The corporate
strategy reflects the path toward attaining the vision of your organization. For example, your firm may have
ENTR 1013 – The Entrepreneurial Mind| 17
 four distinct lines of business operations, namely, automobiles, steel, tea, and telecom. The corporate level
strategy will outline whether the organization should compete in or withdraw from each of these lines of
businesses, and in which business unit, investments should be increased, in line with the vision of your
firm.

2. Business Level

Business level strategies are formulated for specific strategic business units and relate to a distinct
product-market area. It involves defining the competitive position of a strategic business unit. The
business level strategy formulation is based upon the generic strategies of overall cost leadership,
differentiation, and focus. For example, your firm may choose overall cost leadership as a strategy to
be pursued in its steel business, differentiation in its tea business, and focus in its automobile business.
The business level strategies are decided upon by the heads of strategic business units and their
teams in light of the specific nature of the industry in which they operate.

3. Functional Level

Functional level strategies relate to the different functional areas which a strategic business unit has,
such as marketing, production and operations, finance, and human resources. These strategies are
formulated by the functional heads along with their teams and are aligned with the business level
strategies. The strategies at the functional level involve setting up short-term functional objectives, the
attainment of which will lead to the realization of the business level strategy.

For example, the marketing strategy for a tea business which is following the differentiation strategy
may translate into launching and selling a wide variety of tea variants through company-owned retail
outlets. This may result in the distribution objective of opening 25 retail outlets in a city; and producing
15 varieties of tea may be the objective for the production department. The realization of the functional
strategies in the form of quantifiable and measurable objectives will result in the achievement of
business level strategies as well.

Understand and be realistic about two things:

a. Value chain cycle
b. Consumer’s path to purchase or the sales cycle

PERSONAL BRANDING

- a term use to describe the image of one’s self in the public’s mind from
previous choices made that will affect the future level of personal
influence, which is part of self-awareness and self-mastery.
- Before investing make sure that your personal branding is credit-
worthy and funding-worthy.

The first step to building your personal brand is knowing yourself and
your personality.

 Personal branding makes others feel good and feel right working and dealing with the entrepreneur.
Lack of good personal branding will not attract talent and resources so entrepreneurs must therefore
not underestimate its importance, as every act they make is a rehearsal for the future.

ENTR 1013 – The Entrepreneurial Mind| 18

ENTR 1013 – The Entrepreneurial Mind| 19
RAISIING FUNDS

Cash is the lifeblood of business. If you run out of it and lack access to additional resources, the game is over.

As future entrepreneurs, you'll find that raising funds is a significant part of your efforts and, for better or worse,
a major challenge. Unless you have a clearly defined plan and a path to follow, you’re going to end up wasting
precious time that could have been spent elsewhere.So, understanding the basics of raising capital will be
critical to your success. If you’re clear on what you need to do to get from where you are to where you want to
be, you'll be less likely to derail while you’re in the thick of it.

Raising capital is when an investor or a lender gives a business funds to assist with starting, growing, and
managing day-to-day operations.

Some entrepreneurs consider raising capital to be a burden, but most consider it a necessity. Regardless of
their stance on the matter, raising capital is an essential step for entrepreneurs, founders, business owners, or
anyone looking to start a company.

Basic Ways and Simplest Ways to Raise Capital

1. Savings – discretionary funds from unspent money earned previously by the entrepreneur.
2. Partnership – includes investment from relatives, friends and acquaintances.
3. Loans – money advances, which may be sourced from individual informal channel or financial interme-
diaries like banks.
4. Customer’s Advances – terms of sales advantageous to the seller, such as cash with order (CWO),
asking for down payment (DP), cash on delivery (COD, or collecting franchise fee upfront.

More advanced ways to raised funds

Sources of Funding from Outsiders
1. Angel investor – money invested by an outside individual to a firm.
2. Super angel – big amount of money invested by an outside individual to a firm.
3. Venture capital – amount of money invested by outside investors, typically over 10 individuals with none
owning over 10% of investment pool forming themselves as a venture investing company.
4. Private equities – amount of money invested by outside investors, typically over 10 individuals, forming
themselves as a private equity investment company, focusing on firms that already have revenues and
profit.
5. Going public – amount of money invested via initial public offering (IPO) from the stock market.

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Note: entrepreneurs must therefore not limit their expansion on internally generated funds, or borrowing money
from bank, or asking partners to put in more money. On a bigger scale, the company may be attractive to
public investors in the stock market.

Question: WHY PARTNERS ARE NEEDED?

Right partners can provide:

 Needed initial funding
 Opening doors to further fund and spread financial risk
 Creating immediate credibility
 Making entrepreneur highly accountable
 Provide mentorship both professional level (operational and strategic) and personal level (personal
growth)

Inventory of benefits of having great partners

1. Provide immediate feedback on strengths weaknesses of plans
2. Help give operational and strategic directions
3. Provide additional funding
4. Spread out financial risk
5. Narrow your knowledge gap
6. Offer immediate credibility to your company
7. Open their network of contacts to you (key suppliers, customers) to lower cost or raise revenues
8. Give an assurance of fairness on dealing with valuation and stock ownership specially after recovering
investment.
9. Mentorship on professional level
10. Mentorship on personal level

Success Story: when Jollibee bought 70% of MangInasal in 2010, it took over a functional department of
MangInasal every six months starting from the treasury group. In five years’, time, sales of MangInasal went up
to 2.4 times despite increasing the number of stores by only 30%, creating much productive MangInasal in the
process.

THREE SERIES OF INVESTMENT

SERIE REVENUE PROFIT DESCRIPTION RISK LEVEL INESTEMENT

S PREMIUM
A No No Product or Service exists but High None of lowest
no business operation.
B Yes No Nosiness exists with revenue Moderate but can be Case-to-Case
generation but lack either attractive if investment
revenue sources or will leapfrog volume
productivity scale to be way beyond breakeven
profitable. point.
C Yes Yes Company is operating with Low Highest
both revenue and profit
increasing.
Note: A is not yet a business only an idea.
Example: The Facebook, decision making in economics

What is Seed and Angel Funding

If you are in an early stage/Idea Stage in your Business Plan and have utilized your saving and built a product
which is already selling.., you may expect some Angel Investors to be really interested in your startup, or if you

ENTR 1013 – The Entrepreneurial Mind| 21

have an excellent idea and a really good team then investors may be willing to help you build the product too.
Read more About Angel Investors

A. What is Series A Round of Funding?

Series A round of financing is the first round of financing that a startup receives from a venture capital
firm i.e. the first time when company ownership is offered to external investors. This is generally done
by allotting preferred stock.

Valuation of the startup in this round is done on the basis of:

o proof of concept
o progress made with seed capital
o quality of the executive team
o market size
o risk involved
The goal of Series A round of financing is:
o To cover up salaries of people involved
o Additional market research
o Finalization of product/service to be introduced into the market

Series A round of financing is generally done when a company is generating some revenue, though it
might not be net profit. The risk involved is at the highest in this round of funding.

B. What is Series B Round of Funding

At this stage, the product/ service is already being sold in the market. Series B round of funding is
required by the company to scale up, to face competitors and have a market share. The goal of this
round of funding is not only to break-even but to also have the net profit. At this stage, investment risk is
lower and the amount of funding is more than Series A round of funding.

Valuation of the company is done on basis of:

o Performance of the company in comparison to the industry
o Revenue forecasts
o Assets like Intellectual Property, etc.

C. What is Series C Round of Funding

A venture capital firm goes for this round of funding when the company has proved its mettle and is a
success in the market. The company goes for Series C round of funding when it looks for greater
market share, acquisitions, or to develop more products and services. Series C round of funding can
also take place to prepare the company for an acquisition. It is the last stage in a company’s growth
cycle before an Initial Public offer (IPO). Valuation of the company at this juncture is done on the basis
of hard data points. This round of funding is more of an exit strategy of the venture capital firm.

Choosing Mentors

- A mentor is a trusted and experience adviser who is interested in the success of the mentee.
ENTR 1013 – The Entrepreneurial Mind| 22
 - He/She does this by investing time to be a sounding board, to listen and understand context, ask ques-
tions, give sound advice, offer alternative opinions, opening windows of opportunities and lessening
risks of the mentee.

Mentoring ensures that knowledge, experience, and hard-won insight transfers from one person to another
through personal interaction over time. While your own great ideas are essential to your new business, with an
experienced mentor at your side, you will have one of the most powerful assets any new businessperson can
ever have: someone invested in you and your success. Here are a few key points on the vital role a good
mentor can play in the success of an emerging entrepreneur, along with advice on choosing mentors wisely.

1. What characteristics does a good mentor possess?

Ideally, a mentor will not so much give advice as coach. An ideal mentor is someone actively
involved in the direction of his or her own successful business. A good mentor should also be
accessible — not all of the time, but he or she should be able to devote enough time to assisting
you in truly broadening and deepening your understanding in ways you could not have done for
yourself.

2. What can a mentor help you accomplish?

Your mentor can help you stay focused on your goals and hold you accountable to your vision
for your company. A good mentor can help a fledgling entrepreneur think through strategies,
crunch numbers, and create a business or marketing plan. His or her guidance can get you
through rough times when your self-confidence may be waning, and show you new perspectives
and pathways to success.

3. How can you find the right mentor?

You should select a mentor carefully. Make sure to understand exactly what you want your
mentor to do. Do you need networking opportunities, introductions to great contacts, or advice
on evaluating markets or developing your product? Different individuals will bring different sets
of skills and varied perspectives to any mentoring experience, so you will need to know what
your “ask” is.

4. Where should you look for mentors?

You can try local business and start-up networking groups as well as the leadership of
community non-profit organizations to find mentors. Offer to work an event promoted by one of
these groups, which can place you in proximity to industry leaders. Find a few people who are
available to have brief meetings with you and see if you click with any of them as mentors.

5. How can you get the most out of a mentoring experience?

Be flexible enough to appreciate the many forms mentoring can take. You might read a book or
watch a video by a well-known and successful entrepreneur, learning from him or her even if
you will never meet.

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4 Different Types of Mentors Needed by Entrepreneurs

Types of Mentors Role of Mentor for the entrepreneurs Examples for a Start-Up
Needed Advertising Agency
Operational Guides on matters related to present Client acquisition, presentation,
operations, especially key factors for success execution
that the firm should do exceptionally well
Functional Guides on matters related to support Accounting tax, human
functional areas on which the entrepreneur resource
may need some advice
Personal Guides on matters related to personal growth Work-life harmony
Strategic Guides on matters related to the future vision Consulting, service
of the entrepreneur

8 Qualities of a Great Mentor

1. Interested in the success of the mentee.

2. Invest time to listen and understand the different situations of the mentees.
3. Provide advice, both business and personal
4. Help mentees by tapping into the mentor’s network
5. Open doors for opportunities
6. Lessen risk by calling attention to such areas
7. Inspire the mentee
Sincerely desire that the entrepreneur succeeds and be even better than them

ENTR 1013 – The Entrepreneurial Mind| 24

 Lesson 4: Development of the Business Plan via a Business Model

Topic: The Business Model

Learning Outcomes: At the end of this module, you are expected to:

1. Create a sense of direction for future entrepreneurs.

2. Discover the importance of business planning via a business model.

LEARNING CONTENT

Introduction:

Understanding the problem, you are solving for your customers is undoubtedly the biggest challenge you’ll face
when you’re starting a business. Customers need to want what you are selling and your product needs to solve
a real problem.But, ensuring that your product fits the needs of the market is only one part of starting a
successful business.

The other key ingredient is figuring out how you’re going to make money. This is where your business model
comes into play.

The term business model refers to a company's plan for making a profit. It identifies the products or services
the business plans to sell, its identified target market, and any anticipated expenses. Business models are
important for both new and established businesses. They help new, developing companies attract investment,
recruit talent, and motivate management and staff. Established businesses should regularly update their
business plans or they'll fail to anticipate trends and challenges ahead. Business plans help investors evaluate
companies that interest them.

ENTR 1013 – The Entrepreneurial Mind| 25

Lesson Proper:

BUSINESS MODEL DEFINE

At its core, your business model is a description of how your business makes money. It’s an explanation of how
you deliver value to your customers at an appropriate cost.According to Joan Magretta in “Why Business
Models Matter,” the term business model came into wide use with the advent of the personal computer and the
spreadsheet.

These tools let entrepreneurs’ experiment, test, and, well, model different ways that they could structure their
costs and revenue streams. Spreadsheets let entrepreneurs make quick, hypothetical changes to their
business model and immediately see how the change might impact their business now and in the future.

In their simplest forms, business models can be broken into three parts:
1. Everything it takes to make something: design, raw materials, manufacturing, labor, and so on.
2. Everything it takes to sell that thing: marketing, distribution, delivering a service, and processing the
sale.
3. How and what the customer pays: pricing strategy, payment methods, payment timing, and so on.

As you can see, a business model is simply an exploration of what costs and expenses you have and how
much you can charge for your product or service.A successful business model just needs to collect more
money from customers than it costs to make the product. This is your profit—simple as that.

New business models can refine and improve any of these three components. Maybe you can lower costs
during design and manufacturing. Or, perhaps you can find more effective methods of marketing and sales. Or,
maybe you can figure out an innovative way for customers to pay.

Keep in mind, though, that you don’t have to come up with a new business model to have an effective strategy.
Instead, you could take an existing business model and offer it to different customers. For example,
restaurants mostly operate on a standard business model but focus their strategy by targeting different kinds of
customers.

What is a Business Model?

- A description of the means and methods a firm employs to generate sales revenue, profit, and cash
flow, while providing a template for the business to scale up.
- It has 10 building blocks subdivided into two parts – the offering model and the operating model, with
the definition of terms of each building block.

A business model helps shape a company's marketing and sales plans, its growth potential, and its ability to
attract investors. Investors use business models to assess a company’s profit potential while entrepreneurs
use them to shape their ideas into a sound business structure.
A business model provides a framework for a company's monetization strategies. It focuses on defining the
audience (customer segment), unique selling proposition, brand positioning, method of delivery, and
distribution channels to create a profit-making formula.
Business models shape all aspects of a company's development and growth. Therefore, they may change
over time to adapt to new marketplace opportunities, technologies, or distribution channels.

The offering model is composed of what people in the marketing and sales departments typically handle –
target market, value proposition, channel, customer bonding strategy and revenue model.

∞ Target Market – The intended recipients of a firm’s products or services.

∞ Value Proposition – The relevant and unique benefit that the consumer gets from buying or owning the
firm’s product or services.
ENTR 1013 – The Entrepreneurial Mind| 26
 ∞ Channel – The distribution system where products or services will be made available to the customers.
∞ Customer Bonding Strategy – The relationship as well as the solution that will be established with buy -
ers and end users.
∞ Revenue Model – The compensation a firm will get for providing its value proposition to support its in-
tended profit.

The operating model, on the other hand, is what people in the operations department t, like supply chain and
customer fulfillment. Oversee – value chain, resources and processes, complementors, configuration and cost.

∞ Value Network – The strategic linkage of extended supply chain for the firm to provide specific products
or services to the customers.
∞ Resources and Processes
o Resources: The hard and soft assets deployed by the firm to carry out its value proposition for
the customers.
o Processes: The critical repetitive activities that are routinized by the company to deliver the
value to the customers and to the company in a sustainable way.
∞ Complementors – People or groups who will help both directly and indirectly, to enhance the value
proposition.
∞ Configuration – Rearrangement of resources, processes, activities and offerings that can help enhance
the profit goal of the company.
∞ Cost – The monetary consequences of the means to carry out the value proposition.

NOTE: To improve a firm’s profit, the entrepreneur looks at maximizing his revenue in the offering model while
minimizing cost in the operating model.

KEY QUESTIONS TO ASK ABOUT YOUR BUSINESS MODEL

Offering model
∞ Target Market
 Market Space – Who is the target market that has the greatest potential for the firm?
∞ Value Proposition
 Novelty – What are the biggest unmet needs we should satisfy in a novel way?
∞ Channel
 Go-to-market – Where do we make our products conveniently available consistent with the tar-
get market’s buying pattern?
∞ Customer Bonding Strategy
 Organization – How do we have a customer-centric organization that can engage, deliver solu-
tions and build positive relationships with customers better than competition?
∞ Revenue Model
 Price – What will be the most attractive pricing scheme that can leapfrog demand and meet our
objectives (revenue, profit or social cause)?

Operating model
∞ Value Network
 Linkage Structure – How are activities linked & sequenced?
∞ Resources and Processes
 Capabilities – What assets should we leverage & what activities should we perform well to un -
lock value?
∞ Complementors
 Lock-in – What will make it appealing to start and stay as complementors or partners?
∞ Configuration

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  Efficiency – How do we reorganize to provide value without over- or under-spending?
∞ Cost
 Infrastructure – What is the infrastructure cost that will carry out value propostion?
THE 7 ELEMENTS OF A STRONG BUSINESS MODEL

Creating a business model isn’t simply about completing your business plan or determining which products to
pursue. It’s about mapping out how you will create ongoing value for your customers.

Where will your business idea start, how should it progress, and when will you know you’ve been successful?
How will you create value for customers? Follow these simple steps to securing a strong business model.

1. Identify your specific audience.

Targeting a wide audience won’t allow your business to hone in on customers who truly need and want your
product or service. Instead, when creating your business model, narrow your audience down to two or three
detailed buyer personas. Outline each persona’s demographics, common challenges and the solutions your
company will offer.

As an example, Home Depot might appeal to everyone or carry a

product the average person needs, but the company’s primary
target market is homeowners and builders.

2. Establish business processes.

Before your business can go live, you need to have an understanding of the activities required to make your
business model work. Determine key business activities by first identifying the core aspect of your business’s
offering. Are you responsible for providing a service, shipping a product or offering consulting? In the case of
Ticketbis, an online ticket exchange marketplace, key business processes include marketing and product
delivery management.

3. Record key business resources.

What does your company need to carry out daily processes, find new customers and reach business goals?
Document essential business resources to ensure your business model is adequately prepared to sustain the
needs of your business. Common resource examples may include a website, capital, warehouses, intellectual
property and customer lists.

4. Develop a strong value proposition.

How will your company stand out among the competition? Do you provide an innovative service, revolutionary
product or a new twist on an old favorite? Establishing exactly what your business offers and why it’s better
than competitors is the beginning of a strong value proposition. Once you’ve got a few value propositions
defined, link each one to a service or product delivery system to determine how you will remain valuable to
customers over time.

5. Determine key business partners.

No business can function properly (let alone reach established goals) without key partners that contribute to
the business’s ability to serve customers. When creating a business model, select key partners, like suppliers,
strategic alliances or advertising partners. Using the previous example of Home Depot, key business partners
may be lumber suppliers, parts wholesalers and logistics companies.
ENTR 1013 – The Entrepreneurial Mind| 28
ENTR 1013 – The Entrepreneurial Mind| 29
6. Create a demand generation strategy.
Unless you’re taking a radical approach to launching your company, you’ll need a strategy that builds interest
in your business, generates leads and is designed to close sales. How will customers find you? More
importantly, what should they do once they become aware of your brand? Developing a demand generation
strategy creates a blueprint of the customer’s journey while documenting the key motivators for taking action.

7. Leave room for innovation.

When launching a company and developing a business model, your business plan is based on many
assumptions. After all, until you begin to welcome paying customers, you don’t truly know if your business
model will meet their ongoing needs. For this reason, it’s important to leave room for future innovations. Don’t
make a critical mistake by thinking your initial plan is a static document. Instead, review it often and implement
changes as needed.

Keeping these seven tips in mind will lead to the creation of a solid business
plan capable of fueling your startup’s success.

Risks and Profit Potential Vary Among Business Models

Entrepreneurs launching a new company often compare various business models and select one that is likely
to generate the best revenues.

The Business Model Canvas

In the early 2000s, Alexander Osterwalder invented the business model canvas to help businesses develop
and analyze potential business frameworks.

The business model canvas features nine sections or "building blocks" that define customer segments, value
propositions, revenue streams, distribution channels, customer relationships, key activities, resources,
partners, and cost structures. The model also guides users through the major areas of consideration for a
business's structure and strategy.

MORE ABOUT THE BUSINESS MODEL CANVAS

The Business Model Canvas reflects systematically on your business model, so you can focus on your
business model segment by segment. This also means you can start with a brain dump, filing out the segments
the spring to your mind first and then work on the empty segments to close the gaps. The following list with
questions will help you brainstorm and compare several variations and ideas for your next business model.

1. KEY PARTNERS
i. Who are your key partners/suppliers?
ii. What are the motivations for the partnerships?
2. KEY ACTIVITIES
i. What key activities does your value proposition require?
ii. What activities are important the most in distribution channels, customer relationships, revenue
stream…?
3. VALUE PROPOSITION
i. What core value do you deliver to the customer?
ii. Which customer needs are you satisfying?
4. CUSTOMER RELATIONSHIP
i. What relationship that the target customer expects you to establish?
ii. How can you integrate that into your business in terms of cost and format?
5. CUSTOMER SEGMENT
i. Which classes are you creating values for?
ENTR 1013 – The Entrepreneurial Mind| 30
 ii. Who is your most important customer?
6. KEY RESOURCE
i. What key resources does your value proposition require?
ii. What resources are important the most in distribution channels, customer relationships, revenue
stream…?
7. DISTRIBUTION CHANNEL
i. Through which channels that your customers want to be reached?
ii. Which channels work best? How much do they cost? How can they be integrated into your and
your customers’ routines?
8. COST STRUCTURE
i. What are the most cost in your business?
ii. Which key resources/ activities are most expensive?
9. REVENUE STREAM
i. For what value are your customers willing to pay?
ii. What and how do they recently pay? How would they prefer to pay?
iii. How much does every revenue stream contribute to the overall revenues?

Diversified Business Models

Combining multiple business models (or using a variety of business models) in a single company is called a
diversified business model. As companies mature, they often shift from their original business model to a
diversified model to embrace technological advances, open new markets, or add product categories.

Examples of Diversified Business Models

Walmart began as a “dime store” offering high-value,

low priced products in a single brick and mortar
location. Gradually, Sam Walton expanded the number
and location of brick and mortar stores. The company
eventually shifted to a diversified model incorporating
e-commerce, brick and mortar, and third-party sellers
through their online shopping portal.

Publishers sell magazines and newspapers via

subscription. In addition, they may use three or more
additional models to generate profits: retail (individual
copies available for purchase at newsstands or
supermarkets), advertising revenue, and freemiums
(giving away free copies to doctors and dentists for their
waiting rooms).

How Investors Analyze Business Models

Business models offer insights into a company's long-term profit potential. Investors tend to focus on several
areas before choosing companies to add to their portfolios: This is especially true of market size, product
demand, scalability, and the ability to add new channels.

ENTR 1013 – The Entrepreneurial Mind| 31

These components have the most significant potential to impact net income, which is the accurate way
investors measure a company's wealth-generating potential. If net income increases, the company is doing
well and can be a good investment.

Market Size and Product Demand

Business models include insights into the marketplace, like customer demand, potential for reaching new
customers, and expansion opportunities. These insights help investors and analysts understand whether a
company has long-term profit potential.

By expanding their product line beyond collectibles, the company has increased its customer base to both the
collector market and parents of small children. They improved their opportunity to increase gross profit while
sustaining their USP as a brand for people who love horses.

Scalability

Scalability refers to a company's ability to expand or grow with the same amount of resources. If a company is
limited by geography, customer demand, service delivery, or product availability, its potential for growth and
profitability is also limited unless the business model shifts.

*** END of LESSON***

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