6. Business may be defined as any activity
which leads to the creation of utility, in the form of
goods and services to satisfy human wants. The main
objective of business activities is to create exchange as
well as possess wealth in the form of physical output
and useful services. Business, no doubt, is an economic
activity with the object of earning an income, i.e.,
Profit and thereby, accumulating wealth or purchasing
power.
7. Juan is planning to put up a business in their village
since he saved up few of his salary over the years of
working which yielded more than he expected. Since he
already has acquired the discipline to manage his
finances, he wanted to open a business and make sure
that this savings would be put to good use and ensure
that his money will grow. He had a hard time thinking
which business idea suit him and is feasible in his area.
He did not know where to start and he was tired of
thinking of what is the best idea for business.
What is the best way should Juan do in this situation?
8. According to Richard Lannon
(2016), âthere are many tools and
techniques that can be applied to a
strategic analysis. The challenge is
selecting the best approach, tools, and
techniques to use given the business
problem or opportunity.â
12. VMOST stands for
Vision, Mission, Objectives,
Strategy, and Tactical.
VMOST is a tool that can
help you determine whether
your business activities are
in line with your plan and
strategies . Because
alignment is crucial to the
success of a strategy, so this
can be a useful process to go
through.
VMOST
Analysis
13. This Guideline in using VMOST analysis consists of 4 Steps. In each
of these Steps, it proposes to define certain Factors related to the Company
(Consuunt, n.d.).
1. Vision & Mission:
Vision: How you see the Market, and its Future.
Mission: The Role that the Company plays in it.
2. Objectives: The Goals to be Achieved (and When).
They should be Defined and Measurable
3. Strategy: What Methodology will be used to achieve those Goals.
It will vary depending on the project.
4. Tactics: What Actions will be used to comply with that Strategy.
14. Here is another example from Consuunt (n.d.):
Vision & Mission
⢠Your Vision: High-quality Food is very expensive and must be accessible to
everyone.
⢠Your Mission: To offer high quality food in an affordable and attractive way for
everyone.
Objectives
⢠Have the Restaurant Open and fully operational before 6 months.
⢠Have a 10% Profit Margin.
⢠20% of your Clients must be Loyal Clients.
Strategy
⢠Customer Satisfaction is at the center of everything.
⢠Youâll focus on a Total Quality approach.
Tactics
⢠Youâll implement a Continuous Learning process to find what your Customers
value
the most.
⢠Youâll use recipes that people know but employing good products.
⢠Youâll check Social media to track How your Customers perceive your
Restaurant..
16. The SWOT analysis was
created in the 1960âs by
business gurus, Edmund P.
Learned, C. Roland
Christensen, Kenneth
Andrews, and William D.
Brook in their book, âBusiness
Policy, Text and Casesâ
(Sathyabama, n.d.).
SWOT
Analysis
17. Strengths, Weaknesses,
Opportunities, and Threats, is
an
analytical framework that can
help a company meet its
challenges and identify new
markets. The framework can
help identify the businessâs
risks and rewards. It is also a
means of
identifying the internal and
external forces that may affect
the business. It is very helpful
in
SWOT
Analysis
18. Internal forces:
1. Financial resources such as money and sources of funds for
investment;
2. Physical resources, such as the companyâs location,
facilities, machinery, and equipment
3. Human resources consisting of employees
4. Access to natural resources, trademarks, patents, and
copyrights
5. Current processes, such as employee programs,
department hierarchies and software systems, sales and
distribution capabilities, marketing programs, etc.
19. External forces:
1. Economic trends including local, national and international
financial trends, developments in the countryâs stock market,
reforms in the banking system, growth of the Gross Domestic
Product
2. Market trends, such as new products or technology or evolving
buyersâ profiles, including changes in tastes and lifestyle
behaviour
3. National and local laws and statutes as well as political,
environmental, and economic regulations
4. Demographic characteristics of the target market such as the
age, the gender, the culture of the customers
5. Relationships with suppliers and co-owners
6. Competitive threats.
20. The SWOT analysis is a tool that
can help a proponent by enabling
him/her to identify and assess the
internal and external forces that can
affect the business. When used properly
and regularly, this can serve as guide
for the company to attain success. It is
a guide to prepare for a new venture,
design business strategies, and identify
areas of change and reform. When used
properly, the business owner can
anticipate problems, including possible
solutions and take advantage of
identified opportunities. The owner can
maximize its strengths and attempt to
cut out its weaknesses (Dinio & Villasis
SWOT
Analysis
24. TOWS Analysis is a
variant of the classic
business tool, SWOT
Analysis created by
Heinz Weihrich.
TOWS
Analysis
25. TOWS analysis first matches
internal factors to external factors
to help identify relevant strategic
options that an organization could
pursue. By combining the external
environmentâs opportunities and
threats with the internal
organizationâs strengths and
weaknesses, we can come up with
four basic strategies. It can help an
organization to see how it can take
advantage of opportunities, reduce
threats, overcome weaknesses and
exploit any strengths.
TOWS
Analysis
26. The four TOWS strategies are:
1. Strengths/Opportunities (SO)/ Maxi-Maxi Strategy:
Consider all strengths one by one listed in the SWOT
Analysis with each opportunity to determine how each
internal strength can help you capitalize on each external
opportunity.
2. Strength/Threats (ST)/ Maxi-Mini Strategy:
Consider all strengths one by one listed in the SWOT
Analysis with each threat to determine how each internal
strength can help you avoid every external threat.
27. 3. Weaknesses/Opportunities (WO)/ Mini-Maxi Strategy:
Consider all weaknesses one by one listed in the SWOT
Analysis with each opportunity to determine how each
internal weakness can be eliminated by using each external
opportunity.
4. Weaknesses/Threats (WT)/ Mini-Mini Strategy:
Consider all weaknesses one by one listed in the SWOT
Analysis with each threat to determine both can be avoided.
33. Porterâs Five Forces is a
framework to analyze the potential
profitability of a marketplace. It was
invented by Michael Porter in 1979
and has been used consistency by
thousands of companies across the
world since originally being
published (GetLucidity, n.d.).
Five Forces looks at five key
areas in a market that impact your
price and profitability. The forces
analyzed are:
Porterâs
Five
Forces
35. ⢠Number of buyers and market size
⢠Value of each buyer
⢠Ease of switching to competitor
⢠Number of options for buyers
⢠Alternative options for buyers
⢠Sensitivity to price points
⢠How key is product or service to buyer
1. Bargaining power of Buyers
36. ⢠Number of suppliers in market
⢠Size of suppliers in market
⢠Risk of supplier moving into your market
⢠Cost point of suppliers
⢠Substitution options for the supplier product or
service
⢠Ease to move between suppliers
⢠Differentiation of suppliers offering
⢠How big a customer you are to the suppliers
2. Bargaining power of Suppliers
37. ⢠Current substitute products on offer
⢠Reasons for buyer churn
⢠Price of substitute vs product or service
⢠Quality of substitute vs product or
service
⢠Cost of switching
⢠Usage trends
⢠External trends
3. Threat of Substitutes
38. ⢠Brand reputation
⢠Customer loyalty
⢠Your differentiation
⢠Market growth rate
⢠Entry capital requirements
⢠Economies of scale
â˘Logistics and distribution
networks
⢠Skills requirements
⢠Ease of access to technology
⢠Input requirements
⢠Operational margins
⢠Industry knowledge
requirements
⢠Government regulation
⢠Ease for customers to move
provider
4. Threat of New Entrants
39. ⢠Range of products and services
offered
⢠Brand loyalty
⢠Number of competitors in market
⢠Ease of switching between providers
⢠Market growth rate
⢠Industry lifecycle point
5. Competitive Rivalry
41. PESTLE analysis is a
strategic management tool that
businesses use to identify macro-
economic factors that it needs to
consider. The word âPESTLEâ
stands for the six factors â
Political, Economic, Social,
Technological, Legal, and
Environmental. Together, they
form the basis for identifying key
issues that may impact the
strategic direction of the
company (Boyce 2021).
PESTEL
Analysis
42. These factors are all about how and to what degree
a government intervenes in the economy or a certain
industry. Basically, all the influences that a government
has on your business could be classified here. This can
include government policy, political stability or
instability, corruption, foreign trade policy, tax policy,
labor laws, environmental law and trade restrictions.
Here are the guide questions:
⢠What government policies or political groups could
be beneficial or detrimental to our success?
Political
43. Economic
Economic factors are determinants of a certain
economyâs performance. Factors include economic
growth, exchange rates, inflation rates, interest
rates, disposable income of consumers and
unemployment rates. Here are the guide questions:
⢠What economic factors will impact on us moving
forward?
⢠Does the current economic performance affect us?
⢠How does each economic factor impact our
pricing, revenues, and costs?
44. This dimension of the general environment represents the
demographic characteristics, norms, customs and values of the
population within which the organization operates. This includes
population trends such as the population growth rate, age
distribution, income distribution, career attitudes, safety emphasis,
health consciousness, lifestyle attitudes and cultural barriers.
These factors are especially important for marketers when targeting
certain customers. In addition, it also says something about the
local workforce and its willingness to work under certain conditions.
Here are the guide questions:
⢠How do our consumerâs values and beliefs impact on their buying
habits?
⢠How does human behavior or cultural trends play a role in our
Social
45. Technological
These factors pertain to innovations in technology that may affect
the operations of the industry and the market favorably or unfavorably.
This refers to technology incentives, the level of innovation, automation,
research and development (R&D) activity, technological change and the
amount of technological awareness that a market possesses. These factors
may influence decisions to enter or not enter certain industries, to launch
or not launch certain products or to outsource production activities abroad.
By knowing what is going on technology-wise, you may be able to prevent
your company from spending a lot of money on
developing a technology that would become obsolete very soon due to
disruptive technological changes elsewhere. Here are the guide questions:
⢠What innovations and technological advancements are available or on
the horizon?
⢠How might they affect our operations?
46. Although these factors may have some overlap with the
political factors, they include more specific laws such as
discrimination laws, antitrust laws, employment laws,
consumer protection laws, copyright and patent laws, and
health and safety laws. It is clear that companies need to know
what is and what is not legal in order to trade successfully and
ethically. If an organization trades globally this becomes
especially tricky since each country has its own set of rules and
regulations. Here are the guide questions:
⢠How does our physical environment affect us and vice versa?
⢠What are the effects of climate, weather or geographical
location?
Legal
47. Environmental
Environmental factors have come to the forefront only relatively
recently. They have become important due to the increasing scarcity of raw
materials, pollution targets and carbon footprint targets set by
governments. These factors include ecological and environmental aspects
such as weather, climate, environmental offsets and climate change which
may especially affect industries such as tourism, farming, agriculture and
insurance. Furthermore, growing awareness of the potential impacts of
climate change is affecting how companies operate and the products they
offer. This has led to many companies getting more and more involved in
practices such as corporate social responsibility (CSR) and sustainability.
Here are the guide questions:
⢠What regulations and laws apply to our business?
⢠Do they help or hinder our business?
⢠Do we understand the laws across all our markets?
53. LEARNING
OBJECTIVES
After going through this lesson, you are expected to:
⢠Apply business principles, tools, and techniques
in participating various types of industries in the
locality
54.
55.
56.
57.
58. The Philippines has
predominantly always been
an agrarian economy. Being
a tropical country, the
Philippines holds a massive
agrarian land mass,
extending to 9.7 million
hectares of fertile soil
suitable for crops like rice,
coconut, pineapple, mango,
paddy, sugarcane, corn,
maize, cassava, coffee, tea,
bamboo, banana, and cacao.
Moreover, the country also
produces healthy poultry
and livestock (Business
Setup, n.d.).
Agriculture
59.
60.
61.
62. Manufacturing
Industry
This refers to the
processing of raw materials
(ex. Ore, wood, and
foodstuff) into finished
products and into
something more useful
through the use of tools and
process that allows
individuals and business to
add value to the products,
selling them at a higher
price in the market thus,
marketing manufacturing a
profitable endeavor.
63. Manufacturing
Industry
The gross value
added generated from the
manufacturing industry in
the Philippines amounted
to approximately 3.7
trillion Philippine pesos in
2022. Among the industries
within this sector, the
manufacturing of food
products contributed the
highest share of the gross
value added which reached
around 1.8 trillion
Philippine pesos.
64.
65.
66. Retail or
Merchandising
These consist of
establishments that purchase
products from other businesses
or manufacturers and sell
them to customers.
Merchandising companies
usually have merchandising
inventories in their current
assets account. They usually
generate profit by providing
markup prices on their goods
available for sale (Abrugar,
2011).
67. Retail or
Merchandising
The retail industry in
the Philippines is a
combination of various
products varying from food and
beverages to electronics and
appliances, furniture, and
several household products.
Food and beverages have been
one of the leading product
segments in the market, which
has been in high demand in the
country.
68.
69. Tourism industry in the
Philippines is very well known since
our country has a very rich
biodiversity of tourist attraction.
From beaches, heritage towns,
monuments, mountains, resorts,
rainforest, island and diving spots.
Since our country is endowed with
rich natural resources, the
Philippines can promote more
nature-based tourism. Tourism
provides significant economic
benefits, particularly for small
islands and provinces. Being an
archipelago, the Philippines relies
heavily on tourism for its livelihood.
Tourism
70.
71.
72. The exchange of
products and services between
countries is referred to as
international trade. It refers to
the export and import of
commodities and services in
basic terms. Products and
services are sold out of the
country, while goods and
services are imported into the
country.
Since the Philippines
is very rich in natural resources
the country exports more
products, which also means
more production, jobs and
revenue are generated for the
country.
International Trade
(Exports and Imports)
73.
74. A financial institution
(FI) is a company engaged in
the business of dealing with
financial and monetary
transactions such as deposits,
loans, investments, and
currency exchange. Financial
institutions encompass a broad
range of business operations
within the financial services
sector including banks, trust
companies, insurance
companies, brokerage firms,
and investment dealers
(Hayes, 2021).
Banking / Financial
institutions
75.
76. Ever since the last
decade, Business Process
Outsourcing or BPOs have been
one of the fast-paced and rapidly
expanding industries in the
Philippines. BPOs have emerged
as the top contributors to the
Filipino economy. The Information
Technology and Business Process
Association of the Philippines
(IBPAP) has forecasted that the
BPO industry is bound to generate
a revenue of 40 billion USD,
produce 7.6 million direct and
indirect jobs within the sector, and
account for 15% of the aggregate
global outsourcing market. Thus,
making the BPO industry a
flourishing sector to invest into
(Business Set up n.d.).
Outsourcing
77.
78. The Department of Trade and
Industry (DTI) has recently stated that
the Filipino Government is opening up
the construction industry to foreign
investors with the idea that these
investors can potentially become local
contractors by providing them
construction permits. Thus, this is an
ideal time for foreign direct investors to
invest in the construction sector. The PSA
has reported a growth of 16.1% towards
the end of 2018. Taking part in the
infrastructural development of the
country will ensure its rise into becoming
an infrastructure hotspot for Filipino
engineers as well as foreign investors
(Business Set up, n.d.).
Construction
79. The construction industry is a key
sector within the Philippine economy,
contributing a gross value added of about
336 billion Philippine pesos during the
fourth quarter of 2020. In terms of capital
formation, which refers to the total
construction expenditures by private and
public firms, the sector reported
significant contractions in 2020, largely
due to the disruptions caused by the
global coronavirus (COVID-19) pandemic.
Construction
80. The Philippine governmentâs
flagship infrastructure project labeled
the" Build Build Build" program was also
greatly affected by the lockdown
restrictions due to the COVID-19
pandemic. The program was introduced
based on the administration's intent to
propel the country in achieving more
developed and connected life among
Filipinos and generate new jobs. However,
government figures revealed that only
several projects have been completed in
2021 while 31 others have yet to be
completed in 2022.
Construction
81. One of the big tickets in the
government's infrastructure development
plan is the Metro Manila Subway Project
which would be managed by the
Department of Transportation (DOTr),
with an average cost of around 357 billion
Philippine pesos. Its targeted completion
year was projected in 2025 and the
excavation for the project was forecast to
start on the fourth quarter of 2021. Other
high-valued tickets in the pipeline were
the North-South Commuter railway
extensions (PNR North 2, PNR South
commuter), PNR South long haul,
Bataan-Cavite interlink bridge, Panay-
Guimaras Negros bridge, Taguig
integrated terminal exchange and the
New Manila International Airport.
Construction
82.
83. 1. The owner of XYZ Mercantile is having a bad time in
the market during this pandemic since there are only a
few people coming in the store lately. He suspected that
some factors might be because of the rise of the buying
power of the consumers which enable them to bargain
more to the sellers. In which some of his competitors
might have offered discounts to their customers to gain
more sales. What do you think is the best analysis to
reevaluate the companyâs status on the market over his
competitors? Support your answer.
84. Answer: The best analysis to use in this situation is the
TOWS and Porterâs Five Forces. TOWS analysis can be
very helpful to use especially when we are talking about
a business that is already standing and which needs to
evaluate its currents status in the market by identifying
the current threats and opportunities the company
might have to avoid weaknesses. Porterâs Five Forces is
also important since it will identify the bargaining
power of buyer and the supplier which is a big factor in
the market and especially the threat of substitutes as
well.
85. 2. Maria is planning to open up a food-stop shop near the
bus stop. Since their house is near the bus stop, she
thought that it will be an advantage to open the shop since
there are no rental to pay since the shop, she is planning
to open is just an extension of the front of their house. But
she is a bit reluctant to this idea since there are already
few shops in the locality which would make them as her
competitors. What do you think is the type of analysis best
suited to her situation?
86. Answer: The best analysis to use in this situation is the SWOT &
TOWS analysis. Considering the situation of Maria, SWOT
analysis is best suited since we can lay down all the strength and
opportunities of her business idea and identify all of the
weaknesses and threats she might come across when she will
start to operate. TOWS analysis might be very helpful in her
situations since in the statement a few strengths are already
mentioned and few threats as well. All he need is to apply the
TOWS analysis in order for her to maximize all his strength and
to capitalize all of her opportunities since her location is
favorable. And to consider all of her internal strength which will
help avoid the external threats.
87. 3. Ivan is an IT graduate, who lately resigned from his work to
open up a computer shop which would cater computer servicing
and selling of computer equipments, accessories and computer set
as well. He planned this idea since he was still a student in which
his mission is to cater the computer needs within their locality
since there are no one yet to open a computer shop in their rural
area. He thought one of the problems that might arise from his
plan is that computer equipments and computer set are bit pricey
and technologically the people in the locality is not yet well
exposed to these technologies. He wanted to make sure that this
idea of his is profitable enough. What do you think is the best
analysis to prepare to help assess the marketability of the of his
plan?
88. Answer: The best analysis to use in this situation is the VMOST,
PESTLE, and SWOT analysis. VMOST analysis will become very
important in this situation since Ivan needs to lay down his mission
and vision first to align it to his main objectives. If his mission is to
cater the computer needs within their locality, he needs to make it
where people can afford financially. And to identify that, we also
need the PESTLE analysis since this enables us to identify the
current economic status of the area if the people within their area
can afford to buy his products. SWOT analysis might be useful also
in this situation since it is important for us to identify the current
strength and weaknesses and the future opportunities it might have
and its weaknesses that might be avoided.
89. Case Analysis
Direction: Prepare either a VMOST, PESTLE / SWOT / TOWS
analysis / Porterâs Five Forces on the following situation given below.
You can choose either 1 to 3 types of analysis to help in your
explanation. Explain thoroughly why you have chosen the tools you
used and support your answer.
90. Pedro is now planning to open up a business establishment
concentrating on aquaculture called the PASL (Pedroâs Aquaculture of
Shrimp Livelihood). His mission is to provide fresh shrimps for
consumer consumption which can also serve as a livelihood within
the area where it is to be placed since he will hire people to operate
the farm and he will buy shrimp / prawns seeds to be cultured in his
farm in which the people within the area will provide. Pedroâs idea is
good, but he needs further study on the different aspects of the plan
to evaluate the advantages and disadvantages he might have in this
business venture. What do you think is the type of analysis best
suited to his situation that will help him produce more positive
advantages and avoid and minimize disadvantages?
91.
92.
93.
94. LEARNING
OBJECTIVES
After going through this lesson, you are expected to:
⢠Explain the effects of various socio-economic factors
affecting business and industry
95.
96. is the social science that
studies how economic
activity affects and is
shaped by social processes.
In general, it analyzes
how modern societies
progress, stagnate or
regress because of their
local or regional economy,
or the global economy
(Wikipedia, n.d.).
SOCIO-ECONOMICS
97. is the social science that
studies how economic
activity affects and is
shaped by social processes.
In general, it analyzes how
modern societies progress,
stagnate or regress because
of their local or regional
economy, or the global
economy (Wikipedia, n.d.).
is also sometimes used
as an umbrella term for
various areas of inquiry.
The term âsocial
economicsâ may refer
broadly to the âuse of
economics in the study of
societyâ according to
Eatwell, Milgate, &
Newman, (1987).
Socio-economics
99. All business analysis must take into account socioeconomic factors. These
factors are taken into consideration when a corporation makes financial decisions in
which money, goods, and services are all involved in these elements. They have a
micro-level impact on firms, but they have a much larger impact on the overall
economy on a macro-level. A companyâs operations, such as the value of its assets,
consumer demand, and even taxes, will all be influenced by the economy, whether it
be a local or global economy. It is also important to note that these various socio-
economic factors have different effects on various sectors in the business industry:
Consumers, Suppliers and Investors, Government, households, and International
Trade.
All of these socioeconomic factors are taken into account before making
financial decisions especially in terms of buying and selling of consumers, sellers, and
businesses to avoid mistakes.
How do socio-economic factors
affect businesses?
100. Why do we need to understand
these socio-economic factors?
101. Understanding the
socioeconomic factors affecting
business will help you make better
decisions about the future and
direction of your business.
Why do we need to understand
these socio-economic factors?
103. Employment
The first socioeconomic factor is employment.
Your employment is your job. What you do for a living?
What is the level of employment in a community. It is
very evident that the higher rate of employment would
mean higher purchasing power of the people. If the
level of employment is lower then it would mean few
numbers of consumers or buyers will buy your product
or services.
104. Education
Education is the knowledge, skill, and understanding
that one gets from attending school, college, or university.
Education provides every person in a society the
required skills and knowledge for employment in different
jobs. The higher the education a person have will also
have a higher chance of getting a good job with a better
salary, thus increasing the purchasing power and will be
an advantage to business and industry.
105. Income
Income is defined as the amount of money a
person earned from his / her employment,
business, or investments. A consumer spending
depends on his/her available disposable
income. For example, when a consumer
receives luxurious items, he/she wants and not
necessarily need. On the other hand, when the
consumerâs income becomes scarce, he / she
tends to spend on what is only essential.
106. Interest Rates
âInterest rates are everywhere, and they are set by a
variety of individuals. For good reason, banking
institutions are fascinated with knowing what the current
state of interest rates in the economy is. It's how they
make their financing decisions. It's also useful
information for a company that uses debt capital to
finance large-scale projectsâ, according to LaMarco (2018).
107. Exchange Rates
This is a slightly more nuanced topic than that of
interest rates. At the heart of it, exchange rates are
a critical consideration for every company that imports or
exports a variety of goods and services. When exchange
rates fluctuate, it has an impact on a companyâs ability
to pay its international suppliers in a satisfactory
manner. This might have an impact on the companyâs
profit margin as well as the quantity of resources it
needs to stay afloat.
108. Inflation and Recession
Inflation is the rate at which prices of products in the economy
are increasing. Rising cost are likely to force businesses to raise
prices on other products and services to keep the pace with inflation
and maintain profits. Inflation can reduce purchasing power of
consumers unless employers increase wages based on the level of
inflation.
Recession is a much more serious problem than inflation. When
an economy experiences a recession, people' attitudes toward their
purchase decisions are likely to shift. This may compel businesses to
lower their prices in order to stay afloat. A period of negative growth
is defined as a recession. In this condition, the economy's overall
levels of activity are declining. Rising unemployment, asset price
declines, and commodity price declines all contribute to poor
consumer confidence in the economy during a recession.
109. How can we overcome these
socioeconomic factors
110. How can we overcome
these socioeconomic
factors
