Pacardo, Joao Francis G.

ABM - Ford

BUSINESS ENTERPRISE SIMULATION

1. Give some reasons why an individual entrepreneur might succeed in bringing a

product to the market where the government or a large corporation might fail.

One of the reasons why an individual entrepreneur might be successful in

introducing a new product in a market where the government or any large corporation
might fail is that it has more freedom in commercializing ideas and starting new venture.
Unlike the government or other large companies that are already established, small
business owners can be more flexible and versatile with their products (goods and
services) as their brands are still yet to cement its image (brand equity) among
consumers. For instance, you cannot expect the Department of Information and
Communications Technoloy or Globe to open an internet café since they perform
distinct functions and offer different products and services that are far from that of a
24/7 internet café.

Another reason for this is its ease in penetrating into a certain market. The
government and other large corporations already have a rigid organizational structure
and that ideas and proposals have to pass through numerous deliberations and
approvals prior to the actualization. This would delay the introduction of the product
and may work against them.

Lastly, individual entrepreneurs are more accessible to their assets and resources
compared to the government and large corporations. This would enable them to direct
their resources more efficiently towards their target market. This would give them more
opportunities in commercializing their products. Also, there are some business ideas
that require skills and it is likely that only a certain number of individuals have that
specialization. An example of this is tattooing services.

2. Why is business plan so important to the entrepreneur? To the investors? To the

customers? To the suppliers?
 A business plan is a very important strategic tool for entrepreneurs. A good business
plan does not only serve as a compass that supply direction and focus to entrepreneurs
in order to make business ideas succeed, but it also helps them to achieve both their
short-term and long-term objectives. It also lists the necessary details and information
about the business.

A business plan is important to investors since this documents the essential

information about the business that they might invest in. Through the business plan,
investors can assess whether the business would benefit them in the long run or the
business would just leave them scratching their heads. The business plan communicates
to the investors if the business is attractive or if it has potential.

A business plan is important to customers because it is where the products (goods

and services) or product portfolio the business offers is exhibited. Furthermore, the
customers will see a glimpse of the operational process of the company. For instance,
customers who prefer cruelty-free products would know if the product they are
patronizing are cruelty-free or not.

A business plan is important to suppliers since this communicates your capacity to

work and partner with them. This also lists the projected costs of the materials as well
as the schedule for procuring and/or returning the supplies. This would enable the
suppliers to determine if they share the common goal or if they are compatible.

3. Why is it necessary to update the business plan? What specific factors can enhance
the need to update it?

Updating a business plan is usually easier than starting from scratch. Instead of
trying to figure out what your basic business concept is, you only have to decide
whether it’s changing. It is important to update the business plan in order to compete in
the market. New financial periods are bound to begin and significant markets change.
This means that shifting client tastes, consolidation trends among customers and altered
regulatory climates can press for the businesses to update their business plans.
 Another factor is if you have developed a new product, skill, technology, service or
management. The business plan has to be updated since the aforementioned factors
would breed to a different projected cost or result as compared to the current business
plan. Other factors include surpassing the company threshold, new and strong
competitors, and financing decisions.

It is important to note that a plan update is not only treated as a mechanical task,
restricted to improving the most recent sales figures. Instead, it is important to
challenge some of the core assumptions of the plan to see if it still reflects the reality of
the business.

4. Why do some business plans fail?

There are obvious reasons that business plans fail. Some of these include missing
crucial deadlines for finishing the business plan or drawing profit projections that can
repel potential investors. The primary reason why business plans fail is because of bad
ideas. Most ideas appear great on paper—but often times, companies realize they have
invested in a bad idea once it is too late. Business plans can fail because employees are
not compensated in a way that goal of the employee complements the goals of the
company. Other reasons include unbalanced team, missing financial projections, false
assumptions and others.

5. Why is it important for the entrepreneur to establish a high degree of trust with the
potential investor?

It is important for the entrepreneur to establish a high degree of trust with the
potential investors because the investors assist in the business in the form of finances.
Without the investors, the business might not grow and may be affected, especially in
the long run. There must also be mutual respect between both parties and establishing
trust is one way of showing this.
6. What is the effect on cash flow of FIFO and LIFO when the cost of goods I (a)
increasing or (b) decreasing?

The FIFO (first-in, first-out) method of inventory costing purports that the costs of
the first goods purchased are those charged to cost of goods sold when the company
actually sells goods. On the other hand, the LIFO (last-in, first-out) method of inventory
costing assumes that the costs of the most recent purchases are the first costs charged
to cost of goods sold when the company actually sells the goods.

(a). LIFO normally yields a lower gross profit than FIFO only because the costs of the
goods purchased or produced have been increasing over the past decades. Since LIFO
assigns the latest costs of the goods purchased or produced to the cost of goods sold,
the rising costs mean a higher amount of cost of goods sold on the income statement.
That in turn means a lower gross profit than assigning the first or oldest costs to the cost
of goods sold under FIFO.

(b.) If costs were to steadily decrease over several years, LIFO would result in a
higher gross profit than FIFO. The reason is that LIFO would be assigning the latest costs
(which will be lower costs than the first or oldest costs) to the cost of goods sold on the
income statement. That in turn means a higher gross profit than under the FIFO cost
flow assumption.

7. Why is it important for the entrepreneur to conduct a self-evaluation before

entering a franchise operation?

Franchise organizations offer a structure for launching, operating and growing a

business. Self-analysis is crucial before buying a franchise. Before deciding to proceed
with franchising, one must examine if the interests and types of businesses one might
enjoy. Also, it is important to know if one is willing to completely follow the system of
the franchiser. The very key to franchising success is the consistency of product and
service customers find from one franchise to another. One must also study very
carefully the legal documents. Other considerations include if the franchise is successful,
if the franchise can be afforded, and others.

Pacardo, Joao Francis G. ABM - Ford

 BUSINESS ENTERPRISE SIMULATION

CHALLENGE 1: How are you as an OC (Observer/Critic) of a new product?

Get to know about the latest cellphone in the market. What is the role of the creative
mind in coming up with that product? Focus on the design of the product. What is the
utilitarian-purposive appeal of that product? Next, examine and discover the
sensorial-emotional appeal of the product. Do you like to sell it, touch it, hear it, hold
it? What is emotionally captivating about the product? Lastly, how beautiful is the
product? Does it make you want to own it? If you were able to buy the product, would
it make you feel more important and accomplished?

The terms ‘creative thinking’ and ‘business’ are seldom used in the same sentence,
which is a shame as thinking creatively is actually a powerful business tool that should
never be overlooked. The creative mind performs an integral role in coming up with
different minds as it helps a business to identify and exploit new opportunities and
assist in problem solving, improving overall productivity. For instance, the creative mind
behind Apple’s mentions that their company keeps thinking about something until they
find the best way to do it. Tim Crook added “It's caring enough to call the person who
works over in this other area, because you think the two of you can do something
fantastic that hasn't been thought of before. It's providing an environment where that
feeds off each other and grows.”

Utilitarian-purposive refers to something that is designed to be useful or practical

rather than attractive. The utilitarian-purposive appeal of these recent cellphones refer
to the functional attributes that these phones possess. Some of these include lossless
camera zooming, almost 5G internet connection, laptop-grade storage, fake bokeh
effect, water resistance, room mapping camera, and others. This school of thought
actually developed into utilitarian aesthetics which is described as the influence of the
design and the usefulness of the product. In Apple’s case, their recent products came
out with a better display (particularly the full screen mode) that looks pleasing and at
the same time gives the user more space.
 Personally, I would want to sell, touch, hear, and hold these products since they are
the brainchild of various creative and technical minds. The emotional appeal of the
product may be attributed to the meanings these phones may communicate (e.g.,
people’s trendiness and social position). For instance, acquiring the latest iPhone may
translate to one’s buying capacity and that all too often would make the buyer or the
owner happy since one may feel a positive impact on one’s esteem and that the product
is worth the price.

The new products are beautiful and they make me want to own them. If I were able
to purchase the product, I would definitely feel more important and accomplished. In
the foregoing paragraph, I have mentioned the meanings these products convey. More
than that, I would feel glad spending my money on something functional and at the
same time aesthetic.

At the next level of analysis, evaluate the role of the technical mind in coming out with
that cellphone. Is there new technology in the product? Is it highly functional and
operational for users? To what extent did the technical mind use old knowledge for
new application in this particular cellphone? Is the technical design of this cellphone
rendered in a superior way? How does the present product improve upon the old? Is
the improvement worth it?

Yes, technology continuously evolves and this technological evolution is what

shapes innovation. The new cameras, LED displays, speakers, resistance, and others are
the fruits of the continual advancement of technology. Yes, these products are
functional and operation for users as the new features are the same as the essentials
just that they are improved and enhanced. The prior knowledge regarding the phones
serve as the foundation for the new application. This means that without the prior
knowledge, the integration of technology would be unmeaning. With the goal of
improving their previous products, the designs of the cellphones are of course rendered
in a superior way. One example of this is the full screens for different smart phones. This
piqued interest and gained following such that other brands also paced with this trend.
The improvement was worth it since a lot of people would definitely repurchase the
brand.
Finally, focus on the business model. Were the makers of the cellphone able to create
a lot of market space for the new product? Did they launch, advertise, and promote
the product very well? Did they address the market needs very well? Did they use their
own competitive advantages to come up with the new product? Does the product have
great appeal? Is the product acceptable in price? Is the product using great marketing
channels?

The makers of the cellphone were able to create a lot of market space for the new
product. Although their market is already wide to begin with, companies like Apple
continue to grow and even surpass their projected results. For instance, Apple expands
continually after reaching their $1 trillion milestone. Yes, they launched, advertised and
promoted the product through different mediums such as the Internet, television,
brochures, and others. Although there are still rooms for improvement regarding the
new products, the companies addressed the primary needs of the market. Yes, they
used their own competitive advantages particularly in the features of their flagship
phones. Since the products were well-received, it can be concluded that the products
have great appeal. The price actually varies depending on different factors such as
geographical location, nonetheless, the features and performance of the phones make
the price acceptable. Yes, the product use great market channels and varies from direct
marketing channels to indirect marketing channels. Case in point, Apple have their own
direct stores but they also sell to retail firms (marketing intermediaries) like BestBuy and
Walmart.
Pacardo, Joao Francis G. ABM - Ford

BUSINESS ENTERPRISE SIMULATION

CHALLENGE 2: The Product (or Service) and You

Using your Creative Mind, conceptualize a new product or service. What is the
purpose or use of your product or service? Does your product concept appeal to - the
senses and emotions? Does your product or service have aesthetic appeal? Will it
elevate its intended consumers to a new level of self-actualization?

Cosmetic and beauty products are used to enhance one’s appearance. The
cosmetics industry recognizes the unique needs for individual customers and stirs out a
variety of niche products, including make-up, perfumes, deodorants, nail polish, lipstick,
hair dyes, and even contact lenses. These products are used in different parts of the
world. As the primary purpose of cosmetics is to make people feel good about
themselves, affecting their senses and emotions, the consumers would absolutely feel a
new level of self-actualization. Being in the aesthetic industry, these products would
certainly have an aesthetic appeal.

Using your Technical Mind, how do you intend to convert this technologies and
technicalities must you learn? What would be the quality specifications demanded of
your product or service? Are the specifications difficult to attain? What would it take
to attain them? Given the quality specifications demanded by the intended consumers
of your product or service, what are the corresponding technical specifications that
you need to attain? Do you need to seek the guidance of experts in the field? Is it
possible for you to come up with a prototype of the product or service for testing?

The products will be developed and manufactured at our contract facilities. Also,
there will be researches, creative marketing programs and comprehensive distribution
network for the product to be actualized. Aside from the facilities and laboratories
which house the company’s machine and equipment, the company also possesses a
great command regarding cosmetic science and technology which covers the
fundamental aspects of cosmetic science that are necessary to understand material
development, formulation, and the dermatological effects that result from the use of
these products. Understanding the plight of reverse effects, the company commits to
producing only quality and top-notch personal products that surpass the standards of
the ISO. These specifications are not easy to attain however, with the experts working in
the company, these specifications are seen as nothing but only marks of quality. As
some of the consumers demand for cruelty-free products, the company will not practice
animal testing and would conduct cell-based tests and tissue models regarding the
quality testing of the products. Yes, the company will have to seek the guidance of
experts and closely work with them in order to ensure the quality of the products. There
will be prototypes of the

product for testing until the desired formulation or product is achieved. Since the
company commits itself to innovation, the prototypes will likewise be affected.
 Finally, how do you intend to make money out of selling this product costs, and
expenses? What kind of people do you need to help you land this business?

The product will be mass produced upon the go signal from the quality testing.
With the distinct traits of the product partnered with its quality, the product will most
likely become a sure best-seller among people in different parts of the world. The brand
is not limited to a single target market. The company will produce different products
that cater to the different markets such as products for teens, products for women,
products for men and other possible markets. However, the primary targeted end user
of the product is female urban professionals who are between the ages 24 and 65.
These consumers have an active lifestyle and are concerned with their mind and body
wellness. In order to launch this product, the company requires an initial outlay of
$150,000 which roughly amounts to ₱8 million. Sales at the retail stores of the brand are
planned to grow rapidly from Year 1 through Year 5. Initial growth will be financed by a
combination of equity investment and debt financing. The brand will become profitable
in the third year of operation, with sales projected at ₱33 million. The company needs
not only stakeholders and investors and the government’s approval, but also suppliers
who align their goals with the company’s. In addition, the company also needs
employees as well as experts in the field of cosmetics.

After testing the product or the service, what improvements should you make on
the product or service? Are the difficulties you met surmountable? What help do you
need to fully exploit the market and financial potentials of this product or service?

Improvements to be made depend on the feedback from the consumers. The

company is most likely to venture out to different products and different formulations
to cater to a wider pool of consumers. Also, the company will strive to offer a wider
color selection and shade range. The difficulties are inevitable but they are
surmountable as the company is filled with great and hardworking people. The company
needs help from people who are knowledgeable about the changing patterns among the
consumers as well as the continual evolution of technology. Through staying updated,
the company cam easily innovate the products and maintain its position in the market.