Applied Economics

Quarter 2 Module 7 – Lesson1:

Analyze Different Principles, Tools,
and Techniques in Creating a
Business
(Week 7)

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 What I Need to Know

This module was designed and written with you in mind. It is here to help you analyze
different principles, tools and techniques in creating a business. The scope of this
module permits it to be used in many different learning situations. The language
used recognizes the diverse vocabulary level of students. The lessons are arranged
to follow the standard sequence of the course. But the order in which you read them
can be changed to correspond with the textbook you are now using.

The module has one lesson only, namely:

Lesson 1: Analyze Different Principles, Tools and Techniques in Creating a Business

After going through this module, you are expected to:

 identify principles in creating business;
 discuss tools and techniques in making efficient business; and
 analyze business principles, tools, and techniques in making efficient
business.

What I Know

Before we begin our lesson, I want you to answer the pre-assessment to help us know
your prior understanding about the lesson.

Directions. Choose the letter of the best answer. Write your answer on a separate
sheet of paper.

1. The process by which one or two or more persons engage in commercial

activity for profit.
a. Business c. Trade
b. Commerce d. Partnership
2. Persons or company who supplies goods and services.
a. Consumer c. Government
b. Creditors d. Suppliers
3. The capability of a system to expand its total output under an
increased volume of work when resources are added.
a. Autonomy c. Profitability

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 b. Big Ideaa d. Scalability
4. A business which has its own identity and is distinct from the owners is
called ____.
a. Autonomy c. Profitability
b. Big Ideaa d. Scalability
5. A business with the main purpose of gaining profit is called ___________.
a. Autonomy c. Profitability
b. Big Ideaa d. Scalability
6. A businessthat creates its own plan to expand its economic growth.
a. Autonomy c. Profitability
b. Big Ideaa d. Scalability
7. Which brand of drinks may be a very good substitute for Coca-Cola?
a. Mirinda c. Sarsi
b. Pepsi d. Seven-Up
8. Industry rivalry among companies of the same or related industry is
called_______.
a. Competition c. Alliance
b. Distribution d. Threats
9. Competitive advantages that can also be gained by business that seek
cooperation within or related industries is termed as____.
a. Alliance c. Defensive strategy
b. Cost leadership d. Differentiation
10. Individuals who will buy the products and services in the market.
a. consumers c. government
b. creditors d. supplier
11. Margarine is a good substitute for ____________________.
a. butter c. cheddar
b. cream cheese d. Olive oil
12. A strategy that businesses often use marketing and some ads are
against the competitors.
a. Advertising c. Alliance
b. Cost Leadership d. Defensive Strategy
13. An advantage that occurs when a business is able to offer the same
quality product as its competitors, but at a lower price.
a. Differentiation c. Defensive Strategy
b. Alliance d. Cost Leadership
14. Gained by using defensive strategy the business to set them apart
itself from its competitors.
a. Defensive Strategy c. Differentiation
b. Alliance d. Cost Leadership
15. Products use as replacements to other products that gives the same
purpose.
a. clone c. original
b. substitutes d. brand

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 Lesson Analyze Different Principles,
Tools, and Techniques in
1 Creating a Business

Business entities are important to country’s economic growth. It enables to create

goods and services, provide jobs for individuals to generate income and
accumulate wealth and generate revenue for the government which enables to
provide basic social services. Moreover, it produces goods and services that
individuals needs and wants.
Business to thrive and grow need to used tools and techniques to continuously
exist thus best practices and techniques need to be employed.

What’s In

In the previous lesson, you have learned about the challenges and current
problems of the Filipino entrepreneurs face in the Philippines. Based on what you
have learned, Choose among the images below two (2) current problems that
Filipino entrepreneurs faced and write down 5 best practices that can be used for
the business to continuously operate and grow.

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 Notes to the Teacher
The teacher must consider the prerequisite skills needed in
the development of this competency including the schema or
background knowledge which may reinforce learning. This module
will help the learners bridge the gap of learning to attain mastery of
the lesson.

What’s New

Principles, Tools, and Techniques in Creating a Business

To start a new business, an entrepreneurs needs to have a plan to start a business,

as one of the best practice entrepreneurs to identify needs of the community to start
a business. Based on your inquiry whether by interview or survey through print or
online, now, I would like you to identify 5 major needs of your community and rank
them according to order of priority from 1 being the highest and 5 lowest and
describe business opportunities that can be created.

Activity 1. Fill the table below

Needs of the Community Business that can be created Rank

1.

2.

5
 3.

4.

5.

What is It
Principles, Tools, and Techniques in Creating a Business

In planning a business, a thorough study needs to be made from the creation of

business. Understanding how the business will operate and co-exists in the
business world thus one needs to study principle, tools and techniques in creating
business

Principles in Creating a Business

The principles of a business are the driving forces that make it successful.
Below the ten key principles to make a business a success:
1. Scalability- A business must be scalable for it to be successful. Scalability is
the capability of a company to sustain or improve its performance in terms of
profitability or efficiency when its sales volume increases.
2. Big Ideas- A business is no more effective than the idea upon which it is
built. Business creates its own plan to expand its economic growth.
3. Systems- A business is a system in which all parts contribute to the success
or failure of the whole. In this system, everything must work together from
employee to president; from equipment to resources.
4. Sustainability- A business must be dynamic- able to thrive through all
economic conditions, in all markets, providing meaningful highly differentiated
results to all of its customers. Such differentiation is the key to survival.
5.Growth- Growth is essential in business. Without continued growth,
operations will stagnate. This can result in lowered standards of quality for
products or services, decreased customer service, and poor employee morale.
6. Vision- A business must manifest the higher purpose upon which it was
seeded, the vision it was meant to exemplify, the mission it was intended to
fulfil.
7. Purpose- A business is the fruit of a Higher Aim in the mind of the person
who conceived it.
8. Autonomy- A business is not part of the owner's life, but is, in fact, its own
entity. 6
9. Profitability- A business is an economic entity, driving an economic reality,
creating an economic certainty for the communities in which it thrives.
Tools in Evaluating a Business
It's the Holy Grail for small business owners – finding ways to make efficiency
savings in all aspects of their operations. The good news is there are plenty
of tools, tips and techniques available to help them make cost savings and
boost productivity. Here are 10 of them.
1. Use technology to speed up workflow- Businesses should be looking to
innovations in technology to solve day-to-day inconveniences and to
increasee efficiency.
2. Shorter meetings fuel efficiency- Hold a brief meeting standing up, every
morning, where each person explains what they are going to work on that
day to ensure everyone is on the right track and not wasting time on non-
urgent tasks.
3. Smart office space pays- Office space can involve a big outlay for SMEs,
but it is also an area where some smarter thinking can make a real difference.
4. Advertisement- Advertising keeps your business top of mind so consumers
think of it when they require or need a service or product.
5. Small changes, big savings--One way of improving efficiency is for business
owners to make small changes to the way they handle their company's
expenses.
6. Keep a firm grip on cash flow-"Cash is King not profit”. Ensure the right
management of your inflow and outflow of cash.
7. Stay connected on the move- The growing trend towards mobile and
flexible working means that employees are permanently connected and on
the go.
8. Use time more efficiently-Being more efficient is more about being than
doing. It's probably 90% mindset, (Allan, 2013). In addition, “The shorter the
amount of time you allow yourself, the more you will get done”.
9. Get the best deal on insurance- Businesses need insurance because it
helps cover the costs associated with property damage and liability claims.
10. Don't be lax with the legal
In the hectic process of starting up a business, the founders often put off
sorting out the legal matters until later,
7 or not at all.
 Since business is a commercial activity and its main purpose is profit, in the book
published by the Development Academy of the Philippines, how to prepare project
feasibility studies, it includes an industry analysis of the following important
factors.

COMPETITION AND COMPETITORS

Industry rivalry among companies of the same or related industry is an inevitable part
of the business world of any business size.Intense competition leads to reduced profit
potential for companies in the same industry. Businesses seek constantly competitive
advantage.

Competitive Advantage
 is what sets your business apart from your competition.
 highlights the benefits a customer receives when they do business with you.
 It could be your products, service, reputation, or even your location.

Different methods of competitive advantage which it can be done and are classified
into four categories:
c
1.Cost Leadership-an advantage occurs when business is able to offers same products
at a lower price.
2.Differentiation-Find attributes that is important and set them apart from their
competitors.
3.Defensive Strategies-used a defensive strategy to distance themselves from
competitors.
4.Alliances-advantage of seeking strategic alliance with other within related or within
businesses.

CUSTOMERS

Individuals or companies who desires to possess or make use of products and

services. They play a huge role in the success of your business. Customers likewise
can force down prices, demand higher quality or more service, and play competitors
off against each other—all at the expense of industry profits.

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SUPPLIERS
Provide inputs that the firms in an industry need to create the goods and services
that they in turn sell to their buyers.Suppliers can exert bargaining power on
participants in an industry by raising prices or reducing the quality of purchased
goods and services.

A business may need one or more suppliers. It is important to develop suppliers

who are reliable in terms of quality of what they supply and their dependability in
coming up with the things you order from them. It is important to maintain good
relationships with one’s suppliers; they are the key to one’s continued access to

SUBSTITUTES

 Goods/services that can be used in place for another. These goods

may, even if partly, satisfy the same needs of a consumer such that
the consumer may use one for instead for another.
 substitute products or services limit the potential of an industry.
 margarine can be a substitute for butter. Likewise Coke for Pepsi
 But not everybody will be willing to switch brands because they have
developed a taste for a particular cola. This is why manufacturers try
to differentiate their products from their competitors so that the
customers will develop product loyalty from their brand.
.

What’s More

Activity 1.Modified True or False. Write True if statement is correct, write False if
statement is incorrect and underline the incorrect word and write the correct
answer.

___________1. One of the strategies of suppliers is to provide discounts to clients

who buy small quantities of a specific good or service.

___________2. In business, competitors are a must to ensure quality products and

services.
___________3. Affordable price means lesser market share.

___________4. Soya milk is an example of substitute product for fresh milk.

___________5. Low quality means high satisfaction to customers.

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Activity 2

Directions: Read the story carefully. Analyze the business. Then answer the
questions at the end of the story.

Anne and Cherry are friends since high school. Anne is good in baking and Cherry
is good in selling. To increase their income, they decided to put up an online
business of bakery products. They contributed 10,000 each to start the business
and decided to split the profit equally as business partners. The friends agreed
that Anne will be in charge of the production while Cherry will be in charge of the
online site for taking marketing and promotion. Cherry started taking orders
while Anne is busy on baking products. The business started to get big orders
from their regular clients and other who visited their online site. After one year
of operation, while Cherry continue with her regular work Anne as in-charge of
the production, started getting sick and advised to rest. Now, Anne can no longer
continue baking for their business.

1. What went wrong with the business?

2. Do you think Anne and Cherry were right in how they manage their
business?
3. Are they right in their decision of equal sharing of profit? Explain your
answer.
Rubric:10 points- comprehensive and analytical 8-9 points- well written
and some includes analysis; 5-7 points-well written but lacks analysis;
2-4 points- weak essay; 1 point Poorly written and lack strength

Activity 3. Now, I want you to think of a product/service business that is needed

in your locality. List down your competitors, competitive advantage customers and
suppliers. Use the figure below.(10pts)

PRODUC
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 What I Have Learned

In this part of the module, the teacher would like to know what
you have learned in the lesson

Identify at least five principles and

tools in creating business

The picture can't be displayed.

Why is it important to know your

consumers, competitors and
suppliers in creating business?

The picture can't be displayed.

What I Can Do

Essay.As a student of economics, what business can you recommends in

this pandemic crisis Covid 2019 and why? .(Rubric:10 points- comprehensive
and analytical 8-9 points- well written and some includes analysis; 5-7 points-well
written but lacks analysis; 2-4 points- weak essay; 1 point Poorly written and lack
strength)

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 Assessment

Choose the letter of the best answer. Write the answer on a separate sheet of paper.
1.These are individuals/group of individuals who buy goods and services for
personal and business use.

a. Consumer c. Government
b. Creditors d. Suppliers
2.The capability of a company to produce or increase output when resources are
added is called _______________________.
a. Autonomy c. Profitability
b. Durability d. Scalability
3.Business is a legal entity that is separate and distinct from owner.
a. Autonomy c. Profitability
b. Durability d. Scalability

4.Ford and Toyota sells the same products; it evident that there is a ____________ .
a. Competition c. Alliance
b. Distribution d. Threats
5.Competitive advantages can also be gained by business that seeks association or
cooperation with other business:
a. Alliance c. Defensive strategy
b. Cost leadership d. Differentiation

6. Individual or firms who desire products and services in the market for
consumption or business.
a. Consumers c. Government
b. Creditors d. Supplier

7. Which does not belong to the group?

a. Colgate c. Close-Up
b. Head and Shoulders d. Hapee
8. A strategy that businesses use to distinguish themselves apart from their
competitors.
a. Differentiation c. Defensive Strategy
b. Alliance d. Cost Leadership
9. This method occurs when a business is able to offer the same quality product as
its competitors and sell it at a lower price.
a. Differentiation c. Defensive Strategy
b. Alliance d. Cost Leadership

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10. The advantage gained by this type of strategy is that it allows the business to
further distance itself by using defensive method.
a. Defensive strategy c. Diffrerentiation
b. Alliance d. Cost Leadership
11. An economic activity that is engage in buying and selling of goods and services
in exchange of money.

a. Business c. Trade
b. Commerce d. Partnership
12. Business ability to use its resources to produce profit.
a. autonomy c. profitability
b. big idea d. scalability
13. These are alternative goods that can easily replace by other products either
perfectly or in part.
a. brand c. original
b. clone d. substitutes
14. Printed and online promotion is needed in starting your business.

a. advertising c. profitability
b. big ideas d. scalability
15. Entrepreneurs think big and make this idea into a reality for the success of
their business.
a. autonomy c. profitability
b. big idea d. scalability

Additional Activities

Think Big. In the recent ECQ, many businesses suffer a loss due to lockdown. In
at least five (5) sentences, what solutions can you suggest to make their businesses
thrive?

(Rubric: 5 points- comprehensive and analytical 4 points- well written and some includes analysis;
3 points-well written but lacks analysis; 2points- weak essay; 1 point- poorly written and lack
strength)

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