ABM/GAS • Applied Economics

Grade 12: Week 7: Module 7

First Edition, 2020

Copyright © 2020
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form without
written permission from the copyright owners.

Development Team of the Module

Author: Narciso A. Martin Jr., T-II

Editor: SDO La Union, Learning Resource Quality Assurance Team

Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

ATTY. Donato D. Balderas, Jr.

Schools Division Superintendent

Vivian Luz S. Pagatpatan, Ph.D

Assistant Schools Division Superintendent

German E. Flora, Ph.D, CID Chief

Virgilio C. Boado, Ph.D, EPS in Charge of LRMS

Lorna A. Gaspar, EPS in Charge of Accountancy Business and Management

Michael Jason D. Morales, PDO II

Claire P. Toluyen, Librarian II

ii
 Applied
Economics

Week 7: Module 7
 Target

After reading these learning materials, the learner must

analyze the different principles, tools, and techniques when putting up a business of
his choice.

Every individual or businessman must fully understand the prevailing

business principles, tools, and techniques as helpful instruments in the business
day-to-day economic activity.

This lesson will guide a businessman in managing and administering business

operational flexibilities and the different analytical business tools and techniques
used throughout the business cycle. Learners and business enthusiasts have the
chance to explore the most common business tools and techniques used such as the
Environmental Scanning, Business Prediction, Benchmarking, the Strength,
Weaknesses, Opportunities, and Threats (SWOT) Analysis, the TOWS Matrix
(inverted format of SWOT), the Political, Economic, Social and Technological factors
(PEST) Analysis, the importance of conducting first a Feasibility Study and Porter’s
Five Forces.

After going through this information sheet, the learner expects to

Analyze different principles, tools, and techniques in creating a business

(ABM_AE12-Ia-d-9)

Subtasks
1. To discuss the different business principles
2. To interpret the different business tools
3. To distinguish the different business techniques

4
 Jumpstart
Pretest. Short Quiz.
Directions: Choose the best answer from the given choices. Use a separate sheet for
your answers. (5 points)

1. What business tool starts in analyzing the INTERNAL FACTORS affecting the
overall performance of the business?
A. Feasibility Study C. SWOT Analysis
B. Porter’s Five Forces D. TOWS Matrix

2. What business tool starts in analyzing the EXTERNAL FACTORS affecting the
overall performance of the business?
A. Feasibility Study C. SWOT Analysis
B. Porter’s Five Forces D. TOWS Matrix

3. What business tool uses BUSINESS RESEARCHES to support more objective

decision-making when creating a business?
A. Feasibility Study C. SWOT Analysis
B. Porter’s Five Forces D. TOWS Matrix

4. What business tool helps business owners to analyze the LEVEL OF

COMPETITION within industry lines?
A. Feasibility Study C. SWOT Analysis
B. Porter’s Five Forces D. TOWS Matrix

5. Procter and Gamble Philippines owned the product named “Tide” as a

detergent brand offered in the market. What element does the company give
importance to when it continuously innovates the Tide products in the market
through its “PACKAGING”?
A. external factor/s C. SWOT Analysis
B. internal factor/s D. TOWS Matrix

Activity 1: Business Dictionary.

Directions: Supply your answers in the appropriate boxes to discover the hidden
business keywords on each given clue. Use a separate sheet for your answers. (10
points)

5
 2

1 4

5 8

10

Clues

6
 1. It is a collective effort of individuals to produce goods and services for their
target customers.
2. They are the primary recipients of goods and services produced and offered
by all types of businesses.
3. It is characterized by similar companies that offer the same products and
services to win their target customers.
4. It refers to the availability of goods or services offered in the market.
5. It is a stable monetary unit in the Philippines.
6. It relates to the consumer desire to purchase products or avail of the services
offered at a given price.
7. It is considered the "gas and oil" of every business.
8. It is a state where market supply balances with market demands due to a
stable market price.
9. It is the science of dealing with scarce resources to satisfy societal needs,
choices, and wants.
10. The English translation of the Latin word "libra."

Discover

Discussing Business Principles

A successful business understands the critical factors that could potentially affect
the way how it should operate. Business people should also be ready to address
challenges it could bring into the whole organization in unprecedented business
crises. Identifying company strengths and weaknesses will give a clearer picture of
how to properly manage company resources and the accurate administration of the
people’s skills connected to it to maximize production capacity extent (i.e.,
manufacturing business) and income generation.
Around the world, successful businesses continue to innovate to give the best
products and services that their consumers deserve. Some of the fundamental
business principles considered in top management's decision-making process are
supply and demand law statistics that guide manufacturers on producing and
delivering goods to meet the market needs and wants. The use and spending of money
to generate more money and resources such as additional investments for the firm
like procurement of new machinery and equipment could improve business
operations with greater efficiency. The greater the risk, the higher the potential return
teaches businesses to explore possibilities such as the promising benefits of using
technologies in running out our business. Nowadays, social media platforms use to
market products and services all day long, which is becoming more convenient over
costly advertisements. Develop new strategies that will provide a unique taste of
excitements from the consumers, such as more appealing product packaging and
new improve flavors, thus bringing out creativities as an infinite source of business
knowledge. It costs five times as much to get a new customer as it does to sell
something to a previous one, which reminded business-minded people to be more

7
consumer-oriented when it comes to decision-making. Without consumers, there is
no successful business. Consumer service is “king.” It becomes an excellent business
success indicator, especially across service providers across the globe, where
consumers' delight, satisfaction, and loyalty are contributing factors to win our
skeptical consumers' hearts and minds successfully. They are always wandering
around to look for the best consumer service provision in the town. Every industry
worldwide has its set of “best practices” that differentiate it from the rest. Now that
stiff competition in the business world keeps evolving seamlessly among rival firms,
business owners must see that the business will capture and protect their target
markets by simply instilling their brand image, identity, and market share. One
notable example is the Apple Company, led by its former CEO Steve Jobs, who
developed the IOS for smartphones. The company keeps on innovating to sustain its
market share. Businesses with strong advisory boards and a strong management
team make wiser decisions. It follows good governance with the end objective to help
back the community, including all the people connected to the company, to grow
more professionally, and be with the results-oriented team. Some subjects like
Business Ethics, Organizational Development, and Corporate Social Responsibility
have taught all working personnel to be more objective in corporate decisions. The
expected result will always favor the general welfare of both the business and its
people. Good governance means adherence to corporate policies and prevailing laws
and subsequent implementation, keeping accurate financial records of the company,
and paying taxes to sustain the nation's economic stability that somehow has a
potential return in the business chambers. Lastly, successful business owners know
their market and their competition to put firms at their most competitive edge over
their rivals in the market. We have seen successful businesses such as corporations
that stayed in the market not just years but decades of business operational
flexibilities. They have prioritized important business parameters, developed tactics,
and devised business strategies to continue surviving amidst competition and
challenging times.
The present health crisis that confronts the business world will attend on each
business preparedness and readiness (big or small) that operates around the corner
to continue to survive with all the challenges it could bring business into tests.
Understanding and applying some business principles will help business owners and
entrepreneurs manage their business operations to pursue continuous survival as
they also help sustain the nation’s economy.

Interpreting Business Tools

How can we say that a business is a successful one?
For example, a Sari-Sari Store that operates around the corner seemed
successful because we can observe a continuous income flow. Consumers keep
buying items from the store, and there is a constant product supply despite small
earnings.
In contrast, big companies worldwide must possess the minimum
requirements following business success indicators to continue to operate. For
example, for having a good management team, excellent IT infrastructure, service
oriented personnel, production capacity extent, favorable returns on investments
(ROI), and positive business performances (liquidity, solvency, maturity, and
stability). As the business expands, it helps the economy grow because there will be

8
employment opportunities, exchanges of goods and services among retailers and
merchants, and a continuous flow of trade and production of goods in the
countryside.
In helping achieve these organizational objectives, some essential business
tools can help the management team track each business’s progress.
First is the Feasibility Study, which is considered a powerful tool when putting
up a business. Usually, a feasibility study follows essential business parameters that
need to be planned before introducing any company in the target market, such as
Financial, Technical, Market, Operation, and the Organization.
The most common Feasibility Study has the following essential contents such as;

 An Executive Summary
 Description of Product or Service
 Technology Considerations
 Product or Service Marketplace
 Identification of Specific Market
 Marketing Strategy
 Organization Structure
 Schedule
 Financial Projections

Next is the SOAR (Strengths, Opportunities, Aspirations, and Results)

Analysis. Using this tool invites a positive mindset by combining the people’s ideas,
dreams, and interests to fuel an energizing vision to work. SOAR Analysis works for
all industries, all levels in an organization, existing and new businesses, companies
striving for breakthroughs, and individuals as part of their development plans. The
following table shows the SOAR Analysis sample proforma.

Strengths Opportunities

What does the organization do with its What situations lead the team to
assets, resources, capabilities, and success, profit, discoveries, and
challenges? breakthroughs?

Aspirations Results

What success indicators are the best

What do we want to achieve in the future? outcomes?
Table 1. The SOAR Analysis

Next is the SWOT (Strengths, Weaknesses, Opportunities, and Threats)

Analysis. This business tool will help the business identify internal factors as its

9
ultimate business strengths to maximize resources while gradually addressing its
weaknesses. Suppose the company can detect weaknesses, both internal and
external factors. In that case, the business can focus its resources to obtain more
resources, improve its people skills, systems, methods, and even procedural
approaches.
The following table shows the SWOT Analysis sample proforma.

Strengths Weaknesses

Strengths are internal business factors Weaknesses are internal business

that could help generate more assets and factors that could challenge the
resources. achievements of business success.

Opportunities Threats

Opportunities are external business Threats are external business factors

factors that could contribute to business that could harm the whole business
success. organization.
Table 2. The SWOT Analysis

Next is the TOWS (Threats, Opportunities, Weaknesses, and Strengths)

Matrix. One of the main focuses of this tool, compared with SWOT Analysis, focuses
on strategy generation and selection (internal) while the former focused on
opportunities and threats (external). This tool generally matches internal to external
factors to streamline strategic options that an organization would have to take. The
following table shows the expanded TOWS Analysis sample proforma.

External Opportunities External Threats

Internal Strengths (S) SO - Maxi-Maxi Strategy ST - Maxi-Mini Strategy

Internal Weaknesses (W) WO - Mini-Maxi Strategy WT - Mini-Mini Strategy

Table 3. The Expanded TOWS Matrix
Next is the PEST (Political, Economic, Social, and Technological) Analysis,
which is also known for its expanded formats such as PESTLE, PESTEL, PESTLIED,
STEEPLE, SLEPT, and LONGPESTLE. The simplicity of PEST Analysis helps
businesses to understand the “big picture” of forces that potentially exposed the
whole business package that may bring changes, challenges, and opportunities. The
creator of PEST Analysis is Harvard Professor Francis Aguilar, who mentioned in his
1967 book entitled “Scanning the Business Environment” the following reasons for
this tool such as;

1. It helps spot business or personal opportunities while giving an advanced

signal of significant threats.
2. It reveals the direction of change in the business environment.
3. It helps to avoid starting projects that are likely to fail.
4. It helps to develop an objective view of the new environment.

10
 The following table shows the PEST Analysis sample proforma.

P E S T

Political Economic Social Technological

The The The success of The advent of

government purchasing business technological
helps in power of economic innovations
building a consumers could
performances is
progressive could change improve
highly
flow of the the demand business
dependent on
economic and supply operational
system. models of the the flexibility.
economy. demographic
profiles,
characteristics,
and lifestyles of
consumers.
Table 4. The Simple PEST Analysis

Next is Porter’s Five Forces, which derived its name from the proponent, Sir
Michael E. Porter. Porter’s Five Force’s ultimate goal allows the organization to study
the market’s movement while identifying its standing among competitors. It tells the
level of competition of the market that signals strategic intervention for successful
business survival.
The following figure shows Porter’s Five Forces sample proforma.

Threat of
New
Entrants

Intensity of Bargaining
Competitive Power of
Rivalry Buyers
PORTER’S
FIVE FORCES

Bargaining
Threat of Power of
Substitutes Suppliers

11
 Figure 1. The Porter’s Five Forces
Porter’s Five Forces gauges the following business indicators, such as the
threat of new entrants, which analyzes how it is easy to put up a new shop or how it
is challenging to penetrate the target market. It shall also understand the bargaining
powers vested both for the buyers (purchase/buy) and suppliers (deliver/sell). It also
determines how likely a customer chooses alternatives when they become available,
including the emerging numbers of competitors having the same offered products
and services that could intensify competition in the business environment.

Distinguishing Business Techniques

In maintaining the competitive business edge, the probable focus would be on the
effectiveness of business techniques (traditional or contemporary) to match the
demands of the ever-evolving world of the business economy.
Like Andrew Gotianun Sr. led the Filinvest Group that engages in real estate, George
S.K. Ty founded the Metrobank, and the late Henry Sy Sr. became well known in
managing Shoemart now Supermarket (SM), are just among the prominent
successful businessmen here and abroad.
But how they achieved these milestones?
For entrepreneurs or small business players in the market competition, essential
business parameters must carefully consider before creating any business type.
First is the use of environmental scanning, where it provides sorted data about the
business environment. Technically speaking, the business environment has internal
and external environments. When seeking data from the internal business
environment, the business must consider the availability of company resources,
production capacity extent (goods/services), procurements, and even the Research
and Development capability of the organization such as Corporations and
MultiNational Corporations. Data from the external business environment are the
elements that constitute economic situations outside the organization. For instance,
the impact of inflation into one’s economy, rates of interest, changes in buying and
selling stocks, political and social situations, demographic profiles, technology
advances, and even people’s spending could affect the demand and supply models of
the economy. Through careful analyses of the general business environment,
business owners can create realistic decisions crafted from analyzing the business
environments.
Another well-known business technique is employing business prediction or
business forecasting that taught us how to objectively predict variables in a business
environment that could contribute to future success. A basic example when using
this technique is hiring new employees if deemed necessary or, in some cases,
execute retrenchment if, upon careful review, it would potentially put the business
in its most advantageous position. Production of goods may also be predicted, such
as the Accounting data wherein sales get higher during peak seasons. However, one
obvious limitation of business forecasting is its level of certainty that all predictions
made will probably happen in the future.
The concept of benchmarking can alter economic situations such as when
manufacturing quality, affordable and innovative products could increase the
organization’s profitability. Pricing differentiation, product packaging, creating
consumer’s value, and business-identity through best practices could put our
business to its optimum level of competitive advantage among rival firms in the

12
industry lines. It becomes the reason sometimes; our personal experience taught us
to stick with the same brand or products because of trust and loyalty already seed
in the business. Benchmarking is an excellent business technique because even how
high the competition is, the company may still win sensitive consumers because of
the seed business confidence.

Explore

Activity 1:
Directions: Read and analyze the given cases brought by the prevailing health crisis.
Give and support your decisions using business tools for each case. Use a separate
sheet for your answers.
Case 1. Foreclose Property.
Before the coming of COVID-19 in Bauang, La Union, Mang Juan’s
agricultural land (sole property) has considered for bank foreclosure. BDU wants to
foreclose the property of Mang Juan now due to multiple extensions of humanitarian
considerations.
Use one business tool for BDU and Mang Juan and give your decisions.
What will be the BDU’s decisions? Mang Juan’s decisions?

Case 2. Business is a Gamble!

They say that our PESO currency’s value gets weaker every day because of
many factors that affect the Philippine economy, such as the unfavorable currency
exchanges, declining purchasing power, and the drastic effect of this worldwide
pandemic.
What business do you think is the best possible to put up at present using
your simple Feasibility Study?

Case 3. Deposit or Investment?

Compute your daily expenses of food on the table, i.e., how much is the cost of your
breakfast, morning snacks, lunch, afternoon snacks, dinner, including your
midnight snack.
Based on the actual expenses of food for the day, how much should you invest
in the bank, which offers you a 0.125% interest rate?
If you intend to put up a business to support your daily expenses, what
business is it?
A SWOT Analysis must support your chosen decision.

13
14
KEY ANSWERS

15
16
17
18
References
Books

Martin, Narciso Jr., A. (2012). The Quality of Service of Commercial Banks in The
City of Tarlac. Tarlac State University. College of Business and Accountancy.
University Archives - Library of Social Sciences. Pp 1-141.

Silbert, J. and Silbert, T. (2007). Soaring from SWOT” Four Lessons in Strategic
Planning Done Right. Accessed October 24, 2018.

Stavros, J.M. and Hinrichs, G. (2009). The Thin Book of SOAR: Building
StrengthsBased Strategy. Thin Book Publishing Company.

Websites

De Bruin, Lars. “Business-to-you (B2U).” June 18, 2018. Retrieved from

https://www.business-to-you.com/scanning-the-
environmentpestelanalysis/

GroupMap Technology Pty Ltd. (2019). Retrieved from

https://www.groupmap.com/map-templates/soar-analysis/

MindTools. Essential Skills for an Excellent Career. (2020). Retrieved from

https://www.mindtools.com/pages/main/newMN_STR.htm

19