APPLIED ECONOMICS

Chapter 1:
Industry and
Environmental Analysis:
Business Opportunity
 Lesson 1.1
PRINCIPLES, TOOLS, AND
TECHNIQUES IN CREATING
A BUSINESS
 LET'S BEGIN!
In planning a business, a thorough study is
needed 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 principles, tools and
techniques in creating business.
TH E PR INC IPL ES OF A BU SIN ES S

It is the driving force that makes a

business successful
It gives an initial idea about what things
are needed to be done.
It enables entrepreneurs to decide what
should be done and be accomplished in
the business.
 1 SCALABILITY
There are a total of Scalability is the capability of a company to
ten Key Principles sustain or improve its performance in terms
to make a business of profitability or efficiency when its sales
volume increases. With this, a business must
successful
be scalable for it to be successful.

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 together from employee to president; from
equipment to resources.

4 SUSTAINABILITY
A business must be dynamic - able to thrive through all economic conditions, in alll
markets, providing meaningful and 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 fulfill.

7 PURPOSE
A business is the fruit of a Higher Aim in the mind of the person who conceived it.
Your purpose is the reason you have formed your business in the first place.

8 AUTONOMY

A business is not part of the owner's life, but is, in fact, its own entity. It is
separate from our personal life.
 PROFITABILITY
A business is an economic entity, driving an
economic reality, creating an economic
certainty for the communities in which it
thrives.
STANDARD
A business creates standard against which
all business are measured as either
successful or not.
9
Each business needs a
shape and structure, and
these principles will give
your business an outline,
which is necessary for it
to thrive.
10
TO OL S IN EV AL UA TIN G A BU SIN ES S

Tools is the Holy Grail for small business owners

- meaning it have a important part in creating a
new business.
It helps find ways to make savings more efficient
in all aspects of the operation.
There are plenty of tools, tips, and techniques in
helping make cost savings and boost
productivity
 10 TOOLS IN EVALUATING A BUSINESS
1 2

Use Technology To Shorter Meetings

Speed Up Workflow
Businesses should be Hold a brief meeting standing up,
looking to innovations in
technology to solve day-to-
day inconveniences and to
increase efficiency.
Fuel Efficieny
every morning, where each
person explains that 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 4 5

Smart Office Small Changes,

Advertisement
space Pays Big Savings
Advertising keeps
Office space can One way of
your business top
involve a big improving efficiency
of mind so
outlay for SMEs, is for business
consumers think
but it is also an owners to make
of it when they
area where some small changes to the
require or need a
smarter thinking way they handle
service or product.
can make a real their company's
difference. expenses.
 6 7 8

Keep a Firm Grip Stay connected Use time more

on Cash Flow on the move efficiently
"Cash is King The growing trend Being more efficient is
towards mobile more about being than
not profit”. doing. It's probably
and flexible
Ensure the right 90% mindset, (Allan,
working means 2013). In addition, “The
management of that employees shorter Applied
your inflow and are permanently Economics 6 the
outflow of cash. connected and on amount of time you
the go. allow yourself, the more
you will get done”.
 9 10

Get the best deal on Don't be lax with the

insurance legal
Businesses need insurance In the hectic process of
because it helps cover the starting up a business, the
costs associated with founders often put off
property damage and sorting out the legal
liability claims. matters until later, or not
at all.
 IN DU ST RY AN AL YS IS
Industry analysis is a market assessment
tool used by businesses and analysts to
understand the competitive dynamics of an
industry.
It helps with analyzing the important factors
in a business.
It gives an overview of what strategies is
useful in starting a business.
 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
compazanies in the same
industry. Businesses seek
constantly competitive
advantage.
Two Types of Competitors
Direct Competitor
Indirect Competitor
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.
 Cost Leadership - an advantage occurs
1
when business is able to offers same
products at a lower price.

Differentiation - Find attributes that is

2
important and set them apart from
their competitors.
Different methods
of competitive Defensive Strategies - used a defensive
3
strategy to distance themselves from
advantage which it
competitors.
can be done and
are classified into Alliances - advantage of seeking
4
four categories: strategic alliance with other within
related or within businesses.

COSTUMERS
Costumers are one of the aspects that
there is a competition in businesses.
Customers are important because
they drive revenues; without them,
businesses cannot continue to exist.
All businesses compete with other
companies to attract customers,
either by aggressively advertising
their products, by lowering prices to
expand their customer bases, or by
developing unique products and
experiences that customers love.
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.
SUPPLIERS
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