Applied Economics Quarter 2 (Week 7)

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

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

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.
9. Profitability- A business is an economic entity, driving an economic reality, creating an economic certainty for the
communities in which it thrives.
10 Standards A business creates a standard

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 increase 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 nonurgent 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 relax with the legal In the hectic process of starting up a business, the founders often put off sorting out the
legal matters until later, 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:
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.

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

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.

ACTIVITIES

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.

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
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)

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 b. Creditors c. Government d. Suppliers
2.The capability of a company to produce or increase output when resources are added is called
_______________________. a. Autonomy b. Durability c. Profitability d. Scalability
3.Business is a legal entity that is separate and distinct from owner
. a. Autonomy b. Durability c. Profitability d. Scalability
4.Ford and Toyota sells the same products; it evident that there is a ____________ .
a. Competition b. Distribution c. Alliance d. Threats
5.Competitive advantages can also be gained by business that seeks association or cooperation with other business:
a. Alliance b. Cost leadership c. Defensive strategy d. Differentiation
6. Individual or firms who desire products and services in the market for consumption or business.
a. Consumers b. Creditors c. Government d. Supplier
7. Which does not belong to the group? a. Colgate b. Head and Shoulders c. Close-Up d. Hapee
8. A strategy that businesses use to distinguish themselves apart from their competitors.
a. Differentiation b. Alliance c. Defensive Strategy 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 b. Alliance c. Defensive Strategy d. Cost Leadership
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 b. Alliance c. Differentiation d. Cost Leadership
11. An economic activity that is engage in buying and selling of goods and services in exchange of money.
a. Business b. Commerce c. Trade d. Partnership
12. Business ability to use its resources to produce profit.
a. autonomy b. big idea c. profitability d. scalability
13. These are alternative goods that can easily replace by other products either perfectly or in part.
a. brand b. clone c. original d. substitutes
4. Printed and online promotion is needed in starting your business.
a. advertising b. big ideas c. profitability d. scalability
15. Entrepreneurs think big and make this idea into a reality for the success of their business.
a. autonomy b. big idea c. profitability d. scalability