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Entrepreneurship
Learning Activity Sheet
Quarter 3
LESSON 1: DEVELOPING A BUSINESS PLAN (DP)

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 I. Title Topic
→ Recognize a potential market and understand the market.
II. Concept Notes

Background Information for Learner

You have learned that in entrepreneurship a person (entrepreneur) who set up a business must
recognize its financial risk. One must make their business work by eliminating any hindrances or
distractions to their goals. They must overarch strategies and outline the tactics to accomplish them.
Successful entrepreneurs are disciplined enough to take steps every day toward the achievement of
their objectives. If you possess the quality of an entrepreneur to perform a business venture you may
now start having your small business. But before you start your business let us study various factors
required to be considered while setting up any small business.
WHO CAN START A BUSINESS?
Anyone can start a small business unit. He may be an existing entrepreneur or a new one, having a
business background or not educated or uneducated from rural area or urban area.
HOW CAN I ARRANGE MY CAPITAL?
The entrepreneur must analyze and find out the amount and the duration of finance required as well as
the duration for such finance is needed in the business. The entrepreneur requires money to buy
machinery, building, raw material, pay wages to labor, etc. Money spent on buying machinery,
building, equipment, etc. is known as fixed capital. On the other hand, money spent on buying raw
materials and paying wages and salaries, rent, telephone and electricity bills, etc. is known as working
capital. The entrepreneur has to arrange for both fixed as well as working capital for his business. The
finance can be raised by self-contribution or by borrowing from banks and other financial institutions.
Money can also be borrowed from friends and relatives.
HOW CAN I SELECT THE LINE OF RIGHT BUSINESS FOR ME?
The process of launching a business begins when the entrepreneur start thinking about a line of
business, which can be undertaken by him. He may consider business opportunities as per the market
demand. He may go for an existing product or a new product. But before taking any step he has to
ascertain the profitability of the business and the amount of capital investment. Having estimated the
profitability and risk involved, the entrepreneur has to decide which line of business could be desirable
to pursue.
WHAT IS THE RIGHT LOCATION OF MY BUSINESS?
Special care should be taken while selecting the location of the business. An entrepreneur can start
business in his own premises or in a rented premise. It can be located at a marketplace or in a
commercial complex or in an industrial estate. While deciding the location, the entrepreneur should
consider various factors like sources of supply of raw material, nearness to the market, availability of
labor, transportation, banking and communication facilities, etc. Factories should be preferably located
near the source of raw material and at a place that is well connected with rail and road transport facility.
A retail business should be started near residential area or in a marketplace.

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HOW TO SELECT YOUR BUSINESS WORKFORCE?
An entrepreneur cannot run the business alone. He has to employ people to help him. Skilled and Semi-
skilled workers have to be recruited particularly for manufacturing work. Before starting the business,
the entrepreneur must find out whether he will be able to get the right type of employees for the
activities involved.
IMPORTANCE OF POTENTIAL MARKET
Now that you’re familiar on how to set up your small business. It is now time for you to identify and
recognize your potential market by studying its definition and importance. A potential market is the
part of the market you can capture in the future. It includes the demographic groups of customers that
will purchase your product or services in the future who might become your regular customers from
the expansion of your business. A target customer that makes up its share in the available market is to
be set by every business owner. The best ways to grow your business is to identify your potential.
The best ways to grow your business is to identify your potential market that you can begin to target.
The potential market allows you to:
1. Identifying new customers to ensure the future of your business.
2. Think proactively about ways for your business to grow and change.
3. Show the potential of your business to investors or collaborators.
4. Increase your profit. 5. Create a strategic plan when there will be changes in the economy or market.

Potential market is the part of the total population that has shown some level of interest in buying a
particular product or service.
❖ Potential market is also called Total addressable market (TAM) (MBA Skool Team, 2018).
❖ Potential market is the part of the market you can capture in the future. It includes the
demographic groups that are not currently your customers but could become customers in the
future (Lake, L, 2019).
❖ Market potential is the total demand for a product in a given business environment (Bhasin,
H., 2018).
❖ The Importance of Potential Markets (Lake, L., 2019)
✓ Potential markets are an important part of a business's future growth.
✓ Ensure the future of your business by identifying new customers.
✓ Think proactively about ways for your business to grow and change.
✓ Show the potential of your business to investors or collaborators.
✓ Increase your revenue.
✓ Create a plan B that will weather changes in the economy or market.
❖ How to Identify Your Potential Markets (Lake, L., 2019)
o Consider every target demographic that you currently sell to, as well as those you have
not yet targeted. Identify what they have in common with each other, new milestones
that they will encounter in their lives that will impact their buying patterns, and where
they overlap or diverge from your current customers.
❖ Ask yourself these questions that will help you identify both new ways to market your current
products or services, as well as new products and services that you can begin selling.
✓ What other products do my customers need now?
✓ What related products will they need in the future?
✓ Who else could make use of the products I am selling now?
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 ✓ What demographic information does that new group have in common with my current
customers?
✓ What demographic information does that new group have in common with each other?
❖ For example, a business that makes face masks and PPEs could identify potential markets such
as:
✓ Hospitals and other health related industries whose employees are prone to COVID -19
virus and other viruses.
✓ Business industries and other organizations who want to ensure the health condition of
their employees.
✓ Employees and workers who need to report to work to earn income.
✓ Households who need to go out for their necessities.

Note: Depending on the size and age of your company, as well as your industry, you may have a clear
picture of the potential markets that are available.
❖ Reaching Your Potential Market (Lake, L., 2019)
➢ Once you have identified and chosen a potential market to begin targeting, you
will need new marketing strategies in place to communicate with them. Use this
profile to identify:
✓ The demographic information that people in a group have in common.
✓ The best forms of media to reach them.
✓ How they prefer to shop and make purchases.
✓ The concerns, struggles, or problems that you can help them overcome.
✓ What values matter to them, both in everyday life and when shopping.
✓ The language that resonates with them.
❖ Available Market
➢ Prospects who are willing and capable (have sufficient resources) buyers, and have
access to a particular market or service (www.businessdictionary.com).
➢ Defined as the number of people who are both willing and capable of buying a particular
product or service in a particular market (MBA Skool Team, 2020).
❖ Target Market
➢ Refers to a group of potential customers to whom a company wants to sell its products
and services. Target markets are generally categorized by age, location, income, and
lifestyle. Defining a specific target market allows a company to home in on specific
market factors to reach and connect with customers through sales and marketing efforts.
(Kenton, W., 2019).
❖ Penetrated Market
➢ A set of customers or clients who are already using a particular product or service. A
penetrated market means that the potential users of a product or service are aware of
it, and in many cases are active consumers of it. (www.businessdictionary.com)
❖ The Market Need
1. Need
• A motivating force that compels action for its satisfaction. Needs range
from basic survival needs (common to all human beings) satisfied by
necessities, to cultural, intellectual, and social needs (varying from place
to place and age group to age group) satisfied by necessaries
(www.businessdictionary.com).
• A driver of human action which marketers try to identify, emphasize,
and satisfy, and around which promotional efforts are organized
(www.businessdictionary.com).

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 2. Market
• A Market is a place where two parties can gather to facilitate the
exchange of goods and services. The parties involved are usually buyers
and sellers. The market may be physical like a retail outlet, where people
meet face-to-face, or virtual like an online market, where there is no
direct physical contact between buyers and sellers (Kenton, W. & Boyle,
M., 2020).
• A market does not refer to a particular place but it refers to a market for
a commodity or commodities. It refers to an arrangement whereby
buyers and sellers come in close contact with each other directly or
indirectly to sell and buy goods (Shaikh, S., retrieved 2020).
• A market is any place where sellers of particular goods or services can
meet with buyers of those goods and services. It creates the potential for
a transaction to take place. The buyers must have something they can
offer in exchange for the product to create a successful transaction
(Moffatt, M., 2019)
❖ Existing customers: People who have already purchased your product.
❖ Prospects: People who have not yet purchased your product but are considering it.
❖ Target market users: People in your target market who are not currently looking for a
solution.

❖ Define the Market Need for Your New Business - Why is it important to clearly define
market needs?
➢ Below are ways to define your market (Lancaster SCORE (2010):
✓ Consider whether the business offers a new solution to an old problem or
complements an emerging trend.
✓ Have a clear picture of your target market.
✓ Determine the benefits that your product or service offers.
✓ Examine industry data that can confirm whether there is a sustained, growing
demand for your product or service.
✓ Identify the percentage of market share that it is realistic for you to capture.
The more competition you have, the lower the margins will be.
✓ Consider how realistic your pricing is. How can you present your product or
service to potential customers so that it appears to be a good value, while still
affording you a healthy profit?

OPPORTUNITY RECOGNITION
Opportunity is a situation or occasion that makes it possible to do something that you want to do. It is
an exploitable set of circumstances with uncertain outcome requiring a commitment or resources and
involving exposure to risk.
1. OPPORTUNITY SEEKING
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 • Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover new
or different ideas and see whether these ideas will work in the market place.
• Entrepreneurs create value by introducing new products or services or finding better way of
making them
• These may include innovation in terms of product designs or addition of a new product features
to existing ones
• They may also tinker on improving their operational capability by employing new technologies
that will bring them greater efficiency and better economics

2. OPPORTUNITY SCREENING
• Opportunity Screening is the process of cautiously selecting the best opportunity. It is perhaps
the most rigorous and yet, most important part of an opportunity –driven entrepreneurship. It takes
a lot of time, effort, and knowledge to discern which among the potential opportunities uncovered
would be the one worth investing on or at least narrowing down the list to the few promising ones.

VALUE PROPOSITION
A value proposition refers to the value a company promises to deliver to customers should they choose
to buy their product. A value proposition is part of a company's overall marketing strategy. The value
proposition provides a declaration of intent or a statement that introduces a company's brand to
consumers by telling them what the company stands for, how it operates, and why it deserves their
business. A value proposition can be presented as a business or marketing statement that a company
uses to summarize why a consumer should buy a product or use a service. This statement, if worded
compellingly, convinces a potential consumer that one product or service the company offers will add
more value or better solve a problem for them than other similar offerings will.
UNDERSTANDING A VALUE PROPOSITION
A value proposition stands as a promise by a company to a customer or market segment. The
proposition is an easy-to-understand reason why a customer should buy a product or service from that
business. A value proposition should clearly explain how a product fills a need, communicate the
specifics of its added benefit, and state the reason why it is better than similar products on the market.
The ideal value proposition is to-the-point and appeals to a customer's strongest decision-making
drivers.

REQUIREMENTS OF A VALUE PROPOSITION

A company's value proposition communicates the number one reason why a product or service is best
suited for a customer segment. Therefore, it should always be displayed prominently on a company's
website and in other consumer touch points. It also must be intuitive, so that a customer can read or
hear the value proposition and understand the delivered value without needing further explanation.
Value propositions that stand out tend to make use of a particular structure. A successful value
proposition typically has a strong, clear headline that communicates the delivered benefit to the
consumer. The headline should be a single memorable sentence, phrase, or even a tagline. It frequently
incorporates catchy slogans that become part of successful advertising campaigns. Often a sub headline
will be provided underneath the main headline, expanding on the explanation of delivered value and
giving a specific example of why the product or service is superior to others the consumer has in mind.
The subheading can be a short paragraph and is typically between two and three sentences long. The
subheading is a way to highlight the key features or benefits of the products and often benefits from
the inclusion of bullet points or another means of highlighting standout details. This kind of structure
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allows consumers to scan the value proposition quickly and pick up on product features. Added visuals
increase the ease of communication between business and consumer. In order to craft a strong value
proposition, companies will often conduct market research to determine which messages resonate the
best with their customers.
HOW TO DEVELOP A VALUE PROPOSITION?
A good value proposition should allow companies to increase their conversion rates which in turn lift
revenue. However, the value proposition creation process is not something that can be hastily done. It
should loosely follow a series of actions that flesh out what the company can offer to customers.
1. Understand the benefits customers receive.
To start creating a value proposition, leaders need to understand how they create value. Therefore,
the benefits the company provides to the consumers should be listed. Everything from the product’s
use, customer service, delivery processes, and any other component should be on the list. The
benefits the company and its products and services provided to consumers should be something
each employee should be able to pinpoint easily.
2. Connect benefits to the value.
Once leaders have a complete grasp on the benefits offered, they should then link these benefits to
the value the company creates for customers. - How do the benefits help the customer? - Does the
product address a problem or need? - Does the buying process significantly reduce the purchase
time? - How can customers expect to benefit from what the company offers?
3. Target your audience
Every business product is not for every consumer. Leaders need to sharpen the focus and decide
who is the target segment for the product or service. This information can include location,
demographics, income, occupation, hobbies, and many other factors. Knowing who the audience
is will help leaders decide which benefits should be mentioned and which might be best to leave
out. It also creates a way to better link benefits to value.

4. Differentiate the Product and Service

This might be one of the most critical components of all. At this point, leaders need to work with
their teams to see how they are different from competitors. This step revolves around the question
of why consumers should pick this company over someone else’s. It is a good idea to look at direct
competitors and note what they do similarly, and how the company either does it better or more
efficiently. Consumers need to know why they should look over another brand for someone else’s.
5. Put everything into a clear and easy to read sentence.
Through research and analysis, leaders should emerge with an idea of what to include in their value
proposition. The purpose of this statement is not to become a long and arduous read, but it should
quickly inform customers of who the company is. Customers should be able to read over the value
proposition in five seconds to get a feel for the benefits and value the business offers. If the
statement cannot be whittled down to a sentence, then leaders should go back to the drawing board
to cut out features that may not be needed.

6. Place it everywhere.
Once the leader and the team agree on a value proposition, then leaders need to work with
marketing to get this statement as many places as possible. It should be included in a website,
logos, email newsletter signatures, on a company brochure, and everywhere possible.
7. Test its effectiveness.
Leaders need to assess how the value proposition is adding in increasing revenue and bringing in
new customers. Also, leaders should be aware of how the value proposition is changing the
perception of the company.

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 - Have conversions increased?
- Are more people visiting the website?
- Are more email newsletters being opened?
- How are competitors responding?

HOW TO SELECT THE RIGHT PRODUCT FOR YOUR BUSINESS

Key question often asked by start-up entrepreneurs is what to sell in the business. What products or
services could you sell that will make you money? The selection of the right product or service is
critical. In fact, the choice of a product or service for your business can make or break your business.
Choose a product that requires significant production capital when you have none and couldn’t find
any, and your business is compromised from the start. Offer a service that a hundred other
entrepreneurs offer in your locality, and you may find it hard to get noticed above your competitors.
Or select a product with an extremely specialized market yet you do not know how to reach the
potential customers. Your products or services define your business. Your products are your
business! If you want to turn your business into an income-generating machine, the first step is to
choose the right product or services to sell. With the right products, you even stand a better chance
at keeping your customers. The idea is to keep your customers forever by continually offering them a
valuable product or service, thereby diminishing your costs of reaching and appealing to them. Wise
product selection is therefore critical to your business success.
How do you choose the right product to sell?
Here are a few questions to help you narrow your focus and hopefully select the product that
will work for you:
1. What are your primary considerations for choosing a particular product? Make a list of your
selection criteria, and what you think are important to you in identifying what business to engage
in. There are a myriad reason for selecting a product, and these reasons can include: financial
benefit to your business, relatively low investment require on investment, fit with present strategy,
feasible to develop and produce, easy to source and procure, relatively low risk, and time to see
intended results.
2. Can you meet the needs of the customer and solve a specific problem? Your product must
address a need or an opportunity. You need to know how your products or services can assist
customers. It must have a real value that customers can recognize, want and need. Include in your
product information and sales materials how your products can benefit the customers, e.g. help
reduce time, effort and expense.
3. How capable are you to produce the product? Just as an athlete needs to know his physical
condition before he enters a race, you must also know if you have the time, resources and capability
to produce your product. Many entrepreneurs make the mistake of going forward with a business
idea only to find that they cannot afford the manpower required, or do not have the resources to
outsource the product development. As a result, many experience slippage in release dates making
the mistake of launching half-finished web sites. You must also evaluate at the onset how you can
scale up the production if there is a strong demand for the product.
4. What is the size of your potential reachable market? You need to at least get an idea of the size
of your market. Know who are likely to use or benefit from your products. If you are selling an
information product on how to sell at Lazada or Shoppe, define who will be your potential
customers you think will be interested in your product. Many small and home business
entrepreneurs view market research as an unnecessary and expensive cost but understanding who
and how big your market can pay off in the long run.
5. Would you need to comply with government rules and regulations? New laws or government
rules and regulations can impact your product. Some products can be sold immediately without the
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 need for government approval. Others, however, require permits, licenses and approval from the
government.
6. If a similar product exists, can your product be superior in its functionality, presentation or
marketing? This entails knowing and understanding your Unique Selling Proposition. Your
unique selling proposition is the one thing that makes that your product different than any other.
It’s the one reason they think consumers will buy the product even though it may seem no different
from many others just like it. It may be that the product has a lower price or more convenient
packaging, or it may taste or smell better, or last longer.
7. What barriers must be overcome for a potential new product entry? Barriers to entry include
high research and development expenditure, high presence of start-up or sunk costs, and
international trade restrictions such as tariffs and quotas. Patents are likewise important barriers
for many small and home-based businesses, where your competitor may hold legal protection for
an integral component of your product and hence may prevent you from manufacturing your
product. Other barriers to entry include predatory pricing of competitors that will force you to
operate at a loss, high advertising, and marketing costs to compete with established brands in the
industry, and the cost advantages enjoyed by your competitor that allows them to set lower prices.
8. What are the potential sales, growth, profits, and time for payback? Before starting your
business, run your numbers first. Get a clear idea of your cost structure, how much sales you need
to have to breakeven and post a profit, and what your return on investment will be.

WRITING A DETAILED BUSINESS PLAN

A business plan is a document that describes your business in terms of what it does, the products and
services it offers, your business strategy and business goals, and your action plan outlining how you
plan to achieve your goals and earn money.
- is also a road map that provides directions so a business can plan its future and helps it avoid
bumps in the road. It is the only single written document that must be prepared before opening a
new business or expanding an existing business. It provides a clear direction to any uncertain
business endeavor.
- is a detailed and integrated written document that describes the various activities involved in
opening and operating a new entrepreneurial venture.

10 Reasons Why You Need to Prepare a Business Plan for Small Business
1. To help you with critical decisions
2. To iron out the kinks
3. To avoid the big mistakes
4. To prove the viability of the business
5. To set better objectives and benchmarks
6. To communicate objectives and benchmarks
7. To provide a guide for service providers
8. To secure financing
9. To better understand the broader landscape
10.To reduce risk

Writing a business plan shouldn’t be complicated. In this step-by-step guide you will quickly and easily
write a business plan that will get the results you want. You don’t have to have a business or accounting
degree to put together a great business plan. This guide will show you how to get your plan done step-
by step without any of the complexity or frustration.

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There is another written document that must be prepared and is equal importance as the business plan.
This is the feasibility study which serves as the forerunner of the business plan.
Two Major Tests to be Conducted every time a New Business Idea is Created
1. Test of Possibility
2. Test of Feasibility
The test of possibility on the new business should have a positive result, so that the test of feasibility
or viability will be conducted. Business Plan versus Feasibility Study The primary objective of the
feasibility study is to determine whether the proposed business is feasible or not in all areas. If the
outcome of the feasibility study is positive, then the entrepreneur prepares the business plan.
The content and structure of the business plan are almost the same as those of the feasibility study.
The data shown in the feasibility study are the same set of data presented or used in the business plan.
Nonetheless, the business plan presents a more detailed discussion of how the business will be
undertaken and operated.
MAJOR PARTS OF THE BUSINESS PLAN
There is no universally accepted standard format or structure of the business plan.
1. Introduction
2. Executive Summary
3. Environmental Analysis
4. Business Description
5. Organizational Plan
6. Production Plan
7. Operation Plan
8. Marketing Plan
9. Financial Plan
10.Appendix

1. INTRODUCTION
The introduction presents the general perspective of the business. It may consist of one to two pages.
It includes, among others, the following sections:

1. Proposed Name of the Business

2. Address of the Business
3. Name of the Owner or Owners
4. Description of the Business
5. Location of the Business
6. Funding Requirement and Source

In case the consulting team prepares the business plan for prospective owners or investors, the section
Statement of Confidentiality is added as the last section.

1.1 Proposed Name of the Business

The formulation and drafting of the proposed business name is not as simple as it sounds. It is a delicate
and important entrepreneurial task. Remember that the name of the business may exist in the market
for the many years. Careful and in-depth planning is of prime importance.

The proposed business name must:

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1. Reflect the business identify and image,
2. Promote the philosophical values and culture that the business values the most,
3. Profess the brand identity of the product, and
4. Attract or influence the target costumers
At least three suggested trade names must be submitted to the department of Trade and Industry for
approval and registration.

1.2 Address of the Business

It is important that the address of the Business is correctly written because all business
correspondence is mailed to the business address. Raw materials and other manufacturing supplies
are also shipped by the seller to the designated business address.

Nowadays, it is also necessary for the business to have an e-mail address to facilitate electronic
communication between the business and the customers, suppliers, creditors, and other significant
parties.
1.3 Name of the Owner
The name of the owner must be properly stated. In a sole proprietorship, there is only one owner.
In case the venture is a partnership, the names of the partners, including the extent of their
liabilities, must be indicated. For example, if a partner’s must be properly mentioned.

For business ventures that will operate as a corporate entity, the names, nationalities, and addresses
of the incorporators must be given. Incorporators are persons who originally formed the
corporation.
1.4 Description of the Business
A brief description of the business must include information about the type of product or service
that the business intends to produce or provide. It may include a brief information about the
ultimate mission, vision, and objectives of the business. The other products or services that the
business plans to produce or provide must also be mentioned in the description of the business.

2. EXECUTIVE SUMMARY
Although the executive summary is commonly the last section to be written after all other major
parts have been completed, it is the next major part of the business plan after the introduction. It
points out the overall highlights of the business plan as well as bird’s eye view of its sections.
However, the executive summary must not, in any manner, provide a summary of the different
major sections of the business plan. It must be written in a simple language that can be easily
understood and at the same time attract the attention and influence the decision of the reader.

Investors, creditors, and other significant parties usually proceed to the details usually proceed to
the details of the business plan once they find the executive summary interesting, convincing, and
worthy of further reading. Although there is no standard format as to its sections and contents, the
executive summary must include the following sections:

1. Vision, mission, goals, and objectives of the business

2. Business model
3. Business and product position
4. Wealth improvement approaches
5. Parties supporting the business

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VISION, MISSION, GOALS, AND OBJECTIVES
At the very outset, the business plan must depict the fundamental characteristics, nature,
philosophical values, identity, and image of the business. These important concerns are embodied
in the vision, mission, goals, and objectives (VMGO) of the business. The VMGO must be clearly
stated and easily understood. They must be reviewed and revisited at least every three years to
determine whether they are still reasonable and achievable in view of the rapid changes in the
business community.

The business model defines the perspective of the business in terms of its structure, production,
operation, and financial activities that will lead to the achievement of the VGMO. There is no
standard model that will exactly fit all types of business because they have different strengths and
weaknesses, infrastructures, networks, and value propositions.

BUSINESS AND PRODUCT POSITION

The business and product position will help determine how the business defines its course and the
process of accumulating wealth. It tells the size of the market and the target market share of the
business and product. The business and product position must be able to convince the readers that
the proposed business has a competitive advantage in the market.

WEALTH IMPROVEMENT APPROACHES

This section of the executive summary describes the methodologies or approaches that will be
taken by the business in order to

1. Maintain a competitive advantage,

2. Position the business in the market,
3. Improve the market share, and
4. Maximize the utilization of resources.

This section also includes a brief discussion of the marketing policies and financial operations of
the business, and the profitability level of the industry and of the business. Standard benchmarks
are good indicators in assessing the economic performance of the business.

PARTIES SUPPORTING THE BUSINESS

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 The last section of the executive summary is a description of the parties that strongly support the
business. The parties that have a direct relationship with the business are as follows:
1. Consumers
2. Creditors
3. Suppliers
4. Employees and staff

Relevant information about individuals and parties that support the business is important since the
proposed business may conduct transactions with them later.

The executive summary must cover at least three pages but must not go beyond five pages. An
executive summary that is either too short or too long may discourage the reader to continue
reading.

3. ENVIRONMENTAL ANALYSIS
The next major part or section of the business plan after the executive summary is the
environmental analysis. It is a strategic tool that helps determine the external and internal factors
affecting the performance of the business. These factors may be political, economic, social, or
technological in nature. The environmental analysis may consist of at least 20 pages including
the graphical representations, tables, and computations. The environmental analysis section is
considered the heart of the business plan.

Since the business that you intend to open in this entrepreneurial course is considered small in
terms of capitalization, the industry analysis will focus mainly on the consumers and competitors.
The presence of the consumers, after all, is the ultimate reason for the existence of any business
endeavor.

In today’s competitive business environment, an environmental analysis is already a necessity. It

is perceived as the basic element for business survival. It may consist of global analysis, societal
analysis, and industry analysis.

The trend in the global market is the result of what happened in the past, while a possible business
idea is the expected event that may happen in the future. Investors are more interested in what will
happen in the future. The global trend simply acts as an indicator of any favorable sign for a
business idea. However, there is a direct relationship between these two concepts. Once the world
market is properly described, the business opportunities that the global trend provides must also be
described. The reader, therefore, must be convinced that is its worth to exploit the business idea or
opportunity based on the global business trend.

SOCIETAL ANALYSIS

After describing and possibly convincing the reader of the bright business prospect in the world
market, the next step is to present the societal analysis and determine the different variables
affecting the societal environment. These variables include.
1. Political forces,
2. Economic forces,
3. Socioeconomic forces,
4. Technological forces,
5. Ecological forces, and
6. Legal forces.

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Most business plans fall to mention the probable levels of effects of the various forces to the proposed
business, and the frequency of occurrence of the environmental factors. They simply describe the
different variables or forces. A mere description of the various environmental factors does not provide
any brilliant idea to the reader. The societal analysis must tell how the environmental forces affect the
proposed business and how great their effects are.
Assuming that you consider the interest rate and disposable income as economic variables that may
effect on the proposed new business, the description of the analysis may appear as follows:
ECONOMIC ENVIRONMENT
- The prevailing interest rate given by most commercial and industrial banks ranges between 10
and 12 percent and is expected to increase to 15 percent within a two-year period because of the
new monetary policy of the Bangko Sentral ng Pilipinas (BSP).
- The disposable income of Filipino consumers, according to the latest data released by the National
Economic Development Authority and the National Statistics Office, has substantially increased
which has been attributed mainly to the new salary rates of all employees, both public and private,
coupled with the high remittances of overseas contract workers.

INDUSTRY ANALYSIS
The third level of environmental analysis is the industry analysis. The industry analysis basically
involved three important related tasks as follows:
1. Conducting a critical evaluation of the forces in the industry that affect the proposed business
2. Evaluating the probable position of the business in the industry
3. Determining the most appropriate strategy that may be adopted by the proposed business

CONDUCTING A CRITICAL EVALUATION

Conducting a critical evaluation is the most delicate, tedious, and difficult task in industry analysis.
There are some business plans that do not even show any indications that a critical analysis has been
conducted, but rather, the evaluation appears to be a mere play of words.

The industry analysis in all instances must not fail to evaluate and describe the target consumers and
the competitors. Data and information on these important forces in the industry are usually the results
of research work. Research work on the target consumers applies the concepts of market segmentation,
market targeting, and market positioning to determine the total demand of the industry.

The unsatisfied demand may be considered the market share of the proposed business under the
following conditions:

1. The proposed business has the capability to produce the product.

2. There are no expected new entrants to the industry other than the proposed business.

The industry analysis needs substantial work in the process of establishing the projected demand and
supply.

The demand and supply analysis, also called the consumer and competitor analysis, is the
backbone or the foundation of all other analyses. Where there are no consumers or buyers of the
product, the business will never be created. The presence of the consumers is the ultimate reason for
the existence of any business endeavor.

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The entrepreneur must choose the scanning tools that best suit his/her business venture.

Evaluating the Business Position

After conducting a critical analysis of the factors in the industry environment that primarily affect the
proposed business, the next step is to evaluate the possible business position in the industry. This deals
with market share and growth. Entrepreneurs may use a perceptual map, also called positioning
map, to help them understand their position against their competitors in the market. It shows how the
consumers respond to their products and services.

The sample perceptual map shows a comparison among competing products in the market, their
attributes, and the age and gender of their target consumers.

Determining the Most Appropriate Business Strategy

The last important task in the industry analysis is to describe the most appropriate strategy that may be
adopted by the business. The strategy is highly influenced by the analysis of the business strengths,
weaknesses, opportunities, and threats. The reason for the selection of the strategy must likewise be
clearly indicated.

4. BUSINESS DESCRIPTION

The business description section presents the nature and form of the business to be undertaken, and
may cover two to three pages. As to nature, the business may be a merchandising, service,
manufacturing, or a hybrid. The description must include the innovative features of the business.
As to form, it may either be a sole proprietorship, a partnership, or corporation. The reason/s for
the selection of the form must also be indicated.

In case the study is about an already existing business, the present status of the business must be
provided, including the intended innovation.
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 In addition, the business description also includes the following:
1. Product or service that it plans to produce or serve
2. Various plant and office equipment
3. Size of the proposed business
4. Future parties with whom contracts may be necessary
5. Personal requirement 6. Administrative operation

5. ORGANIZATION PLAN

The organization plan provides a detailed description of the business in terms of the following:

1. Form of the business organization

2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements

In case a feasibility study has been prepared prior to the preparation of the business plan, most of the
information contained in the organization plan can be found in the management aspect of the feasibility
study.

Forms of the Business Organization

A business organization can come in the form of a sole proprietorship, a partnership, or a corporation.
There must be a purpose for the selection of the most appropriate business form. In other words the
mere statement, “The ABC Manufacturing shall be in the form of a sole proprietorship, “ is an
incomplete description of the business organization.

The factors affecting the selection of the most appropriate business form include the following:

1. Capital requirement
2. Liability of the owner or owners
3. Management and supervisory skills
4. Tax implications
5. Government intervention
6. Nature of the Business
7. External financing requirement

Liability of the Owner or Owners

This section describes the extent of the owner’s financial obligations with creditors. The creditors can be
in the form of individual persons, suppliers of raw materials and supplies, or financial institutions. The
extent of financial liability can either be limited or unlimited.
The term limited liability means that in the case of business dissolution and there still remains unsettled
financial obligation of the business, the creditor cannot go after the personal property of the business
owner. The liability of the owner is only up to the extent of his/her financial contributions to the business.
On the other hand, the term unlimited liability means that the creditors can run after the personal property
of the owner in the event that the business fails to fully settle its financial obligation during business
dissolution.
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The extent of the liability of the owners in a sole proprietorship and a partnership is usually
unlimited. In a corporate form of business organization, the shareholders have limited liability. They are
only liable to the extent of their investments in the corporation. The investment of the shareholders is
represented through ownership of shares or stocks.
ORGANIZATIONAL STRUCTURE
The organizational structure of the business is usually shown or reflected in the organizational chart. It
shows and defines the hierarchy of the different positions in the organization and the interrelationships of
the different offices or departments. The organizational chart depicts the flow of communication within
the organization, and the line and staff authority that must be observed and executed.
A corporation has the most complicated organizational structure, since most corporations are
composed of a huge workforce and also if the corporation operates across the different parts of the
Philippines. On the other hand, a small business, like the business that you intend to pen, has a very simple
organizational structure- the owner acts as the president or general manager and, at the same time, the head
of the production and marketing operations.
The entrepreneur prepares the structure that best fits the organization and hires the most qualified people
to do the tasks.

ROLES AND RESPONSIBILITIES

The roles and responsibilities of the various positions in the business organization must be clearly defined
in order to minimize and avoid misunderstanding and overlapping of functions. The educational
requirements and experiences required of the workers must also be specified. Complete information about
the expectations of a particular job or positions facilitates evaluation and hiring of qualified personnel and
the assessment of performance of existing workforce.
SALARY REQUIREMENTS
The organizational plan must show the total estimated monthly and annual salary requirements of the
business. All other mandatory benefits like the employer’s contributions to the Social Security System
(SSS), Pag-Ibig, and Philhealth must likewise be specified. If some legal plans and moves of the Congress
of the Philippines will bring about increases in the salaries of personnel, the projected amount must be
included in the disclosure as well.

6. PRODUCTION PLAN

The Production plan presents or describes activities related to the production of goods. The production
plan is the result of the industry analysis, particularly the study of supply and demand and consumer
behavior.

The production plan usually includes the following:

1. Production Schedule
2. Production Process
3. Processing Plant and equipment
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4. Sources of Material
5. Production Cost

This section basically applies to manufacturing entities. For service entities, this section must
be modified and labeled as Service Provision Plan.

Production Schedule

The production schedule presents the total number of goods to be produced and the expected time
to produce them. The total number of units to produce, however, is usually affected by the
following factors :

1. Demand for the product

2. Availability of resources
3. Capacity of the plant

The primary factor that influences the number of goods to be produced is market demand. The
entrepreneur must produce goods based on the total demand of the consumers. The second
consideration is timing. Producing the goods exactly at the time when the consumers need them is
an excellent production practice.

Production Process
This section of the plan must show the estimated cost of production. The three elements of cost,
namely labor, direct materials, and factory overhead must be properly described and accounted for.
In the event that the final product involves the use of several direct or indirect materials, all the
materials used in the production of goods must be properly listed and provided with the cost. The
total cost of the proposed product may serve as the basis in setting its selling price, which not be
lower than its production cost.

7. OPERATION PLAN

The operation plan is a major section of the business plan that outlines the various activities, from
the acquisition of raw materials to the delivery of the products to the target consumers.

The operation plan commonly covers the following areas:

1. Evaluation of suppliers
2. Materials requisition and receiving procedures
3. Storage and inventory control system
4. Shipment system and control
5. Functions of support services

Evaluation of Suppliers
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The new basic entrepreneurial concept of quality management is that control starts from the
suppliers of raw materials. It used to be a common practice that a business starts to implement its
control system upon receipt of the materials. The suppliers of raw materials must practice total
quality management to minimize or avoid defects or damages in the supplies. This concept extends
from the suppliers of the business to the suppliers of the suppliers. The business must conduct a
critical evaluation of the suppliers of raw materials and establish harmonious working relationships
with them to reduce the threats they posed.

Materials Requisition and Receiving Products

The procedures in requisitioning raw materials and other manufacturing supplies and receiving
them must be explained in the operation plan. The person assigned to conduct inspection upon
receipt of the materials must be included.
This section covers the following areas:
1. Basis of receiving the raw materials
2. Comparison of the order and receipt
3. Quality of materials received

The basis of the receiving report is the purchase order of the business. It must be signed by
authorized personnel. After the inspection, the person receiving the materials usually prepares the
receiving report.

Storage and Inventory Control System

The operation plan describes how the business stores the finished goods and protects its inventory
against possible theft and losses. Goods that have been completed in the processing plant are
transferred to the warehouse or storeroom.

This section deals with the following:

1. Owning or renting a warehouse
2. Management of the warehouse
3. Procedures in the transfer of goods.
4. Control of inventory in the warehouse

Under the just-in-time manufacturing system, also known as JIT production system, storage and
warehousing are eliminated because only actual orders are produced at the exact required time.
The JIT system also eliminates wastage of expired products and requires less capital since only
essential stocks are ordered.

Shipment System and Control

The basis of sales invoice and other shipment documents are the purchase order received from the
customers. The sales contract and shipping documents must be properly approved before the
product is shipped to the customers.

This section covers the following:

1. Approval of shipping and sales documents

2. Terms of shipment 3. Manner of shipping the product
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 4. Other terms and conditions like sales contract.

The proper operation plan on the shipment of goods must be clearly defined. It would be too costly
on the part of the business to lose millions of pesos on shipment. For example, who owns the
products in transit that cost ten million pesos? In transit means that the product is no longer in the
custody of the seller, but the buyer has not yet received it.

In a situation like where the shipment terms have not been clearly defined, problems will definitely
arise. Normally, the seller will opt to collect the amount from the buyer since the goods have
already been shipped, but the buyer may refuse to pay because he/she has not yet received the
goods.

Functions of Support Services

The operation plan defines and describes the functions of other support services relative to the
acquisition, processing, and shipment of goods to the customers. It also includes the important role
of other support services such as the maintenance personnel and the security officers and staff.

Most businesses consist of three or four functional areas as follows:

1. Finance
2. Marketing
3. Operation
4. Human resources

8. MARKETING PLAN

The marketing plan details how the proposed business will sell its product to the target consumers. It
may consist of some or all of the following important sections:

1. Product
2. Place
3. Price
4. Promotion
5. People
6. Packaging
7. Positioning

Basically, the business plan describes the factors of the marketing mix in its various sections such as
product and people in the business description section, place or location in the introduction, and
positioning in the environmental analysis section.

Nevertheless, the entrepreneur may opt to discuss all the seven P’s of the marketing mix in the
marketing plan to reiterate how a product is distributed to the target consumers through an innovative
mechanism. He/She may also present the most appropriate marketing strategy that will provide a
competitive marketing position for the product and the business in general.

9. FINANCIAL PLAN

➢ The last major section of the business plan is the financial plan.

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➢ It accumulates and describes all the data expressed in the monetary units from the other sections of
the business plan.
➢ Simply collates and describes the various sets of information derived from the other sections of the
business plan.

➢ It is composed of the following important areas:

1. Major assumptions
2. Projected statement of comprehensive income
3. Projected statement of cash flows
4. Projected statement of changes in equity
5. Projected statement of financial position
6. Financial statement analysis

Examples:
• Amount of Salaries that appears in the projected statement of comprehensive income comes
from the organization plan

• Cost of machineries and equipment that appears in the noncurrent asset section of the
projected statement of financial position comes from the production plan.

Major Assumptions

The financial statements in the business plan are not actual but rather projected, thus requiring some
major assumptions based on reliable data or information. Suppose the entrepreneur projects an increase
of 10 percent in the salaries of employees in the projected statement of comprehensive income. This
projection may be based on a related pending bill in Congress or on the policy of the business to
gradually increase the salaries of workers in comparison to those of the competitors.

Financial Statements

The financial plan features the following different projected financial statements of the proposed
business:

1. Statement of comprehensive income

2. Statement of cash flows
3. Statement of changes in equity
4. Statement of financial position

These financial statements are projected for at least three years and are considered the final product of
the whole accounting process. The statement of comprehensive income and the statement of financial
position, respectively, are the financial statements included in this module. The statement of cash flows
and the statement of changes in equity will not be covered because they require a more exclusive
accounting knowledge.

Financial Statement Analysis

➢ is the last section of the financial plan

➢ is intended to primarily fit the requirements of the course. The financial statements do not
provide any useful and relevant information to the users unless they are evaluated and analyzed.
➢ Is done through several approaches and usually dependent upon the objective of the users
of the financial statements.

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 ➢ Basically, it is conducted to determine the financial operation of the business in terms of
liquidity level, profitability of operations, and solvency status.

It must be noted that the mathematical computations in the financial analysis are not the most important
part of analysis but rather the interpretation and implication of the results to the business. In other
words, mere mathematical computations do not provide value to the analysis.

BUSINESS PLAN OUTLINE

The following is an outline of the business plan and its various sections.

A. Title Page
B. Table of Contents
C. List of Tables
D. List of Figures
E. List of Appendices
F. Introduction
1. Proposed name of the business
2. Address of the business
3. Name of the owner or owners
4. Description of the business
5. Location of the business
6. Funding requirements and sources

G. Executive Summary
1. Vision, mission, goals and objectives of the business
2. Business model 3. Business and product positions
4. Wealth improvement approaches
5. Parties supporting the business

H. Environmental Analysis
1. Global analysis
2. Social analysis
3. Political forces
4. Economic forces
5. Socioeconomic forces
6. Technological dances
7. Ecological forces
8. Legal forces
9. Industry analysis
10.Customers
11.Competitors
12.Creditors
13.Suppliers
14.Government
15.Shareholders
16.Employees
17.Trade associations
18.Market forecast
19.Market share
20.Market position
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 21.Marketing strategy

I. Business Description
1. Nature of the organization
2. Product or service that it plans to produce or serve
3. Various plant and office equipment
4. Size of the proposed business
5. Future parties with whom contracts may be necessary
6. Personnel requirements
7. Administrative operation

J. Organizational Plan
1. Form of business organization
2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements

K. Production Plan
1. Production schedule
2. Production process
3. Processing plant and equipment
4. Sources of materials
5. Production cost

L. Operation Plan
1. Evaluation of supplier
2. Materials requisition and receiving procedures
3. Storage and inventory control system
4. Shipment system and control
5. Functions of support services

M. Marketing Plan
1. Product
2. Place
3. Price
4. Promotion
5. People
6. Packaging
7. Positioning

N. Financial Plan
1. Major assumptions
2. Projected statement of comprehensive income
3. Projected statement of cash flows
4. Projected statement of changes in equity
5. Projected statement of financial position
6. Financial statement analysis O. Appendix

` O. Appendix

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III. Learning Tasks
➢ Learning Task No.1
Instructions: Read and analyze the given situations below. Identify whether this refers
to existing customer, prospects, or target market users. Write your answer in
yellow pad/bond paper.

➢ Learning Task 2
Consider the following situation.

Entrepreneur X

Entrepreneur X put up a coffee shop immediately in his barangay. He thought of an idea that
early bird catches the worm. He eventually hired his friends and ordered stocks for his coffee
shop business.

Entrepreneur Y

Entrepreneur Y is planning to open a bakery shop in his place. He gathered first information
from the residence of his place whether what kind of bread they love to eat.

Questions:

1. Among the two entrepreneurs, who do you wanted to be? Why?

2. What is/are the risks to be taken by each entrepreneur?
3. What do you think the importance of business planning is?

➢ Learning Task 3
Instructions: (Assuming that you are an onwer of (Milk Tea Shop, Internet café, & Tour &
Package Agency) Note: Just choose one business Only.
Getting to know the market. Answer the following questions. Write your answer in a
yellow pad/bond paper.
1. Who are my potential customers?
2. What are my customers’ shopping and buying habits?
3. How large is my target market?
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 4.How much are potential customers willing to spend?
5.Who are my competitors?
6. What are my competitors’ strengths and weaknesses?
(Rubric: 5 pts Each. Reflective Thinking (5-1pt.);Analysis (5-1 pt.); Making Connections (5-
1pt.)

IV. Reflection
Instructions: Complete the statement:

I have learned that __________________________________________________________

_________________________________________________________________________
_________________________________________________________________________

PERFORMANCE TASK 1 ( Put it in a long bond paper)

Directions:

1. Choose at least 3 entrepreneurs that are known not only in our country but internationally
with their ventures and how they excel in their chosen careers. (with picture)

2. You can use the following guide questions to study each entrepreneur.
a. What is the educational background of the entrepreneur?
b. Is the line of entrepreneurial activity congruent to the educational background or skill of the
entrepreneur? Why or Why not?
c. What are the common traits of the entrepreneurs?
d. Are the necessary skills in their chosen business learned or acquired? Explain.
e. Do they employ others in their business? Expand your answer.

V. References
Websites
1. Available Market. Retrieved from: http://www.businessdictionary.com/ definition/available-
market.html
2. Bhasin, H. (2018). How to determine Market potential for any product or service? Retrieved
from: https://www.marketing91.com/determine-marketpotential/

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 3. Definition of need. Retrieved from: http://www.businessdictionary.com/
definition/need.html
4. How to Define Market Needs to Align Content Effectively. Retrieved from:
https://www.aberdeen.com/cmo-essentials/define-market-needs-aligncontent-effectively/
5. Kenton, W. (2019). Target Market. Retrieved from:
https://www.investopedia.com/terms/t/target-market.asp
6. Lake, L., (2019). The definition and importance of potential markets. Retrieved from:
https://www.thebalancesmb.com/identifying-opportunity-in-new
E/drew-starbird/7-reasonspeople-become-entrepreneurs.html potential-markets-4043634
7. Lancaster SCORE (2010). Define the Market Need for Your New Business. Retrieved from:
https://scorelancaster.wordpress.com/2010/01/18/define-themarket-need-for-your-new-
business/
8. MBA Skool Team, (2020). Available Market. Retrieved from:
https://www.mbaskool.com/business-concepts/marketing-and-strategyterms/11747-
available-market.html
9. Penetrated Market. Retrieved from: http://www.businessdictionary.com/
definition/penetrated-market.html

Compiled by:
Name of Teacher Lenie Santos Pasigna
Designation Teacher 2
Name of School Mactan National High School- Senior High
Name of Division DepED-Division of Lapu-Lapu City

Reviewed and Checked by:

LERA R. MORA
Master Teacher I - Math

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