Chapter 5:

STRATEGIC PLANNING AND BUSINESS DEVELOPMENT

OBJECTIVES:
After this lesson, you should be able to:
1. Discuss the factors that should be studied before venturing in new business;
2. Explain the importance of environmental scanning;
3. Explain the importance of selecting the proper business location;
4. Discuss the important role of SWOT analysis before starting the business;
5. Give the characteristics of weak products and management; and
6. Identify the business opportunities in the countryside.

The entrepreneurs are not discouraged with the constraints along the causes of our economic malady. It should be
turned into positive note and new solutions must be made to make them different from other individuals. There are lots
of opportunities for entrepreneurs who are hardworking, creative and resourceful, and would like to take the calculated
risk.
Business opportunities are wide open for people who would like to invest their money into gainful business
activities. They need to find out this new venture that interests them and how they can harness their technical
knowledge of the trade.
The search for business opportunity should start with the individual entrepreneur. He has to find out the skills and
talent for that particular type of business activity. His talent and skills are the beginning of his great investment in the
trade. He must have the passion for independence and willingness to work hard and long to keep up with his dream of
being an entrepreneur.
Before venturing into the field of business the new entrepreneur should look into the following factors:
1. Know your Product or Service
First, you must believe on the product or service that you will offer to your customer. If it is a new idea or
concept then you must be able to convince that you have a unique product that would satisfy customers’ needs and
wants. Customers want to try new products but it must be better than those existing in the market.
2. Analyze the Market Potentials
The customer base will determine the success of your business venture. The wider the market potential, the
more chances of growth and success. The entrepreneur must know his needs and wants and figure out how to satisfy
these needs. Analyze customers’ profile as to their buying habits, their income, and social status.
3. Determine the Marketing Strategy
A unique product or service needs effective distribution strategy to get customer into the basket of demand
potential. Continuous supply determines product growth. Customers must have access to the product when they
need it. Outlets must be developed that would answer customers’ demand. The customers must be able to make
suggestions as to product quality and availability as they are the kings and queens of the entrepreneur.
4. Know the Competitors
In launching a product with existing competitors, you must know their strengths and weaknesses. Develop new
product and marketing strategy and turn their weaknesses as new opportunity for your product. Continuous
innovation and research would mean better quality products or service. Make things better and serve your customers
with loyalty and dedication and it will make a great difference.
5. Do not set on your Laurels
The landscape of business is continuously changing. Your initial success in your business activities needs more
proactive analysis for expansion and growth and overcome possible competitions. Develop adverting and promotion
strategy to penetrate the wider market. Develop budget for expansion and diversification either horizontally or
vertically. Get new resources and develop new materials. Invest in research projects that will enhance the quality of
your products.

I. ENVIRONMENTAL SCANNING
The environment of business is vast with opportunities and the entrepreneur must have a greater look into this
potential as well as the conditions prevailing in the community. The entrepreneur’s ultimate objective in diving into
business worlds is to make profit. Investment in money and effort should generate financial gain for the
entrepreneur.
To generate income for his product or service he must be able to deliver customer satisfaction. The following
factors are contributory to the development of customer satisfaction:
1. Business Location for Small Entrepreneurs.
A retail outlet would need a site that is convenient to prospective customers in terms of parking space or
availability of transportation. A restaurant or an entertainment center would need ample parking area where
customers would not worry on where to leave their cars while enjoying their stay. The same could be true with a
grocery store.
In choosing the location, the following factors must be looked into by the entrepreneur:
a. Rent and Space – the cost of rent is a regular monthly expense and it must be sustained with the possible
income that will be generated.
b. Terms and Lease Agreement – the term of lease must be studied carefully as some owners of space might
take advantage of lessee.
c. Types of Goods or Merchandise – a convenient store is located where there are pedestrians passing by. They
need quick and easy access to the store and would not spend a lot of time to purchase their goods.
d. Income Level of Prospective Customer – the type of pedestrians and the income level of customer must be
taken in to account. A good barber shop or a beauty salon with facilities of air conditioning units and other
amenities need to be located in the community with higher income bracket.
 e. Prospective Sales Volume – high density sales volume need to be located in shopping area where customers
conversed to buy essential goods. Lower sales volume could be located in the community or secondary
areas like subdivisions or the BARANGAY.
f. Municipal or City Ordinances including taxes and fees – the locations must not violate city or municipal
ordinances and the taxes and fees must be reasonable for the owners of business.
g. Location of the Areas – the area must be free from floods and other calamities that will endanger the
business.
2. Location for Small Industrial Plant or Manufacturing Facilities
Environmental factors in locating a manufacturing plant or industrial facilities need to be studied
carefully as plant location is a great factor in the investment of funds and its profitability in the long run. The
industrial facility must be suitable to the kind of operation. It must comply with government zoning regulations
related to pollution and environmental laws.

The following are important factors to consider:

a. Land Area – the contour of the land, its size, and shape must be suitable to the plant site. It must be free
from floods or other environmental hazards that will disturb operation. The assess value of the property
must be reasonable as expenses to start up of operation requires a lot of money. The assess value is also a
factor in the payment of taxes.
b. Facilities for Expansion – The land areas must have ample space for plant expansion and provisions for
parking facilities for customers and employees.
c. Power and Utilities – Availability of power supply and the cost of electricity involve in the operation are
great factors in the production of goods. Water supply is also needed and the proper disposal of waste must
be put in place to comply with environmental laws.
d. Building and Other Utilities – The building must be within the restrictions code of the municipality or city.
The utilities like canteens and other employees’ facilities must be put in place in compliance with the labor
code.
e. Plant Site Accessibility – The plant site must be accessible to public or service transport for its employees
and valued customers. It must be near highways or expressway to provide ease in travel time and reduce
cost in the transport of raw materials and finish product. Delay in transport system are added cost that must
be avoided.

II. STRENGTHS WEAKNESSES OPPORTUNITIES AND THREATS (SWOT)

SWOT ANALYSIS is an entrepreneur tool in determining the profitability of the business operation.
Opportunities carries with it some risk involved and this should be look into carefully. The strengths and
weaknesses are internal factors to the entrepreneur while the opportunities and threats are external factors.
The entrepreneur must look at how strong he is to combat the weaknesses on his side and this needs strong
determination to succeed with caution. He may need long working hours and advanced thinking to overcome the
possible threats. Planning and environmental analysis is needed to keep opportunities moving to his side of
profitability. Investment in money and effort should turn the tide of profit to the side of the entrepreneur and this
needs careful study and analysis.

The product must be evaluated along the following areas:

1. Product Strength in the Market must have the following:
a. Available Technology in Product Processing
Technology is an important component in producing the product as the economies of scale determines
the price index. The more products is produced, the lower the price it can be offered to the market.
Technology, on the other hand, improves product quality and customers want those items with technical
standards.
b. The Source of Raw materials must be Abundant and at Lower Price
The constant supply of raw materials is an important factor in the production of the product. Cheap raw
materials that are processed into good products would be able to penetrate the market as its price could be
competitive. Continuous production will eliminate distribution disruption hence maximum supply to the
target market.
c. Skilled Workers Must be Available
Technology must have the component of skilled workers that shall operate the machineries and other
equipment. They may need training in machine operation as quality products also come from skilled
workers.
d. Capital Investment in Machinery and Operating Expenditures
A starting venture may have little investment in terms of machinery and equipment but starting with
small capital should generate profitable operation. As the enterprise expand its market base in investment
in operating capital should expand its market base investment in operating capital should expand to meet
the growing demand of the customer.
e. Expertise and Technical Skills of the Management Team
A good product is the making of a well conceived idea of the management team. Improvements in
product quality is a continuing process and it must be the management objective to get customers
patronage. Customers seek better products and the taste for quality changes over time.
2. Characteristic of Weak Products and Weak Management:
a. Poor Quality and High Price
The entrepreneur should not launch a poor product in the market as it will surely fail to advance in the
sales and profit. It is not wise to invest in the production of poor products. The entrepreneur must see to it
that product has undergone customer taste and acceptance before it gets into the production line.
 b. Product Design and Appeal
Product design should appeal to customers demand. Poor design of the product is the making of people
with no technical expertise in handling customers wants in terms of features. Artistic designs are
conceptualized and approved by the possible users. Product appeal in terms of color and features are
important ingredients for customer patronage.
c. Production Cost
Production cost is the price determinants. Entrepreneur cannot make maximum profitability on
products whose production cost cannot survive market competition. Production cost may be attributed to
high labor cost and the availability of cheap raw materials.
d. Supply and Demand
Intermittent supply to the market will make customers shift to other products. The supply to the market
will make customers shift to other products. The supply chain management must be put in place to make
the products available to valued customers. The supply chain management must be able to capture the
widest market possible to sustain product development.
e. Weak Product Management
Weak management is created when people at the top of the organization fail to sustain a vigorous effort
for expansion and growth when management sets on his initial laurels and ventured on vices and extra
activities that will lose his total investment. Some people who acquired money, became too complacent and
forgot all about expanding thereby competition gets them out of the market place.

3. Sustainable Product Opportunities in the Market:

a. Product Demand
Product demand is the greatest opportunity of the entrepreneur. Demand is the essence of profit and
this must be sustained by the entrepreneur before wide competition appeared in the market place. The
absence of other products will expand production operation and thereby generate opportunities to expand
into other ventures of vertical and horizontal expansion.
b. Presence of Poor Quality in the Market
The presence of poor quality product in the market place is an opportunity for the entrepreneur. The
alternative is on the side of the entrepreneur to supply the market with quality product and sustain
patronage. The product must be superior in quality and the price must be reasonable compared with that of
the competitor.
c. Government Policies and Support
The government support to local entrepreneur is an opportunity for greater expansion. The government
should support the local entrepreneur in terms of taxes and government incentives. Regulating on the
importation of foreign products where local products are available is one important government program
that will sustain economic growth of the local enterprise.
d. Liberal Credit Terms and Interest Rates
Liberal credit terms by banks and other government institutions will generate expansion for the local
entrepreneurs. Banks and financing institutions serve as conduit of business in their expansion program.
Credit terms given by suppliers of raw materials and other production inputs are opportunities for the
growth of the business.

4. Treats to Product Profitability and Market Expansion:

a. Entrance of Competition
The entrance of many competitors in the market place will definitely give problem to the entrepreneur.
Competition will reduce profitability as the price has to be competitive with those in the market place. When
profit drops, expansion will be limited and innovation will drain the opportunity for growth. Advertising and
promotion cost has to be sustained in order for the product to get patronage.
b. The Supply of Raw Materials
The supply of raw materials will be limited as other competitors will be getting the same suppliers. As
demand for raw materials become competitive in prices, production inputs go higher and this will affect
product pricing. Increased production cost means changes in product price.
c. The Emergence of Leftwing Labour Unions
Many companies close shops with the advent of labour unions with leftist philosophy as they want more
wages and benefits that the company could not give. Company strikes and lockouts are deterrent to the
expansion and company’s growth. Most entrepreneurs would try to avoid Unions if possible, as leftist
elements usually come into the picture that will affect the opportunities of business growth and expansion.
d. The Presence of Double Taxation
The government already imposed a lot of taxes to the entrepreneur. Honest businessman could not
profit in their operations as there are lots of taxes that the government would like to collect. Still related are
the unfavorable treatment given by the tax collectors to businessman that they have to put in grease money
for a little favor. Taxes are collected by the government and another tax by unofficial tax collectors.
e. Peace and Order in the Area of Business Operation
Peace and order are components of business growth. Criminality and killings would drive away
investors. Killing competitors by those riding in tandem syndrome scares people to go into business. Hold up
gangs and robbery syndicates are not good to business growth.
Coupled with this problem in the revolutionary tax collected by the leftist elements. If you do not pay
the revolutionary tax surely your business will go into flames. These are some greater threats to the
expansion of business in the countryside.
f. The Cost of Power Supply
Cost of production increases with the cost of utilities like current and water. The government private
partnership in the operation of power and water utilities has increased the cost of power by about 400%.
 This contributed to increased production cost and pose threat to our competitiveness in the world market.
Power and water utilities should be regulated by the government in order to sustain growth in our
industries.

THE ENTREPRENEUR SHOULD LOOK DEEPER INTO THE FOLLOWING AREAS:

1. The Management Team
Management must be able to set the direction of the enterprise with a clear MISSION and VISION as the
guiding tool for its plans and programs. Plans and programs are tentative activities that will make a definite step
towards the accomplishments of target objectives. Objectives set into motion the goals of the enterprise to
profitability.
The technical and manpower complements are important factors in the success of the business. The
entrepreneur cannot do the task alone as he needs people with the same outlook and perseverance as he has,
especially at the early stage of the business. They must work hard, persistent and must focus on the vision and
mission of the business.
Manpower complement may need some training and indoctrination of company’s operation. Motivated
employees will perform better and they need to be looked into by top management. They must know the
management philosophy. They must be involved in the planning process to get their utmost cooperation in the
undertaking the enterprise activities.
The management must introduce new technology to make work easier for the working team.
Technology in the work place is a motivating factor for the employees to produce more products or better
service. Product quality is improved and customers will always look for quality as vital component in continuous
patronage.

2. The Production Process

Product specifications must be maintained according to products standards that are acceptable to
customers. Product quality is now the name of the game in the business. Customers are now aware of product
quality and they must be able to get their money’s worth. The physical properties must be attractive and
mechanical or electronic component must appeal to customers demand.
The management must look into cheap available raw materials in the production of good. Good quality
materials should not be sacrificed in terms of price as poor quality will affect the production of quality products.
Quality and price must be looked into carefully by the management.
Production schedule must be made together with product specification. Work schedules must be
followed to save on energy and time. Productions capacity must be followed according to target production so
that delayed in shipment could be avoided.
The rated daily production and monthly plan output must be put in graph and charts for easy reference.
Production rejects must be at maximum level. Inventory reports must be available and warehousing activities
are supervised accordingly.
For service industries like restaurants, hotels, beauty salon, barber shops or even water stations, the
customers must be served with dignity and smile. Front line production crew must have the personality that will
attract customers. They must possess pleasing personality, clean in looks, and proper attire. The place must have
an ambiance and the service must be prompt and must follow an approved procedure.

3. The Marketing Program

The marketing program needs demand analysis for the last 5 years as to the major users of the product.
A new product would need customer view point before it is launched into the market. Product samples may be
necessary at the initial stage so that customers’ tastes and preferences could be considered before mass
production.
The demographic profile of the target customer must be taken into account as the success of the
product depends on the target customer. The target market must be specified accordingly and their needs and
wants must be satisfied. Customers would like to have a lot of choices yet when they like the product we turn
them into regular customers.
Products competitiveness is determined by quality and price. A demand and supply analysis must be
conducted through marketing research. Marketing research will determine the true picture of the market
demand and the product competitors. This has to be looked into carefully by the entrepreneur as the success of
the product depends greatly on the market size and its demand.
The growth in market demand needs channels of distribution. The channels of distribution should be
measured in terms of the capability of the distributors to handle the product. It must reach the consumer at the
time they need it and the price that is affordable to them. Various channel of distribution in the prevailing
market condition should be studied carefully as it is the lifeblood of customers’ wants and needs.

4. The Financial Management

Venturing into business needed financial resources. Money is needed to finance the activities of
business. Whatever capital is available determines the kind of business operation. Many small entrepreneurs
start with limited capital but they were able to make business empire as they knew how to invest their money in
profitable operation. Savings and wise investments are characteristics of successful business entrepreneur.
Then internal source of capital will come from the savings and assets of the starting entrepreneur. Liquid
assets in cash or in banks are the usual starting point. Real properties and personal properties may be put in as
guarantee for loans that may be used for operating expenses.
Banks are external sources of funds. They are willing to help businessmen with clear vision and good
business acumen back up by good feasibility studies. Bank loans must have reasonable interest rates that it
could be paid at reasonable period until the company would be able to operate on its own funds. Real
properties are usually accepted by banks as loan guarantee.
 Other sources of funds are partnership and stock options. While funds could source from other people,
the entrepreneur must look into the controlling management of the business. Careful choice of partners or
investors must be looked into as he may lose control of his projected venture with the interference of the other
partners in the business. Some partnership disbands after a few years causing business collapse.

III. THE IDENTIFICATION OF BUSINESS OPPORTUNITY

The entrepreneur’s desire to establish his business is a visible idea yet it must come into a test whether
it is a viable business option. It needs a careful analysis of opportunity evaluation. The entrepreneur who fails to
evaluate his noble idea because of his eagerness to plunge into the business world often discovers later that he has
more problems to solve and at times abandons the idea after spending his time and money.

THE FOLLOWING STEPS WILL HELP THE PROSPECTIVE ENTREPRENEUR

EVALUATE THE IDEA BEFORE GOING INTO BUSINESS:
1. The Starting Point of Conceiving the Idea of the Type of Business:
Conceiving a new product is a process of innovation and when it comes into a reality, the product must
be different from an existing product.
New product needs customer evaluation and this process needs exposure to the target market as to its
economic value. This new product must satisfy customers’ needs and wants. It needs market exposure and
public acceptance before it could take off the ground.
The entrepreneur must find a new approach to win customer on his side if the product or service is
similar to what is existing in the community. The new venture must be able to present a new alternative or
different approach for him to take off.
He must know the strengths and weaknesses of his competitor and thereby devise a new system of
promotion and advertising such as product discounts, cash discounts, raffles, and other package of prizes.
Emphasis should also focus on good customer service.

2. The Technical Feasibility and Time Frame:

An idea is not only concentrated on one entrepreneur. The entrepreneur might have conceived an idea
that is also in the mind of other person. The case of cellular phone is a concrete example. Many companies tried
the venture but the leader in the industry is still NOKIA. Other begin to follow and strong competition emerged
in the process but the leading brand has taken off the ground before others followed tailing behind.
The new product must have its technical feasibility and the time to launch the product must be
immediately done to take ahead before others take the idea. The entrepreneur must analyze the market
demand and how he will be able to meet this demand on time. He must be able to determine the risk involved in
the new venture and the investments in terms of money and time.
The new product needs testing as to its technical capability to satisfy customers’ needs and wants. Some
customers prefer branded products, those that are produced by big names in the industry. Filipino innovators
and investors find it difficult to convince the local consumers that their product is good or better than those
imported, hence many are selling their idea to foreign investors.
In the food industry the growing fast food chain is crowded with growing senior citizens who have
money to buy yet they have not discovered their need for health foods with less cholesterol. A good restaurant
or fast food with fish and vegetables and some wellness program may do the trick for this demographic sector.
This may work wonders in some developing urban sectors outside Metro Manila as it works wonders in some
known restaurant in the metropolis.
ACTIVITY 1. TERMS AND CONCEPTS FOR STUDY.
Write it on your notebook.
A. Discuss the following terms (in your own words).
1. Strategic Planning
2. Environmental scanning
3. Plant location
4. Product demand
5. Double taxation
6. Management team
7. Production process
8. Marketing program
B.
1. Enumerate and discuss the factors that the entrepreneur should look into before venturing in a new
business.
2. Identify the factors that contribute to customer satisfaction.
3. Prepare a list of factors in the proper selection of business location.
4. Discuss the different factors in selecting the product that the business should produce to satisfy customer
wants and demands.
5. Prepare a list of the internal factors that must be analyzed before starting the business operation.

ACTIVITY 2. TERMS AND CONCEPTS FOR STUDY.

Test I – Write TRUE if the statement is correct and FALSE if the statement is wrong.
_______1. The search for opportunities in the opening of the business should start with the entrepreneur.
_______2. Investment and effort should generate financial gain as the entrepreneur enjoys working independently
in the production of goods and services.
_______3. The government imposed zoning regulations but it must not be the concern of the entrepreneur as long
as long as he makes profitable operations.
_______4. Protection of the environment is the concern of the government and the entrepreneur has no business
related to pollution.
_______5. The strengths and weaknesses are external factors in the operation of the business.
_______6. Planning and environmental scanning are important factors in considering business operation.
_______7. The supply of finish product is dependent on the supply of cheap quality raw materials and the
availability of good manpower.
_______8. The government must regulate the entry of foreign products when it is produced locally by the
entrepreneur.
_______9. The entrepreneur must not be alarmed by the entrance of other products similarly produce by the
company.
_______10. Technical and manpower supply are important factors in the success of the business.

ACTIVITY 3. ASSESSMENT (ESSAY)

Answer the following questions.
1. In order to prevent the COVID-19 from entering the Province of Zambales, entry points all over the towns of the
province have been provided with digital thermoscanners to detect feverish persons coming in from other
places. However, there is no guarantee that the province would be virus-free for a long time despite the state-
of-the-art equipment that the authorities have been using.
What do you think are the opportunities presented by this threatening situation?

2. Shortly after starting your small business, the COVID-19 pandemic happened. What is your strategic plan
towards your business?

ACTIVITY 4. IDENTIFICATION
_____1. It is the objective of the entrepreneur to sustain product quality and market acceptance.
_____2. It refers to the product acceptance before it is rolled out into the production area.
_____3. It refers to the place where the facilities will be located.
_____4. Customers look not only on the product’s quality but also on its appearance and usability.
_____5. Entrepreneurs must look at it as an important component in the production of goods.
_____6. The entrepreneur creates these problems when they fail to sustain growth and expansion.
_____7. This is created when there is market sustained patronage and customer satisfaction.
_____8. These are the conduit of entrepreneur in vertical or horizontal expansion.
_____9. Profitability and market expansion is affected by the entry of another product.
_____10. The entrepreneur must maintain in plant operation product standard and specification.
a. Production process f. Weak product management
b. Product quality g. Plant location
c. Product demand h. Competition
d. Production cost i. Production process
e. Banks and financial institutions j. Technical skills of management