Core Subject Title: Business Enterprise Simulation

Prerequisite: Business Math, Organization and Management, FABM 1&2, Principles of Marketing,
Business Finance.
Co-requisite: Applied Economics; Ethics and Social Responsibility

Subject Description: This course integrates all the key concepts and process of Accounting,
Business and Management (ABM) as applied in real-life activities following the business cycle:
business opportunities search, product/service development, business formation and organization,
business implementation and control, business wind-up, and relevant management reporting in the
context of ethical standard and social responsibility. Technologies are used in a business enterprise
as appropriate.

BUSINESS ENTERPRISE SIMULATION OUTLINE :

Performance Standard: Undertake research on and analysis of business opportunities present in their
community.

1.1 Scan the market and identify potential business opportunities to capitalize on.
 Four ways to identify more business opportunities – smart company
Listen to your potential clients and past leads. When you’re targeting potential customers listen to
their needs, wants, challenges and frustrations with your industry. Listen to your customers. Look
at your competitors. Look at your industry trends and insights.

 Eight Analysis Types to identify Market opportunities.

1. Consumer segmentation
2. Purchase situation analysis
3. Direct competition analysis
4. Indirect competition analysis
5. Analysis of complementary products and services
6. Analysis of other industries
7. Foreign markets analysis
8. Environment Analysis

 Let us go through the 5 elements to determine market potential.

1. Market size
2. Market growth rate
3. Profitability
4. Competition
5. Product and consumer type
6. Example of Determining market potential

 Here are four ways to identify more business opportunities.

1. Listen to your potential clients and past leads. When you’re targeting potential customers
listen to their needs, wants, challenges and frustrations with your industry.
2. Listen to your customers
3. Look at your competitors
4. Look at industry trends and insights
 There three key approaches to identify the investment opportunities are :
1. Observing Trends. Study how customers interact with products.
2. Solving a Problem. Recognize problems and develop innovative ways to solve them.
3. Gaps in the market place.

1.2 Use appropriate analysis framework analysis framework and methodology in choosing a
product which is feasible in terms of the market, operations and financials.

 How do you know if a product is feasible ?

Consider the following :
1. Product safety. Product safety is an important factor in determining the technical and market
feasibility of your idea.
2. Market gap.
3. Keep research and development (R&D) time short.

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 3. Keep research and development (R&D) time short.
4. Keep R & D simple
5. Dependence on other products.
6. Customer usage
7. Pressure from the competition
8. Industry growth and stability.
 What is feasibility of a product ?
A feasibility study is an analysis that takes all of a product relevant factors into account –
including economic, technical, legal, and scheduling considerations – to ascertain the likelihood
of completing the product successfully.

 What are the four areas of the feasibility analysis ?

The full feasibility analysis for profit enterprise typically covers four areas : Product/service
feasibility ; industry/market feasibility ; Organizational feasibility; and Financial feasibility
(Barringer & Gresock 2008)
1.3 Choose the appropriate methodology (research, sampling, and data processing and data
processing) in determining the demand and market acceptability of proposed product.

 There are four main types of probability sample.

1. Simple random sampling in a simple random sample, every member of the population has an
equal chance of being selected.
2. Systematic sampling.
3. Stratified sampling.
4. Cluster sampling.

 What are the 4 market research methodologies ?

Four common types of market research techniques include surveys, interviews, focus groups
and customer observation.

 What is sampling methods in market research ?

In market research, sampling means getting opinions from a number of people, chosen from
a specific group, in order to find out about the whole group. Therefore, market researches
make extensive of sampling from which, through careful design and analysis, marketers can
draw information about their chosen market.
 What is the best sampling technique to use for determining ?
Finally, the best sampling method is always the one that could best answer our research
question while also allowing for others to make use of our results (generalizability of results).
When we cannot afford random sampling method, we can always choose from the non-random
sampling methods.

Performance Standard : Apply knowledge from his/her previous business courses through the
preparation of a business plan that will guide the eventual implementation of the venture.
2.1 Prepare a strategic plan outlining the competitive environment and focusing on the
appropriate competition strategy.

STRATEGIC PLANNING FOR SMALL BUSINESS

The resources at the disposal of the entrepreneur are always thought to be limited. In spite of the
limitations, however, entrepreneurs are not discouraged from pursuing their objectives. They can
make use of some techniques that have been proven valuable in business operations.
In the for attainment of business objectives, one technique has slowly been adopted by business
persons. The concept, called strategic planning, is borrowed from the military and has found useful
applications in large corporate enterprises. Its relevance to small business, however, has also been
recognized.
It is not unusual for a new business venture to spend more than what is earns during the first few
years of operation. If this expected by the entrepreneurs, he will not be surprised. Expectations,
however, can be more meaningful if the entrepreneur is engaged in strategic planning.
What is Strategic Planning ?

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What is Strategic Planning ?
✓ Strategic Planning refers to the process of determining the primary objectives of the
entrepreneurship and then adopting courses of action and allocating resources to achieve those
objectives. The definition involves three distinct steps : (1) determination of objectives, (2)
adoption of course of action, and (3) allocation of resources. Strategic planning provides the
entrepreneur with a systematic approach to the achievement of the firm’s objectives. Figure 13
shows that the determination of objectives is a pre-requisite step before a strategy is adopted.
In turn, strategy is a requirement before resources are allocated.

The Determination of Objectives

The objectives of the firm are important components of the firm’s strategic planning activities but
before these are determined, the firm’s mission statement must first be developed.

The Mission Statement. This term refers to the basic description of the fundamental nature,
rationale, and direction of the firm. It consist of three concerns.
1. how the entrepreneur intends to use his resources;
2. how the entrepreneur expects to relate to the ever-changing environment; and
3. the kinds of values the entrepreneur intends to offer to his customers.

An example of a mission statement is indicated below :

“The mission of Birdie Poultry Products is to provide the various poultry requirements of
consumers. The services of retailers located in the various malls and public markets in Nueva Ecija
are tapped as means of distributing our products. In addition to the assortment of products, we
stress quality and efficient service. We intend to cover all towns of Nueva Ecija within five years
through effective pricing and promotion.”

Strategic Objectives. This terms to specific performance targets that the entrepreneurs hopes to
accomplish. The objectives define, in specific terms, how the firm’s mission will be realized.

Examples of strategic objectives are the following :

1. expand production capacity by 50% within two years;
2. increase sales by 50% by the year 2012;
3. increase market share by 10% every two years; and
4. increase the number of outlets by three within three years.

In developing realistic strategies, the entrepreneur can make use of the most popular tools.
These are the following :
1. SWOT analysis; and
2. forecasts of future sales performance.

SWOT ANALYSIS. The firm which is fully aware of its internal environment (specifically its
strengths and weaknesses) as well as its external environment (specifically threats and
opportunities) is most likely to develop a strategy that considers the firm’s needs.

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 opportunities) is most likely to develop a strategy that considers the firm’s needs.

SWOT ANALYSIS is an organized method of assessing a firm’s strengths and weaknesses and
the opportunities and threats to determine what strategy to adopt (Figure 14).

The firm’s strength refers to a skill, a competence , a valuable organizational resources or

competitive capability; or an achievement that gives the firms a market advantage.
Examples of strengths are as follows :
1. a recording firm’s unique line-up of contract singers;
2. a company’s ownership of the land that is the source of high grade material required for
producing its products.
3. the strategic location of the firm’s sales offices; and
4. the firm’s exclusive supply contract with a reliable manufacture.

The firm’s weakness refers to something a company lacks or does poorly (compared with others) or
a condition that puts it at a disadvantage. It must be noted, however, that depending on the
competitive situation, a weakness may or may not make a company vulnerable to competition.

Examples of weakness are as follows :

1. lack of qualified managers;
2. poor design of the firm’s product;
3. low employee morale; and
4. poor location of the firm’s sales offices.

Opportunity refers to the chance offered by the external environment to improve the firm’s
situation significantly.

Examples of opportunities are the following :

1. For a motorcycle trading firm – the escalating cost of fuel;
2. For a small restaurant – the withdrawal from business of a major competition;
3. For a tailor residing in a provincial city – the absence of a reliable tailoring shop; and

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 3. For a tailor residing in a provincial city – the absence of a reliable tailoring shop; and
4. For a newspaper dealer – an exclusive contract of the entire province offered by a major
national publisher.

Threats refer to a challenge posed by an unfavorable trend or development in the external

environment that would lead to, in the absence of purposeful entrepreneurial action the erosion of
the entrepreneurship’s position.

Examples of threats are the following :

1. To the grocery store – the proposed opening of a mall in the vicinity;
2. To the restaurant located along the highway – the proposed construction of a diversion road
by passing the highway and the restaurant;
3. To the local dealer of skin-whitening soap and cream – the proposed dissolution of the
company supplying the product; and
4. To the local operator of 20 units of public utility tricycles – the proposed city ordinance
banning tricycles from plying the major streets of the city.

Forecasts of Future Sales Performance.

Forecasts are supplementary tools for SWOT analysis. It is an estimate or prediction of the future
sales or income of the firm. Forecasts may be short-term (one year or less), medium-term (one to
five years), long term (over five years)
Sales forecast are often determined through a combination of statistical and intuitive forecasts
tempered by the experience of the entrepreneur.

Implementing Strategic Plans

Strategies are useless unless they are implemented. To put strategies into action, the following
activities are required :
1. identifying the specific methods to be used; and
2. deploying the resources needed to implement the intended plans.

Identifying Specific Methods

Strategies determine the best way to use resources. There is a need, however, to develop tactics
which will be used to implement the strategies. Tactics are more detailed and they are used to
determine how the specific task can best be accomplished on time with available resources.

If “establish branches in strategic locations” is a stated strategy, the tactical plan to implement it
may appear as follows :
1. identify strategic locations;
2. determine the potentials of the identified strategic locations; and
3. set a timetable for installing the branches.

Deploying the Resources

The specific aim of planning is to be able to deploy the right quality and quantity of resources in
the various activities required to achieve the objectives. The resources would be indicated in terms
of human and nonhuman elements.

Fundamental Strategies for Small Business

There are certain basic strategies that are necessary for the survival of small business. There are
the following :
1. flexibility strategy;
2. strategy of effectives as a higher priority ; and
3. strategy of starting simple.

Flexibility Strategy
Small businesses ventures are not usually afforded the advantages enjoyed by large business. It is
very difficult for small business to effect changes in its environment because its resources are
usually limited. For instance, a small business cannot match the advertising budget of a large
business if they are in competition with one another. When hindrances such as those prevent the
small business in flexible enough. For instance, when the small appliance dealer does not have the
facility to deliver goods directly to the customer, the entrepreneur can hire the services of a small
transport operator. Another option could be the granting of a discount to offset the delivery
expense that will be shouldered by the customer.

Such remedies, however, will require a certain degree of flexibility on the part of the small business.

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Strategy of Effectiveness as a Higher Priority

Effectiveness is sometimes sacrificed for the sake of efficiency. Although efficiency is a desirable
goal, it is oftentimes disastrous for small business to neglect effectiveness.

A firm that concentrates on efficiency may be able to reduce its expenses but it may not be able to
generate sufficient income to keep it afloat.

At the early stages in the life of the small firm, when the venture is still trying to gain a foothold in
the market, turning out the first products and closing the first sale are of a more basic concern than
making a profit. As concerns for organization and structure are aimed at increasing efficiency, such
activities must in the beginning give way to effectiveness.

Strategy of Starting Simple

In starting new business venture, the entrepreneur often encounters problems related to financing.
The temptation is great for the entrepreneur to finance all the activities required to in operating the
venture. As expected, however, funds are not always sufficient. It may be wise for the entrepreneur
to let his subordinates perform the more simple tasks and sub contract those that will need more
elaborate employee skills and/or special equipment. An example is the manufacturer of salted
peanuts cannot produce packaging for his products at costs lower than what a package
manufacturer products. As a result, he accepted the package manufacturer’s offer of a subcontract.

In choosing the subcontract option, the entrepreneur is afforded with the following advantages :
1. he has more time to attend to more important tasks like searching for new markets; and
2. he is relieved of the burden of financing the subcontracted tasks.

The general idea is for the small business venture to start simple and absorb slowly the more
complicated tasks as it grows.

Strategy Concerns of Small Business

In determining what strategy to adapt, the entrepreneur is confronted with two general situation
(Figure 15) :
1. is he organizing a new business ? or
2. is he currently running an old business?

New Business. This term refers to one that will be operated for the first time by the small business
operator. If so, his options consist of the following :
1. acquiring an existing business;
2. organizing a new business; and
3. buying a franchise

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 When making a choice between the three options, the entrepreneur or the small business operator
must consider the advantages and disadvantages of each. The resources of the prospective
entrepreneur are also an important factor.

Strategies For A Going Concern

The strategic problems of small business are not as intense as those of large business. Even if
small business cannot compete head on with the big business, its size has a built in maneuverability
which is a very important competitive weapon.

Any or all of the following strategies are applicable to small business :

1. Segment markets – The small business operator will have to identify the market segment
with which it has an expertise, then compete.
2. Efficient use of research and development – Since the small business cannot fight the
research and development efforts of big companies, it must concentrate its R and D efforts to
lowering process costs or to bring new products to the market.
3. Think small. The small business can still be strong with being small. The emphasis must be
on profits rather than sales growth, and specialization rather that diversification.

Why Small Business Operators Ignore Strategic Planning

1. Lack of expertise
2. Inability to get started
3. Uncontrollable, often intangible variables
4. Resource poverty
5. Focus on daily operations
6. Failure to realize the importance of strategic planning.

2.2 Prepare a marketing plan that will describe the product offering, the value it brings to the
consumer, and the subsequent tactical plan on how to reach consumers (4Ps), and conclude with
a sales forecast.
Marketing – is that function concerned with planning and implanting the conception, pricing,
promotion, and distribution of products or services that will satisfy the firm’s objective.

Small Business and the Marketing Concept

The marketing concept provides a guide to small business. It indicates that a match must be made

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 The marketing concept provides a guide to small business. It indicates that a match must be made
between its intended customers and the firms product or service offerings. To achieve the desired
match, the following questions must be answered :
1. Who are my customers ?
2. What products or services are needed by my customers ?
3. At what price are the products or services required ?
4. At what place are the identified products or services required ?
5. At what time are the identified products or services ?
6. At what mode of delivery are the identified products or services are required ?

To provide answers to the questions cited above, the firm must undertake the following :
1. devise a marketing strategy;
2. engage in marketing research
3. develop a marketing mix
4. identify the size of the target market.

Devising a Marketing Strategy

Marketing strategy is the general guide the SBO will use to achieve the firms marketing goal. It is
a plan for getting products and services into the hands of customers timely, cost-effective, and
appropriate manner.

Market Strategy Planning

Market strategy planning is a small business activity which seeks to find attractive opportunities
and develop profitable marketing strategies. The strength and weaknesses of the firm are
recognized in strategy planning. This is followed by an analysis of the external environment which
is useful in identifying attractive market opportunities.
The output of market planning is the firm’s marketing strategy and it contains the following :
1. target market;
2. applicable marketing mix; and
3. size of the market area,

Target Marketing
Target Market refers to the a activity of selecting well-defined groups of potential customers an
tailoring a marketing mix to their needs and preferences.

Choosing the Target Market

1. the goods or service category of the firm;
2. the firm’s goal;
3. what competitors are doing;
4. the size of the various segment;
5. the relative efficiency of each segment to the firm;
6. the resources required; and
7. other factors

Identifying the characteristics of the Target Market

Relevant characteristics will refer to any of the following :

1. age 2. Sex 3. Family size 4. Family life cycle 5. Income
6. income 7. Occupation 8. Religion 9. Race 10. Nationality

The marketing Mix

The marketing mix refers to the set of marketing tools that the firm uses to pursue its marketing
objectives in the target market. T

The marketing tools are the controllable variables that when properly blended constitute the
marketing mix.

The controllable variables are the following :

1. product offering (including the breadth of the product line, quality levels and customer services);
2. price;
3. promotion (advertising, sales promotion and sales decision); and
4. Place (or distribution)

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 MARKET RESEARCH

Market Research or Marketing Research Process -can be defined as the process of gathering ,
analyzing and interpreting the information about the products or the services to be offered for sale
to the potential consumers in the market.
There are ways to collect data the data. The most important methods you can consider are surveys,
focus group discussion and interviews.

SURVEYS are the most common way to gather primary research with the use of questionnaires or
interview schedule. These can be done via direct mail, over the phone, internet (e.g. Google)or email,
face to face or on Web (e.g.. Skype or Viber).

INTERVIEW is one of the most reliable and credible ways of getting relevant information from target
customers. It is typically done in personal between the research/entrepreneur and a respondent
where the researcher asks pertinent questions that will give significant pieces of information about
the problem that he will solve.

FOCUS GROUP DISCUSSION (FGD) – is an excellent method for generating and screening ideas and
concepts. It can be moderated interviews and brainstorming sessions that provide information on
user’s needs and behavior.
- The length of the session is between 90 to 120 minutes
- 8 to 10 participants
- Assign an expert moderator

2.3 design an operating plan to ensure that the inputs and processes required to deliver the
product or service are identified, and estimate the costs needed for production.

THE ENTERPRISE DELIVERY SYSTEM (EDS) FRAMEWORK AND THE QDP

The Six Ms of the operations function cover the input portion of the EDS Design Framework. To
better illustrate how the six Ms work across the EDS Design Framework, refer to Table 8.1
Table 8.1 Enterprise Delivery System and the QDP

Input Throughput Output Final Delivery to Outcomes

customers
Resources Transformation Process Products Marketing and customer Customer
Mobilized Servicing Expectations
= Money Goods made or services = Quality
= Men conversion of input rendered Marketing Program =Delivery
= Machines into output =Price
= Material Service Level
= Methods Exp Market
= Experiencing Expectation
Management =revenues/sales
=Market Share
=Market
RESEARCH

Finance
Expectations
=Profits
=Return on
Investment

From Entrepreneurship Modules no. 6 (4M’s instead of Six M’s)

The Factors involved in the input and the production process are usually referred to as the Four M’s
of Production, namely Manpower, Method, Machine, Materials.
Manpower – talks about human labor force involved in the manufacture of products.
Materials – talks about raw material necessary in the production of a product.

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2.4 craft a financial plan, the inputs of which are from the results of the marketing plan (sales)
and operating plan (operating costs), and which will define the financial goals that will be his/her
target upon eventual execution.
Forecasting the Revenues of the Business
Revenue – is a result when sales exceed the cost to produce goods or render the services. Revenue
is recognized when earned, whether paid in cash or charged to the account of the customer. Other
terms related to revenue includes Sales and Service Income. Sales is used especially when the
nature of business is merchandising or retail. Service Income is used to record revenues earned by
rendering services.

Factors should serve as basis in forecasting revenues of the business.

1. The economic condition of the country.
2. The competing businesses or competitors.
3. Changes happening in the country.
4. The internal aspect of the business.

Mark up – refers to the amount added to the cost to come up with the selling price. The formula for
getting the mark up price is as follows :
Mark Up Price = (Cost x desired markup percentage)
Mark up for T-shirt = (90 X. 50)
Mark up for T shirt = 45.00

Table 1 Projected Daily Revenue

Fit Mo’to Ready To Wear Online Selling Business

Type of RTW’s Cost per Unit Mark -up Selling Price Projected Projected Revenue
(A) 50% (C) Volume (D) (E)
(B)
Average
No. of Items Sold Daily
(Daily)
(A) (B) = (A X .50) (C) = (A+B) (D) (E) = (CxD)
T-shirts 90.00 45.00 135.00 10 1,350.00
Jeans 230.00 115.00 345.00 6 2,070.00
TOTAL 320.00 160.00 480.00 16 3,420.00

Computations about the monthly revenue is calculated by multiplying daily revenues by 30 days
(1month)
Example , in Table 1 the daily revenue is 3,420.00. To get the monthly projected revenues by 30
days . Therefore ,
Projected Monthly Revenues = Projected daily revenue x 30 days
Projected Monthly Revenue = 3420 x 30
Projected Monthly revenue = 102,600.00

On the other hand, the projected yearly revenue is computed by multiplying the monthly revenue by
12 months. The calculation for projected yearly revenue is as follows :
Projected Monthly Revenues = Projected daily revenue x 365 days
Projected Monthly Revenue = 3420 x 365
Projected Monthly revenue = 1,248,300.00

Forecasting the Costs to Incurred

The business also incurs costs in its operation, these costs are called Operating Expenses. Operating
Expenses such as payment of internet connection, Utilities (ex. Electricity). Salaries and Wages and
Miscellaneous are essential in the operation.

Operating Expenses

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 Operating Expenses
Add : Internet Connection P 1299.00
Utilities (Electricity) 800.00
Miscellaneous Expenses 300.00
Total Operating Expenses P 2399.00

Sample of an Income Statement

ABC Sari-sari Store

INCOME STATEMENT
For the Month of April 30, 2021
Sales P 10,000.00
Less : Operating Expenses
Transportation Expenses P 500.00
Electric Expenses 500.00
Salaries (sales girl) 2000.00
Telephone/CP Load 500.00
Packaging Expenses 300.00
Miscellaneous 100.00 3,900.00
Net Profit P 6,100.00

2.5 Craft a full Business Plan

Business model describes the reasons of how an organization creates, delivers, and captures value
in economic, social, cultural or other contexts. The development of the business model construction
and variation is also called business model innovation and forms a part of business plan.
It is a company’s plan for how it will make a profit. It describes what products or services the
business plans to manufacture and market, and how it plans to do so, as well as what expenses it
will incur.
There are important phases in developing your business model, namely : Identifying the specific
audience; establishing business process; regarding a business resources; developing strong value
proposition; determining key business partners; and creating a demand for today’s generation
strategy and be open for innovations.
After developing a business model, we will proceed in developing a business plan. To be able to
successfully complete this module, you need to prepare a business plan and operate your plan and
finally keep records of your business transactions.
Business Plan is an important tool for you to have an idea about the future of your business.
Your business plan will be your guide in the moment you will be implementing and operating your
business proposal.
You can also make use of the business plan in securing investment capital from financial
institutions or lenders. It can also be used to influence people to work for your enterprise, to secure
credit from suppliers, and to fascinate potential customers.

The following are the components found in a Business Plan.

1. Introduction – this part discusses what is the business plan all about.
2. Executive Summary – is part of the business plan which is the first to be presented but the
last to be made.
3. Management Section – shows how you will manage your business and the people you need
to help you in your operations.
4. Marketing Section - shows the design of your product/service; pricing, where you will sell and
how you will introduce your product/service to your market.

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5. Financial Section – shows the money needed for the business, how much you will take in and how
much you will pay out.
6. Production Section – shows the area, equipment and materials needed for the business.
7. Competitive Analysis – is the strategy where you identify major competitors and research their
products, sales and marketing strategies.
8. Market – The persons who will buy the products or services.
9. Organizational Chart – is the diagram showing graphically the relation of one official to another,
or others of a company.

Business Plan Making

Below is template for business plan. You need to fill this out using the business you want to
pursue.

MANAGEMENT This section will show how you will manage your business and the people you
SECTION need to help you in your operations
a. Manger :_____________________________
b. Workers :____________________________
MARKETING This section shows the design of your product/service; pricing, where you
SECTION will sell and how you will introduce your product/service to your market.

a. Product Description :
___________________________________________
b. Price :
____________________________________________
c. Selling Location :
____________________________________________
d. Promotional Activity :
____________________________________________

FINANCE This section shows the money needed for the business, how much you will
SECTION take in and how much you will pay out.

a. Capital Amount :_______________________________

b. Expected Daily Sales :___________________________
c. Expected Daily Expenses :________________________
d. Income per Day :_______________________________

PRODUCTION This section shows the area, equipment and material needs for the business .
SECTION
a. Draw a lay out of your production area :
b. Enumerate the equipment needed:
c. Enumerate the materials needed :

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