Industry and Environmental

Analysis: Business
Opportunity Identification
MODULE 4
 Learning Outcomes
1. Identify principles and tools in creating a business;

2. Apply SWOT analysis and tools in evaluating a business;

3. Apply Porter’s Five Forces of Competitive Position

Analysis can be applied as a tool in evaluating a business
opportunity;

4. Analyze the activities in the circular flow of economic

activity in an effort to relate the concept to the putting up bY THE END OF THIS MODULE,
of a business; STUDENTS WILL BE ABLE TO
UNDESRTAND THE IMPORTANCE
5. Make a simple industry analysis; OF DOING INDUSTRY AND
ENVIRONMETAL ANALYSIS
 Learning Outcomes
6. Identify the factors which are taken into account in an environmental
analysis;

7. Describe the economy’s three main producing sectors and show how
important they are in making choices of what business to establish;

8. State the importance of competitiveness and efficiency in the economy;

9. Explain the value of international trade in how one can set up a business;

10. Show the role tourism plays in the economy and how it can be utilized as
business opportunity; and

11. Identify and assess small business opportunities.

PRINCIPLES, TOOLS, AND TECHNIQUES

A business is just a small portion of an industry.

It is an undertaking by a person or a group of persons who are partners, or

of stockholders who own a juridical entity known as a corporation.

Its main objective is to earn profit for the owners.

An industry, on the other hand, is an aggregation of the different businesses

engaged in the same line of undertaking.

For example, celine is a business firm that is a part of the country’s shoe
industry.
 BUSINESS ORGANIZATION

Sole Proprietorship Corporation

Partnership Cooperative
 Sole Proprietorship

This is generally the simplest way to set up a business. A sole

proprietorship is owned by a single individual who is solely
responsible for running the business and is accountable for all the
debts and obligations related to the business.

The sole proprietor enjoys exclusive control and decision-making

as well as gets all the profits earned but he also shoulders all
losses and has unlimited liability which means payment of his loans
will extend to his personal assets.
 Partnership

A partnership is an agreement in which two or more persons

combine their resources in a business with a view of making a profit.
A partnership agreement is drawn up and profits are divided among
the partners according to the terms of the agreement. There are
two types of partnership:

(1) General Partnership

(2) Limited Partnership
 General Partnership Limited Partnership

All owners share the

Some members are
management of the
general partners who
business and each of them
control and manage the
are personally responsible
business and maybe
for and must assume the
entitled to a greater share
consequences of the action
of the profit while other
of their partners.
partners are limited and

contribute only capital,

All general partners have
take no part in control or
unlimited liability which
management, and are
means loan payments will
liable for debts to a
extend to their personal
specific extent only.
property.
Corporation
 Corporation
Is a legal entity that is separate from its owners, the shareholders.
No shareholder is personally liable for the debts, obligations, or
acts of the corporation. Directors and officers can bear liability for
their involvement with the corporation.

The legal entity of the corporation gives it an individual identity of

its own. Corporations normally can exist for a life of 50 years, which
is renewable for another 50 years. Owners have limited liabilities,
however corporations are burdened by heavy taxes.
Cooperative
 Cooperative
Cooperative is an entity organized by people with similar needs to
provide themselves with goods or service or to jointly use available
resources to improve their income.

Cooperative members have an equal say in decision-making with

one vote per member regardless of number of shares held, there is
open and voluntary membership and surplus earning is returned to
the members according to the amount of their patronage.
Tools in
Evaluating
a Business
ANALYSIS
The SWOT analysis was created in
SWOT
the 1960’s by business gurus,
Edmund P. Learned, C. Roland
Christensen, Kenneth Andrews and
William D. Book in their book,
Business Policy, Text and Cases.
 This table presents a SWOT analysis
template that can be used as a guide to
identify the strengths, weaknesses,
opportunities and threats. List its
elements side by side for comparison.
Most of the time, the business’s
strengths and weaknesses
will not match the listed opportunities
and threats, and this is where the owner
should attempt to make them meet.
The framework can help identify the business’s risks and rewards. It
is also a means of identifying the internal and external forces that
may affect the business.
STRENGTHS AND WEAKNESSES:

(INTERNAL)
 Internal Factors

Strengths and weaknesses make up the internal

factors of this form of environmental analysis.
They are called internal because they actually can
be influenced and even controlled by the
organization. If a company has a very strong brand
name, this would be a strength because it was
made possible by the effective
use of resources by them.
So this is an internally created factor, which highlights one of the reasons
the business is strong.

Included as internal factors are:

1. financial resources such as money and sources of funds for investment;
2. physical resources, such as company’s location, facilities, machinery and
equipment
3. human resources consisting of employees
4. access to natural resources, trademarks, patents and copyrights; and
5. current processes such as employee programs, department hierarchies,
and software systems, sales and distribution capabilities, marketing
programs, etc.
OPPORTUNITIES AND THREATS:

EXTERNAL
External Factors

Opportunities and threats

Precipitation is basically make
the process of up the external factors of
this form
water of environmental
droplets in the clouds fallinganalysis.
back to Unlike the factors
above, theysurface.
the earth’s cannot becould
This controlled
happen in by the company in any
shape or form. manyIn forms.
fact, these factors occur on their own,

often unprecedented.
- Rain
- Sleet
All companies have
- Snowcompetitors; this is a threat because
one can’t simply- Hail
eradicate competition.
External Factors

Hence, this is how external factors work. So now that you

Precipitation is basically the process of
know
waterhow to work
droplets with falling
in the clouds a SWOTback analysis,
to you can use these
findings to surface.
the earth’s add toThis thecould
environmental
happen in analysis.
many forms.
The strengths can
further be built upon, the weaknesses
- Rain
can be eradicated by making use of opportunities timely
- Sleet
and threats can- Snow
be mitigated by keeping
wary of them. - Hail
 External forces, those that affect a company, an
organization, an individual and
those outside their control. These may include:

1. economic trends including local, national and international financial trends,

developments in the country’s stock markets, reforms in the banking system, growth of
the GDP;

2. market trends such as new products or technology or evolving buyer’s profile,

including changes in tastes and lifestyle behavior;

3. national and local laws and statuses as well as political, environmental and economic
regulations;

4. demographic characteristics of target market such as the age, gender and culture of
customers;

5. relationships with suppliers and co-owners and

6. competitive threats
 SWOT ANALYSIS

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

project may entry of

government difficulty of replace competitors
incentives organization imported
goods available time
in the market consuming
low capital costly set-up
production
requirements will improve processes
possible employee
market pollution welfare opposition
acceptance problems from the
improved residents in
experienced lack of company the community
training of reputation
leaders
workers natural
new technology
phenomena
 Porter's Five Forces
of Competitive
Position Analysis
Presented by: Jazmine Canlas
Brief (1) Why is sit called Porter's Five Forces?

Background (2) When was it developed?

(3) What is the purpose of this analysis?
(4) Why is it important?

(5) How does this analysis help

business organization?
What: Porter's Five Forces of Competitive Analysis

When: Developed in 1979.

Who: Michael Porter

For assessing and evaluating the competitive
For what purpose:
strength and position of a business organization
to determine the competitiveness and attractiveness of a
Why?
market, and to locate the business current competitive position.
The attractiveness
of the market

Market attractiveness is a measure of the potential

value of a particular market, by assessing their
products and their business portfolios according to
the strength of the market.
 Cost leadership
- lowering the cost or price

Cost Focus
- attempting to attract customers
based on price

Differentiation
- development of unique products

Differentiation Focus
- offer unique features to a product or
service, fulfilling demands of narrow market.
 Poster's F iv e Fo rc es of
Compe tit iv e An aly sis :
mong existing competitors.
Rivalry a

Bargaining power of suppliers.

Bargaining power of buyers.

Possibility of Substitution

Threat of new entrants.

Diagram
representation:
 Rivalry among
Competitors

The number and capability of competitors

This force examines in the market will also impact on the
attractiveness of the market.
how intense the
competition is in the
If competitors are numerous and offer
marketplace. basically similar products and services, the
market will be less attractive.
 Bargaining Power of
Suppliers

This force analyzes how much power a

business’s supplier has and how much
control it has over the potential to raise its
prices, which, in turn, lowers a business’s
profitability.
Source of If there are a few suppliers
Power of - Fewer supplier means more power they have

Suppliers How unique the product or service is.

- The more unique the product, the easier for supplier to raise
prices

Greater size and strength in the market.

- Greater size and strength in the market, means supplier has
great power to drive up prices
Bargaining Power of
Buyers
This force examines the power of the consumer,
and their effect on pricing and quality.

The smaller the number of buyers in the market, the

greater is the power of buyers to drive prices down.

The buyer's cost of switching from one supplier to

another is also a determinant of the extent of the
buyer's power to bring prices down.
Possibility of
Substitution

When it is easy to substitute products

in a market, it is expected that buyers
will switch to alternatives in case of
price increases.
 Possibility of
New Entrants

However, if barriers to entry

This force considers The easier it is for a new
how easy or difficult it competitor to gain entry, the
greater the risk is of an
is for competitors to
established business’s market
join the marketplace. share being depleted.
prevent new participants
from entering the market,
profits will be maintained
among the existing
participants.
Thank you for
Listening!
 MEMBERS

BELNAS, Hannah Jane CANLAS, Jazmine Nichole CORTEZ, Rhona