12

Applied
Economics
Quarter 2 – Module 1
Principles, Tools and
Techniques in Creating a
Business
Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 2 – Module 1: Principles, Tools and Techniques in Creating a Business

Second Edition, 2021

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Lesson 1: Tools in Evaluating a Business

 Learning Competency: Analyze different principles, tools, and techniques in
creating a business.

At the end of the lesson, you are expected to:

 examine the steps in evaluating business opportunities;
 analyze the competition exists among rival firms; and
 examine the strengths, weaknesses, opportunities, and threats (SWOT) as
principle, tool, and technique in creating a business.

What is it?

Five Steps to Evaluate Business Opportunities

1. Self-Analysis
Evaluate personal own talents, desires and goals before starting a feasibility of an
idea. Consider willingness to take risks as well as the amount of time and energy that
is needed to make the business a success. Review financial, personnel and marketing
skills as well to ensure to have the necessary background to make a success of a new
venture.
2. Financial Components
Evaluate your own resources. Part of a financial assessment includes the amount
you have in personal savings to add to the initial investment. Banks typically require
entrepreneurs to come up with a portion of investment to show good faith and
willingness to take a risk with the lender. Assess the financing available through the
seller, investors and lenders when evaluating your chances of succeeding.
3. Market Research
To thoroughly understand what getting into, perform an extensive market research
project to determine the feasibility of a business. In addition to gleaning statistics of
trends and current customer buying patterns, one needs to know who your customers
are, where they are located and what kind of competition exists in your area.
4. Risk Assessment
A complete evaluation of a business opportunity includes a risk assessment. An
honest appraisal of the potential risks inherent in your new business can help you
prepare for possible problems and decide whether the risk are worth the investment.
Details you need to consider in the risk assessment process include factors that could
negatively affect your business, such as the general state of the economy, weather
events and your competition’s competitiveness. Internal considerations should include
your own health, level of credit available to you and the number and type of employees
you’ll need to hire to run the business efficiently.
5. Support
Finally, evaluate the amount of support you expect to receive from your family and
the community. You’ll most likely spend an inordinate amount of time in the initial
stages of opening your new business, which could affect your family relationships.
Outside hobbies and commitments may need to be curtailed for some time. Attitudes
and cultural preferences in your community can impact your ability to grow and
sustain your business. Evaluate your standing on all these fronts to ensure you’ve got
the necessary support to be successful.
 What’s more?

Directions: Write TRUE if the statement is correct and FALSE if it is wrong.

________ 1. The willingness to take the risk is one of the factors to be considered in
assessing yourself before going into business.
________ 2. Part of a financial assessment includes the amount you have in personal
savings to add to the initial investment.
________ 3. Market research helps determine the feasibility of a business.
________ 4. Outside hobbies and commitments may not be affected in doing a
business.

Lesson 2: Competition

What is it?

Competition
 The rivalry among sellers trying to achieve such goals as increasing profits,
market share, and sales volume by varying the elements of the marketing mix:
price, product, distribution, and promotion.
 It causes commercial firms to develop new products, services and technologies,
which would give consumers greater selection and better products. The greater
selection typically causes lower prices for the products, compared to what the
price would be if there was no competition (monopoly) or little competition
(oligopoly).
 It is a condition where “buyers tend to compete with other buyers, and sellers
tend to compete with other sellers,”

Ways to consider competition in business planning.

 Study the barriers to entry in the industry.
 See if you have or can create a sustainable competitive edge.
 Anticipate the consequences of your pricing strategy.
 Have contingency plans.
 Check if the company owner has an emotional attachment to the business.
 Have frequent reassessments.

The Philippine Competition Act (PCA) or R.A. 10667

 The primary competition policy of the Philippines for promoting and protecting
competitive market.
 The act reflects the belief that competition:
 Promotes entrepreneurial spirit
 Encourages private investments
 Facilitates technology development and transfer, and
 Enhances resource productivity

Customer
 An individual or business that purchases the goods or services produced by a
business.

Customers are consumers

The terms “customer” and “consumer” are almost synonymous. Customers are
defined by their purchase of goods, or their contracting for services, as the consumer,
or end user. As the term is commonly used, a customer is the end consumer of a
product. This distinguishes true customers from resellers and vendors, who usually
make purchases to sell later.
What’s more?
Directions: Write TRUE if the statement is correct and FALSE if it is wrong.
________ 1. Competition causes commercial firms to develop new products, services
and technologies.
________ 2. Customers are the end users of a product/service.
________ 3. Competition promotes entrepreneurial spirit.
________ 4. Smart and Globe are competing industry.

Lesson 3: SWOT Analysis

What is it?

SWOT Analysis focuses on internal and external factors in identifying business

opportunities, the analysis are as follows:

1. Strengths – these are internal characteristics of firms or industry that can

contribute directly to the profitability of firms and the industry. This includes
the availability of skilled laborers, highly qualified management team, adequate
equipment, and modern plant conducive for production and distribution
activities.

2. Weaknesses – these are internal characteristics of firms or industry that

features direct, actual, and current discounting factor on profitability that
contributes in making the industry less attractive.

3. Opportunities – these are positive impacts of various external environments on

the profitability of an industry. Like strengths, opportunities can contribute in
enhancing the profitability of an industry but unlike strengths, their
contributions are only potential, indirect, and prospective because the firms do
not have direct control over these factors.

4. Threats – these are undesirable impacts of external factors, because they can
potentially impair the profitability of firms in an industry. Just like weaknesses
these factors have harmful impacts on the profitability of the industry. But
unlike weaknesses these external factors can only have potential, indirect,
prospective effects because the firms or the industry do not have control over
these factors. The most they can do is manage these threats and minimize their
consequences.

What’s more?

Directions: Match the word in column A to column B. Write only the letter of your
answer.
COLUMN A COLUMN B
1. Strengths A. Unskilled workforce
2. Weaknesses B. Rising office rentals
3. Opportunities C. Highly qualified management team
4. Threats D. Reliable supplier of raw materials
 Assessment

Directions: Read each item carefully and write the letter of your choice on your
answer sheet.

1. Why do we evaluate business opportunities?

A. To evaluate business potential C. To evaluate your abilities
B. To analyze the risk and benefits D. All of the above

2. This includes the amount you have in personal savings to add to the initial
investment.
A. Financial Components C. Risk Assessment
B. Market Research D. Self-Analysis

3. It determines the feasibility of the business.

A. Financial Components C. Risk Assessment
B. Market Research D. Self-Analysis

4. The following are factors to be considered in assessing the risk of a business except
________.
A. Customer buying pattern C. State of the economy
B. Health of condition D. Weather events

5. Industry rivalry among companies of the same or related industry is called _______.
A. Alliance B. Competition C. Distribution D. Threats

6. Individuals who will buy the products and services in the market.
A. Consumers B. Creditors C. Government D. Supplier

7. The end user of a product.

A. Consumer B. Customer C. Producer D. Purchaser

8. The primary competition policy of the Philippines for promoting and protecting
competitive market.
A. R.A. 10551 B. R.A 10667 C. R.A. 11225 D. R.A.12446

9. These are internal characteristics of firms or industry that features direct, actual,
and current discounting factor on profitability that contributes in making the industry
less attractive.
A. Opportunities B. Strengths C. Threats D. Weaknesses

10. Which of the following is an example of opportunity in SWOT analysis?

A. Absence of supplier C. Low morale of employees
B. Growing domestic economy D. Modern physical facilities

Nothing is impossible, the word itself says I’m possible. (Audrey Hepburn)

Congrats for another achievement!

Answer Sheet
Name: ________________________________________________________________________
Grade & Section: ________________ Score: _______

Quarter 2 – Module 1

Lesson 1 Assessment
What’s more? 1.
1. 2.
2. 3.
3. 4.
4. 5.
6.
Lesson 2 7.
What’s more? 8.
1. 9.
2. 10.
3.
4.

Lesson 3
What’s more?
1.
2.
3.
4.

Reference

Efren S. Basilla, J. (2017). Applied Economics. Manila: Future Builder Publications,

Inc.