12

Applied
Economics
Quarter 2 – Module 2.2
Application of Business
Principles, Tools and Techniques
in Various Types of Industries
Applied Economics – Grade 12
Alternative Delivery Mode
Quarter 2 – Module 2.2: Application of Business Principles, Tools and Techniques
in Various Types of Industries

First Edition, 2020

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Lesson 1: Porter’s Five Forces of Competitive Position
Learning Competency: Apply business principles, tools, and techniques in
participating in various types of industries in the locality.

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

 apply Porter’s five forces of competitive position,
 apply environmental scanning in industry analysis, and;
 apply SWOT Analysis as a tool in evaluating business opportunity.

What is it

In this section, the goal of profitability of an industry will still be pursued

through the use of Porter’s Five Forces of Competitive Position. This framework
was developed by Michael Porter (1979) as an alternative perspective on
profitability analysis and on the attractiveness of an industry for business
ventures. According to Porter, the stronger the forces of competition have bearing
on the industry, the lower its profitability and the less attractive the industry for
business enterprise. Because of this, the appropriate strategy for the industry is to
control and manage these forces in order to enhance the industry’s profitability.
In Porter’s five forces analysis, the strengths of five major forces affecting firm’s
profitability are evaluated as follows:
1. Competition among Existing Firms in the Industry – this refers to the
competition among other firms to improve their market control and profitability.
2. Bargaining Power of Customers – this refers to the utilization and maximizing
buyer’s preferences like price lowering to enhance their satisfaction and of the
same time considering the sellers profit maximization.
3. Bargaining Power of Suppliers – this refers to the sourcing of raw materials
and factor inputs can have an impact of the profitability of the industry if its
sources come from a single or few suppliers. In such way, the business strength is
to adjust by diversifying its sources of raw materials to weaken the bargaining
power of suppliers like forming subsidiary firm that will supply all the raw
materials for the conglomerate.
4. Threats of Potential Entrants – this refers to a new competition like business
rivals which are realistic threat especially in the profitable industry, because they
might have produced a differentiated product or services at lower prices. In such a
way, the existing companies are engaged to research developments and
improvements about their products and to segment the market through product
differentiation.
5. Threats of Substitute Goods – the strength of this competitive force measured
by the cross elasticity demand which means the responsiveness of the demand for
a substitute good due to a change in the price of the product produced in the
industry.
 What’s More

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

________ 1. The stronger the forces of competition on the industry, the higher its
profitability.
________ 2. Competition among other firms aims to improve their market control and
profitability.
________ 3. Business rivals are threats.
________ 4. Forming subsidiary firm that will supply all the raw materials can
strengthen the bargaining power of suppliers.

Lesson 2: Environmental Scanning

What is it

In environmental scanning in industry analysis shows the impact of the various

spheres where industry operates on its profitability. This profitability will affect the
stability and growth of the industry considering the following:

1. National and Global Economies – this refers to the analysis of viability and
profitability of the global economy which tells a rapidly growing economy will
have positive effects on various industries and sectors and a good business
venture.

2. Government Policies and Regulations – this refers to the government as

governing body that regulates and taxes business and business transactions as
well. On the other hand, the government is also an agency tasked to stabilize
the economy and promote its growth.

3. Technological Developments – this refers to the rapid developments in

technology in recent years particularly in information and communication
technology

4. Demographical Changes – this refers to the country’s population which

business enterprises draw primarily their customer. In such a way, a
population expands creates additional demand or services and can enhance the
profitability of business companies and several industries.

5. Social Changes – this refers to the modification of family structure and other
social changes that the business think possible venture for consumer behavior
and tastes.

6. Changes in the Natural Environment – this refers to the adaptability of

company to the changing environment like weather, temperature, seasons, and
even geological movements by changing the production and distribution process
to adapt.
 What’s More

Direction: Read each item carefully. Choose your answer from the word/s inside the
box. Write your answer on your answer sheet.
Demographical Changes Social Changes
Government Policies and Regulations Technological Developments

____________ 1. This refers to the modification of family structure and other social
changes that the business think possible venture for consumer
behavior and tastes.
____________ 2. This refers to the country’s population which business enterprises
draw primarily their customer.
____________ 3. This refers to the government as governing body that regulates and
taxes business and business transactions as well.
____________ 4. This refers to the rapid developments in technology in recent years
particularly in information and communication technology.

Lesson 3: SWOT Analysis Application

What is it
Agriculture
 The science and art of cultivating plants and producing livestock.
 It devotes more than 50 percent of farm lands in the planting of rice and corn.
 It is also the source of raw materials supplied to the industrial sector as well as
the producer of export products for the world market.
 Because of the low productivity, a number of initiatives has been implemented
to enhance the sector’s productivity. This includes the manufacture and
distribution of farm supplies, implements, and equipment, production of
agricultural inputs, managing farms, processing of agricultural products,
storage, and distribution of agricultural or farm produce.
 Many business ventures derive their income and provide employment from the
production of leading agricultural crops.
 There are also business opportunities in the production of other fruits and
vegetables and varieties of rice and corn that cater to the changing tastes of
Filipino consumers.
 The long coastlines of the Philippines are endowed with marine resources for
fisher folks to harness for fish production. But aside from commercial fishing
for seafood production, there are business prospects in municipal fishing,
aquaculture, and cage/pen operations opportunities.
 For animal production, there are two types that can be pursued: livestock (pigs,
cows, carabaos, and goats) and poultry production which includes chicken,
ducks, and goose. Small scale entrepreneurs can also undertake these
commercials activities as backyard and livelihood ventures that can provide
income and employment opportunities to poor households.
 In agricultural support and agricultural processing, the opportunities are huge
and expanding although the current share of this type of agribusiness is still
small.
 The sale of agricultural inputs and farm implements can improve the
productivity of agriculture aside from enhancing the non-crop production of
those in the agricultural sector.
 Besides the production and sale of agricultural equipment, there are business
opportunities in leasing or renting expensive capital equipment to small
farmers.
 In addition, some farm produce can be processed in cottage industries located
near the farm.
  There are business opportunities in packaging these agricultural farm produce.

What’s More

Direction: Identify the following statements as STRENGHT, WEAKNESS,

OPPORTUNITY or THREAT of agriculture sector.
____________ 1. Rice importation.
____________ 2. Long coastline and municipal water resources.
____________ 3. Shifting demand for organic produce.
____________ 4. High cost of fertilizers and farm inputs.

Assessment

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

1. This one of Porter’s Five Forces of Competitive Position which refers to a new
competition like business rivals which are realistic threat especially in the profitable
industry.
A. Bargaining power of customers C. Threats of potential entry
B. Bargaining power of suppliers D. Threats of substitute goods.

2. This refers to the utilization and maximizing buyer’s preferences like price lowering
to enhance their satisfaction and at the same time considering the sellers profit
maximization.
A. Bargaining power of customers C. Threats of potential entry
B. Bargaining power of suppliers D. Threats of substitute goods.

3. This refers to the country’s population which business enterprises draw primarily
their customer.
A. Changes in the natural environment C. Government policies and regulations
B. Demographical changes D. Social changes

4. This refers to the government as governing body that regulates and taxes business
and business transactions as well.
A. Changes in the natural environment C. Government policies and regulations
B. Demographical changes D. Social changes

5. Joel has a lechon manok business in their community. Aside from him, there are
also other establishments that sell grilled chicken like Chicken Inasal, Juicy Chicken
Lechon and Boy’s Manok Inihaw. Therefore, Joel’s business has _______________.
A. Opportunity B. Strength C. Threat D. Weakness

6. In a bookstore business, which of the following can be classified as strength?

A. Using price bundling to increase sales.
B. Promoting the use of E-books.
C. Giving discounts to customers.
D. Hiring experienced workers.

7. In a bookstore business, which of the following can be classified as threats?

A. Using price bundling to increase sales.
B. Promoting the use of E-books.
C. Giving discounts to customers.
D. Hiring experienced workers.
8. In an online business, which of the following can be classified as an opportunity?
A. Well known blogger patronize your products.
B. Discover a new level of marketing that can increase your sales.
C. Customer are supportive.
D. Difficulty in distributing products to rural areas.

9. In an online business, which of the following can be classified as threats?

A. Competitors have well known bloggers that patronize products
B. Free shipping fee to your valued clients
C. Customers have freebies
D. Financial difficulties

10. When you receive a proposal for new investor, then your business has _______.
A. Opportunity B. Strength C. Threat D. Weakness

Pleasure in the job puts perfection in the work. (Aristotle)

 Answer Sheet

Name: ________________________________________________________________________
Grade & Section: ________________ Score: _______

Quarter 2 – Module 2.2

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.
 Answer Key

Quarter 2 - Module 2.2

Lesson 1

What’s More Assessment

1. False 1. C 6. D
2. True 2. A 7. B
3. True 3. B 8. B
4. False 4. C 9. A
5. C 10. A

Lesson 2

What’s More

1. Social Changes
2. Demographical Changes
3. Government Policies and Regulations
4. Technological Developments

Lesson 3

What’s More

1. Threat
2. Strength
3. Opportunity
4. Weakness

Reference
Tereso S. Tullao Jr., P. (2016). Applied Economics for a Progressive Philippines. Quezon
City: Phoenix Publishing House, Inc.