APPLIED ECONOMICS Assumptions

 all firms maximize profits

[Market Structures]  there is free entry and exit to the
market
 firms sell differentiated products
Market Structure  consumers may prefer one product
over the other (consumer preference)
– an economic model that allows economists
to examine competition among businesses in the
same industry
Oligopoly

- dominated by only a small number of firms

4 Basic Types of Market Structure - limited competition
- either compete against each other or
 Perfect Competition / Pure Competition
collaborate
 Monopolistic Competition - use their collective market power to drive up
 Oligopoly prices and earn more profit
 Monopoly

Assumptions
Note: Not all of these market structures exist in  all firms maximize profits
reality; some of them are just theoretical constructs.  oligopolies can set prices
Nevertheless, they are critical because they help us  barriers to entry and exit exist in the
understand how competing firms make decisions market
 products may be homogenous or
differentiated
Pure / Perfect Competition  only a few dominates the market

- describes a market structure

- large number of small firms compete against
each other
- a single firm does not have significant
market power
- the industry as a whole produces the socially
optimal level of output, because none of the
firms can influence market prices
Monopoly
- single firm controls the entire market
- it has the highest level of market power
- often reduce output to increase prices and
earn more profit

Assumptions
Assumptions  the monopolist maximizes profit
 all firms maximize profits  it can set the price
 there is free entity and exit to the  there are barriers to entry and exit
market  one firm that dominates the entire
 all firms sell entirely identical goods market
 there are no consumer preferences

Perfect Monopolistic Oligopoly Monopoly

Monopolistic Competition Competition Competition
Many sellers Many sellers Few number 1 seller
- a large number of small firms compete Homogenous Differentiated Differentiated 1 product
&
against each other Homogenous
- unlike in perfect competition, firms here sell Free entry Easy to Hard to enter Impossible
similar but slightly differentiated products enter0 entry
No market Small Large Complete
- certain degree of market power power amount of amount of market
- allows them to change higher prices within a power power power
specific range
 APPLIED ECONOMICS Wages

[Economic Issues Affecting Filipino Entrepreneurs] - monetary compensation

- burden for entrepreneurs to increase the
minimum wage
Entrepreneur

- a person who organizes and operates a Tax

business or businesses, taking on greater
than normal financial risks in order to do so
- initiative
- act upon ideas
- compulsory financial change imposed upon
a taxpayer by a governmental organization in
order to fund government spending
- the higher the income, the higher the tax

Examples of Entrepreneurs:

1. Henry Sy – SM
2. Mariano Que – Mercury
3. Tony Tan – Jollibee
4. Edgar Sia – Mang Inasal
5. Cresida Tueres – Greenwhich Pizza

Entrepreneurship

- the process of developing, organizing, and

running a new business to generate profit
while taking on financial risk

Characteristics
 attempts to organize his own
business
 assumes all the risk and return on
his investment
 decides on what, how, and how much
of a food or service will be provided
 monitors and controls all the
activities of the business

[Contemporary Economic Issues Affecting the

Filipino Entrepreneurs]

Investment and Interest rate

- capitals and loans

- banks are affected due to the loan

Rentals

- fixed amount, small profit

- boutique on malls
- needs to higher the price of products in order
to pay rental
 APPLIED ECONOMICS
[Analyze Different Principles, Tools, and
Techniques in Creating a Business]
Business Entities
- important to country’s economic growth
- enables to create goods and services, provide
jobs for individuals to generate income and
accumulate wealth and generate revenue for
the government which enables to provide
social services
- produces goods and services that individuals
need and want
[Principles, Tools, and Techniques in Creating a
Business]
Principles in Creating a Business
Scalability
- capability of a company to sustain or
improve its performance in terms of
profitability or efficiency when its sales
volume increases
Big Ideas
- business is no more effective than the idea
upon which it is built
- business creates its own plan to expand its
economic growth
Systems
- all parts contribute to the success or failure
of the whole
- everything must work together from
employee to president; from equipment to
resources
Sustainability
- business must be dynamic-able to thrive
through all economic conditions, in all
markets, providing meaningful highly
differentiated results to all of its customers
- such differentiation is key to survival
Growth
- essential in business
- without continued growth, operations will
stagnate
o can result in lowered standards of
quality for products or services,
decreased customer service, and
poor employee morale
Vision
- business must manifest the higher purpose
upon which it was seeded, the vision it was
meant to exemplify, and the mission it was
intended to fulfil
Purpose
- business is the fruit of a Higher Aim in the
mind of the person who conceived it
Autonomy
- business is not part of the owner’s life, but
is, in fact, its own entity
Profitability
- business is an economic entity, driving an
economic reality, creating an economic
certainty for the communities in which it
thrives
Standards
- business creates standard against all
businesses measured as either successful or
not
- business will go beyond if it aims high
beyond the existing standard
Tools in Evaluating a Business
1. Use technology to speed workflow
o businesses should be looking to
innovations in technology to solve
day-to-day inconveniences and to
increase efficiency
2. Shorter meetings fuel efficiency
o hold a brief meeting standing up,
every morning, where each person
explains what they are going to work
on the day to ensure everyone is on
the right track and not wasting time
on non-urgent tasks
3. Small office space pays
o can involve a big outlay for SMEs,
but it is also an area where some
smarter thinking can make a real
difference
4. Advertisement
o keeps your business top of mind so
consumers think of it when they
require or need a service or product
 5. Small changes, big savings Opportunities
o make small changes to the way they
handle their company’s expenses - external factors in your business
6. Keep a firm grip on cash flow environment that are likely to contribute to
o CASH IS KING not profit your success
o ensure the right management of your
inflow and outflow of cash
7. Stay connected on the move Threats
o growing trend towards mobile and
- external factors that you have no control
flexible working mean that
over
employees are permanently
- consider putting in place contingency plans
connected and on the go
for dealing them if they occur
8. Use time more efficiently
o being more efficient is more about
being than doing
o probably 90% mindset PESTLE Analysis
o “The shorter the amount of time you
P – Political
allow yourself, the more you will get
done.” E – Economics
9. Get the best deal on insurance
o helps cover the costs associated with S – Social
property damage and liability claims T – Technological
10. Don’t be lax with the legal
o during hectic process of starting up a L – Legal
business, founders often put off
E – Environmental
sorting out the legal matters until
later, or not at all

Political Factors
Common Tools and Techniques - determine the extent to which a government
may influence the economy or a certain
SWOT Analysis
industry
- standard analysis tool
Economic Factors
S – Strength
- determinants of an economy’s performance
W – Weaknesses that directly impacts a company and have
resonating long term effects
O – Opportunities
Social Factors
T – Threats
- filter the social environment of the market,
and gauge determinants like cultural trends,
Strength demographics, population analysis, etc.

- internal, positive attributes of your company Technological Factors

- things that are within your control - innovations in technology that may affect the
operations of the industry and the market
favorable and unfavorably
Weaknesses - automation, research, and development and
the amount of technological awareness
- negative factors that detract from your
strengths Legal Factors
- things you might need to improve on to be
competitive - have bots external and internal sides
- certain laws that affect the business
environment in a certain policy that
companies maintain for themselves
Environmental Factors - action-oriented and contain specific, feasible
plans, often at a high level.
- include those that influence or are - depending on the vision, one or more
determines by the surrounding environment mission statements might be needed to help
- crucial for certain industries particularly for the company get to where it wants to be, and
example: these may take weeks, months and
o tourism sometimes even years
o farming - similar to a mission in military context,
o agriculture mission statements often require multiple
- factors of a business environmental analysis people to achieve the goal in question
include but are not limited to: - the same applies in the corporate world
o climate - therefore, it is often a complicated task, in
o weather which planning and resource management
o geographical location are combined at the very least, to form
o global change in climate missions and incorporate them in the vision.
environmental offsets
Objectives

- goals are linked to them, in order to help the

VMOST Analysis
- known as MOST Analysis
- framework and evaluation technique for
strategic planning in an organization
- ensures stakeholders in an organization gain
reliable insight into the desired changes in
their organization
V – Vision
M – Mission
O – Objectives
S – Strategy
T – Tactics
Vision
- set of ideas that describes what the future
should look like
- vision statements often use terms like “will”
or “shall” and will often contain visual
descriptions such as a location where the
plans should be implemented
- contains an idea on how and which products
should be offered
- a good vision has a good character, though
due to the high level of dynamics in
organizational life, these might need to be
changed along the way
Mission
- concise actions of changes to help the
company accomplish its vision
user, measure their success rate.
- Goals
o checkpoints that let the user know
whether an individual mission
statement has been completed or
not.
- SMART acronym
o a convenient tool to formulate
realistic goals.
o If a goal has been defined in a SMART
way, this means that it is specific,
measurable, achievable, relevant and
time bound.
Strategy
- must be linked to a least one mission
statement goal
- a consequence of this is that a strategy often
results in being a complicated and
comprehensive idea about how a company
should be managed
- often a strategy supersedes a theme, for
example the focus on new innovations or the
improvement of user-friendliness of devices
or apps.
Tactics
- actions that need to be completed in order to
fulfil the strategy
- The easiest way to think about tactics is the
use of the ‘Verb-Noun’ format. For example:
design CRM, expand website or recruit
employees.
- encompass multiple units and therefore are
often part of multiple groups such as
product, human resources, processes,
technology or marketing.