LEARNING OBJECTIVES:

• Analyze different principles, tools, and

techniques in creating a business.
• Apply business principles, tools, and
techniques in participating in various types of
industries in the locality.
What is business?
What are the basic concepts
of SWOT analysis?
What is SWOT analysis?
What are the basic concepts
of SWOT analysis?
 Why SWOT analysis is
important in planning a
business?
DIFFERENT PRINCIPLES,
TOOLS, AND TECHNIQUES IN
CREATING A BUSINESS
DIFFERENT PRINCIPLES, TOOLS, AND
TECHNIQUES IN CREATING A BUSINESS
• In economics, the main concern is to realize the
maximum profit.
Principles in Creating a Business
The principles of a business are the driving forces
that make it successful. They are the backbone for
the organization. Each business needs a shape and
structure, and these principles will give your
company an outline, which is necessary for it to be
thrive.
BUSINESS PRINCIPLES
BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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BUSINESS PRINCIPLES

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Porter’s Five Forces Competitive
Position
• The framework was developed by Michael E.
Porter (1979) as an alternative perspective on
profitability analysis and on the attractiveness
of an industry for business ventures.
Porter’s Five Forces Competitive
Position
1. The competition among rival firms within the
industry;
2. The bargaining power of customers;
3. The bargaining power of suppliers;
4. The threat of entry of rival firms; and
5. The threat of substitute products or services
The competition among rival firms
within the industry
The first force comes from competitive behaviour
of existing players in the industry. The forces of
their competitive behavior will depend on the
structure of the market.
Bargaining Power of Customers
In a market, transactions are made between sellers
and buyers. For sellers responding to the needs of
the customers and their important reason is for
engaging in business aside from earning profits.
Bargaining Power of Customers
Options to mitigate the bargaining power of the
customers:
1. Diversification – distributing a large share of its
outputs to other sectors.
2. Offering differentiated products – selling variety
of products instead of single products.
Bargaining Power of Suppliers
Refers to the pressure suppliers can exert on
businesses by raising prices, lowering quality, or
reducing availability of their products.
Bargaining Power of Suppliers
In addressing the solid haggling control of a single
or exceptionally few sources of raw materials, the
industry can alter by differentiating its sources of
raw materials to debilitate the bartering control of
providers.
The Threat of Potential Entrants/ Entry
of Rival Firms
Potential entrants to the industry are realistic
threats especially if the industry is very profitable.
Scale and legal barriers within the industry can
reduce the competitive force that these potential
competitors may pose on existing players.
The Threat of Potential Entrants/ Entry
of Rival Firms
However, the potential entrants can have their
harmony to strengthen their competitive force on
the industry.
Threats of Substitute Products or
Services
In 1970’s, the OPEC (Organization of Petroleum Exporting
Countries) member countries considered the threats of
substitute goods that gave a great impact to the profitability in
the industry when they imposed production cuts that is made
by oil exporting countries lead to the tripling price of oil in the
world that gave a huge profit to the oil exporters.
Sole Proprietorship
It is owned by a single individual who is solely
responsible for running the business and is
accountable for all debts and obligations related to
the business.
Partnership
• It is an agreement in which two or more
persons combine their resources in a business
with a view to making profit.
• An agreement is drawn up and profits are
divided among the partners according to the
terms of agreement.
Partnership
There are two types of partnership:
1. The General Partnership – all owners share the
management of the business and each is
personally responsible for the must assume the
consequences of the actions of the other partners.
Unlimited liability which means loan payments will
extend to their personal property.
Partnership
2. The Limited Partnership – contribute only
capital, take no part in control or management, and
are liable for debts to a specific extent only.
Corporation
• A legal entity that is separate from its owners,
the shareholders.
• No shareholder is personally liable for debts,
obligations, or acts of the corporation
• Corporation normally can exist for a life of 50
years, which is renewable for another 50 years.
• Corporation are burdened by heavy taxes.
Cooperative
• An entity organized by people with similar
needs to provide themselves with goods or
services or to jointly use available resources to
improve their income.
Small, Medium, and Large Scale
Businesses
• Php.1,500,000 - below – Micro Business
• Php.1,500,001 – Php.15,000,000 – Small
Business
• Php.15,000,001 – Php.60,000,000 –
Medium Business
• Php.60,000,001 – above – Large Scale
Business
INDUSTRY ANALYSIS
Key Factors to be considered in
Analysing the Industry according to
North Carolina’s Small Business and
Technology Development Center
(SBTDC)
1. Geographic Area – identify the area whether local,
regional, nationwide, or international.
2. Industry (as to size) – worth in pesos and number
of firms, trends and developments and future
outlook.
3. Product – physical attributes and characteristics,
and is uses.
4. Buyers – describe target customers as to age,
income group, occupations and buying habits.
5. Regulatory Environment – includes government
laws and regulations that apply to the business.
6. Company Information – make a list of the most
successful businesses in the industry.
7. Brief History of the Industry – when it started and
how it developed.
8. Factors that Affect Growth of the Industry –
migration of population from rural to urban areas.
9. Trends in Sales over Recent Years – show actual
sales in the industry over the past 5 years.
10. Competitor Information – includes the location
of competitors and how long have they been in
business and their market share.
ENVIRONMENTAL ANALYSIS
Economic Forces
• this involves a look at economic factors such as
income of the people, specifically the target
market, economic conditions such as inflation,
recession, prosperity, demand, and supply in the
market.
Physical Environment
• this includes a look at the population size, the
geography of the place where business will be
located, land distribution, climate, and its today’s
global warming situation, whether or not the area
is prone to flood or earthquake.
Political Factors
• the type of government, the stability and
strength of the government, and good leadership
are factors that can be an advantage to a
business.
Culture and Lifestyle
• it is important to study cultural practices such as
fiestas, celebration of Christmas season, trends in
consumption patterns, as a means to identify the
goods and services that will fit into these
celebration and spending behavior.
Competition
• this is something that needs to be studied. The
degree of competition in the market and the
extent and strength of competition are all very
vital in determining the success or failure of a
business.
SWOT ANALYSIS
 SWOT ANALYSIS
SWOT (strengths, weaknesses, opportunities, and
threats) analysis is a framework used to evaluate a
company's competitive position and to develop
strategic planning. SWOT analysis assesses internal
and external factors, as well as current and future
potential.
Strengths
Strengths describe what an organization excels at
and what separates it from the competition: a
strong brand, loyal customer base, a strong balance
sheet, unique technology, and so on.
Weaknesses
Weaknesses stop an organization from performing
at its optimum level. They are areas where the
business needs to improve to remain competitive.
Opportunities
Opportunities refer to favorable external factors
that could give an organization a competitive
advantage.
Threats
Threats refer to factors that have the potential to
harm an organization.