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LESSON 7

BUSINESS PURPOSE

IDENTIFYING THE BUSINESS PURPOSE


To propel the business towards success, it is
important that the entrepreneur knows why he is in
the business and what he wants to achieve.
This section will guide you in identifying and
writing your business purpose by helping you write
the following:
A. Mission
B. Core Values
C. Goals and Objectives

MISSION STATEMENT OF THE COMPANY


- defines the purpose of the business and guides
in attaining the goals towards success.
3 Basic Dimensions of Mission Statement
1. What the company does for its customers.
2. What it does for its employees.
3. What it does for its owners.

In Tim Berrys How to Write a Mission Statement


in 5 Easy Steps
1. Who is your company?
2. What do you do?
3. Do you want to make a profit?
4. Who are your market and what benefits you offer
them?
5. What kind of environment do you have for your
employees?

Guidelines in writing a mission statement:


1. Keep it short and simple.
2. Use plain language to make sure that people
who reads it will understand.
3. Be specific on the products/service that the
company offers.
4. Use straightforward and simple explanations.

VISION STATEMENT OF THE COMPANY


- lights the direction of the firm
- like a big picture that shows the future of the
company
- provides long term direction and guidance

VALUES STATEMENTS OF THE COMPANY


- set of beliefs and principles that guides the
business activities and how it should be
operated by the entrepreneur
-keeps the company oriented and reliable

GOALS AND OBJECTIVES FOR THE COMPANY


- create a road map for the future of the
company and minimize the risk of making
wrong decisions and wasting resources
- help in clarifying the purpose of the business
and the necessary actions to achieve its mission
and vision
According to Don Hofstrand:
Goals are the general statements of what you
need to achieve in your vision while Objectives are
specific, time-sensitive statements for achieving

LESSON 8
THE BUSINESS
ENVIRONMENT

INDUSTRY ANALYSIS
- market strategy tool used in determining the
stage of the industry where the business falls
- allow the entrepreneur to know whether there is
a demand for the industry in the long run
- help in identifying the stability of the demand in
the industry
To help the entrepreneurs to assess the
attractiveness of the industry, they can use
Industry Trends and Five Forces Models.

INDUSTRY TRENDS
Trend refers to the direction or a course that
follows a tendency or a style. These could be
related to business, fashion, lifestyles, languages
and education.
The importance of studying industry trends:
1. It helps the entrepreneur in analyzing the
sudden shift (increase or decrease) of the
products or services sold by the firm.
2. It guides the entrepreneurs in making positive
assessment of the future of the industry where

THE FIVE FORCES MODEL


- marketing tool created by the Harvard Business
School Professor, Michael Porter
- study the attractiveness and the profitability of
the business
- useful in determining the strength of the firms
position in the market
- helps in identifying whether the new product or
service has potential to be profitable

A. COMPETITIVE RIVALRY
There are 4 factors that determine the nature and
intensity of the rivalry among existing firms in the industry:
1. Number of competitors- competitive rivalry is higher
when there are more potential competitors in the
industry.
2. Product differentiation- how the product differs from one
producer to another affects the rivalry.
3. Growth rate and market size- the rivalry is more intense
during periods of low market growth.
4. Level of fixed cost- when fixed cost is relatively high
relative to the variable costs, large business would
require greater sales volume to cover up the cost.

B. THREAT OF NEW ENTRANTS


Investopedia defines barrier to entry as the
existence of high start-up costs or other obstacles
that prevent new competitors from easily entering
an industry or area of business. Barriers to entry
benefit existing companies already operating in an
industry because they protect an established
companys revenues and profits from being whittled
away by new competitors.

Six Major Sources of Barriers to Entry:


A. Economies of scale- when a certain company mass-produce the
products that results to a lower average cost.
B. Product differentiation- it is difficult for the newcomers to gain
market share since existing firms have already gained loyalty
from the customers.
C. Large investment- capital requirements should be considered by
new entrants.
D. Cost advantage- existing companies have already acquired
assets like land, building or equipment where the cost is lesser.
E. Access to suppliers and distribution channels- looking for
distribution channels and suppliers are difficult since they do lack
access to them.
F. Government and legal barriers- another restrictions for new

C. THREAT OF SUBSTITUTION
Like the threat of new entrants, the industry
is more likely attractive when the threat of
substitutes is low. The extent of the threat
would depend on whether it can match the
product in the industry and the customer is
willing to switch products.

D. BUYER POWER
Several factors determine the bargaining power of
buyers:
A. Number of customers- if there are fewer buyers that
sellers, there is a greater bargaining power for the
customer.
B. Buyers cost- if the item has great importance to the
buyer, he is more sensitive in the price of the product.
C. Number of firms supplying the product- when there is a
large number of customers and has low number of
suppliers, the advantage of the purchasing power is more
favorable for the suppliers.
D. Threat of backward integration- the power of the

E. SUPPLIER POWER
Suppliers are powerful when they have established a dominant
position in the market. These include the following:
A. Supplier concentration- when there is large number of buyers and
only few suppliers can provide a critical product, the supplier has
the power over the buyers.
B. Switching costs- if the supplier provides the key ingredient for
customer that is not easy to find or buy somewhere else, the
bargaining power of the supplier is high.
C. Attractiveness of substitute- if there are no substitutes for the
product or service, it is more likely that the power of the supplier
is enhanced.
D. Threat of forward integration- the bargaining power of the

CUSTOMER ANALYSIS
It plays an important role in planning the
business. It is conducted to identify and distinguish
the customers characteristics to better understand
their needs and their purchasing behavior. These
data are usually gathered through feedback, focus
group, transactions and product testing.

UNDERSTANDING CUSTOMERS
Customers are the ones who pays and purchase
the products/services. There are five main roles
that exist in the purchasing situations of the
customers:
Roles
Functions
Initiator

These are individuals who initiate the search for a solution to the
problem of the customer.

Influencer

These are individuals who may have some influence on the


purchase decision.

Decider

These individuals who are responsible in making final decisions


whether to purchase or not the product.

Purchaser

These are individuals who buys the product or the service.

User

These individuals are the end-user and the ones who consume the
product.

CONDUCTING CUSTOMER RESEARCH


Knowing the customer will help the entrepreneur
know where to find them, what kind of products or
services they like and what motivates them to
make the purchases.
In conducting research studies on customers, it is
important to study the geographic, demographic,
psychographic and behavioral patterns of buyers.

RESEARCH METHODS
A. Questionnaires and surveys- used to obtain general
information which is inexpensive and easy to analyze. The
feedback may not be accurate and somehow impersonal.
B. Interviews- used to probe answers which help in getting
fuller range of information. This method is difficult in
analyzing the gathered information and the analysis would
usually takes some time.
C. Observation- done by documenting the behavior of the
buyers. It can easily get the information. The problem is the
difficulty in interpreting findings and somewhat expensive.
D. Documentation review- involves in studying the factual
history of the transactions of the clients. However, this is
time consuming and the data is limited based on the

COMPETITOR ANALYSIS
An essential marketing strategy to measure the
companys strategies against competitors. The
purpose is to determine the strengths and
weaknesses of the competitors that will provide the
firm the competitive advantage.

IDENTIFYING THE COMPETITORS


A. Direct competitors- businesses that offer the
same products/services. These are the most
important competitor since they go after the
same customers.
B. Indirect competitors- businesses that offer close
substitute to the product/service.
C. Future competitors- businesses that are not yet
considered as direct or indirect competitors.

THE RICH KIDS


Nas, Francheska Lyn A.
Dela Cruz, Gileann I.
Dinoy, Eunice Bea C.
Merlan Jeramiah D.
De Vera, Kimy Lorraine,
Bermudez, Pherlyn
Jose, John Paolo
Padin, Rodella Mariz

MC3A