LESSON 3.

2 TOOLS
IN EVALUATING A
BUSINESS
CABUS,RANDO/ BOCANEGRA,JOSE
L O U I S / G U E VA R R A , C H E N A
According to a guide developed and by North
Carolina’s Small Business and Technology
Development Center, the key factors that must
be considered in analyzing the industry are the
FF:
1. The geographic area which your business will
enter to.
2. The size and outlook of the industry.
3. Description of the product.
4. The buyers have to be identified.
5. The regulatory environment.
6. The need to identify the leading business in the
industry ,and to provide company information
on the most successful business that you will
be up against.
7. Factors that will affect the growth of the
business
 THE SWOT ANALYSIS
• The SWOT analysis was created in the 1960s by
Business gurus , Edmund P. Learned , C. Roland
Christensen, Kenneth Andrews , and William D. Book
in their book, Business Policy , Text and Cases.
• S-TRENGTHS
• W-EAKNESS
• O-PPORTUNITY
• T-HREATS
• Analytical framework that can help a
company meets its challenges and identify new
markets.
-Also a means of identifying the internal and
external forces that may affect the business.
INTERNAL FORCES –Are the sources and
experience readily available to the business
proponent.
1.Financial resources
2. Physical resources
3. Human resources
4. Access to natural resources
5. Current processes
• EXTERNAL FORCES – Are those that affect a company an
organization ,an individual and those outside their control
• Economic trends
• Market trends
• National and Local statutes.
• Demographic characteristic of the target market .
• Relationship of suppliers and co-owners
• Competitive threats
 SWOT analysis is a tool that can help a
proponent by enabling him/her to identify or asses
the internal and external forces that can affect the
business.
 STRENGTHS
• Government incentive
• Local capital requirements
• Market acceptance
• Experienced leaders
OPPORTUNITIES
• Project may replace imported good
available in the market
• Will improve employee welfare
• Improve company reputation
WEAKNESS
• Difficulty of organization
• Costly set-up
• Possible pollution problems
• Lack of training of workers
THREATS
• Entry of competitors
• Time consuming production
processes
• Opposition from residents in the
community.
PORTER’S FIVE FORCES OF
COMPETITIVE POSITION ANALYSIS
• Another analytical tool that can be used to assess a
business .
• It was developed in 1979 by Michael E. Porter of
Harvard Business School as a framework or a guide
for assessing and evaluating the competitive strength
and position of a business organization.
PORTER’S FIVE FORCES OF
COMPETITIVE POSITION ANALYSIS
FIVE FORCES THAT NEEDS TO BE
EVALUATED
-SUPPLIER POWER- It is important to assess
how much power the supplier has in his ability
to drive up prices .

*The more unique the product ,the easier it

is for the supplier to drive up the price.
BUYER POWER- If a supplier can enjoy the power
to drive prices up, it is also possible for a buyer to
drive prices down.

*The smaller the number of buyers in the market,

the greater is the power. enjoyed by the buyer
 - NUMBER OF COMPETITORS- The
number and capability of competitors in the
market will also impact on the attractiveness of
the market.

* if competitors are numerous and offer

basically similar products and services, the
market will be less attractive.

-
POSSIBILITY OF SUBSTITUTION-When it is easy
to substitute products in a market, it is expected
that buyers will switch to alternatives in case of
price increases.

*suppliers will enjoy less power to drive prices

up and the market will be less attractive.
 -POSSIBILITY OF NEW ENTRANTS- When
investors see that a market is profitable, they will
desire to join the bandwagon and get share of the
profits. But when new investors enter a market ,
the share of the participants in the market will be
divided among more people and will therefore
decline ,thus, eroding profits.
 IMPORTANCE OF PORTER’S FIVE
FORCES ANALYSIS
• Is the significant tool for organizations to understand
the factors affecting profitability in a specific industry
and can help to form decisions on whether or not to
enter a specific industry , whether or not to increase
capacity in a specific industry , and also for developing
competitive strategies.
• Under this theory ,a business becomes more
attractive ,the greater the supplier’s power to drive
prices up, less the buyer’s power to drive prices
down , the less the number of competitors in the
market , the more differentiated the product or
services is, the less the substitutability of the
products for similar goods, and the more difficult it
is for new entrants to participate in the market.
•

NO BUSINESS CAN
SUCCEED IN ANY GREAT
DEGREE WITHOUT BEING
PROPERLY ORGANIZED