CHAPTER 4:

Problem Solving
Strategies
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Prof. Edgar E. Reyes

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 SUBTOPICS:
● FACTORS TO CONSIDER OF A NEW ENTREPRENEUR

● STEPS IN PROBLEM SOLVING

● PECULIAR CHARACTERISTIDCS OF MANAGERS IN SOLVING PROBLEMS

● ENVIRONMENTAL SCANNING c

● STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

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● THE IDENTIFICATION OF BUSINESS OPPORTUNITY

● CAUSES OF BUSINESS FAILURE

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● WHAT TO DO WHEN BUSINESS STARTS TO FAIL?

 I. FACTORS TO CONSIDER OF
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A NEW ENTREPRENEUR
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 I. FACTORS TO CONSIDER OF A NEW ENTREPRENEUR
1. Knowing your Product or Service

Entrepreneurs setting up new businesses and industrial units help with regional
development by locating in less developed and backward areas.

2. Analyze the Market Potentials

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The customer base will determine the success of your business venture. The wider
the market potential, the more chances of growth and success.
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3. Determine the Marketing Strategy

A unique product or service needs an effective distribution strategy to get

customers into the basket of demand potential. Continuous supply determines product
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growth.
 I. FACTORS TO CONSIDER OF A NEW ENTREPRENEUR
4. Knowing the Competitors

In launching a product with existing competitors you must know their strengths and
weaknesses. Develop new product and marketing strategy and turn their weaknesses
as new opportunities for your product.

5. Do no set on your Laurels c

The landscape of business is continuously changing. Your initial success in your

business activities needs more proactive analysis for expansion and growth and
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overcoming possible competitions.

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 II. STEPS IN PROBLEM
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SOLVING
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 II. STEPS IN PROBLEM SOLVING
1. Identify the problem

The risk involved in the management of the business has to be identified and
analyzed before solutions could be made. Relevant data and information must be
organized.

2. Gather the data that brought the problem

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Good and intelligent entrepreneurs must be able to get the data that brought about
the problem. The solution to the problem is dependent on the data available at hand.
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3. Analyzing the data

Not all information is relevant to the solution of the problem. Some data must be
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discarded. The data must focus on the problem at hand.

 II. STEPS IN PROBLEM SOLVING
4. Formulating alternative solutions

The entrepreneur makes various alternative solutions to the problem at hand.

These solutions are subject to a series of analysis and he may need outside opinion.

5. Selecting the best alternatives course of action

After all the alternative courses of actionc have been analyzed, the entrepreneur
makes the decision. The decision has to be implemented with the least possible risks in
terms of money, time, and effort.
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6. Implementing the best alternative

Problems and Solutions are best arrived at when people who will be implementing
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the decisions are properly consulted and their opinions and ideas are taken into
account before the final decision is implemented.
 III. PECULIAR
CHARACTERISTICS OF
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MANAGERS IN SOLVING
PROBLEMS
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 III. PECULIAR CHARACTERISTICS OF MANAGERS IN
SOLVING PROBLEMS
1. He develops systems and procedures that are precise based on current practices
in an industry.

2. The manager is interested in solving organizational problems rather than finding

other avenues in the solution of the problems.
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3. The manager calibrated the refinement of policies and procedures and tends to
revise them to solve existing problems.
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4. He finds and means to provide solutions and compliance to routine activities.

5. He is interested in details and sensitive to group cohesion and extract group

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cooperation as a means to group accomplishments.

 IV. ENVIRONMENTAL
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SCANNING
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 IV. ENVIRONMENTAL SCANNING
The environment of business is vast with opportunities and the entrepreneur must
have a greater look into this potential as well as the conditions prevailing in the
community. The entrepreneur’s ultimate objective in diving into the business world is to
make profit.

The following factors are contributory to the development of customer satisfaction:

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1. Business location for small entrepreneurs

A retail outlet would need a site that is convenient to prospective customers in

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terms of parking space or availability of transformation.

In choosing the location, the following factors must be looked into by the
entrepreneur:
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 IV. ENVIRONMENTAL SCANNING
a. Rent and space

A retail outlet would need a site that is convenient to prospective customers in

terms of parking space or availability of transformation.

b. Terms of Lease Agreement

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The term of lease must be studied carefully as some owners of space might take
advantage of lessees.
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c. Type of Goods or Merchandise

A convenient store is located where there are pedestrians passing by. They need
quick and easy access to the store and would not spend a lot of time purchasing their
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goods.
 IV. ENVIRONMENTAL SCANNING
d. Income Level of Prospective Customer

The type of pedestrians and the income level of customers must be taken into
account.

e. Prospective Sales Volume

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The term of lease must be studied carefully as some owners of space might take
advantage of lessees.
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f. Municipal or City Ordinances including taxes and fees

The location must not violate city or municipal ordinance and the taxes and fees
must be reasonable for the owners of business.
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 IV. ENVIRONMENTAL SCANNING

g. Location of the Areas

The area must be free from floods and other calamities that will endanger the
business. It must be free from fire hazards or other environmental factors that will
disturb the operation of business.
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2. Location for Small Industrial Plant or Manufacturing Facilities

Environmental factors in locating a manufacturing plant or industrial facilities

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need to be studied carefully as plant location is a great factor in the investment of

funds and its profitability in the long run.
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 IV. ENVIRONMENTAL SCANNING
The following factors are contributory to the development of customer satisfaction:

a. Land Area

The contour of the land, its size, and shape must be suitable to the plant site. It
must be free from floods or other environmental hazards that will disturb operation.
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b. Facilities for Expansion

The land area must have ample space for plant expansion and provisions for
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parking facilities for customers and employees. Anticipation of growth and expansion in
plant facilities should be considered as additional sites in the future may create a
problem.
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 IV. ENVIRONMENTAL SCANNING
c. Power and Utilities

Availability of power supply and the cost of electricity involved in the operation are
great factors in the production of goods. Water supply is also needed and the proper
disposal of waste must be put in place to comply with environmental laws.

d. Building and Other Utilities

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The building must be within the restriction code of the municipality or city. Fire safety
and hazards signs are mandatory requirements.
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e. Plant Site Accessibility

The plant site must be accessible to public or service transport for its employees and
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valued customers. Delays in transport systems are an added cost that must be
avoided.
 V. STRENGTHS,
WEAKNESSES,
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OPPORTUNITIES, AND
THREATS (SWOT)
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 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
SWOT ANALYSIS is an entrepreneurial tool in determining the profitability of the
business operation. Opportunities carry with it some risk involved and this should be
looked into carefully. The strengths and weaknesses are internal factors to the
entrepreneur while the opportunities and threats are external factors.

The product must be evaluated along the

c following areas:

1. Product strength in the market must have the following:

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a. Available Technology in Product Processing

Technology is an important component in producing the product as the economies

of scale determines the price index. The more products are produced, the lower the
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price it can be offered to the market.

 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
b. The Source of Raw Materials must be Abundant and at Lower Price

The constant supply of raw materials is an important factor in the production of the
product. Cheap raw materials that are processed into good products would be able
penetrate the market as its price could be competitive.

c. Skilled Workers must be Available c

Technology must have the component of skilled workers that shall operate the
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machineries and other equipment.

d. Capital Investment in machinery and Operating Expenditures

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A starting venture may have little investment in terms of machinery and equipment
but starting with small capital should generate profitable operations.
 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
e. Expertise and Technical Skills of Management Team

A good product is the making of well-conceived ideas of the management team.

Improvement in product quality is a continuing process and it must be the
management objective to get customers patronage.
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2. Characteristic of Weak Products and Weak Management:
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a. Poor Quality and High Price

The entrepreneur should not launch a poor product in the market as it will
surely fall to advance in the sales and profit.
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 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
b. Product Design and Appeal

Product design should appeal to customers' demand. Poor design of the product is the
making of people with no technical expertise in handling the customer wants in terms of
features.

c. Production Cost c

Production cost is the price determinant. Entrepreneurs cannot make maximum

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profitability on products whose production cost cannot survive market competition.

d. Supply and Demand

Intermittent supply to the market will make customers shift to other products. The supply
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chain management must be put in place to make the products available to valued
customers.
 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
e. Weak Product Management

Weak management is created when people at the top of the organization fail to
sustain a vigorous effort for expansion and growth when management sets on his initial
laurels and ventures on vices and other extra activities that will lose his total
investments. c
3. Sustainable Product Opportunities in the Market:
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a. Product Demand

Product demand is the greatest opportunity of an entrepreneur. Demand is the

essence of profit and this must be sustained by the entrepreneur before wide
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competition appears in the marketplace.

 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
b. Presence of Poor Quality in the Market

The presence of poor quality products in the marketplace is an opportunity for the
entrepreneur. The alternative is on the side of the entrepreneur to supply the market with
quality products and sustain patronage.

c. Government Policies and Support c

The government support to local entrepreneurs is an opportunity for greater expansion.

The government should support the local entrepreneur in terms of taxes and government
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incentives.

d. Liberal Credit Terms and Interest Rates

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Liberal credit terms by banks and other government institutions will generate expansion
for the local entrepreneurs.
 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
4. Threats to Product Profitability and Market Expansion:

a. Entrance of Competition

The entrance of many competitors in the marketplace will definitely give

c reduce profitability as the price has to
problems to entrepreneurs. Competition will
be competitive with those in the marketplace.
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b. The supply of raw materials will be limited as other competitors will be getting the
same suppliers. As demand for raw materials becomes competitive in prices,
production inputs go higher and this will affect product pricing.
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 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
c. The Emergence of Leftwing Labour Unions

Many companies close shops with the advent of labor unions with leftist philosophy
as they want more wages and benefits that the company could not give.

d. The Presence of Double Taxation

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The government already imposed a lot of taxes on entrepreneurs. Honest
businessmen could not profit in their operations as there are lots of taxes that the
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government would like to collect.

e. Peace and Order in the Area of Business Operation

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Peace and order are components of business growth. Criminality and killings would
drive away investors.
 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
f. The Cost of Power Supply

Cost of production increases with the cost of utilities like current and water. The
government private partnership in the operation of power and water utilities has
increased the cost of power by about 400 percent.
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The entrepreneur should look deeper into the following areas:

1. The Management Team

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The technical and manpower complements are important factors in the success of
the business. Management must be able to set the direction of the enterprise with a
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clear MISSION and VISION as the guiding tool for its plans and programs.
 V. STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND
THREATS (SWOT)
2. The Production Process

Product specifications must be maintained according to product standards that are

acceptable to customers. Customers are now aware of product quality and they must be
able to get their money’s worth.

3. The Marketing Program c

The marketing program needs demand analysis for the last 5 years as to the major
users of the product. Marketing research will determine the true picture of the market
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demand and the product competitors.

4. The Financial Management

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Venturing into a business needs financial resources. Money is needed to finance the
activities of business.
 VI. THE IDENTIFICATION OF
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BUSINESS OPPORTUNITY
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 VI. THE IDENTIFICATION OF BUSINESS OPPORTUNITY

The entrepreneur's desire to establish his business is a visible idea yet, it must
come into a test whether it is a viable business option. It needs a careful analysis of
opportunity evaluation.

The following steps will help the prospective entrepreneur evaluate the idea before
going into business:
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1. The starting point of conceiving the idea of the type of business
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Conceiving a new product is a process of innovation and when this comes into a
reality, the product must be different from an existing product. The entrepreneur must
find a new approach to win customers on his side if the product or service is similar to
what is existing in the community.
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 VI. THE IDENTIFICATION OF BUSINESS OPPORTUNITY

2. The technical feasibility and time frame

An idea is not only concentrated on one entrepreneur. The new product must
have its technical feasibility and the time to launch the product must be immediately
done to take ahead before others take the idea.
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 VII. Success & CAUSES OF
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BUSINESS FAILURE
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 VIIa. Success OF BUSINESS FAILURE
The success of the entrepreneur can be viewed from several situations
namely:

1. Business profitability is to provide high benefits to the employees such as

profit sharing;
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2. Survival from an economic crisis is ability to stay in the industry amidst
financial difficulties that cause and bankruptcy of other establishments most
particularly competitors;
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3. Incremental sales and share of the market is the introduction of new

product lines and design that expands market share and attract new market
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segment;
 VIIa. Success OF BUSINESS FAILURE
4. Expansion of market area and product lines such as opening of new
outlets, branches and attracting new dealers by offering new product designs
and images;

5. Acquisition and ownership of plant machinery and premises in buying or

acquiring new plants, factory and other cfixed assets shows success in the
industry;

6. Getting a long term business contract with the government or a big

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business entity.
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 VIIb. CAUSES OF BUSINESS FAILURE
These causes are avoidable but they must be known and made clear to the
entrepreneur. They are follows:

1. Undercapitalization

The entrepreneur must make sure that before the business starts, there must
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be a contingency fund if in case the expected ROI (Return on Investment) did not
operate.
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2. Poor Business Location

The location must be strategic enough for the suppliers of the raw materials,
accessible to the customers, and convenient to the future market.
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 VIIb. CAUSES OF BUSINESS FAILURE
3. Negligence to Public Policy

“Ignorance of the law is not an excuse” emphasizes that the business organization
must be aware of the existing and proposed law that can affect the operation of the
entity.

4. Unprepared to Risk
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The entrepreneur may not be able to control the market situation but there is surely
a way to manage the risk in business that arises from fortuitous events like fire, flood,
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or theft.

5. No New Product or Service

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The entrepreneur must be creative and innovative to promote new product design
and image.
 VIIb. CAUSES OF BUSINESS FAILURE
6. Unsatisfactorily Performance of Relatives

Blood is thicker than water when workers consider their employment by

relatives (even family members) is a matter of privilege rather than a duty to be
sincere and productive.

7. Irregular Attendance c

The absentee entrepreneur will not be there to make critical decisions. The
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presence of the owner can guarantee commitment from the subordinates.

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 VIII. WHAT TO DO WHEN
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BUSINESS STARTS TO FAIL?

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 VIII. WHAT TO DO WHEN BUSINESS STARTS TO FAIL?
If one are an active business owner, one should be the first to know that
business is about to sink. When employees start to chit chat about where your
business headed, it is almost a sure sign that are in trouble.

Tactics to solve bankruptcy:

1. Make a new SWOT analysis considering

c all factors of present business
conditions.

2. Start collecting the accounts receivable and notes receivable.

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3. Borrow money while you are still in a good credit standing.

4. Increase the prices or tack on additional charges such as service fees or

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handling fees when appropriate.

 “Focus on the solution, not on the
problem.” – Jim Rohn
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 VIII. WHAT TO DO WHEN BUSINESS STARTS TO FAIL?
5. Move inventory either by returning them to the supplier for a refund or selling
them to the public at deep discounts.

6. Renegotiate contracts for smaller and cheaper rent areas or move out to a
smaller and cheaper rent area.

END OF CHAPTER 4
7. Find new clients or customers to increase

8. Minimize your personal expenses.

c sales.
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9. Liquidate or sell your office furniture, fixtures, or equipment to generate cash.

10. Get professional help, or at the very least, ask a friend to counsel you on what
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to do next.