APPLIED ECONOMICS

Industry and Environmental Analysis:

Business Opportunity identification
Ms. Ma. Jhobelle L. Alayon, LPT
 Business
• an organization or enterprising entity engaged in commercial,
industrial, or professional activities.

• A business is just a small portion of an industry. It is an undertaking

by a person of a group of persons who are partners, or stockholders
who Own a juridical entity known as a Corporation. Its main
objective is to earn profit for the owners.
 Business organization

Sole
Proprietorship Partnership Corporation Cooperative
Sole Proprietorship
• this is generally the simplest way to
set up a business
• A sole proprietorship is owned by a
single individual who is singly
responsible for running the business
and is accountable for ail debts and
obligations related to the business.
 Partnership
• an agreement in which two or more
persons Combine their resources in
a business with a view to making
profit.
• A partnership agreement is drawn
up and profits are divided among
the partners according to the terms
of agreement.
General Partnership
• all owners share the management of the
business and each is personally responsible
for and must assume the consequences of
actions of the other partners All general
pariners have unlimited liability which
means loan payments wil extend to their
personal property.
 Limited Partnership
• some members are general partners who control and manage
the business and may be entitled to a greater share of the profit
while other partners are limited and contribute only capital,
take no part in control or management and are liable for debts
to a specific extent only.
• form of partnership similar to a general partnership except that
while a general partnership must have at least two general
partners (GPs), a limited partnership must have at least one GP
and at least one limited partner. Limited partnerships are
distinct from limited liability partnerships, in which all
partners have limited liability.
 Corporation
• is a legal entity that is separate from its owners,
the shareholders. No shareholder is personally
liable for the debits, obligations,or acts of the
corporation.
• Directors and officers can bear liability for their
involvement with the corporation. The legal
entity of the corporation gives it an individual
identity of its own. Corporations normally can
exist for a life of 50 years, which is renewable
for another 50 years. Owners have limited
liabilities. However, corporations are burdened
by heavy taxes.
 Cooperative
• is 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. Cooperative members have an equal say in
decision-making with one vote per member regardless
of number of shares held, there is open and voluntary
membership and surplus earning is returned to the
members according to the amount of their patronage
• A cooperative is an association of persons
(organization) that is owned and controlled by the
people to meet their common economic, social, and/or
cultural needs and aspirations through a jointly-
owned and democratically controlled business
(enterprise).
 The geographic area which your

01. business will cater to. is it limited to

local areas? Or will it cover a region,
the entire country, or even the
international market?

Tools in
Evaluating a 02.
The size and outlook of the
industry. What trends can be
identified?

Business
03. Description
product
of the
 04.
The buyers have to be
identified. Who are your
target customers?

Tools in
Evaluating a 05.
The size and outlook of the
industry. What trends can be
identified?

Business
The regularity environment. Are there

06.
local, national laws that will restricts the
business? One needs to identify
government regulations specific to the
chosen industry.
 07.
Factors that will affect the
growth of the business.

Tools in
Evaluating a
Business
 The SWOTANALYSIS
SWOT, which stands for Strengths, Weaknesses,
Opportunities and Threats is an analytical framework that
can help a company meet it challenges and identify new
markets. The framework can help identify the business's
risks and rewards. It is also a means of identifying the
internal and external forces that may affect the business.
 The SWOTANALYSIS
Strengths and Weaknesses actually refer to the internal factors, and ‘these are the
resources and experiences readily available to the business proponem, Usually
included as internal factors are:

a. Financial resources such as money and sources of funds for investment

b. Physical resources, such as the company’s location, facilities, machinery and
equipment
c. Human resources consisting of employees
 The SWOTANALYSIS
on the other hand, when we speak of external forces, these are those any, an organization, an
individual, and those outside their control. These may include:

a. Economic trends including local, national and international financial frends, developments in the
country's stock market, reforms in the banking system, growth of the Gross Domestic Product

b. Market trends such as new products or technology or evolving buyer’s profile including changes in
tastes and lifestyle behavior c. National and local laws and statutes as well as political,
environmental and economic regulations d. Demographic characteristics of the target market such as
the age, the gender, the culture of the customers e. Relationships with suppliers and co-owners f.
Competitive threats
Porter's
five forces of
competitive position
analysis
Porter's five forces are used to identify and
analyze an industry's competitive forces.
 Supplier power - it Is important to assess
how much power the supplier has in his

01.
.Possibility of substitution — when it is easy
ability to drive up prices. A supplier
to substitute products in a market, it is

04.
enjoys this power if there are few
suppliers of an essential input and they
therefore control the supply of that input.
expected that buyers will switch to
alternatives in case of price increases. The
suppliers will enjoy less power to drive prices
up and the market will be less attractive.

Buyer power — if a supplier can enjoy the power

to drive prices up, it is also possible for a buyer

02.
to drive prices down. An assessment needs to be
made on of how easy it is for buyers to drive
prices down. The smaller the number of buyers in
the market, the greater is the power enjoyed by Possibility of new entrants ~ when investors see
the buyer. that a market is profitable, they will desire to join

05.
the bandwagon and get a 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.
.Number of competitors — the number and

03.
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
 Industry
Analysis
Competition — who are the major businesses in
the industry? Are there locations close to your
proposed business? It is very important that you
know your competitors and be ready for them.
Your aim is to win their customers, convince
them to buy from you instead, and remain as
loyal customers.
Customers - who will you sell your product to?
The target market must be identified. Who
exactly will buy your products? What income
groups? What age prackets? What gender? What
career groups? What types of people will you
cater to, based on their preferences, lifestyles and
buying habits?
Suppliers — every retail business needs suppliers
from whom one Can source raw materials,
intermediate products, or even the finished goods
one intends to resell. A business may need one or
more suppliers. It is important to develop suppliers
who are reliable in terms of the quality of what they
supply and their dependability in coming up with the
things you order from them. A business owner can
buy directly from the manufacturers. Another
alternative is to buy from distributors. A third source
of goods is through imports. It is important to
maintain good relationships with one's suppliers;
they are the key to one's continued access to goods
and to raw materials that will be needed for the
business.
Substitutes — are goods that can be used in place
of another. These are goods that may even if party,
satisfy the same needs of a consumer such that the
consumer may use one instead of another. This is
why manufacturers try to differentiate their
products from their competitors so that the
customers will develop product loyaity for their
brand.
 Geographic area — identify the

01. area whether local, regional,

nationwide or international

A Guide to Industry (as to size) — worth in

Industry Analysis 02. pesos and number of firms,

trends and developments and
future outlook

Product — describe the product

03.
as to physical attributes and
characteristics,
and its uses
 Geographic area — identify the

04 area whether local, regional,

nationwide or international

A Guide to
Buyers — describe target customers as to
age, income group, geographical ocation

Industry Analysis 05 and occupations; include consumer

demographics such as population/household
size, sex, race, ethnicity, family status,
housing status, etc

Regulatory environment —

06
shouid include government laws
and regulations that apply to the
business