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INTERACTIVE MODULE
FOR

APPLIED ECONOMICS

ABM MODULE

ANN MARGARET A. DELA

FUENTE
Educ’l Attainment: BS in Accounting Technology (BSAcT)
Subject: Applied Economics
Topic: Industry and Environmental Analysis: Business
Opportunity Identification

TNT: 09460677235

Margaret Dela Fuente

[email protected]

Module Content:
 a. Tools in Evaluating a Business

LEARNING OUTCOME/COMPETENCIES
The learners…
 Identify and explain different principles, tools and techniques in creating a business
 Distinguish the different services/products of business and industry in the locality.

Introduction to Applied Economics

I. Pretest (True of False)

Direction: Write the correct answer on a Long bond paper/Yellow pad paper/Activity Notebook.

1. When drafting a SWOT analysis, what is created is a table split up into four rows to list
each element side by side, for comparison.
2. SWOT stands for Strengths, Weaknesses, Opportunities, and Trends.
3. An analytical tool that can be used to assess a business is Porter’s Five Forces of
Competitive Position Analysis.
4. SWOT Analysis is an analytical framework that can help a company meet its challenges
and identify new markets.
5. The bigger the number of buyers in the market, the greater is the power enjoyed by the
buyer.
6. 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.
7. Porter’s Five Forces of Competitive position analysis was developed in 1979 by Michael E.
Porter of Oxford Business School.
8. The SWOT analysis was created in the 1970s by business gurus, Edmund P. Learned. C.
Roland Christensen, Kenneth Andrews, and William D. Book.
9. The number and capability of competitors in the market will also impact on the
attractiveness of the market.
10. It is very important to know the Strengths and weaknesses of the business to continue its
operation.

II. Class Activity

Direction: Kindly write your answer in a long bond paper or Yellow Pad paper/Activity
Notebook.

1. About the business you decided to put up, answer the following key factors that must be
considered in analyzing the industry.
a. The geographic area which your business will cater to. Is it limited to local areas? Or
will it cover a region, the entire country, or even the international market?
b. The size and outlook of the industry. What trends can be identified?
 c. Description of the product
d. The buyers have to be identified. Who are your target customers?

III. Instruction on the Proper use of this module:

1. Follow closely the instruction in every activity.
2. Be honest in answering and checking your exercises.
3. Answer the pre-test before going over the materials. This is to find out what you already
know.
4. Answer the exercises encountered at the end of every lesson.
5. Review the lesson that you think you failed to understand.
6. Seek assistance from your teacher if you need help.

IV. Introduction
A business is just a small portion of an industry. It is an undertaking by a person or
a group of persons who are partners, or of stockholders who own a juridical entity known as
a corporation. Its main objective is to earn profit for the owners. An industry, on the other
hand, is the aggregation of the different businesses engaged in the same line of undertaking.
For example, Celine is a business firm that is part of the country’s shoe industry.
For a person to put up a business, it is essential that an industry analysis first be
made. Commonly used is a system known as the SWOT analysis, which lists the strengths,
weaknesses, opportunities, and threats that the business faces.

Tools in evaluating a Business

According to a guide developed by North Carolina’s Business and Technology Development

Center, the key factors that must be considered in analyzing the industry are the following:

1. The geographic area which your business will cater to. Is it limited to local areas? Or will
cover a region, the entire country, or even the international market?
2. The size and outlook of the industry. What trends can be identified?
3. Description of the product.
4. The buyers have to be identified. Who are your target customers?
5. The regulatory environment. Are there local, national laws that will restrict the business?
One needs to identify government regulations specific to the chosen industry.
6. The need to identify the leading businesses in the industry, and to provide company
information on the most successful businesses 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 (Irwin 1969).

SWOT, which stands for Strengths, Weaknesses, Opportunities, and Threats, is an analytical
framework that can help a company meet its challenges and identify new markets. These refer to
the internal factors, and these are the resources and experiences readily available to the business
proponent. Usually included as internal factors are:

1. Financial resources such as money and source of funds of funds for investment.
2. Physical resources, such as the company’s location, facilities, machinery, and equipment
3. Human resources consisting of employees;
4. Access to natural resources, trademark, patents, and copyrights; and
5. Current processes, such as employee programs, department hierarchies and software
systems, sales and distributors capabilities, marketing programs, etc.

When drafting a SWOT analysis, what is created is a table split up into four columns to list each
element side by side, for comparison. Most of the time, the business’ strengths and weaknesses
will not match the listed opportunities and threats, and this is where the owner should attempt to
somehow make them meet. The table below presents a SWOT analysis template that can be used
as a guide to identify the strengths, weaknesses, opportunities, and threats.

Porters Five Forces of Competitive Position Analysis

An analytical tool that can be used to assess a business is Porter’s Five Forces of Competitive
Position Analysis. 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.
Under Porter’s theory, he identifies five forces that determine the competitiveness and
attractiveness of a market and which seek to locate the power in a business situation, its current
competitive position, and the strength of a position that an organization may enter into. These five forces
help in identifying new products or services are potentially profitable. Once the area where power lies is
identified, then areas of strength can be pinpointed and exploited, solutions to weaknesses may be
proposed, and possible mistakes avoided. Below is the table of Porter’s Five Forces.
 1. Supplier power – It is important to assess how much power the supplier has in his ability
to drive up prices.
2. Buyer power – 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.
3. Number of competitors – The number and capability of competitors in the market will
also impact on the attractiveness of the market.
4. Possibility of substitute – When it is easy to substitute products in a market, it is 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.
5. Possibility of new entrants – When investors see that a market is profitable, they will
desire to join 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.

Activity 1.2: Write your answers on a Long Bond Paper/Yellow Pad paper/Activity
Notebook.

1. What is the importance of Porter’s Five Forces Analysis?

2. Why is making a SWOT Analysis important?

V. NEW LEARNINGS
 SWOT Analysis stands for strengths, weaknesses, Opportunities and Threats Analysis
 SWOT is an analytical framework that can help a company meet its challenges and
identify new markets.
 An analytical tool that can be used to assess a business is Porter’s Five Forces of
Competitive Position Analysis.
VI. WHAT CAN I DO?
Direction: Write your answers on a Long bond paper/yellow paper/activity notebook together with your
previous answers.

1. Make a SWOT analysis on your preferred business.

B. TRUE OR FALSE

1. When drafting a SWOT analysis, what is created is a table split up into four rows to list
each element side by side, for comparison.
2. SWOT stands for Strengths, Weaknesses, Opportunities, and Trends.
3. An analytical tool that can be used to assess a business is Porter’s Five Forces of
Competitive Position Analysis.
4. SWOT Analysis is an analytical framework that can help a company meet its challenges
and identify new markets.
5. The bigger the number of buyers in the market, the greater is the power enjoyed by the
buyer.
6. 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.
7. Porter’s Five Forces of Competitive position analysis was developed in 1979 by Michael E.
Porter of Oxford Business School.
8. The SWOT analysis was created in the 1970s by business gurus, Edmund P. Learned. C.
Roland Christensen, Kenneth Andrews, and William D. Book.
9. The number and capability of competitors in the market will also impact on the
attractiveness of the market.
10. It is very important to know the Strengths and weaknesses of the business to continue its
operation.

BIBLIOGRAPHY

APPLIED ECONOMICS by Rosemary P. Dinio, PhD and George A. Villasis

Book of Economics (New Edition) by Gerardo P. Sicat

https://www.investopedia.com/articles/economics/11/intro-supply-
demand.asp