APPLIED ECONOMICS
Module 1: Industry and Environmental Analysis: Business Opportunities Identification
Business Organization
There are four ways to form a business:
1. Sole Proprietorship
This is generally the simplest ways 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 all debts and obligations related to the business.
Advantage of sole proprietorship is that the owner makes all the decisions like the location of the business, who to hire,
what to sell and the owner is not bound to share the profits with anyone else. Disadvantage of sole proprietorship he
shoulders all the losses and has unlimited liability which means payment of his loans will extend to his personal assets.
And when he dies, the business will be terminated.
2. Partnership
A partnership is an agreement in which two or more persons put together their resources in a business for the
purpose of making profit. The profits to be earned will divided among the partners according to the terms of agreement.
Advantage of partnership is that each owner can help with financing, start-up costs., shared knowledge and experience.
Disadvantage of partnership is the equal sharing of profits they put in to start the business.
There are two types of partnership:

The general partnership. Is a business arrangement by which two or more individuals agree to share in all
assets, profits and financial and legal liabilities of the business.

The limited partnership is consisting of general partnership who manages the business and has unlimited
liability for the debts and obligations of the business.
3. Corporations
A corporation is a legal entity that is separate from its owners, which is called the shareholders. No stock holder is
personally liable for the obligations and debts, or acts of the corporation. The legal entity of the corporation gives it and
individual identity of its own. Corporations normally 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.
4. Cooperative
A cooperative is an entity organized by people with similar interests and needs to provide themselves with services
and goods or to jointly use available resources to uplift their financial status. Cooperative members have the same level of
powers when it comes to the decision- making with one vote per member regardless of number of shares held, there is
voluntary and open membership and excess earning is returned to the members in accordance to the amount of their
patronage.
Tools in Evaluating a Business:
THE SWOT ANALYSIS
The SWOT Analysis is useful in scanning the business environment which can help in identifying economic opportunities.
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. The framework can help identify the business’s risks and rewards.
It is also associates with the internal and external forces that may affect the business. It is very helpful is assessing new
ventures.
Porter’s Five Forces of Competitive Position Analysis
1.Supplier power. It is essential to evaluate how much power the supplier is capable to drive up prices. A supplier benefits
this power if there are few suppliers of an essential input and they therefore control the supply of that input. The more
unique the product, the easier it is for the supplier to drive up price. An evaluation of how easy it is for suppliers to drive
up prices.
2. Buyer power. An evaluation of how easy it is for buyers to direct prices down. This is directed by the: number of
customers in the market; worth of each buyer to the organization; and cost to the interchange from one supplier to
another. If a business has just a less of powerful buyers, they are usually able to dictate terms. An evaluation of how easy
it is for buyers to control prices down.
3. Competitive rivalry / Number of Competitors. The major driver is the number and competitor’s capability in the market.
A lot of competitors, offering common products and services, will reduce market attractiveness. Number and capability of
competitors in the market will also impact on the attractiveness of the market.
4. Threat of substitution / Possibility of Substitution. Where common products available in a market, it improves the
livelihood of customers switching to alternatives in response to price increases. This lessens both the power of suppliers
and the attractiveness of the market. Buyers will switch to alternatives in case of price increases.
5. Threat of new entry / Possibility of New Entrants. Profitable markets attract new entrants, which destroy profitability.
Unless current have strong and long-lasting barriers to entry, for example capital requirements or government policies and
regulations, then profitability will slow down to a competitive rate. Investors join the bandwagon when market is profitable
and get a share of the profits.
INDUSTRY ANALYSIS
The following important factors are included in the industry analysis in preparing project feasibility studies, and business
development.:
 Competition- is the rivalry between sellers selling the similar products and services with the aim to win their
customers, convince them to buy from you instead, and remain as loyal customers.
 Customers – is an individual or groups that purchases goods and services. The target market must be identified.
 Suppliers – is an entity that supplies goods and services in the market.
 Substitutes- are goods that can be utilized in replace of other.
Applied Economics
Module 2: INDUSTRIES
There are five types of industries. These are;
1. AGRIBUSINESS
Agriculture has been defined as the science and art of producing livestock and cultivating plants and. The
agricultural sector has been an important component of the Philippine economy. One of these is the development of the
production of food grains and crops like rice, banana, pineapple, coffee, camote, monggo, corn, coconut and calamansi.
The development of fish and animal production have been implemented too. For animal production, there are two types
that can be engaged to one is livestock and the other is poultry. These two are commonly engaged by the small
entrepreneurs which provide livelihood that can provide income and employment opportunities to poor households.
2. RETAIL
Retail includes the sale of merchandise from a one point of purchase directly to a consumer who tends to utilize
that product. The single purchase could be a brick-and-mortar retail store, a catalog, an internet shopping website, or even
a mobile phone. The retail activity is at the last point of the chain. Manufacturers sell huge quantities of goods to retailers,
and retailers tends to sell those same quantities of goods to customers.
3. SERVICE
A service industry is any industry that produces value that is primarily intangible such as advice, consultation,
customer service, knowledge, management, data and experiences. Advanced economies are undergoing a long-term shift
whereby service industries are turning into a larger component of economic output similar to other industries such
agriculture and manufacturing.
4. MANUFACTURING
Manufacturing is the processing of raw materials into finished goods through the use of equipment, tools and
processes. Manufacturing is process that allows enterprises to sell finished products at a price over the cost of the raw
materials used. Manufacturing, any industry that produces products from raw materials by the use of human labor or
machinery and that is normally carried out orderly with division of work. In the common sense, manufacturing denotes
the assembly of parts into finished products on an equal large scale. Among the most essential manufacturing industries
are those that make aircraft, computers, chemicals, refined petroleum products, consumer electronic, clothing, electrical
equipment, furniture, heavy machinery, ships, steel, automobiles, and tools and dies.
5.INTERNATIONAL TRADE
International trade is the exchange of services and goods from one country to another. This type of trade gives
opportunity to a world economy, in which prices, or demand and supply, affect and are affected by global events. Trading
worldwide gives consumers and countries the chance to be exposed to goods and services that cannot be found to their
own countries. Most of the products that can be found on the international market: food, water, stocks, clothes, spare
parts, oil, jewelry, currencies, and wine. Services are also traded like consulting, tourism, transportation and banking. A
product that is sold to the international market is an export, and a product that is bought from the international market is
an import.
Activity No. 1
Directions: Identify which type of industries are the following statements can be associated with. Write the letter that
corresponds to your answer in the space provided for.
a. Agriculture
b. International trade
c. Manufacturing
d. Retail
e. Service
___ 1. My friend, Lorna, owns a boutique. She buys her stocks in bulk and sells it by piece.
___ 2. Anna works in a Spa and Beauty Salon in the city.
___ 3. San Miguel Corporation is the largest corporation in the Philippines in terms of revenue.
___ 4. Minda bakes cupcakes and sells them at a reasonable price.
___ 5. My parcel was delivered by LBC on time.
___ 6. Production of livestock and poultry are done mostly by poor households as backyard and livelihood ventures.
___ 7. The long coastlines of the Philippines are endowed with marine resources for fisher folks to harness for fish
production.
___ 8. The import of auto parts from Japan is considerable.
___ 9. Vegetable oil is one of the Philippines top exports.
___10.7 Eleven continues to boom year after year.
Activity No. 2
Direction: Written below are some of the businesses and industries that we can find in the Philippines. Write the product/s
or service/s that they sell/offer.