INTRODUCTION TO BUSINESS The Role of Business in Economy Business Defined A business is an enterprise or any lawful activity that provides products or services desired by customers for profit. BUSINESS ORGANIZATION Sole Proprietorship Partnership Corporation SOLE PROPRIETORSHIP A business organization owned by one individual Advantage • Easier to start • Least regulated • Single owner keeps all profits • Taxed once as personal income Disadvantages • Limited to life of owner • Equity capital limited to owner’s personal wealth • Unlimited liability • Difficult to sell ownership interest PARTNERSHIP a business organization owned by two or more individuals but not more than fifteen is a contract between two or more persons bind themselves to contribute money, property and industry into a common fund with the intention of providing profit among themselves. (Civil Code of the Philippines, Article 1767) PARTNERSHIP Advantages –Two or more owners –More capital available –Relatively easy to start –Income taxed once as personal income • Disadvantages – Unlimited liability • General partnership • Limited partnership – Partnership dissolves when one partner dies or wishes to sell – Difficult to transfer ownership CORPORATION An artificial being created by operation of law, having the right of succession and the powers and the powers, attributes and properties expressly authorized by law or incident to its existence(The Corporation Code of the Philippines, Sec.2) CORPORATION Advantages – Limited liability – Unlimited life – Separation of ownership and management – Transfer of ownership is easy – Easier to raise capital • Disadvantages – Separation of ownership and management (agency problem) – Double taxation (income taxed at the corporate rate and then dividends taxed at personal rate) NATURE OF BUSINESS Manufacturing/Industry Merchandising/Commerce Service Manufacturing Business change basic inputs into products that are sold to individual customers. Classification per Industry Genetic – agriculture, forestry, fish culture Extractive-mining, lumbering Construction – airports, seaports, dams, hi-way Commercial – foods, automotive, apparel etc. Merchandising Business engaged in buying and selling of goods and services. Classification as per Industry Supermarkets Dry Good Stores e.g. groceries, drugstore Sari-Sari Store Service Business engaged in selling of services to customers. Classification as per Industry Recreation – Movie Houses, Theaters, Radio Station, etc. Personal – Restaurant, Barber Shop, Transportation, Hotel, etc. Finance – Banks, Investment Houses, Lending, Company, etc. Objectives of Business Profit Political Influence Family Control of the Business Community Involvement Lifestyle Organizing a Business Reasons to Engage in Business Provision of employment to people Profits Service to the community Personal satisfaction Means to earn a living Achievement of power Protection of one’s self and family Key Business Decisions Product – What type of product should be produced? Production – How should the product be produced? Promotion – How should the product be promoted? Financing – How should the company obtain funds to finance the cost of producing the product? Business Decisions Key Stakeholders Owners – Entrepreneurs – Co-owners – Stockholders Creditors Employees – Managers Suppliers Customers Creating Business Idea Identify a competitive advantage. Differentiate the product or service from competitors. Determine necessary resources. Assess feasibility of the idea. Key Function of Business Management Means by which employees and other resources are used by the firm Marketing Means by which products and services are developed, priced, distributed, and promoted to customers Finance Means by which firms obtain and use funds for their business operations Continued . . . Accounting Summary and analysis of the firm’s financial condition Used to make various business decisions Information systems Information technology, people, and procedures that provide appropriate information to make effective decisions How Business Decisions Affect a Firm’s Earning Developing a Business Plan Assess the Business Environment Economic environment Industry environment Global environment Develop Management Plan Organizational Structure Production Human Resources Continued. . . Marketing Plan Target Market Product Characteristics Pricing Distribution Promotion Financial Plan Financing Feasibility Online Resources Advice and basic information Yahoo’s Small Business site American Express Small Business Administration Financing Options Quicken Small Business Garage.com The Elevator Business Planning Software Lessons to Remember Successful businesses do not require a great invention. Many focus on making life more convenient for customers. Some business ideas will fail—but entrepreneurs can learn from failures and make revisions. Top Ten Corporations The SM Group of Companies, regarded as the Philippines’ largest retail company, was founded by FilipinoChinese business tycoon Henry Sy. It is comprised of retail outlets, shopping malls, banking and finance institutions, and property developments. The company as it is today is a far cry from the small shoe store Mr. Sy opened in Carriedo back in the 1950s. Top Ten Corporations Jollibee Foods Corporation is the mother company of popular FilJollibee Foods Corporationipino fastfood chain Jollibee. Tony Tan and his family founded the first Jollibee joint in Cubao in 1975. In 2007, the company opened its 600th Philippine store in Aparri, Cagayan and also a new branch in Las Vegas, Nevada, USA. In 2009, Jollibee celebrated its 31st year as the fast-food chain most loved by Filipinos. Top Ten Corporations United Laboratories started as a small drugstore in post-war Philippines back in 1945. It slowly became the leading pharmaceutical company in the country, providing quality yet affordable medicine to every Filipino. The company’s products has also penetrated neighboring Asian countries such as Indonesia, Thailand, Malaysia, Singapore, Hong Kong, Vietnam, and Myanmar. Top Ten Corporations San Miguel Corporation is the Philippines’ largest food, beverage, and packaging company. It was founded in 1890 as a brewery and presently has 100 facilities in the Philippines, Southeast Asia, China, and Australia. Its divisions and subsidiaries include San Miguel Beer, Ginebra San Miguel, Incorporated, Purefoods-Hormer Company, San Miguel Packaging Products, and other businesses. Top Ten Corporations Ayala Corporation functions as the holding company of the many diversified interests of the Ayala Group. It is the oldest and largest conglomerate operating in the Philippines since its founding in 1834. Currently, the company is being headed by Jaime Augusto Zobel de Ayala, the older son of former chairman Jaime Zobel de Ayala. Top Ten Corporations The Philippine Long Distance Telephone Company is the largest telecommunications provider in the country. It was incorporated in 1928 following the merger of 4 telephone companies under US ownership. As of present, the company has grown to include fixed lines subsidiaries, wireless companies such as Smart Communications, Inc., and companies engaged in information and communications technology. Top Ten Corporations Filinvest Development Corporation is a company engaged in real estate development and leasing, financial and banking services, and the sugar business. It is controlled by the family of Andrew L. Gotianun Sr. through ALG Holdings Corporation. The corporation has several subsidiaries, namely Filinvest Alabang, Inc., Filinvest Land, Inc., East West Banking Corp., and Pacific Sugar Holdings Corp.. Top Ten Corporations The Lopez Group of Companies is the business conglomerate owned by the Lopez family of Iloilo. Its flagship company is Benpres Holdings Corporation which was first listed in the Philippine Stock Exchange in 1993. Among the businesses listed under its names are ABS-CBN, Maynilad Water Services, Inc., Rockwell Land Corporation, Bayan Telecommunications, SKYCable, and The Medical City. Top Ten Corporations JG Summit Holdings, Inc. started in 1957 when Universal Corn Products, Inc. (now Universal Robina Corporation) was founded in Manila. From then on, the business grew and expanded into different fields. Under its helm are Universal Robina Corporation, Robinsons Land Corporation, Digital Telecommunications Philippines, Inc., JG Summit Petrochemicals Corporation, Cebu Pacific Air, Robinsons Savings Bank, and JG Summit Capital Services Corporation. Top Ten Corporations Metropolitan Bank and Trust Company or Metrobank is the country’s largest bank in terms of assets. The bank’s first branch was established by four enterprising individuals on 5 September 1962 in Binondo, Manila. Presently, the company has a combined network of over 800 local and international branches, remittance offices, and subsidiaries worldwide. BUSINESS TYCOONS Being the owner of the SM Group of Companies, who wouldn’t know Henry Sy? For four years in a row, he has been number 1 in the list of the richest men in the Philippines. In 2010, he continued to expand his investments to other industries such as leisure, banking and financial services, and commercial property development in very strategic locations. All his businesses compliment each other so well that his net worth went up to 38 billion USD from only 5 billion USD in 2009. BUSINESS TYCOONS The government ads that discourage people to smoke and the issues that happened to some of Lucio Tan’s businesses might have affected his income in 2010 but he is still one of the most prominent business magnates in the country. From being an ordinary employee, he is now the owner of the largest tobacco company in the Philippines, Fortune Tobacco. He also expanded his investments to different fields. Among his well-known businesses are Asia Brewery (the 2nd largest brewer in the Philippines), Tanduay Holdings (one of the world's largest rum makers), Philippine Airlines, Philippine National Bank, and Allied Bank. Like the other tycoons, he also ventured to commercial properties development when he started Eton Properties Philippines. According to estimates, the total value of his business empire would not be less than 2.1 million USD and he himself controls 40 to 60% of the said amount. BUSINESS TYCOONS John Gokongwei, Jr. has one of the most inspiring stories among the successful business men in the country. Following the history of his career, his businesses just kept on rising. His most successful business is the Universal Robina Corporation (URC) which is the manufacturer of well-known brands such as Jack n’ Jill, C2, and Great Taste. He is also the owner of various successful businesses in the Philippines such as Sun Cellular, Cebu Pacific Airlines, and Summit Media publications. In 2010, he continued venturing into property development, hotel management, and retailing through Robinsons Land Corporation. BUSINESS TYCOONS Jaime Zobel de Ayala stayed focused and competitive with his businesses even though he was born from a wealthy family. He is credited for steering the Ayala Group of Companies into its fastest growth periods. They say that the 90s saw the “Golden Age of the Ayala”. He has been the Chairman Emeritus of Ayala Corporation since April 2006. Zobel de Ayala served as the Chairman of the Board of Directors of Bank of the Philippine Islands (BPI) and Chairman of the Board of Trustees of [[Ayala Foundation]]. BUSINESS TYCOONS Andrew Tan is a son of a factory worker who put himself through college and worked in an appliance store. From humble beginnings, he later made his first fortune in brandy. He is also the man behind the [[Megaworld Corporation. He also owns the Alliance Global Group, Inc. which includes businesses engaged in food and beverage, real estate, and gaming. BUSINESS TYCOONS The man who started his business with only two ice cream parlors, Tony Tan Caktiong became World Entrepreneur of the Year 2004 and is the current head of Jollibee Foods Corporation. Also from modest beginnings, his business has grown to become one of the most admired and respected companies in Asia. Jollibee Foods Corporation now employs 30,000 people in almost 1,000 outlets in seven countries which includes the United States and China. In the Philippines, Jollibee commands 65% of the domestic fast food market, competing very successfully against established global brands. BUSINESS TYCOONS Beatrice Campos‘ family is well-known for being the owner of the leading local pharmaceutical company Unilab. The company was co-founded by her late husband, [[Jose Campos]]. She also has a controlling stake in the Singapore-listed Del Monte Pacific Limited which is run by son her Joselito who recently invested in San Miguel Corporation. BUSINESS TYCOONS George Ty is the owner of G.T. International Tower, one of the most famous landmarks in Makati. He is the founder of the Metropolitan Bank and Trust Company. He is one of the most powerful tycoons in the Philippines with his current net worth of 805 million USD . BUSINESS TYCOONS Eduardo Cojuangco, Jr. , better known as Danding Cojuanco, is the chief executive of the largest food and beverage company in the Philippines, San Miguel Corporation. He used to be an advisor and a close friend of the late former president Ferdinand Marcos. In 1992, he ran for presidency but lost. His current net worth is 760 million USD. BUSINESS TYCOONS Manuel V. Pangilinan ,also known as Manny Pangilinan and MVP, is a Filipino businessman. He is the Chairman of the Philippine Long Distance Telephone Company, from 1998 up to the present. Pangilinan spent his elementary and high school days at San Beda College. He graduated cum laude from the Ateneo de Manila University with a Bachelor of Arts degree in Economics. He received his MBA degree in 1968 from the Wharton School of the University of Pennsylvania. He is also the owner of ABC/TV5 network, Cignal Digital TV and Smart Communications. He was the former Chairman of the Board of Trustees of Ateneo de Manila University.