2. Targets
At the end of the lesson, the students will be able to:
• Describe the 4M’s( Manpower, Method, Machine, Materials) of
operations in relation to the business opportunity.
• Develop a description for your product or service.
• Create a prototype of your product or service and test it by validating
the service description of the product with potential costumers to
determine its market acceptability.
• Select or pinpoint potential suppliers of raw materials and other
inputs necessary for the production of the product or service.
3. • Discuss the value or supply chain in relation to the business
enterprise.
• Recruit qualified people for one’s business enterprise.
• Develop the business model.
• Forecast the costs and revenues of the business.
• Create the business five-year projected financial statements.
4. Start Up!
• Recall the product or service you have selected from the previous
lessons.
• On a sheet of short bond paper, make a sketch of the product or
service you want to sell in your business.
• You have 30 minutes to do this.
5. Answer these guide questions:
• What will your product be made of?
• What are the things you need for your business?
• Will you need machines, tools, or equipment to make your product or
operate your business?
• Can you make your product on your own?
• Will you need other people to help you in your business?
• How much money do you need to make your product or operate your
business?
6. 4 M’s of production or operation
• Manpower
• Method
• Machines
• Materials
7. Manpower
• The first component in the production or operation of your business
are the people who will work with you.
• You cannot run a shop without the people who will help you move
things in order.
• Some entrepreneurs or business owners run their own shop alone
but others hire workers who will assist them in the delivery of
products and services in their services.
8. • Manpower talks about human labor force involved in the
manufacture of products. It is measured as the most serious and main
factor of production. The entrepreneur must determine, attain and
match the most competent and skilled employees with the jobs at the
most appropriate time period.
9. Types of workers
Direct workers-those whose primary jobs and functions are directly
related to the production and operation of the business.
• Production workers
• Assemblers
• Carpenters
• Mechanics
• Hairdressers
• Barbers
• Service crew
10. Indirect workers- those whose primary jobs and functions are not
directly related to the production and operation of the business.
• Janitors
• Security guards
• Secretaries
• Managers
• Sales agents
11. Method
• Production method discusses the process or way of transforming raw
materials to finished products. The resources undergo some stages
before it is finalized and becomes set for delivery to the target buyers.
The selection of the method of production is dependent on product
to produce, mode of production, manufacturing equipment to use
and required skills to do the work.
12. Machines/Machinery
• Discusses about manufacturing equipment used in the production of
goods or delivery of services. In the process of selecting the type of
equipment to purchase, the entrepreneur may consider types of
products to be produced, production system to be adopted, cost of
the equipment, capacity of the equipment, availability of spare parts
in the local market, efficiency of the equipment and the skills required
in running the equipment.
13. Materials
• Talks about raw materials necessary in the production of a product.
Materials mainly form part of the finished product. Just in case the
resources are below standard, the finished product will be of
unsatisfactory as well. The entrepreneur may consider cost, quality,
availability, credibility of suppliers and waste that the raw material
may produce.
14. Types of materials
Direct materials-those directly related to the production of your
product or to the performance of the service you are offering.
• Raw materials
15. Indirect materials- those that are not directly related to the production
of your product or to the performance of the service you are offering.
• Paper
• Ink
• Notebook..
16. Activity 1: Define your business
• The first step in setting up any business is to define it: What will it be
like? You may have been thinking about certain jobs you can do for
your potential customers. Whatever they are, you must be able to
define them in your own clear and specific terms.
17. • Define your business using the template below. As indicated, it should
contain, the name of your business, the goods or service job sold, etc.
18. Your Business Idea Template
Name of the Business:
Type of Business: Manufacturer Service Operator
Retailer Wholesaler
Other
Which needs the goods/services will satisfy:
What goods/services business will produce:
Who will sell goods/services to:
How will the business sell goods/services:
19. Activity 2:Making a prototype and market test
Once you have described your business using the template in the
previous section, make a prototype or a preliminary version of your
product. For a service type of business, a prototype may be in the form
of a demonstration.
20. Activity 3: Select or pinpoint potential
suppliers
• List down the supplies, materials or ingredients needed to make your
products or to provide services to your customers. You will realize
they are not always within your reach. You may need to source them
outside your school or home.
• List down all the materials or ingredients( in case of a food-related
kind of business) or supplies( in case of a service type of business)
that you would need for your business.
• The list should also include the quantity of each material, ingredient
or supply as well as its price and supplier.
22. Activity 4: Describe your value or supply chain
A supply chain is the process of all parties involved in fulfilling a
customer request while a value chain is a set of interrelated activities a
business uses to create a competitive advantage.
23. • Inbound logistics-include receiving supplies or materials, warehousing or
safekeeping and inventory control of these items.
• Operations- include value-creating processes that transform inputs into
products—these are the methods or processes of your business discussed
in the previous section.
• Outbound logistics-include activities required to get a finished product to a
customer such as transportation and delivery.
• Marketing and sales- are activities that are related to getting a buyer or
customer to purchase a product or service while service activities include
those that maintain and enhance a product’s value-giving customers more
than what they paid for-such as after-sales customer support.
24. • For your business, make a value chain and supply chain similar to the
ones presented below. Describe each chain or activity represented.
Ultimately, your value and supply chains should describe how you will
get to your customers in the most efficient and least costly manner.
26. Activity 5: Recruit qualified people for your
business
Make a chart showing the human resource complement of your
business.
27. Name Position/Designation Function/Role
John Michael Ekong Owner/ Manager Oversees the entire
production and operation
of the business.
Val Carlo Quilapio Head Cook and Baker Prepares recipes for the
food to be cooked and
baked for selling.
Janine M. Landicho Production Support Buys ingredients and
assists the head cook and
baker in the kitchen.
Kim Corpuz Sales Support Mainly in charge of selling
the dishes and cakes to
customers.
28. Activity 6: Develop your business model
Business model describes the reasons of how an organization creates,
delivers, and captures value in economic, social, cultural or other
contexts. The development of business model construction and
variation is also called business model innovation and forms a part of
business plan.
29. • It is a company's plan for how it will make revenues and make a
profit. It describes what products or services the business plans to
manufacture and market, and how it plans to do so, as well as what
expenses it will incur.
• There are important phases in developing your business model,
namely; Identifying the specific audience; establishing business
process; recording a business resources; developing strong value
proposition; determining key business partners; and creating a
demand for today’s generation strategy and be open for innovations.
30. Activity 7: Forecast the costs to be incurred
and revenues of the business
• Make a chart that will show your projected or estimated sales or
revenues, which is computed based on your price multiplied by the
number of units to be produced or number of customers to be served
in case of a service type of business.( You decided on the price or how
much you are going to sell your product or service from your
marketing plan.)
31. • Let’s say you will venture into a bag-making business and you are
going to sell one tote bag made of canvas for 200 pesos, your
estimated sales for three months will be as follows:
Month 1 Month 2 Month 3
No. of Units to be
Produced
10 15 20
Estimated Sales(No.
of Units to be
Produced x Price of
P200.00 per piece)
P2,000.00 P3,000.00 P4,000.00
32. Deduct your costs of goods sold, costs of sales or cost of merchandise
sold from your estimated sales and you will have your gross profit.
Month 1 Month 2 Month 3
Sales P P P
Less: Cost of Sales
Direct Materials P P P
Direct Labor
Factory Overhead
Gross Profit from
Sales
P P P
33. • Gross profit- is the profit a business makes after deducting all the
direct costs-the cost of sales-or all the costs associated with making
and selling the products or all the costs associated with providing the
services.
• Net income- simply the monetary gain that you earn after deducting
the cost of sales and the operating expenses.
34. Month 1 Month 2 Month 3
Sales P P P
Less: Cost of Sales
Direct materials
Direct Labor
Factory Overhead
P P P
Gross Profit from
Sales
P P P
Less: Operating
Expenses
Marketing
Expenses (if any)
P P P
Administrative
Expenses(if any)
Net Income P P P
35. Note that in real life, operating expenses are not the only expenses that
you will have to incur for your business. You will also have to deduct
taxes, which are computed based on your net income. Only then will
you get your true net income or net income after tax.
37. Year 1 Year 2 Year 3 Year 4 Year 5
Sales P P P P P
Less: Cost of sales
Direct Materials
Direct Labor
Factory Overhead
P P P P P
Gross Profit from
Sales
P P P P P
Less: Operating
Expenses
Marketing
Expenses(if any)
P P P P P
Administrative
Expenses(if any)
Net Income P P P P P
38. Branch out
Put together your marketing, operating and financial plans in a folder,
mark it with the title” Business Plan of ( Name of Business)”
