ABM

1. Chapter 3: Industry and Environmental
Analysis:
Business Opportunity Identification

2. Learning
Objectives:
Identify the principles and tools in creating a business;
Identify
Apply SWOT analysis as a tool in evaluating business opportunity;
Apply
Differentiate classifications of business and
Differentiate
Explain the importance of assessing or analyzing a business
Explain

3. L1: Principles, Tools and Techniques
A business is just 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
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 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.

4. Business Organization
• Sole Proprietorship
• This is 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 all debts
and obligations related to the business.
• Partnership
• It is 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 equally divided
among the partners according to the terms of agreement.

5. Business Organization
• Corporation
• It is a legal entity that is separate from its owners – the shareholders. No shareholder is
personal liable for the debts, obligations, or acts of 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.
• Cooperative
• A cooperative is an entity organized by people with similar needs to provide themselves with
goods or services or to jointly use available resources for better and cheaper access to, say,
income opportunities.

6. Small, Medium, and Large-scale
Businesses
In the Philippines, small and mid size enterprises (SMEs) are enterprises who have an
employees size of 10 to 199 workers. Micro business is a business with total assets worth below Php
1,500,001. Small business is a business with total assets worth from Php 1,500,001 to Php
15,000,000. Medium business is a business with total assets worth from Php 15,000,001 to Php
60,000,000. Large-scale business is a business with total assets in excess of Php 60,000,000.
Any form of the business organization must be registered with the appropriate government
agencies. In the case of sole proprietorships and partnerships, 100% must be owned and capitalized
by Filipinos. For corporations, at least 60% of the outstanding capital stocks must be owned by
Filipino Citizens, and the remaining 40% can be owned by foreigners.

7. L2: Tools in Evaluating a Business
According to a guide developed by North Carolina’s Small 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
• It may be a local area, a region, the entire country, or even the international market. What advantages will
be derived from setting up a business in such a location?
2. The size, outlook, and trends of the industry
• What are the recent innovations in the market? What are the changes in fashion? How strong is the
competition?

8. Tools in Evaluating a Business
3. A description of the market
• What are the features that will make the product different from those already in the market? What is the
style or concept involved? What are its ingredients and components? What are its unique features that can
attract buyers?
4. The identification of the buyers
• Who are your target customers? Are you catering to the high-income people or low-income consumers?
Make a profile of the customers; this could be according to age group, lifestyles, occupations, gender, and
geographical location
5. The regulatory environment
• Are there local and national laws that restrict a business ? Are taxes higher compared to other
municipalities? One needs to identify government regulations specific to the chosen industry.

9. Tools in Evaluating a Business
6. The need to identify and profile the leading and most successful competitors in the
industry
• Are there existing businesses already meeting the needs of the market? Are they providing the right goods
for the consumers?

10. 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” (R.D. Irwin, 1969)
• SWOT, which stands for strengths (S), weaknesses (W), opportunities (O), and threats (T), is an
analytical framework that can help a company face its challenges and find its most promising place
in the market.
• The internal forces are Strengths (S) and Weaknesses (W), While the external forces are
opportunities (O) and Threats (T).

11. The SWOT Analysis
Typically covered by these internal factors are:
1. Financial resources such as money and resources 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, trademarks, patents, and copyrights; and
5. Current processes such as employee programs, department hierarchies, and software systems

12. The SWOT Analysis
Typically covered by these external factors are:
1. Economic trends such as local, national, and international financial trends, developments in the
country’s stock market, banking system, and growth of national production;
2. Market trends such as new products or technology or changing buyer characteristics;
3. National and local laws and statutes;
4. Demographic characteristics of the target market such as the age, gender, and culture of the
customers;
5. Relationships with suppliers and co-owners; and
6. Political, environment, and economic regulations

13. The SWOT Analysis
Strengths Weaknesses
• Government Incentives
• Low capital requirements
• Market acceptance
• Experienced leaders
• Good Innovations
• Inflexibility of organization
• Costly setup
• Possible pollution problems
• Lack of training of workers
• Bad roads leading to the market
Opportunities Threats
• Project may replace imported good available in
the market
• Will improve employee welfare
• Improved company reputation
• Increase target market to cover those who
normally do not patronize the product
• Entry of new competitors
• Time-consuming production processes
• Opposition from residents in the community
• New political leaders who may impose new
taxes and regulations

14. L3: A Guide for Industry Analysis
The following key factors are to be considered in analyzing the industry:
1. Geographic area – is your area local, regional, nationwide, or international.
2. Industry as to size (what is the number of firms) – what are the trends and development and
future outlook?
3. Product – the product has to be described with regard to its physical attributes, characteristics,
and uses.
4. Buyers – Describe your target customers as to age, income group, geographical location, and
occupation. Include consumer demographics such as population/household size, sex, race,
ethnicity, family status, housing status, etc. you may also include psychographics such as lifestyle
information, tastes, preferences, and buying habits.

15. L3: A Guide for Industry Analysis
The following key factors are to be considered in analyzing the industry:
5. Regulatory Environment – this should include government laws and regulations that apply to the
business.
6. Company Information – make a list of the successful businesses in the industry. This should
enable you to study how these businesses have become successful and make use of them as
models of how to conduct your own undertaking.
7. A Brief History of the Industry – Find out when the industry started and how it developed.
8. Factors that affect the Growth of the Industry – Identify factors such as the migration of
population from rural to urban areas, availability of training for workers, and the educational system
in the locality.

16. L3: A Guide for Industry Analysis
The following key factors are to be considered in analyzing the industry:
9. The trends in sales over recent years – show actual sales in the industry over the past 5 years,
this should indicate if the prospects you face are good and promising.
10.Current Operational/Management Trends within the industry – Define what are the standard
practices prevalent among the firms..
11.Types of Marketing Strategies – Describe those that are prevalent within the industry. You will be
able to choose among these strategies or adapt them to make your own business a success.
12.Competitor Information – Data should include the location of competitors, how long have they
been in business, and what is their market share.