Bes Abm12 L1 - L2

Lesson 1: Business Enterprise Simulation
(Introduction)
Schedule: Time Frame: 2 weeks
Objective:
At the end of the chapter, the learner-entrepreneurs are expected to:

 Integrate the competencies, skills, and learning acquired by the student from the
ABM Strand courses;
 Begin Business Enterprise Simulation activities; and
 Utilize the ABM Incubation Laboratory (ABMIL) facilities.
Introduction
What is Business?
"The regular production or purchase and sale of goods undertaken with an objective of earning
profit and acquiring wealth through the satisfaction of human wants."
"Business refers to a form of activity conducted with an objective of earning profits for the benefit of
those on whose behalf the activity is conducted."
"Human activity directed towards producing or acquiring wealth through buying and selling of goods."
Discussion
The Concept of Business

 The exchange of goods/services with money for mutual benefit/profit
 An organization that provides goods and/or services to earn profits
 All profit-seeking activities that are organized and directed to convert factors of production into
goods and services or combination between goods and services for customers in the markets to
achieve the business objectives
Factors of Production
 Labor or human resources – the physical and mental capabilities of people that contribute in
economic production.
 Capital – the funds needed to create and operate a business enterprise
 Land or physical resources – tangible resources used in the conduct of their business
 Entrepreneurs – people who take opportunities and the risks in creating and operating business
 Information resources – data and information used in decision making and problem solving in
operating business
Entrepreneur
Entrepreneur - A person who takes the risks to organize and manage a business innovatively and
creatively that receives the financial profits and non-monetary rewards for his/her.
The Growth Oriented Entrepreneur
 Need for Achievement - A Strong desire to succeed, to grow up and to accomplish challenging tasks
 Low need to conform, persistence, High energy level
 Risk-taking tendency
pg. 1
A merchandising type of business is the “buy and sell” business. Firms under this category purchase
product and sell the same at a higher price without changing the form of the products. Retailing is the
sale of goods in small quantities, while wholesaling is the sale of goods in large volumes. A familiar
retailing business in the Philippine sari-sari store.
A service type of business offer merchandise with no physical form like skills, field of expertise, and
consultancy. Service business examples include beauty parlors, repair shops, and transportation vehicles,
medical, dental, accounting, legal, architectural design, and other professional services are also service
example.
Differences between goods and services

Goods Service
Tangible and durable outputs Intangible outputs
Output can be inventoried Output cannot be inventoried
Low customer contact High customer contact
Long response time Short response time
Regional, National or International markets Local Markets
Large facilities Small Facilities
Capital intensive Labor Intensive
Quality easily measured Quality not easily measured
Business Objectives
 Business Profit = TR -TC
 Economic Profit – business profit that considered opportunity cost as a part of expenses
 Survival
 Growth
 Social Responsibility
Market
Market a mechanism for exchange between buyers (demand) and sellers (supply) of particular goods
and services.
Market Classifications:
 Input Market is market in which firms buy resources from supplier household
 Output market is market in which firms supply goods and services in response to demand
on the part of household
Circular Flow in A Market Economy
Market Competition structure
pg. 2
 Perfect competition – market characterized by numerous firms producing an identical
product in the market
 Monopolistic – market characterized by numerous buyers and one or just few sellers in the
market
 Monopoly – numerous buyers with only one seller that can set the price in market
 Oligopoly – numerous buyers with few sellers that can influence the price in the market
Characteristics of Market Structure

Characteristics Perfect Competition Monopoly Oligopoly
Number of competitors Many None Few
Ease of entry into
Easy Regulated Difficult
industry
Similarly of goods/
Identical Specific Variety
services
Level control over price None High Low-medium
Economic Systems
 Planned Economy – an economy system in which the government owns, controls and allocates
the productive resources. The two most its basic forms are communism and socialism.
 Market Economy – an economy system in which individuals own, control and allocate the
resources through supply and demand in the markets. Its form is capitalism.
 Mixed Market Economy – featuring characteristics of both planned and market economies.
The business contribution to economic performance
 Economic growth by increasing two indicators:

 Aggregate output – total quantity of goods and services produced by an economic system in
given period indicated by GDP and GNP
 Standard of Living – total quantity and quality of goods and services that people can
purchase with the currency used by their economic system.
 Economic Stability – condition in which the balance between the money available in an economy
and the goods produced in the same rate. It’s indicated by:
 Inflation rate – the rise in the average level of price for all goods and services in a particular
time
 Unemployment rate – the level of joblessness among people actively seeking work.
Business Forms
 Sole Proprietorship - a business owned and managed by one individual who is responsible for all of its
debts
 General Partnership – business with two or more owners who share in both the operation of the firm
and the financial responsibility for its debts
 Corporations - a business that is a legal entity separate from its owners who has responsible the limits
of their investment
Characteristics of Business Forms

Characteristics Proprietorship Partnership Corporation
Simplest to establish Relatively easy, but Complicated based on
Start-up and operation
and form needs written contract law and procedure
Shareholders are liable
Liability for debts and Owner has unlimited Partners have unlimited
only to extent of
taxes liability liability
investment
Easy, after debts are Complicated, depends
Termination Difficult and expensive
paid on contract
Terminates at death of Terminates at death or
Duration of business indefinite
owner withdrawal of partner
pg. 3
Incorporated Forms of Business
 Cartel - cooperation among some business in achieving same goals. E.g. Price Cartel, Production Cartel,
Area Cartel and Syndicate Sales Cartel
 Business Trust - two or more business joint together to accomplish specific business goal.
 Holding Company/Concern - a corporation that hold many business
 Acquisition/Consolidation/Merger: Horizontal Merger, Vertical Merger and Conglomerate Merger
The critical scope and limitation for the course include the following:
1. Geographical scope: ‘where is the target market located and/or where are the services or
merchandising facilities located?’
2. Period scope, or the most recent three years, for historical data on the sector and target market
population; nearest 70 class sessions for projected data, as stated in the Business Enterprise
Simulation schedule.
3. Functional scope: ‘Which business functions are covered by the Enterprise Business Plan?’
pg. 4
Activity Sheet
Name: ________________________________________________ Date: ______________

Section: ______________________________________________
Direction: Create and submit at least two own product ideas, one under the service sector, and one
under the trading/merchandising sector. With picture or drawing.
Service sector:
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
Drawing/Picture of the
Product or Service
Trading/Merchandising Sector
______________________________________________________________________________________________________
______________________________________________________________________________________________________
______________________________________________________________________________________________________
Drawing/Picture of the
Product or Service
pg. 5

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Lesson 1: Business Enterprise Simulation

At the end of the chapter, the learner-entrepreneurs are expected to:

The Concept of Business

The Growth Oriented Entrepreneur

Differences between goods and services

Circular Flow in A Market Economy

Market Competition structure

Characteristics of Market Structure

The business contribution to economic performance

 Economic growth by increasing two indicators:

Characteristics of Business Forms

Name: __________________________________ Date:

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