ENTREPRENEURSHIP

QUARTER 1– WEEK 5
MODULE 5: Tools to be used to determine product/service viability,
profitability and customer requirement.

MELC: Screen the proposed solution/s based on viability,

profitability, and customer requirement; and select the
best product or service that will meet the market need.

Prepared by: EMERENCIANA H. SALAPARE

SHS Teacher II
Product due diligence is the approach used to evaluate the viability, profitability and customer
requirement of a given product or service. There are four (4) common tactics include:
1. SWOT Analysis
2. Identifying Opportunities in the Environment Using Trend Analysis
3. Competitor Analysis.
4. Industry Analysis

A. SWOT Analysis

A SWOT analysis is used to assess your internal competencies as well as external factors that
could impact your success. SWOT is an acronym for strengths, weaknesses, opportunities and
threats. This framework is sometimes referred to as TOWS, which starts by identifying threats
and opportunities before weaknesses and strengths. Strengths are the “internal positives of the
organization, the assets or valuable resources of the organization or the enterprise. Examples,
state-of-the-art facilities, competitive advantage, and strategic location of business. Weaknesses
are the exact opposites of strengths, these are factors that are causing negative impacts on
company’s performance. Examples, high number of untrained workers, inefficient distribution
channels, and a high amount of liabilities. Opportunities, on the other hand, are the external
positives of the enterprise. In contrast to strengths and weaknesses, opportunities are outside the
control of the enterprise. These are possible occasions to improve the organization’s resources,
quality or productivity. In here, you have to consider the political, economic, social and
technological environments. Examples, a new regulation increasing import quotas lower
personal income taxes etc. Threats are the external negatives that may inhibit or prevent the
organization from reaching its goals. Analyzing opportunities and threats helps you prepare for
market entry with a clear vision of how to make money, and how to protect against potential
pitfalls. Example, influx of cheap and imported goods to the Philippines is a threat to local
industries offering same products. The figure below illustrates the relationships of the elements
in the SWOT Matrix.

POSITIVE NEGATIVE

Proper identification of factors into SWOT elements is very important in order to come up with
effective strategies to make sure that the product/service you offer to the market is viable,
profitable and it is the needs of the customers that will really satisfy them.

B. Business Opportunity Identification Using Trend analysis

Let us go the external environment. After being able to assess your enterprise, then try to find out
what business opportunities your environment currently offers, and which among these will be
wise to pursue by using trend analysis. Trend analysis is a technique used in technical
analysis that attempts to predict the future stock price movements based on recently observed
trend data. Trend analysis is based on the idea that what has happened in the past gives traders an
idea of what will happen in the future. (www.investopedia.com)

C. Competitor Analysis
Competitor analysis involves a comparison of your product or service features, strengths and
weaknesses relative to those offered by competitors. After identifying some possible
opportunities you can now further scrutinized these opportunities by answering the guide
questions below to help you decide what business or product/service to set up or how you can
improve a current one to meet customer’s needs.
1. Who are the competitors?
2. Among these competitors, who are my direct competitors?
3. Among these competitors, who are my indirect competitors?
4. At what prices do my competitors sell their product?
5. How do they distribute their products to make these accessible to their customers?
6. What is their relative size and market share?
7. Is there still a portion of the market I can make as target market? Is there a “neglected”
part of the market my competitors don’t offer products to that I can make my target
market?
8. What can make my intended products different from those of my competitors?

D. Industry Analysis
An industry analysis is a review of the current scope of an industry and the types of goods
being offered. After identifying your competitors you can see now the bigger picture. Take note
that before an entrepreneur enters into the industry, they conduct first an industry analysis to let
them assess their capability to set up, operate and sustain the business enterprise. In conducting
industry analysis below are the guidelines adapted from the Five Forces Model of Michael
Porter of Harvard University. Porter is known for his extensive research on competition and
competitive strategy, and his studies are widely used by professionals, regulators, and businesses.
These elements are shown below.

1. Barriers to Entry. The threat of entry by new competitors. Barriers to entry

determinants include economies of scale, product differentiation, capital requirement,
 access to distribution channels, government policies, resource exclusivity, and industry
growth rate. These are the factors that tend to raise barriers to the entry of competitors.
● Are there government policies existing that may enhance or hamper my entry into
this industry?
● What cost disadvantages will I encounter in the operation of my business?
● What costs will I encounter due to distribution?
● What costs will I encounter in encouraging my customers to switch their current
brand to mine? What costs will there be if my customers switch from my brand to
other newer brands?
● How much capital do I need to make my product different from the other brands?
● How much products do I need to produce to reach economies of scale? Do I have
the advantage in increasing this scale?
(Note: The easier competitors can enter the industry, the more competitors you will have.
The harder to penetrate the industry, the less competitors.)
2. Bargaining Power of Suppliers. Determinants of supplier power include supplier
concentration, availability of substitute inputs, supplier’s product differentiation, buyer’s
switching cost to other inputs, supplier’s threat of forward integration, and buyer’s threat
of backward integration. This item assesses how much influence do suppliers have.
● Is the industry dominated by a few or many suppliers?
● How concentrated or dispersed are these suppliers compare to the buyers?
● Are there or are there no substitutes for these supplies?
● How many important customers do suppliers have?
● Is the supplier’s input or contribution critical to the industry?
● How high or how low are switching costs of enterprise if they switch from one
supplier to another?
(Note: If the answers to these questions tend to favour suppliers, suppliers have the upper
hand. If answers tend not to be in their favour, suppliers tend to have less influence.)
3. Bargaining Power of Buyers. The bargaining power of buyers impacts industry
structure. It points to the influence of consumers on product/service prices in the industry.
Common determinants are number of buyers relative to sellers, product differentiation,
switching costs to use other products, buyer’s threat of backward integration, and buyers
volume. This item measures how much influence do buyers possess.
● How concentrated or dispersed is the bargaining power of buyers?
● Do buyers buy in volume or in smaller quantities?
● Do buyers prefer standardized or differentiated products?
● Do buyers experience high or low switching costs?
● Does the industry experience low profit margins from these buyers?
● How important is the product to the buyers?
● How much relevant information do the buyers have regarding the product?
 (Note: The more favourable the answers are to the buyers, the greater is their bargaining
power. The less favourable, the less the bargaining power.)
4. Threat of Substitutes. Substitutes refer to goods or services that satisfy the same
consumer need as another good or service. The main determinants of the threat of
substitutes include price of substitute products, relative quality of substitutes, and
switching costs to buyers. Pressure from substitutes products. This item measures the
threat presented by substitute products.
● How many close (direct) substitutes does the industry have for the product I am
considering?
● How many not-so-close (indirect) substitutes does the industry have for the
product I am considering?
● How differentiated are these substitutes?
● What advantages or disadvantages will my product have over these substitute
products?
● How different will my product be from these substitutes?
(Note: If there are more close substitutes that tend to be more superior, the harder it is to
compete. The fewer substitutes there are and more varied features from one another, the
easier it will be.)
5. Rivalry of Competition. The intensity of rivalry among existing competitors.
Determinants of industry rivalry include the number of competitors and concentration,
relative size of competitors, industry growth rate, fixed costs versus variable cost, product
differentiation, diversity of competitors, and exit barrier. These factors tend to increase
or decrease the rivalry among the existing competitors.
● How many rivals are there in the industry – few or numerous?
● Is the rivalry equally balanced or does it tend to favour some over the others?
● What is the growth scenario in this industry? Do competitors grow slowly or at a
rapid pace? What do I expect with the growth of my business enterprise?
● How high or how low are the fixed costs of rival firms? Could I be at par with
them?
● How differentiated are products in this industry? Could my product be any
different?
● How high or how low are switching costs? Could I afford these costs?
● What is the standing of these enterprise in terms of incremental production
capacity?
● How many competitors will my enterprise really have? How diverse is this
competition?
● How high or how low are the stakes or risks in this industry?0Could I afford to
take these risks?
● How easy or difficult is it to leave or exit this industry?
 (Note: The greater the rivalry among firms, the less profitable it will be for a business
enterprise. The less the rivalry, the better for your business.)

DEVELOPMENTAL ACTIVITY
Directions: Categorize the following as strength, weakness, opportunity, or threat. Support your
answer by giving a brief explanation.
Example Category Explanation
1. Strategic location
of business _________________________
2. Influx of cheap and
imported goods to
the Philippines _________________________
3. Imposition of
import quotas _________________________
4. Inefficient
distribution _________________________
channels
5. Competitive
advantage _________________________

II. Directions: Identify at least three (3) trends in the environment/problems encountered with
the products you use as possible sources of business opportunities. List them below and refer to
them as you complete the table.
Some Current Trends Possible Business Opportunities
1. 1.
2. 2.
3. 3.
 WORKSHEET

Part 1. True or False

Direction: Write the word “TRUE” if the statement is correct and “FALSE” if it is incorrect.

_____ 1. The reciprocal of the factors involved in computing the ROI is the profit margin.

_____ 2. In analyzing the intensity of rivalry among existing competitors, one should assess how

High or low are switching costs.

_____ 3. Threats are considered the external negatives to business organizations.

_____ 4. Strengths are considered the external positives to an enterprise/business organization.

_____ 5. Opportunities are possible occasions to improve the enterprise/business organization

resources, quality or productivity.

_____ 6. In analyzing the bargaining power of a supplier one should ask the question, “Are there

no substitutes for these suppliers?”

_____ 7. In identifying opportunities in the environment one should determine and evaluate the

rrivalry.

_____ 8. Supplier Information is important in conducting an Industry analysis.

_____ 9. Special Products are products which can be used to replace an existing product with the

same purpose or use.

_____ 10. The more players in the industry are, the greater the competition.

Part 2: Multiple Choice

Directions: Read each question carefully then choose the correct letter that best describe the
concepts/statements. Write the letter on the space provided before each item.
__1. These are internal positives, assets or valuable resources of the enterprise.

A. Opportunities C. Strengths
B. Business opportunity D.Competitive Advantage

__2. It refers to the assessment of enterprise internal and external environment specifically its

strengths, weaknesses, opportunities and threats.

A. Trend Analysis C. SWOT Analysis

B. Competitor Analysis D. Industry Analysis

__3. It is the approximate time needed to recover the initial investment.

A. Payback Period C. Holding Period

B. Recovery Period D. Return Period

__4. These are considered as internal negatives.

A. Weaknesses C. Business Limits

B. Threats D. Weak Points

__5. It is computed by dividing the potential profit per year by the total amount of the
investment.

A. Asset Turnover C. Profit Margin

B. Return on Investment D. Residual Income

__6. These are the external negatives that prevent the enterprise from reaching its goals.

A. Risks C. Threats
B. Weaknesses D. Opportunities

__7. The following questions are helpful in identifying possible opportunities EXCEPT

A. How easy or difficult is it to leave or exit this industry?

B. Who are my competitors?

C. How do they distribute their products to make these accessible to their

customers?
D. Is there still a portion of the market I can make as target market?

__8. Determinants that tend to raise barriers to the entry of competitors include the following

EXCEPT

A. Economies scale C. Government policies

B. Capital requirement D. Number of competitors

__9. In conducting an industry analysis, guide questions are adapted from the Five Foces Model

contributed by

A. Peter Porter C. Michael Porter

B. Peter Drucker D. Michael Drucker

__10. A technique used in technical analysis that attempts to predict the future stock price

movements based on recently observed trend data.

A. SWOT Analysis C. Competitor Analysis

 B. Industry Analysis D. Trend Analysis

KEY ANSWER

Activity 1: Categorize and Explain

Example Category Explanation

1. Strategic location This is an enterprise strength
of business Strength because if you have strategic
location you can attract and
retain best employees which
can boosts company’s
performance. Also you can
attract more customers to
your outlet. So a well located
store make supply and
distribution easier.
2. Influx of cheap and This is a threat because
imported goods to imported goods increases
the Philippines Threat competition and cuts local
producers profits.
3. Imposition of This is an opportunity
import quotas Opportunity especially if your enterprise
rely on imports of raw
materials
 4. Inefficient I consider this as weakness
distribution because you could not reach
channels Weakness all your target market.
5. Competitive This is strength because you
advantage Strength can make this to give a
higher price for your
product/service which gives
you more profit or income.

Activity 2: Complete the Table for Business Opportunity Identification Using Trend
Analysis
Note: answers vary. These are only one of the possible answers.
Some Current Trends Possible Business Opportunities
1. Phone system devices including Plant Shop
smartphones
2. Bakeware Online Business
3. Personal Protective Materials such as Thrift Shop (Ukay Ukay)
face masks, face shield and etc.

WORK SHEET

Part 1. True or False

1. True 6. False
2. True 7. True
3. True 8. False
4. True 9. False
5. True 10. True

Part II. Multiple Choice

1. C 6. C
2. C 7. A
3. D 8. D
4. A 9. C
5. B 10.D

References:
A. Book
Boado, S.A.(2017). Applied Economics. Makati City, Philippines: Diwa Learning
Systems Inc.
Azarccon et.al. (2008).Entrepreneurship Principles and Practices. Baguio City:
Valencia Educational Supply. Page 7-16
B. Online and Other Sources

https://www.envestopedia.com
https://bizfluent.com
https://www.bigcommerce.com
https://strategicmanagementinsight.com