Apecon Review

Business Environment
It includes all internal and external factors that affect the company’s
performance and functions. It includes employees, customers, management, supply
and demand, business regulations, and competition.
Environmental scanning is a process used by organizations to monitor their
external and internal environments.
Environmental analysis is a strategic tool in assessing the level of threats or opportunities that
might affect the business.
The internal environment of the organization consists of factors that are
controllable by the management.
There are two elements in the external environment: micro and macro. These
environmental factors are beyond the control of the business but they still minimize
the impact if the business has an effective strategic plan.
Micro Environment Factors
1. Suppliers- Suppliers can control the success of the business when they hold power.
2. Resellers- Market intermediaries, middleman, or resellers have a great contribution to
the delivery of products to the ultimate consumers.
3. Customers- A customer is an individual or business that purchases goods or services.
Customers are important because they drive revenues.
4. Competition- Those who sell the same or similar products and services as your organization
is called competitors.
Macro Environment Factors
1. Political factors- These are about how and to what degree a government intervenes in the
economy.
2. Economic factors- Economic factors have a significant impact on how an organization does
business and also how it is profitable.
3. Social Factors- These include the shared belief and attitudes of the population.
4. Technological Factors- Technological factors affect the management and marketing in three
ways: new ways of producing goods and services, new ways of distributing goods and
services, and new ways of communicating with target markets.
5. Environmental Factors- These factors have become important due to the increasing scarcity
of raw materials, pollution targets, doing business as an ethical and sustainable company.
6. Legal Factors- It includes health and safety, equal opportunities, advertising standards,
consumer rights and laws, product labeling, and product safety.
SWOT Analysis
SWOT (strengths, weaknesses, opportunities, and threats) analysis is a
framework used to evaluate a company's competitive position and to develop
strategic planning. SWOT analysis assesses internal and external factors, as well as
current and future potential (Grant, 2020)
Internal Factors: Strengths (S) and Weaknesses (W)

These are the resources and experiences readily available to the business
proponents. These factors include:
1. financial resources such as money and source 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, sales, and distribution
capabilities, marketing programs, etc.
Strengths describe what an organization excels at and what separates it from the
competition: a strong brand, loyal customer base, a strong balance sheet, unique
technology, and more.
Weaknesses stop an organization from performing at its optimum level. There are
areas where the business needs to improve: lack of raw materials, personnel attitude,
poor location, and lack of budget for product promotion, among others.
External Factors: Opportunities (O) and Threats (T)
These are factors that affect a company, an organization, an individual, and
those outside their control. These factors include:
1. economic trends such as stock market, economic performance, and the like;
2. market trends such as new products or technology, changes in tastes and
lifestyle of society;
3. national and local laws and regulations;
4. relationship with suppliers; and
5. competitive threats.
Opportunities refer to favorable external factors that could give an organization a
competitive advantage. Examples include larger market, company expansion, and
new customer trends, among others.
Threats refer to factors that have the potential to harm an organization. For example,
changes in government policy, changes in consumer tastes and preferences,
inflation, and recession, among others.
Porter’s Five Forces Analysis

The five forces model was originally developed by Michael E. Porter of Harvard
Business School. Porter’s Five Forces Analysis is a framework or a guide for assessing
and evaluating the competitive strength and position of a business organization.
According to Porter, the origin of profitability is identical regardless of
industry.
Porter’s Five Forces:
1. Competitive Rivalry
This force examines how intense the competition currently is in the market,
which is determined by the number of existing competitors and what each is capable
of doing.
2. Bargaining Power of Suppliers
This force analyzes how much power a business’ suppliers have and how
much control it has over the potential to raise its prices, which, in turn, would lower
a business’s profitability.
3. Bargaining Power of Buyers
This force looks at the power of the consumer to affect pricing and quality.
Consumers have power when there aren’t many of them, but lots of sellers, as when
it is easy to switch from one business’s products or services to another.
4. Threat of New Entrants
This force examines how easy or difficult it is for the competition to join the
marketplace in the industry being examined.
5. Threat of Substitute Products or Services
This force studies how easy it is for consumers to switch from a business’s
product or service to that of a competitor.
Manufacturing Business
A manufacturing business is any business that uses components, parts, or
raw materials to make a finished good. These finished goods can be sold directly to
consumers or other manufacturing businesses for making a different product.
Manufacturing businesses in today's world are normally comprised of machines,
robots, computers, and humans that all work in a specific manner to create a product
(Hill, 2020).
Economies of Scale refer to the cost advantage experienced by a firm when it

increases its level of output. The advantage arises due to the inverse relationship
between the “per-unit fixed cost” and “quantity produced”.
These are the effects of economies of scale on production costs:

1. It reduces the per-unit fixed cost. As a result of the increased production,
the fixed cost gets spread over more output than before.
2. It reduces per-unit variable costs. This occurs as the expanded scale of
production increases the efficiency of the production process.
The latest Annual Survey of Philippine Business and Industry (ASPBI) showed
a total of 24,200 manufacturing establishments in 2017. This represents a 13.6%
decrease from the 28,003 manufacturing establishments recorded in 2016.
Among industry groups, the manufacture of other food products accounts for
7,880 establishments or 32.6% of the total. Manufacture of beverages followed by
2,407 (9.9%) establishments. Printing and service activities related to printing
ranked third with 1,581 (6.5%) establishments. The total employment generated by
manufacturing establishments reached 1.3 million in 2017.
Retail trade is the business activity associated with the sale of goods to the
ultimate customer. It links the manufacturers and the customers of the product.
Typically retailers sell goods in small quantities to consumers for personal use, not
for resale or business use.
Retail enterprises can be either independently owned and operated or part of

a "chain," a group of two or more stores whose activities are determined and
coordinated by a single management group.
Specialty Stores - These establishments typically concentrate on selling a single

type or very limited range of merchandise.
Department Stores - These establishments are comprised of a series of

departments, each of which specializes in selling a particular grouping of products.
Supermarkets - These retail establishments, which are primarily involved in

providing food to consumers but have increasingly ventured into other product areas
in recent years.
Convenience Stores – It is a retail outlet that sells a limited range of prepared

and ready-to-eat food, bottled and fountain beverages, household staples, tobacco
products, and periodicals.
115,998- 2016
101,136- 2017
12.8% decrease
highest share:
other goods- 30.7%
other household equipment- 13.4%
food and bev- 8.9%
A service business is a company that provides professional support to its

clients. From a business standpoint, service businesses are those that provide an
activity or work with a commercial purpose.
Business Services- The most basic definition would be, business services support the daily
operation and activity of any business. ex. banking
Personal Services- These services are engaged in commercial activities which intended for
individual needs. ex. salon
Social Services- These services are linked to public services. They are provided by the
government or non-profit organizations. ex. medical
7,048- 2016
9.2% decrease
6,398- 2017
photography- 22.3%
legal- 1,168
International trade is the exchange of goods and services between countries.
Comparative advantage refers to the ability of the economy to produce goods

and services at a lower opportunity cost compared to trade partners.
The law of comparative advantage is popularly attributed to an English

political economist, David Ricardo in his book “On the Principles of Political Economy
and Taxation” in 1817, although it is likely that Ricardo's mentor James Mill
originated the analysis.
export- sold
import- bought
Electronic Commerce (e-commerce, eCommerce) is the exchange of

information or business transactions using any form of electronic communication.
E-commerce operates in all four of the following major market segments: (1) business
to business; (2) business to consumer; (3) consumer to consumer; and (4) consumer
to business.
advantages:
convenience
increased selection
disadvantages:
limited customer service
lack of instant gratification
Inability to touch the products
Micro, Small and Medium Enterprises (MSMEs)

small at least 3M
micro 3M-15M
medium 15M-100M
The top five (5) industry sectors according to the number of MSMEs in 2018 were:
1. Wholesale and Retail Trade with 461,765 establishments;
2. Accommodation and Food Service Activities with 144,535 establishments;
4. Manufacturing with 116,335 establishments;
5. Other Service Activities with 66,162 establishments; and
6. Financial and Insurance Activities with 46,033 establishments.
Contribution of MSMEs on the Philippine Economy

1. Employment Opportunities
2. Exports Contribution of MSMEs
Government Programs to Support MSMEs

1.Barangay Micro Business Enterprise (BMBE) Act or R.A. 9178- It encourages the formation
and growth of BMBEs (or micro-enterprises) by
granting them incentives and other benefits (i.e., exemption from income tax,
exemption from minimum wage).
According to Section 7-8 of the article: “All BMBEs shall be exempt from tax
for income arising from the operations of the enterprise”. “The BMBEs shall be
exempt from the coverage of the Minimum Wage Law, provided, that all employees
covered under this Act shall be entitled to the same benefits given to any regular
employee such as social security and healthcare benefits.”
2.Go Negosyo Act or R.A. 10644- The law seeks to promote “job generation and inclusive
growth through the
development of MSMEs” in the country.
Consumer theory is the study of how people decide to spend their money
based on their individual preferences, and budget constraints.
3 basic assumption about human behavior:

1. Utility maximization - Individuals are said to make calculated decisions
when shopping, purchasing products that bring them the greatest benefit
known as a maximum utility.
2. Nonsatiation - People are seldom satisfied with one trip to the shops and
always want to consume more.
3. Decreasing marginal utility - Consumers lose satisfaction in a product the
more they consume it.
A consumer aims to maximize the satisfaction he/she derives from the use of
a good or service. The utility is a term in economics that refers to the total satisfaction
received from consuming a good or service.
Total Utility refers to the combined utility derived from consuming an

additional unit of a good. Marginal Utility refers to the additional utility derived from
consuming an additional unit of a good.
The Law of Diminishing Marginal Utility states that, as additional units of
goods are consumed, the additional utility derived from each additional unit tends
to diminish.
The law is based upon the fact that the total wants of humans are virtually
unlimited, each single want is satiable. Therefore, as an individual consumes more
and more units of goods, the intensity of his want for that goods declines, to the point
that he no longer wants to consume more goods.

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Business Environment

Internal Factors: Strengths (S) and Weaknesses (W)

Porter’s Five Forces Analysis

Economies of Scale refer to the cost advantage experienced by a firm when it

These are the effects of economies of scale on production costs:

Retail enterprises can be either independently owned and operated or part of

Specialty Stores - These establishments typically concentrate on selling a single

Department Stores - These establishments are comprised of a series of

Supermarkets - These retail establishments, which are primarily involved in

Convenience Stores – It is a retail outlet that sells a limited range of prepared

A service business is a company that provides professional support to its

International trade is the exchange of goods and services between countries.

Comparative advantage refers to the ability of the economy to produce goods

The law of comparative advantage is popularly attributed to an English

Electronic Commerce (e-commerce, eCommerce) is the exchange of

Micro, Small and Medium Enterprises (MSMEs)

Contribution of MSMEs on the Philippine Economy

Government Programs to Support MSMEs

3 basic assumption about human behavior:

Total Utility refers to the combined utility derived from consuming an

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