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APPLIED ECONOMICS
QUARTER 2 – Module 2

TYPES OF INDUSTRIES

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INTRODUCTION (What I Need to Know)

Before starting an industry, an entrepreneur has to take into consideration the market
potentialities of his product. Concentration to the availability of goods and services must be
considered. A certain town or region tends to specialize in the production of a particular
commodity. Fancy and chance play a big part in participating in the various types of industries in
the locality. When an industry is localized in a particular locality, it makes the economy dependent
for its requirements of the products manufactured there.

(MELC) Most Essential Learning Competency

Apply business principles, tools and techniques in participating in various types of
industries in the locality.

At the end of this module, you should be able to:

a. understand the various types of services/products as to industry analysis;
b. distinguish the different services/products of business and industry in the locality;
c. analyze the environmental forces in the operation of business in the locality.

DISCUSSIONS AND ACTIVITIES (What is It)

INDUSTRY ANALYSIS
The following terms are to be take into good consideration when practicing industry
analysis:
1. Competition
` Who are the major businesses in the industry? Are there locations close to your proposed
business? Have they been long existing or still new entrants? What is the market share of each of
these businesses? It is very important that you know your competitors and be ready for them.
Your aim is to win their customers, convince them to buy from you instead, and remain as loyal
customers.
2. Customers
Who will you sell your product to? The target market must be identified. Who exactly will
buy your products? What income groups? What age brackets? What gender? What career groups?
What type of people will you cater to, based on their preferences, lifestyles, and buying habits?
3. Suppliers
Every retail business needs a supplier from whom one can source raw materials,
intermediate products, or even the finished goods one intends to resell.
A business may need one or more suppliers. It is important to develop suppliers who are
reliable in terms of the quality of what they supply and their dependability in coming up with the
things you order from them. With modern technology, one can easily go online and shop for
suppliers, look at reviews made by other retailers to determine who the reliable ones are. The
yellow pages of the telephone directories are also a good source of suppliers’ stores and names.
The person intending to put up a business must ask around for prices in order to be more
competitive with other sellers in the market.
A business owner can buy directly from the manufacturers. This will be the cheapest source
since there are no middlemen involved. However, this is only recommended if the supplier’s
location is convenient and will not involve expensive delivery costs. (Dinio, Villasis 2017)

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 Another alternative is to buy from distributors. They are wholesalers or brokers who buy in
big quantities from manufacturers, add a mark-up to their purchase price, and sell to retailers.
Their prices are higher but they can sell in small quantities, which the manufacturers would not
normally do.
A third source of goods is through imports. Some businessmen go to nearby countries to
buy their goods or raw materials there. This is advisable if the prices abroad are relatively cheaper
and no heavy import duties will raise the prices and make the goods less competitive in the country
and when transport costs are not excessive.
It is important to maintain good relationships with one’s suppliers; they are the key to one’s
continued access to goods and to raw materials that will be needed for the business.
4. Substitutes
Substitutes are goods that can be used in place of another. These are goods that may, even
if partly, satisfy the same needs of a customer such that the customer may use one instead of
another. For example, margarine can be a substitute for butter or wheat bread for white bread.
Some goods are close substitutes while others are not. Pepsi Cola may be a very good substitute
for Coca Cola, but not everybody will be willing to switch brands because they have developed a
taste for a particular cola. This is why manufacturers try to differentiate their products from their
competitors so that the customers will develop product loyalty for their brand. We know that
Safeguard and Dove are both bath soaps, yet we can distinguish one brand from another, and we
have our own preferences.

The more differentiated a product is, the greater the edge of its manufacturer because this
can convince the customers to buy their product instead of that of the competitors.

A GUIDE TO INDUSTRY ANALYSIS

An industry analysis guide developed by North Carolina’s Small Business and Technology
Development Center (SBTDC) can help in making an analysis of one’s business industry.
The key factors to be considered in analyzing your industry identified by the SBTDC are:
1. Geographic Area – identify the area whether local, regional, nationwide, or international
2. Industry (as to size) – worth in pesos and number of firms, trends, and developments and
future outlook
3. Product – describe the product as to physical attributes and characteristics, and its uses
4. Buyers – describe target customers as to age, income group, geographical location, and
occupations; include customer demographics such as population/ household size, sex,
race, ethnicity, family status, housing status, etc.; may also include psychographics such
as lifestyle information, tastes, preferences, and buying habits
5. Regulatory Environment – should include government laws and regulations that apply to
the business
6. Company Information – make a list of the most successful businesses in the industry
7. A brief history of the industry – when it started and how it developed
8. Factors that affect growth of the industry – such as migration of population from rural to
urban areas
9. 1Trends in sales over recent years – show actual sales in the industry over the past 5 years
10. Current operational/ management trends within the industry, which are standard practices
prevalent among the firms
11. The types of marketing strategies prevalent within the industry
12. Competitor information – include the location of competitors and how long have they been
in business and their market share (Dinio, Villasis 2017)

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ENVIRONMENTAL ANALYSIS

The other analysis that has to be done is an analysis of the environment in which the
business will operate. This means an evaluation of the possible or probable effects of external
forces and conditions on the survival and growth of the business.
An environmental analysis includes thorough study of:
1. Economic Forces
This involves a look at economic factors such as income of the people, specifically the target
market, economic conditions such as inflation, recession, prosperity, demand, and supply in the
market.
2. Physical Environment
This includes a look at the population size, the geography of the place where business will
be located, land distribution, climate, and in today’s global warming situation, whether or not the
area is prone to flood or earthquake.
3. Political Factors
The type of government, the stability and strength of the government, and good leadership
are factors that can be an advantage to a business.
4. Cultures and Lifestyles
It is important to study cultural practices such as fiestas, celebration of the Christmas
season, trends in consumption patterns, as a means to identify the goods and services that will fit
into these celebrations and spending behavior.
5. Competition
As already mentioned above, the degree of competition in the market and the extent and
the strength of competition are all very vital in determining the success or failure of a business.

THE CIRCULAR FLOW OF ECONOMIC ACTIVITY

To further guide the students on how the market works, this section describes the various
economic activities that take place in the economy. This is referred to as the circular flow which is
defined as the flow of activities of household and firms in a circular direction.

The Simple Flow of Goods and Services

Goods and services flow from the first firm as producers, to the households as consumers,
in a clockwise direction. On the other hand, households as resource owners provide firms as
producers with resource use such as labor rendered, capital lent or invested, land rented to
producers, and entrepreneurial skills. These resources flow from the households to the firms also
in a clockwise direction. It is the use of these resources that enables the firms to produce the goods
and services delivered to the households. The flow of products and resources are the physical flows
in the economy.
The flipside to the physical flow is the money payment flow. Household pay and firms earn
revenues in exchange for the goods and services received and provided, respectively. revenues flow
counterclockwise from the households to the firms as payments for the goods and services received
by the former. Likewise, firms pay and households earn factor income for the use of resources
provided to the former. Factor income payments counter flow from the firms to the households for
resources provided by the latter.
For as long as households are willing to consume, producers continue to produce goods
and services for the households using the resources provided by the latter. (Dinio, Villasis 2017)

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 As the physical flow continues, so is the money payment flow in exchange for products and
resources. the physical flow continues in a clockwise direction in exchange for money payment
flow in counterclockwise direction.

The Circular Flow

Dinio, Rosemary P., PhD & Villasis,

George A. 2017. Applied Economics.
P. 69 Manila Philippines. REX Book
Store.

Raw materials are unprocessed goods like raw minerals, logs and wheat, which are
extracted from their sources and do not undergo any process of production. Intermediate goods
are semi-processed goods that are not ready for final use by the consumer, such as leather, cloth,
and steel, which have undergone some processing but need to go through additional processing
before they can be actually used. These are supplied to final good firms for conversion into goods
in their finished stage. Final goods are goods that are ready for direct consumption such as
refrigerators, dresses or pants. These final goods are then sold to customers for their use.

The Government Sector and the Global Economy

There are two other relevant units in the flow---the government and the foreign countries.
The government is important because it makes purchases of economic resources from the
household and makes money payments to the resource owners for the use of their resources. The
government also buys goods and services from the producing units for which it makes money
payments.

The significance of the global economy cannot be overemphasized in today’s times. An

economy buys goods from other countries; these are called imports. An economy sells goods to
other countries; these are called exports. A country pays for the goods imported and earns income
from exports.

The Economy’s Producing Sectors

The economy has three main producing sectors:

1. Agriculture, Fishery and Forestry
2. Industry
 Manufacturing
 Construction
 Electricity, Gas and Water
 Mining and Quarrying
(Dinio, Villasis 2017)
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 3. Service
 Trade
 Transportation, Communication and Storage
 Banking and Finance
 Public Service (Government)
 Real Estate
 Private Services

Agriculture, Fishery and Forestry

The Agriculture, Fishery and Forestry Sector reaps the fruits of natural resources like the
soil, water and forests. However, these environmental resources are vulnerable to climate change
affecting production such as long dry spells and frequent devastating typhoons due to say, the El
Nino phenomenon. From this sector comes the food we cook at home and the raw materials
processed or used by other economic sectors (e.g. cotton for making pillows and mattresses).
Agriculture accounts for most (84%, NEDA) of sectoral production as fishery lags far behind despite
the country’s big fishing grounds. Much less does forestry contribute to output as it will take
decades to revegetate our vastly denuded forests.

Industrial Sector

The Industrial Sector supposedly processes raw materials from agriculture, fishery and
forestry into intermediate products that are further processed into final products. For example,
local makers of wallets and bags produce the final products by processing the intermediate product
of leather which is manufactured from the animal hide extracted by agriculture. Within the
industrial sector itself, local cement manufacturers produce the product by heating limestone
mixed with clay from the quarrying industry for use in the construction industry. The lead
industries in resource use and output are manufacturing and construction as they respectively
account for 65% and 20% of sectoral production (NSCB 2009).

Service Sector

The Service Sector produces the intangibles supporting and complementing production in
the other sectors as well as among its own industries. For example, the transport industry brings
input and output among the other countries. Reliant on its activity is the trade industry that takes
on the complementary role of marketing their produce. The single biggest industry in resource use
and output is trade as it accounts for 29% of sectoral production (NSCB 2009). (Dinio, Villasis 2017)

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ACTIVITY 1. TRUTH OR LIE!
Directions: Write TRUE in your answer sheet if the statement is correct and FALSE if the
statement is incorrect.
_____1. A business may need one or more suppliers.
_____2. Competition aims to win customers.
_____3. Substitute goods satisfy the same needs of a consumer.
_____4. Physical environment involves income of the people.
_____5. Leadership is one of the factors that can be an advantage to a business.
_____6. Raw materials from agriculture, fishery and forestry are being processed in the industrial
sector.
_____7. Transport industry brings input and output among other industries.
_____8. Manufacturing is an example under Service Sector.
_____9. Banking and finance are examples under Industry Sector.
_____10. Final goods are goods that are ready for direct consumption.

ACTIVITY 2. MATCH ME!

Directions: Match the given word on factors of industry analysis from Column A that
corresponds to the illustration in Column B. Write the correct letter in your answer
sheet.

COLUMN A COLUMN B

1. Substitutes a.

Fig. 1 https://www.123rf.com

2. Competition b.

https://www.freepik.com
Fig. 2

3. Customers c.

Fig. 3 http://howestudy.blo
gspot.com

4. Suppliers d.

Fig. 4 https://sproutsocial.com

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ACTIVITY 3. RELATE me!
Directions: Fill in the blank with the missing word that expresses a similar relationship that
express the original pair. Choose your answer from the box below and write in your
answer sheet.

1. Economic Factor:Income; _____________:Leadership

2. Physical Environment:______________; Competition:Success of Business
3. Culture:Fiesta; Lifestyle:_____________
4. Goods and Services:____________; Households:Consumers
5. Economic Condition:Inflation; _________________:Population size

ASSESSMENT
I. Directions: Put a check mark () in your answer sheet if the statement is correct and cross
mark (x) if it is incorrect.

1. Rent, Wage, Interest and Profit are the factors of income payments in a circular flow.
2. The flow of products and resources are the physical flows in the economy.
3. Producers will continue to produce goods and services, if there is no willingness to consume.
4. Televisions, cellphones and computers are ready for consumption.
5. Unprocessed goods are raw materials.

II. Directions: Give ten (10) different business in your barangay. Then group them in the
appropriate column below according to the main sectors in the economy. Write your answer in
your answer sheet.
Name of Barangay: ________________________

AGRICULTURE,FISHERY INDUSTRIAL SERVICE

and FORESTRY
SECTOR SECTOR

Fig. 1 https://www.theedgemarkets.com
Fig. 2 https://www.dnaindia.com Fig. 3 https://portal.edukasyon.ph

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III. Directions: Compare and contrast two (2) different business in your barangay in terms of
their strategies and techniques. Write your answers using the Venn Diagram in your answer
sheet.

Name of Business Name of Business

Similarities
Differences Differences

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ANSWER KEY FOR ACTIVITIES
10.T 5. Physical Environment
9.F 4.Culture
8.F 3.Trends
7.T 2.Geography of the place
6.T 1.Political factor
5.T Activity 3
4.F 4.b
3.T 3.d
2.T 2.a
1.T 1.c
Activity 1 Activity 2

References:
A.Book:
Dinio, Rosemary P., PhD & Villasis, George A. 2017. Applied Economics. Manila Philippines. REX
Book Store. P. 66-72
B.Online and Other Sources:
Education: Types of Goods With Example- Economics. https://www.google.com
Social Customer Service/Sprout Social.
https://www.google.com
Supplier/Free Vectors, Stock Photos & PSD.
https://www.google.com
Excited man woman pull rope. Tug of war competition between two.
https://www.google.com/
Combating Energy at large Scale Industries
https://www.google.com
January local PPI surges 10.2% on year driven by mining index.
https://www.google.com
Service Sector.
https://www.google.com

DIVISION QUALITY ASSURANCE TEAM IN HUMANITIES AND SOCIAL SCIENCE

WRITER/S: ETHEL P. FABIA

VALIDATORS: DR. MARILEX A. TERCIAS

DR. EUGENE M. TORALBA
DR. ALBERTO O. RABANG
DR. VIRGINIA B. FREGILLANA
JEANNEROSE M. ACOSTA
ZOSIMO IRENE H. FERNANDEZ
MA. JOCELYN J. SOTONG
DANILO T. SIBLAG
VICTOR B. ABAN
JAMILIE M. CRISPINO
CONSULTANTS:

DR. MAYBELENE C. BAUTISTA

DR. JEROME S. PARAS
DR. CORNELIO R. AQUINO
DR. TEODORA V. NABOR
DR. DANILO C. SISON

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ANSWERS KEY FOR ASSESSMENT

III. Possible Answers

Barbershop 3.
Tailoring 2. Name of Business: Sari-sari
Salon 1. Store

Service Difference: There are varieties

of products to be offered.
Ironworks Factory 3.
Construction Supply Factory 2. Name of Business: Gasoline
Noodles Factory 1. Station

Industrial Difference: There is only one

 5. product to be offered.
 4. Furniture Shop 3.
Fish Vendor 2. Similarity: Both are essential
x 3.
Palay Buy and Sell 1. needs of the people in the
 2. barangay.
Agriculture, Fishery and Forestry
 1.
I. II.
Assessment Possible Answers

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