LESSON 10: Principles, Tools and Techniques 9.

Profitability – a small business is an

in Creating a Business economic entity, driving an economic reality,
creating an economic certainty for the
communities in which it thrives.
Principles in creating a Business
10. Standards – a small business creates a
According to the New Oxford American Standard against which all small businesses
Dictionary, a principle is “A fundamental truth or are measures as either successful, or not. All
proposition that serves as the foundation for a small businesses should aim to thrive beyond
system of belief or behavior for a chain or the standards that formerly existed.
reasoning.”
The principles of a business are the driving forces
that make it successful. They are the backbone SEVEN STEPS IN EFFECTIVE DECISION-
for the organization. MAKING
1. Identify the Decision to be Made
After realizing that a decision must be made, you then
TEN PRINCIPLES
go through an internal process of trying to clearly define
1. Scalability – the capability of a system, the nature of the decision you make.
network, or process to handle a growing 2. Gather Relevant Information
amount of work, or its potential to be enlarged Most decision require collecting pertinent information.
in order to be accommodate that growth. Some information must be sought from within yourself
through a process of self-assessment, while other
2. Big Ideas – a small business is not more information must be sought from outside books, people
effective than the idea upon which it is built. and a variety of other sources.
The entrepreneur’s vision is more important to 3. Identify Alternatives
the life of the business than anything else. Through the process of collecting information, you will
probably identify several possible paths of action, or
3. Systems – you must recognize that a small alternatives. In this step of the decision-making process,
business is a System in which all parts you will list all possible and desirable alternatives.
contribute to the success or failure of the
4. Weigh Evidence
whole. In this system, everything must work In this step, you draw on your information and emotions
together: from employee to president; from to imagine what it would be like if you carried out each
equipment to resources. pf the alternatives to the end. You must evaluate
whether the need identified in Step 1 would be helped or
4. Sustainability – a business must be solved through the use of each alternative.
dynamic-table to thrive through all economic
5. Choose among Alternatives
conditions, in all markets, providing
Once you have weighed all the evidence, you are ready
meaningful, highly differentiated results to all to select the choice that seems to be best suited to you.
of its customers. Such differentiation is key to
survival. 6. Take Action
You now take some positive action, which begins to
5. Growth – all businesses need internal growth. implement the alternative you chose.
A small business is a School in which its 7. Review Decision and Consequences
employees are students, with the intention, In the last step you experience the results of your
will, and determination to grow. decision and evaluate whether or not it has “solved” the
need you identified in Step 1. If it has, you may stay with
6. Vision – a small business must manifest the this decision for some period of time. If the decision has
higher purpose upon which it was seeded, the not resolved the identified need, you may repeat certain
vision it was meant to exemplify, the mission it steps of the proves in order to make a new decision.
was intended to fulfill.
7. Purpose – a small business is the fruit of a
DECISION-MAKING TOOLS
higher aim in the mind of the person who
conceived it. 1. Decision Matrix
A decision matrix is used to evaluate all the options of
8. Autonomy – a business is not part of the a decision.
owner’s life, but is, in fact, its own entity. A
small business possesses a life of its own, in 2. T-Chart
This chart is used when weighing the plusses and
the service of God, in whom it finds reason. minuses of the options. It ensures that all the positives
 and negatives are taken into consideration when making
a decision.
TECHNICAL MARKETING TECHNIQUES
3. Decision Tree
This is a graph or model that involves contemplating 1. Create Utility and Usefulness with your
each option and the outcomes of each option and the Product
outcomes of each. Statistical analysis is also conducted 2. Change your Pricing
with this technique. 3. Emphasize your Product’s Key Benefit to the
4. Multivoting Customer
This is used when multiple people are involved in 4. Deliver True Value of your Product to your
making a decision. It helps whittle down a large list Customer
options to a smaller one to the eventual final decision.

5. Pareto Analysis
This is a technique used when a large number of METHODS OF COMPETITIVE ADVANTAGES
decisions need to be made. This helps in prioritizing
which ones should be made first by determining which Businesses are constantly seeking
decisions will have the greatest overall impact.
competitive advantages in the market-place.
6. Cost-benefit There are many different ways in which this can
This technique is used when weighing the financial be done, but many will focus on a few tried-and-
ramifications of each possible alternative as a way to true methods of gaining a leg up on the
come to a final decision that makes the most sense from
an economic perspective.
competition. These methods can generally be
classified into about four different primary
7. Conjoint Analysis categories.
This is a method used by business leaders to determine
consumer preferences when making decisions.  Cost Leadership
Cost leadership is the first competitive
advantage businesses often attempt to gain. Cost
TOOLS AND TECHNIQUES IN MAKING AN
leadership as an advantage occurs when a
EFFICIENT BUSINESS
business is able to offer the same quality products
1. Use technology to speed up workflow as its competitors, but at a lower price. Cost
2. Shorter meetings fuel efficiency leadership can occur when a company finds ways
3. Smart office space pays or by the utilization or resources in a more
4. Small changes, big savings efficient manner than competitors. Other factors,
5. Manage staff expenses such as proprietary technology, can also factor
6. Keep a firm grip on cash flow into this type of advantage. Cost leadership may
7. Stay connected on the move be classified as an offensive strategy, whereby
8. Use time more efficiently businesses attempt to drive competitors out of the
9. Get the best deal on insurance market by consistently using price strategies
10. Do not be lax with the legal designed to win over consumers.
 Differentiation
COMPETITION Differentiation is a second strategy that
businesses often use to set themselves apart
It shows that weak competition is one of
from competitors. In a differentiation strategy, low
the fundamental factors that explain limited
cost is only one of many possible factors that may
growth, productivity, and employment in the
set aside a business from others. Business that
economy. Maintaining a competitive environment
differentiates themselves typically look for one or
requires coordinated policies to implement
more marketable attributes that they have than
continued liberalization and deregulation in
can set them apart from their competitors. They
tandem with the necessary support measures that
then find the segment of the market that finds
will address the structural obstacles to the entry
those attributes important and market to them.
and growth of domestic enterprises. These efforts
The process can also work in the other direction
should be pursued jointly with well-functioning
with businesses conducting research to
competition and regulatory agencies.
determine which things consumers find most
important and then developing a niche market for
those products or characteristics.
 Defensive Strategies  Head-to-Head Competition
Another way for business to gain a competitive In some cases, companies will compete directly
advantage is to utilize a defensive strategy. The with their top competitors. They will not try to
advantage gained by this type of strategy is that it perform well, but they will also try to make it
allows the business to further distance itself from difficult for their opponents to do well. Since the
its competition by, in some sense, maintaining a opponents may be also using such tactics, they
competitive advantage it has gained. Therefore, will need to use good defensive measures to
this strategy is closely related to differentiation deflect the attacks.
and cost leadership because it is a method used
 Controlling Supplies
by businesses to keep those advantages in place
once they have been attained. Whereas the other One way in which a company can deter their
two strategies are more offensive in nature. This opponents from doing well is to try to control the
strategy becomes an actual advantage as it supplies. By outbidding in vital supplied or
becomes increasingly difficult for so-called controlling suppliers can be done to hinder the
competitors to offer any real opposition to the opponents. However, make it sure that suppliers
business. will benefit from your business if you want to
control them.
 Alliances
 Advertising
Competitive advantages can also be gained by
businesses that seek strategic alliances with Marketing and advertising sometimes employ
other businesses in related industries or within negative ads about the competitors. The best ads
the same industry. Businesses have to be careful indicate lack of quality of the competition through
not to cross the line between alliances and the use of implication.
collusion, though. Collusion occurs when
businesses within the same industry work  Distribution
together to artificially control prices. Strategic Controlling the distribution of products is another
alliances, on the other hand, are more along the method of deterring the competition. Beer and
lines of joint ventures that businesses use to pool beverage companies will gain contracts to be the
resources and gain themselves exposure at the sole distributor at ballparks.
expense of other competitors not in the alliance.
 Predatory Competition
Large companies have been known to buy out
TYPES OF BUSINESS COMPETITION smaller competitors. Or they may simply make it
 Performance Competition difficult for the company to stay in business.

Many companies are aware of their competition  Supplier

but are mainly concerned in their immediate  Suppliers are party that supplies goods or
business, getting customers and satisfying those services. A supplier may be distinguished from
customers. a contractor or subcontractor, who commonly
adds specialized input to deliverables. Also
By providing good products and services, these called vendor.
companies hope to be successful and even lead
the pack. Marketing and making the customers  Supplier, is a supply chain management term
aware of their products and company is also done that means anyone who provides goods or
to improve their business performance. services to a company individual.
 Suppliers are individuals or businesses that
By using Total Quality Management (TQM) or Six-
provide goods or services to vendors in return
Sigma methods and confronting the ISO 9000
for the agreed upon compensation. A such
Standards, a company can enhance their ability
suppliers do not generally interact with
to make quality products and have a well-run
consumers directly, leaving that task to
company.
vendors or shop owners. It is not unusual for a
Many companies are aware of their competition supplier to provide volume discounts to
and their position in the marketplace, so they vendors when they agree to sign long-term
simply try to do their best to meet their customers’ contracts or place orders for large quantities.
needs. In this case, ‘the cream rises to the top”.
IMPACT OF SUPPLIERS TO BUSINESS
1. Quality Underemployment – is a condition in which
Supplier components can positively or negatively affect workers are employed in less than full-time or
the quality of your product. Higher quality increases regular jobs or insufficient jobs for their training or
customer satisfaction and decreases returns, which
adds cash to your bottom line. economic needs.

2. Timeliness
Their timely deliveries are crucial to how customers view ECONOMY
your reliability. A quick turnaround can become the key
to minimizing your inventory, which in turn translates to In recent times, the Philippines has been
less risk of inventory obsolescence and lower cash transitioning from agricultural-based economy to
needs.
one that increasingly relies on services and
3. Competitiveness manufacturing. Agriculture now only accounts for
They can give you the one-up on your competition roughly 30% of the workforce and about 14% of
based on their pricing, quality, reliability, technological GDP.
breakthroughs and knowledge of industry trends.

4. Innovation EFFECTS OF PESO DEOPRECIATION

Suppliers can make major contributions to your new AGAINTS US DOLLAR
product development. Remember, they live their product
more than you do; they’re working to be on the cutting 1. Higher prices in peso terms for imported
edge of innovation for their product. The good ones will goods and services.
understand your company, its industry and needs, and 2. A weak peso will negate the impact of falling
can help you tweak your new idea. crude oil prices abroad
5. Finance 3. Increase in the pump-prices of gasoline and
If you’ve proven to be a considerate, loyal and paying other petroleum products.
customer, you may be able to tap into you suppliers for 4. It fuels inflation due to increase in the price of
additional financing once you hit growth mode–or if you
imported goods.
run into a cash crunch. That financing may take the form
of postponed debt, extended terms on new purchases, a 5. Higher debt servicing on the part of
loan, or an investment in your company. government
6. Domestic tourists find it expensive to visit
places abroad because they will need more
APPLICATION OF SUPPLY AND DEMAND
pesos to buy dollars.
How the Price of Basic Commodities Works? 7. Exporters and OFW’s and their dependents
now receive more pesos for every dollar they
If the quantity demanded changes a lot when exchange.
prices change a little, a product is said to be 8. Foreign tourists find it attractive to visit the
elastic. When there is a small change in demand Philippines with they dollars buying more
when prices change a lot, the product is said to pesos.
be inelastic.

CONTEMPORARY ECONOMIC ISSUES

LABOR SUPPLY, POPULATION GROWTH, FACING THE FILIPINO ENTREPRENEUR
AND WAGES
Investment and Interest Rates – is an economic
Labor laws and regulations have been devised to sense, an investment is the purchase of goods
protect labor from abuses by employers and to that are not consumed today but are used in the
improve the power of labor to bargain decent future to create wealth. In finance, an investment
wages and working conditions. is a monetary asset purchased with the idea that
the asset will provide income in the future or
appreciate and be sold at a higher price.
EMPLOYMENT, UNEMPLOYMENT, AND
UNDEREMPLOYMENT
THE DETERMINANTS OF INVESTMENT
Employment – is an agreement between an
employer and an employee that the employee will 1. The Expected Return on investment
provide certain services. 2. Business Confidence
3. Changes in National income
Unemployment – it occurs when someone is
4. Interest Rates
willing to work but does not have a paid job.
5. General Expectations
6. Corporation Tax
7. The Level of Savings

THREE CHALLENGES FOR THE FILIPINO

ENTREPRENEURS
1. Government Licensing and Permits
2. Prohibitive Rental rates and other Clauses in
Malls
3. There are Many Who Have Hobs
\

CURRENT PROBLEMS OF FILIPINO

ENTREPRENEURS
1. Inadequate access to technology
2. Financing capital
3. Marketing advice
4. Logistical problems in setting up and
maintaining their competitiveness in their
community

TAXES IN THE PHILIPPINES

 The 19-year-old personal and corporate
income tax systems of the Philippines are the
“most uninviting and out of date” among the
Association of the Southeast Asian Nations
(ASEAN) economies, several economists
said.
 The Philippines currently has the second
highest personal and highest corporate
income tax systems among its ASEAN-6
peers.

TYPES OF BUSINESS TAXES

1. Value-Added Tax (VAT)
2. Salary and Wage Taxes
3. Amusement Taxes
4. Excise Taxes
5. Import Taxes
6. Individual Income Tax
7. Corporate Income Tax
8. Real Estate Taxes
9. Estate or Inheritance Taxes

EFFECTS OF HIGH TAXES ON BUSINESS

1. Inadequate Incomes
2. Low Wages
3. High Prices
4. Substandard Products
5. Product Unavailability and Continuation
6. Poverty and High Crime