12

ENTREPRENEURSHIP
QUARTER 3– 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

For queries, please contact us:

Contact Messenger
Name of Teachers
Number
CHERRY ANN F. ULANDAY 09185916580 Cherry Ann Fernandez Ulanday
RIESSA H. REYES 09269980203 Riessa HR
ROSEMARIE L. GARCIA 09972174526 Rosemarie Llena Garcia
ROWENA P. MONTES 09685149365 Rowena Pugalmontes
 OVERVIEW
One of the traits of an entrepreneur is being innovative opportunity seekers for they always
discover and love new things or ideas and see if these will work in the marketplace. This is
what makes them different from other businessman whose aimed is just simply to earn profits
from producing, buying and selling. But an entrepreneur they see to it that the product or service
they offer in the market will really proposed solutions based on viability, profitability and
customer requirement by means of doing such research, survey and analysis. And once have just
successfully hurdled such analysis and after being able to assess what enterprise and
product/service they intend to put up, they find out what business opportunities their
environment currently offers, and which among these will be wise to pursue and select the best
product/service that will meet the customer’s need. So in this module we will be discussing how
to determine market viability, profitability and customer requirement for a product or service.
This is a little bit more technical for it entails a considerable degree of experience and expertise
to really appreciate how the tools discussed in this study apply to the business enterprise. And
this module is good for two weeks.

LESSON 5: TOOLS TO BE USED TO DETERMINE PRODUCT AND

SERVICE VIABILITY, PROFITABILITY AND
CUSTOMER REQUIREMENT.

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. Analy zing 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 offeri ng same products. The figure below illustrates the relationships of the elements
in the SWOT Matrix.

POSITIVE NEGATIVE

S
Strengths
W
Weaknesses

O
Opportunities T
Threats

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.

Barriers to
Entry

Bargaining Bargaining
Power of Power of
Suppliers Porter’ Buyers
s Five
Forces

Threat of Rivalry of
Substitutes Competition

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.
 ENTREPRENEURSHIP
12 Quarter 3- Module 5
Module Title: Tools to be used to Determine product/service Viability,
Profitability and Customer requirement
1
Subject Teacher: ____________________________
Name: ______________________________________________________Date: _____________
Grade/Section: _________________________________________________________ Score:____________

SUMMATIVE ASSESSMENT

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

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