WEB DEVELOPMENT NC III

Basic Competency
UOC9. FACILITATE ENTREPRENEURIAL SKILLS FOR MICRO-SMALL-MEDIUM
ENTERPRISES (MSMEs)
LO1. Develop and Maintain Micro-Small Medium Enterprise (MSMEs) Skills
in the Organization

Information Sheet 9.1-1: Business Models and Strategies

What is a business model?

A business model outlines how a company plans to increase its revenue or
essentially make a profit with its products, services and customer base. Each model
helps support a business and aims to give customers a reason to choose one
company over another. Not only does a model explain what it plans to sell, but also
its plans to market a product or service, expected expenses and plans to make a
profit.

Why are business models important?

Business models enable you to create value from new ideas. While it's important to
have ideas for your products and services, you also need to answer key questions
on how to take these ideas to the next step—all of which a business model can help.
A business model also helps you think about a company and highlight its key
components to teams and stakeholders. In addition, business models help
companies manage their strategies and create new growth. Having a business
model also lets you determine how a company does things now and how it can do
these things better in the future.

Components of a business model

Though business models vary in form and function, they all feature the same
essential components. While all business models aim to increase revenue, they
include many other factors outside of income. Here are the main components of a
business model:
 Value proposition: A value proposition is a description of the products and
services a company plans to sell, as well as a reason as to why they're
desirable to the company's target audience. Ideally, a value proposition also
explains how a company's product or service differs from its competitors.
 Target market: A company's target market refers to a group of consumers
that's interested in its products and services. Identifying the company's
target market in a business model can help you create an effective marketing
strategy, all while ensuring you're keeping your market's interests at the
forefront.
 Startup costs: A new company's business model should include projected
startup costs and explain where or how the company hopes to secure
financing.
  Competitive advantage: Since many companies offer similar products and
services, the business model must include unique features about unique
offerings that competitors don't provide.
 Cost structure: A business model also needs to include a list of the
company's fixed and variable expenses to operate. In addition, it needs to
include how both fixed and variable costs affect pricing.
 Key metrics: Key metrics refer to a company's primary method of
measuring success. Essentially, this should describe how the company knows
it's on track to meet its goals.
 Resources: A business model should include details regarding your
company's physical, financial and intellectual resources or assets. This
information shows what resources to allocate to help the business model
succeed.
 Problem and solution: This refers to the target customer's pain points.
Along with identifying their issues, a business model must also explain how
the company plans to resolve or meet them.
 Revenue model: A revenue model is a framework or outline for how a
company plans to generate income. The business model should identify
income sources a company intends to pursue.
 Revenue streams: This refers to how a company plans to generate income.
Companies generate income in many ways, such as selling their products or
services.
 Profit margin: A profit margin explains how a business uses its revenue to
make a profit. This lets you see how well a company generates income from
its regular operations.

Types of business models

1. Distributor business model

Companies have one to three key distribution channels in a distributor business
model to reach their final customer. If your company uses this model, it doesn't
need to manufacture its products. Instead, it can focus on product distribution. With
this business model, distributors can set prices to earn a profit and use various
promotional strategies to ensure sales.

2. Bricks and clicks

A bricks and clicks business model is essentially an extension of an in-store
shopping experience. In this model, stores offer online ordering with the option of
in-store pickup or online-exclusive items. This allows them to offer additional
flexibility to current customers and appeal to potential consumers.

3. Aggregator business model

In an aggregator business model, an aggregator acts as an intermediary between
the involved parties. This model lets a company work with various goods and
service providers and lets it sell its offerings under its brand. This form of business
model is common in the travel industry.
4. Conceptual business model
This business model is a diagram that details an industry's or business functions.
Companies that require concepts and ideas to create unique or innovative products
can benefit from a conceptual business model. This type of business model typically
involves research to develop new ideas.
Example: A car company creates a conceptual model of a new car to be introduced
in the market. It develops the design after consumer research to understand what
appeals most to consumers.

5. Razor blade business model

In a razor blade business model, companies offer a primary product cheaply and a
complementary product or refill at an expensive rate. The latter essentially serves
as bait since it seems like customers receive a bargain. When a company offers a
cheaper product, it hopes its customers eventually purchase more expensive
accessories. Companies use this model when they have a complementary product
that can encourage customers to make another purchase.

6. Franchise business model

A franchise is an established business purchased and reproduced by a buyer known
as the franchisee. The original owner, known as the franchise, works with the
franchisee regarding various business operations such as financing and marketing
to ensure the business runs and operates like its predecessor. In this business
model, the franchiser receives a percentage of the profits from the franchisee.

7. Crowdsourcing business model

In a crowdsourcing business model, companies receive feedback, opinions and work
from various people through the internet. Companies using this business model can
access an extensive network of talent instead of hiring in-house employees.
Companies utilizing the crowdsourcing business model can generate profits by
hosting content and advertisements.

8. Peer-to-peer (P2P) business model

A P2P business refers to a platform wherein two individuals interact to buy and sell
products and services with each other. This business model eliminates the need for
third-party involvement. They may also produce goods and services together.

9. Bundling business model

In a bundling business model, companies sell two or more products as part of a set
or single unit. Typically, they offer this set at a lower price than they would if they
sold each product separately. With a bundling business model, companies can
increase their sales volume and potentially sell products or services that tend to
undersell when sold individually.

10. Ecommerce business model

The ecommerce business model relies on the internet to sell goods. This business
model aims to sell products through a website known as an online shop.
The ecommerce model includes the business-to-consumer, business-to-business,
consumer-to-business, and consumer-to-consumer models.

11. Manufacturer business model

A manufacturer business model involves manufacturers converting raw materials
into products for companies to sell. Remember that even if companies create
products using parts manufactured by another company, they're still considered
manufacturers. In the manufacturer business model, companies make money by
selling to other businesses or retailers.

12. Leasing business model

In a leasing model, a company purchases a product from a seller. Then, the
company charges another company to use said product. Products that work well
with the leasing business model include medical or manufacturing equipment.

Source:
https://www.indeed.com/career-advice/career-development/business-model-
example

Information Sheet 9.1-2: Types and categories of businesses

There are different types of businesses to choose from when forming a company,
each with its own legal structure and rules. Typically, there are four main types of
businesses: Sole Proprietorships, Partnerships, Limited Liability Companies (LLC),
and Corporations. Before creating a business, entrepreneurs should carefully
consider which type of business structure is best suited to their enterprise.

#1 Sole Proprietorship
A sole proprietorship is an unincorporated company that is owned by one individual
only. While it is the most simple of the types of businesses, it also offers the least
amount of financial and legal protection for the owner. Unlike partnerships or
corporations, sole proprietorships do not create a separate legal identity for the
business. Essentially, the owner of the business shares the same identity as the
company. Therefore, the owner is fully liable for any and all liabilities incurred by
the company.

An entrepreneur may choose this option if they want to retain full control of the
company. Additionally, it is a relatively easy and inexpensive process to establish a
sole proprietorship. There are also tax benefits, as income is considered the owner’s
personal income and therefore only taxed once. Finally, there are relatively few
regulation requirements for sole proprietorships.

#2 Partnership
As the name states, a partnership is a business owned by two or more people,
known as partners. Like sole proprietorships, partnerships are able to take
advantage of flow-through taxation. This means that the income is treated as the
owners’ incomes so it is only taxed once. Owners in partnerships are responsible for
the liabilities of the firm. However, there are some nuances to this. There are
different types of partnerships: general partnerships, limited partnerships, and
limited liability partnerships.

 General Partnerships: This is the easiest type of partnership to form, with

few upkeep costs. Every partner is considered as participating in the
operations of the business, and there is unlimited liability for every partner.
This means that every partner’s personal assets can be used to repay the
liabilities of the partnership. This also means that each partner is responsible
for every other partner’s actions.
For example, John and Dave are in a general partnership. If John is sued for
malpractice, Dave’s personal assets may also be claimed against in the
lawsuit.
 Limited Partnerships: This type of partnership has at least one general
partner. This general partner takes on unlimited liability for the partnership
and manages the operations of the company. Additionally, there are also
limited partners in limited partnerships. Limited partners only take on as
much liability as their financial stake in the business. However, as limited
partners, they are not involved in management decisions and do not have
any direct control over the company.
 Limited Liability Partnerships (LLP): LLPs are similar to general
partnerships, where multiple partners are each responsible for the operations
of the business. However, partners in LLPs are not personally responsible for
the actions of other partners or the debts of the business. Unfortunately, not
all businesses can be LLPs. This type of business is often restricted to certain
professions, such as lawyers or accountants.

In general, as compared to other types of businesses, partnerships offer more

flexibility but also have greater exposure to risk.

#3 Limited Liability Company (LLC)

Limited liability companies (LLCs) are one of the most flexible types of businesses.
LLCs combine aspects of both partnerships and corporations. They retain the tax
benefits of sole proprietorships and the limited liability of corporations. LLCs are
able to choose between different tax treatments. As long as the LLC chooses not to
be treated as a C corporation, it retains its flow-through taxation status.

Additionally, LLCs benefit from limited liability status. In LLCs, the company exists
as its own legal entity. This protects the owners of the LLCs from being personally
liable for the operations and debts of the business.

#4 Corporation
Corporations are a separate legal entity created by shareholders. Incorporating a
business protects owners from being personally liable for the company’s debts or
legal disputes. A corporation is more complicated to create, as compared to the
other three types of businesses. Articles of incorporation must be drafted, which
include information such as the number of shares to be issued, the name and
location of the business, and the purpose of the business.

In sole proprietorships and partnerships, if one of the owners passes away or

declares bankruptcy, the company is dissolved. Corporations exist as a legally
separate entity. Therefore, they are protected from this situation and will continue
to exist even if the owner of the business passes away.

There are three main types of corporations:

 C Corporation: This is the most common form of incorporation. The
corporation is taxed as a business entity and owners receive profits that are
then also taxed individually.
 S Corporation: This is similar to a C corporation but may only consist of up
to 100 shareholders. S corporations are pass-through entities like
partnerships, so profits are not taxed twice.
 Non-Profit Corporation: Often used by charitable organizations, non-profit
corporations are tax exempt. All forms of incoming cash flow must be utilized
to spend on the organization’s operations or future plans.

Source:
https://corporatefinanceinstitute.com/resources/management/types-of-businesses/

Information Sheet 9.1-3: Business operation

Business operations refer to activities that businesses engage in on a daily basis to

increase the value of the enterprise and earn a profit. The activities can be
optimized to generate sufficient revenues to cover expenses and earn a profit for
the owners of the business.

Business Operations in Different Industries

The operations of a business vary across industries, and they are structured
according to the requirements of the specific industries. Mastering the operations of
a specific industry can help the business achieve success. Here is an analysis of
business operations in different industries:

1. Retail industry
One of the main goals of a retail business is to stock products that customers are
looking for and at a price that the customers are willing to pay. This means that the
business must maintain an efficient inventory system so that it knows what is in
stock at any given time, while reducing instances of dead stock. Dead stock refers
to products that the company has in stock but that are not in high demand.
In order to maximize revenues, the business should stock fast-moving items that
customers are willing and happy to pay for. The business should also negotiate
friendly credit terms with suppliers so that they can get the required products on
credit to prevent stock-outs.

2. Service industry
The business operations of a service business are divided into the front-end and
back-end side of the business. The management must ensure that the two divisions
are running efficiently to prevent laxity on one side, which can hinder the
achievement of the company’s objectives. On the front end, the business should
focus on streamlining the service delivery to customers to increase their
satisfaction. It should also formulate a means of receiving feedback and complaints
from customers to know their expectations and how to improve service delivery.

On the back end, the management should employ the right people in each
department. For example, the company should appoint trained and experienced
staff to prepare forecasts for client projects to prevent the actual costs from
exceeding client budgets.

3. Manufacturing industry
Manufacturing companies are involved in turning raw materials into physical
products, which are then sold to consumers. One of the things that a manufacturing
company can do to achieve efficiency is to source quality raw materials from
credible suppliers. For perishable and edible products, the business should look into
how raw materials are stored, processed, and shipped to consumers.

The company can also eliminate bottlenecks that increase processing times to save
time during manufacturing and shipping. If the company is struggling with shipping
logistics, it can outsource shipping and concentrate on other areas of the business
that it excels in.

4. Technology industry
The key to streamlining operations of a technology company is hiring the right staff
and training them on how to execute the tasks they are assigned. This means that
the company should put a hiring criterion in place that helps them hire the best
candidates for the job. The company should also come up with an internal training
and mentorship program where senior staff works hand-in-hand with junior staff to
help them perfect their skills.

Another way of increasing efficiency is by collaborating different tools such as apps,

websites, and systems that the company uses. The company’s management should
continually monitor internal and external processes to spot any glitches and address
these issues quickly.
Source:
https://corporatefinanceinstitute.com/resources/management/business-operations/
#:~:text=Business%20operations%20refer%20to%20activities,the%20owners
%20of%20the%20business.

Information Sheet 9.1-4: Basic Bookkeeping

Bookkeeping is the practice of recording and tracking the financial transactions of a

business. Bookkeepers regularly summarise this activity into reports that show how
the business is doing. They may also perform wider tasks such as invoicing, paying
bills, preparing tax returns, monitoring key performance indicators, and providing
strategic advice.

History of bookkeeping
Evidence of financial record keeping has been found in Mesopotamia, Babylon,
Sumer and Assyria as far back as 7000 BC. Archives have been discovered, showing
the recording of accounts from farm produce in ancient Greece as well as from the
Roman Empire.

But it’s in the 15th century that the roots of modern bookkeeping can be found. And
fittingly, there are two entries in the history books for who documented the double-
entry system. Some credit Benedetto Cotrugli and his 1458 book Of Commerce and
the Perfect Merchant. But most regard Luca Pacioli as the father of bookkeeping, for
his 1494 book Review of Arithmetic, Geometry, Ratio and Proportion.

An Italian mathematician and Francisan monk, Pacioli wrote the first popular
description of the double-entry system and the use of various bookkeeping tools
such as journals and ledgers. His book became the teaching tool for bookkeeping
and accounting for the next several hundred years. Bookkeeping became a
recognized profession in the UK and US in the 1800s.

An introduction to bookkeeping basics

Here are some basic bookkeeping concepts and definitions that you should know.
They’re central to the methods and processes that a bookkeeper follows to create
accurate accounts:
 Ledger: The place where business transactions are recorded and categorized
 Accounts: The categories under which all business transactions fall
 Assets: Things the business has bought and owns (or part-owns), inventory,
and money owed to the business as accounts receivable
 Liabilities: Amounts the business owes in unpaid bills, taxes, wages, or
loans
 Equity: Money introduced and withdrawn by the owner or shareholders
 Revenue: Money coming into the business through sales, interest or
dividends
  Expenses: Money paid out to keep the business running
 Financial statements: Reports that shows the financial activities and
performance of a business – two main ones are the balance sheet and profit
and loss statement
 Balance sheet: Lists the things your business owns and their value, plus the
amounts your business owes
 Profit and loss (P&L) statement: Totals the revenue and expenses for a
set period of time and demonstrates how the business is trading
 Chart of accounts: A list of all the accounts you use to record financial
transactions in your ledger. They’re also called general ledger codes.
 Journal entry: The name given to any record made in the accounts

The difference between bookkeeping and accounting

Bookkeeping traditionally refers to the day-to-day upkeep of a business’s financial
records. Bookkeepers used to simply gather and quality-check the information from
which accounts were prepared. But their role has expanded over time, and we’ll
look at how in the next chapter.

Accounting refers to the analysis, reporting and summarizing of the data that
bookkeepers gather. Accounting reports give a picture of the financial performance
of a business, and determine how much tax is owed.

An accounting degree requires deep education and training in tax and other laws
with which businesses need to comply, plus finance and business management.
While some bookkeepers may have developed similar skills, that level of training
isn’t required to be called a bookkeeper.

Bookkeeper vs. Accountant

 Bookkeeper: A bookkeeper is someone who’ll accurately record financial
data of a business. They’ll make sure that every entry is correct while logging
all of the transactions in the books. In simple terms, bookkeepers record and
organize all financial data. However, this can often be done monthly,
quarterly or even annually.
 Accountant: Accountants are mainly responsible for generally overseeing
accounts and producing financial statements and tax returns that comply
with the law. Accountants will adjust entries made by bookkeepers at the end
of each fiscal period to help make more informed business decisions.

The first concept to get you started as a beginner is to know how you’ll complete
your records. Typically, there are three popular options:

 Spreadsheets: They can be a good starting point to get you up and running.
Although they’re suitable for smaller businesses, you’ll find that it could be a
challenging maintaining them as your business grows and human errors can
creep in too.
 Accounting Book: If you’re just keeping track of simple accounting records,
then an accounting book can be the answer. However, the manual process
 isn’t for everyone, especially with the government introducing the Making
Tax Digital (MTD) initiative.
 Bookkeeping Software: To comply with MTD, you will have to use a
bookkeeping app or desktop software. To make the process simpler, look for
a solution that takes the confusion out of bookkeeping with easy-to-
understand phrasing and the critical features that you’ll need.

Basic Types of Bookkeeping

 Cash: The account where all business transactions pass. This is an important
account that often bookkeepers use two journals, cash receipts and cash
disbursements, to track the activity.
 Accounts Receivable: If your business sells products or services and you
don’t collect money immediately, then you have receivables. This account
tracks the money due from customers. This needs to be kept up-to-date so
you can send accurately and timely invoices.
 Inventory: The account where you account for all of the products you have
in stock. The numbers you have in your books should be tested by doing
physical counts of inventory on hand.
 Accounts Payable: The account that allows you to see what money is
leaving or has left the business - and when. This account gives you a clear
view of everything you need to pay and makes sure that you don’t pay
anyone twice.
 Loans Payable: The account which tracks and breaks down everything that
you still owe and when payments are due for anything that you’ve borrowed.
 Sales: The account where you track all of your incoming revenue from sales
transactions. This is another important account, as recording sales accurately
and in a timely manner helps to know where your business stands.
 Purchases: The account where you track any materials or goods that you
have bought for your business. This is a key component of calculating Costs
of Goods Sold which you subtract from Sales to find your business’ gross
profit.
 Payroll Expenses: The account where you track salaries and wages paid to
your employees. This is often the biggest cost of all for many businesses.
Keeping this accurate is essential for meeting tax and other reporting
requirements.
 Retained Earnings: This account tracks any of your company’s profits that
are reinvested in the business and aren’t paid out to the owners. The
earnings here are cumulative, so they appear as a running total of money
that’s been retained since the company started. It’s a good way of tracking
how well your business has done over time.

Basic Bookkeeping Terms

 Balance Sheet: A report which breaks down your business’ financial
situation. It includes the assets, liabilities and the capital of the business. Its
purpose is to help show what your business owes and owns.
  Chart of Accounts: A full list of accounts used in your business to
categorize financial transactions. This can include assets, liabilities, equity,
income and more.
 Expense: This is the fixed, variable, accrued or day-to-day costs that a
business may incur through its operations.
 Trial Balance: A business document where all ledgers are compiled into
debit and credit columns. This is to make sure a company’s bookkeeping
system is mathematically correct.
 Profit and Loss: A financial report which shows the revenue and expenses
over a period of time.

Sources:
https://www.xero.com/ph/guides/what-is-bookkeeping/introduction-to-bookkeeping/
https://www.easybooksapp.com/blog/bookkeeping-for-beginners-basic-concepts-to-
get-you-started

Information Sheet 9.1-5: Business internal controls

Internal control is a process, affected by an entity’s board of directors, management

and other personnel, designed to provide reasonable assurance:
 That information is reliable, accurate and timely
 Of compliance with applicable laws, regulations, contracts, policies and
procedures
 Of the reliability of financial reporting

Internal controls are intended to prevent errors and irregularities, identify

problems and ensure that corrective action is taken. In many cases, process owners
within your department perform controls and interact with the control structure on a
daily basis, sometimes without even realizing it because controls are built into
operations.

Internal control structure

The internal control structure is derived from the way management runs an
operation or function and is integrated with the management process. Although the
components apply to the entire company, small and mid-size departments may
implement them differently than large ones do. Together, they are designed to
provide reasonable assurance that overall established objectives and goals are met.

The internal control structure consists of five inter-related components:

 Control environment – The control environment sets the tone of an
organization, influencing the control consciousness of its people. Control
environment factors include (1) the integrity, ethical values and competence
of the entity's people; (2) management's philosophy and operating style; (3)
the way management assigns authority and responsibility and organizes and
 develops its people; and (4) the attention and direction provided by the
University. Additional examples are:
o Tone from the top
o University policies
o Organizational authority
 Risk assessment – Risk assessment is the identification and analysis of
relevant risks to achievement of the objectives, forming a basis for
determining how the risks should be managed. Examples include:
o Monthly meetings to discuss risk issues
o Internal audit risk assessment
o Formal internal departmental risk assessment
 Control activities – Control activities are the policies and procedures that
help ensure management directives are carried out. They include a range of
activities as diverse as approvals, authorizations, verifications,
reconciliations, reviews of operating performance, security of assets and
segregation of duties. Additional examples are:
o Purchasing limits
o Approvals
o Security
o Specific policies
 Information and communication – Pertinent information must be
identified, captured and communicated in a form and timeframe that
enable people to carry out their responsibilities. Information systems produce
reports containing operational, financial and compliance-related information
that makes it possible to run and control the organization. Effective
communication also must occur in a broader sense, flowing down, across and
up the organization. Examples include:
o Vision and values or engagement survey
o Issue resolution calls
o Reporting
o Communications (e.g., emails, meetings)
 Monitoring – Internal control systems need to be monitored, a process that
assesses the quality of the system's performance over time. This is
accomplished through ongoing monitoring activities, separate evaluations or
a combination of the two. Ongoing monitoring occurs in the course of
operations. Internal control deficiencies should be reported upstream, with
serious matters reported to top management and the Regents. Examples
include:
o Monthly reviews of performance reports
o Internal audit function

Internal control types

Different risks and environments require different controls. The control types
described below can be used in combination to mitigate risks to the organization.

Preventive and detection controls

  Preventive controls attempt to deter or stop an unwanted outcome before
it happens. Examples include use of passwords, approval, policies
and procedures.
 Detection controls attempt to uncover errors or irregularities that may
already have occurred. Examples include reconciliations, monitoring of actual
expenses vs. budget, prior periods and forecasts.

Hard vs. soft controls

 Hard controls are formal and tangible. Examples include organizational
structure, policies, procedures and segregation of duties
 Soft controls are informal and intangible. Examples include tone at the top,
ethical climate integrity, trust and competence

Source:
https://audit.ucsf.edu/internal-controls

Information Sheet 9.1-6: Basic quality control and assurance concepts

Quality assurance (QA) is any systematic process of determining whether a product

or service meets specified requirements.

QA establishes and maintains set requirements for developing or manufacturing

reliable products. A quality assurance system is meant to increase customer
confidence and a company's credibility, while also improving work processes and
efficiency, and it enables a company to better compete with others.

The ISO (International Organization for Standardization) is a driving force behind QA

practices and mapping the processes used to implement QA. QA is often paired with
the ISO 9000 international standard. Many companies use ISO 9000 to ensure that
their quality assurance system is in place and effective.

Importance of quality assurance

Quality assurance helps a company create products and services that meet the
needs, expectations and requirements of customers. It yields high-quality product
offerings that build trust and loyalty with customers. The standards and procedures
defined by a quality assurance program help prevent product defects before they
arise.

Quality assurance methods

Quality assurance utilizes one of three methods:
 Failure testing, which continually tests a product to determine if it breaks
or fails. For physical products that need to withstand stress, this could involve
testing the product under heat, pressure or vibration. For software products,
 failure testing might involve placing the software under high usage or load
conditions.
 Statistical process control (SPC), a methodology based on objective data
and analysis and developed by Walter Shewhart at Western Electric Company
and Bell Telephone Laboratories in the 1920's and 1930's. This methodology
uses statistical methods to manage and control the production of products.
 Total quality management (TQM), which applies quantitative methods as
the basis for continuous improvement. TQM relies on facts, data and analysis
to support product planning and performance reviews.

QA vs. QC
Some people may confuse the term quality assurance with quality control (QC).
Although the two concepts share similarities, there are important distinctions
between them.

In effect, QA provides the overall guidelines used anywhere, and QC is a production-

focused process – for things such as inspections. QA is any systematic process for
making sure a product meets specified requirements, whereas QC addresses other
issues, such as individual inspections or defects.

Source:
https://www.techtarget.com/searchsoftwarequality/definition/quality-assurance

Information Sheet 9.1-7: Government and regulatory processes

The Philippine government has established various acts that affect businesses
operating in the Philippines. These laws cover many areas, including labor
standards, taxation, consumer protection, and environmental regulations. By
following these legal provisions, businesses can operate ethically and avoid legal
issues that could harm their reputation.

1. Foreign Investments Act

Republic Act No. 7042 or the Foreign Investments (FI) Act is a Philippine law that
seeks to entice foreign investment. Its primary purpose is to create a
comprehensive framework for foreign investment. The act outlines the rules and
regulations for foreign-owned businesses to enter, establish, and operate in the
Philippines. Since it was enacted in 1991, the law has undergone multiple
amendments to attract more foreign investors to Philippine businesses.

One of its amendments allows foreign investors to own up to 100% of a business,

with some limitations and requirements. It also provides them with benefits such as
tax holidays and simplified customs procedures. To avail of these benefits, foreign
investors must register their investments with authorized government agencies and
secure the necessary permits and licenses to operate their businesses in the
country.

Corporate Recovery and Tax Incentives for Enterprises Act

One of the newer acts implemented in the Philippines is Republic Act No. 11534,
also called the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
This became effective in 2021 to provide economic relief to businesses affected by
the COVID-19 pandemic. It offers support by reducing corporate income tax rates
and granting additional incentives to companies.

Under this, small businesses with a taxable income of up to PHP 5 million can
benefit from a corporate income tax rate of 20%. In comparison, larger businesses
with a taxable income of over PHP 5 million will have their corporate income tax
rate from 30% to 25% over the next few years.

To be eligible for the incentives, businesses must register with the Philippine
Economic Zone Authority (PEZA) or the Board of Investments (BOI). On top of that,
they must also fulfill specific criteria such as investing in certain industries, creating
jobs, and using locally sourced materials.

Philippine Competition Act

Republic Act No. 10667 or the Philippine Competition Act (PCA), is a law established
in 2015 that aims to promote fair competition in trade and commerce within the
country. This law sets out the legal framework for competition policy and regulation
to prevent anti-competitive behavior in the market.

The PCA includes provisions that safeguard consumers from fraudulent, unjust, and
unreasonable sales practices brought by close-fisted sellers. It also requires
businesses to disclose product information to consumers. Furthermore, this law
promotes fair competition in public procurement and government contracts, aiming
to create a transparent procurement process.

Barangay Micro Business Enterprises Act

To support the growth of micro-enterprises in the Philippines, Republic Act No.
9178, the Barangay Micro Business Enterprises (BMBE) Act, was signed into law in
2002. If your business has assets not exceeding 3 million with not more than 10
workers, it qualifies for BMBE. To register, your business needs to comply with the
requirements set by the Department of Trade and Industry (DTI) or the local
government unit where you operate.

This law offers a way for micro-businesses to register as BMBEs and gain access to
benefits, such as exemption from income tax and other fees for the first three years
of operation. They are also exempted from the minimum wage law and can avail of
government financing programs and technical assistance.
Revised Corporation Code of the Philippines

Finally, Republic Act No. 11232, also known as the Revised Corporation Code of the
Philippines, was fully effective in 2019, which updated the previous Corporate Code
in 1980. This law was recently updated to make good changes to the requirements
for the establishment and operation of corporates in the country.

For instance, it reduces the minimum number of incorporators required to form a

corporation from five to two and a one-person corporation and allows the formation
of a one-person corporation. This law also allows the use of electronic signatures
and documents to simplify the process of incorporating a company.

It’s clear that this offers more protection for minority shareholders and strengthens
the corporate governance framework, which is now enjoyed by many corporations.

Source:
https://sciencepark.com.ph/blog/acts-that-affect-businesses-in-the-philippines/

SELF-CHECK 9.1-1

1. A new company's business model should include projected startup costs and
explain where or how the company hopes to secure financing.
a. Startup cost
b. Value proposition
c. Target market
d. Cost structure
 e. Competitive advantage

2. Identifying the company's ____________ in a business model can help you

create an effective marketing strategy, all while ensuring you're keeping your
market's interests at the forefront.
a. Startup cost
b. Value proposition
c. Target market
d. Cost structure
e. Competitive advantage

3. It is a description of the products and services a company plans to sell, as

well as a reason as to why they're desirable to the company's target
audience.
a. Startup cost
b. Value proposition
c. Target market
d. Cost structure
e. Competitive advantage

4. A business model also needs to include a list of the company's fixed and
variable expenses to operate.
a. Startup cost
b. Value proposition
c. Target market
d. Cost structure
e. Competitive advantage

5. Since many companies offer similar products and services, the business
model must include unique features about unique offerings that competitors
don't provide.
a. Startup cost
b. Value proposition
c. Target market
d. Cost structure
e. Competitive advantage