Applied Economics Reviewer 1

APPLIED ECONOMICS
Business Organizations
1. Sole proprietorship - It is by a single individual who is singly responsible for running the
business and is accountable for all debts and obligations related to the business.
2. Partnership - is an agreement in which two or more persons combine their resources in a
business to make a profit.
Two types of partnership:
• General Partnership-partners divides responsibility for management and liability.
• Limited Partnership- other partners are limited and contribute only capital, take no
part in control or management and are liable for debts to a specific extent only.
3. Corporation - is a legal entity that is separate from its owners, the shareholders.
4. Cooperative - is an entity organized by people with similar needs and is operated for their
mutual benefit.
Different Tools and Techniques in Creating a Business

 Steps to starting a business
STEP 1: The Business Plan: Creating and Starting the Venture
STEP 2: Get a Business Assistance and Training
STEP 3: Location
STEP 4: Capital/Equity
STEP 5: Determine your Business’ Legal Structure
STEP 6: Register Business
STEP 7: Tax
STEP 8: Licensing
STEP 9: Responsibility
 Different Tools and Techniques in Creating a Business

 VMOST Analysis
VISION - The aspirational statement that describes the desired long-term outcome or
future state of an organization.
MISSION - The purpose or reason for the organization's existence, including its
values and principles.
OBJECTIVES - Specific, measurable goals that help fulfil the mission.
STRATEGY/TACTICS - The plan of action designed to achieve the objectives and,
ultimately, the vision
 SWOT Analysis
- simply means Strength, Weaknesses, Opportunities and Threats.
- It is a business framework that helps to assess a wide variety of factors that
may have a profound impact on a business’s performance.
- It may either be internal to a company or external.
External Sources - these are those that affect a company, an organization, an individual and
those outside their control.
Strength
- identifying factors that are within the control of the firm
- factors that firm can capitalize on
Weaknesses
- factors that causing negative impacts on a company’s performance
- are within the control of the firm but have not been addressed
Opportunities
- positive external forces that impacts the firm’s industry or several industries
- outside the control of the firm
- consider to look on the pestle factors
Threats
- factors that are harmful to a business outside its control
 PESTEL Analysis
Political – government regulations and legal factors are assessed in terms of their
ability to affect the business environment and trade markets.
-political stability
-tax guidelines
-trade regulations
-safety regulations
-employment laws
Economic – through this factor, businesses examine the economic issues that are
bound to have an impact on the company.
-inflation
-interest rates
-economic growth
-the unemployment rate and policies
-the business cycle followed in the country
Social – With these, a business can understand how consumer needs are shaped
and what brings them to the market for a purchase. A business can analyze the
socio-economic environment of its market via elements
-customer demographics
-cultural limitations
-lifestyle attitude
-education
Technological – How technology can either positively or negatively impact the

introduction of a product or service into a marketplace is assessed here.
-technological advancements
-lifecycle of technologies
-the role of the Internet
-spending on technology research by the government
 PORTER’S 5 FORCES OF ANALYSIS
Socio Economic Factors Affecting Business Entity

1. Income capacity - Income capacity of consumers determines how much they can spend on
certain products.
2. Occupation - The occupation of consumers is largely related to the income they earn.
3. Educational level - Education levels influence the type of occupation a person can get and
ultimately their income level.
4. Economic Growth - Economic growth and development of a country can also have an
impact on the social status of its citizens.
Socio Economic Impact of a Business

1. Consumer – as long as new business can provide new goods and services, better quality of
goods and more options, the consumer can benefit from it.
2. Government – the government will also benefit from the establishment of new business,
through revenues earned on fees collected from them and on taxes imposed on the income of
the businesses.
3. Suppliers and Investors – a new business will also provide opportunities for suppliers and
investors. Many suppliers will now get a chance to sell to the newly established business,
which means income for them. Demand for goods provided by the suppliers will increase.
4. Households - new business mean employment opportunities for the Filipinos. Those who
have jobs but are earning low wages may find better paying jobs with the new companies.
Unemployed workers may have the chance to be employed.
5. Community – Corporate social responsibility (CSR) has a growing trend among
businesses today. as a result, these corporations and even small businesses have increased
their focused-on projects that they can provide scholarships for the poor but deserving
students, allocating budgets for housing for low -income families.
BUSINESS ICONS
MANUEL V. PANGILINAN – Philippines business icon- 2008 he was the 39th richest man
in the Philippines. Among his notable accomplishments were:
• PLDT
• SMART COMMMUNICATIONS
• METRO PACIFIC INVESTMENTS

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APPLIED ECONOMICS

Different Tools and Techniques in Creating a Business

 Different Tools and Techniques in Creating a Business

Technological – How technology can either positively or negatively impact the

Socio Economic Factors Affecting Business Entity

Socio Economic Impact of a Business

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