APPLIED

ECONOMICS
• INDUSTRY AND ENVIRONMENT ANALYSIS: BUSINESS
OPERATION IDENTIFICATION
ECONOMIC ANALYSIS OF
PROFIT MAXIMIZATION

• Profit
• Is the gap or difference between revenue and cost.
Thus, the condition of for maximum profit is when
marginal revenue is equal to marginal cost.

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FACTORS LEADING TO PROFIT
MAXIMIZATION
Profitability Factors Minimal Profit Medium Profit High Profit

Market Concentration Many sellers Few Sellers One seller

Market Entry No barriers to Entry Some Scale Barriers Scale and legal Barriers
Contestable Market Gov’t Barriers

Product Differentiation Homogenous Good Some degree of Product Highly Differentiated

differentiation Product

Information Perfect Information for all Limited Information Very limited Information
Participants

Market Power No market power Limited Market Power High Market Power
Market Structure Perfect Competition Oligopoly or Monopoly
Monopolistic Competiton

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MARKET CONCENTRATION

This refers to the number of sellers and buyers in

the market.
The more concentrated the market means the
lesser producers are there in the industry. These few
suppliers command huge market power in determining
the price the price in the industry.

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BARRIERS TO ENTRY

This refer to inherent features of the

industry and the various means devised in the
market to prevent the entry of potential players
and competitors that want to take advantage of
the enormous profit in industry.

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Two categories of Market Barriers

Scale Barriers refer to requirements for a large

production plants for a feasible operation in the industry.
Legal Barriers refer to proprietary rights and their
corresponding legal protection extended to existing market
players in the production and distribution of a product or
service.

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PRODUCT DIFFERENTIATION

This factor refers to the ability of a business firm

to create a market niche through several means of
varying its products and services. The ability of the
business enterprise to convince the buyers that its
products or service it is selling is different from similar
products and services can give market power to the
firm.

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LIMITED INFORMATION

This element refers to the unevenness in

the distribution of information among the actors
in the market. When market actors are not
evenly informed those with more information
can have market power and extract surplus front
the other actors.

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POSTER’S FIVE FORCES OF
COMPETITIVE POSITION

• Competition among existing firms in the

industry
• Bargaining power of customers
• Bargaining power of suppliers
• Threats of potential entrants
• Threats of substitute goods

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ENVIRONMENTAL SCANNING IN
INDUSTRY ANALYSIS

World Economy

Changes in the Government

Natural Regulation and
Environment policies

Firm

Social Changes
Technological
Development

Demographic
Changes

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 ENVIRONMENTAL SCANNING IN
INDUSTRY ANALYSIS
• National and Global Economies
A potentially profitable business venture thrives in a
favorable business climate which in turn is set in a vibrant
economy.
• Government Policies and Regulations
The government will always be there to regulate the tax
not only business but also business transactions. It should
be recognized that government is an institution that
exercises control over commercial ventures.
 ENVIRONMENTAL SCANNING IN
INDUSTRY ANALYSIS
• Demographic Changes
From the country’s population business enterprises draw primarily their
customer. As population expands, it creates additional demand for product and
services can enhance the profitability of business companies and several
industries.
• Social Changes
• Modifications in family structure and other social changes have impact on
consumer behavior and tastes.
• For example, with traffic congestion in Metro Manila getting worse many
students and young professional have opted alternative measures to address
this daily toll on their lives.
 ENVIRONMENTAL SCANNING IN
INDUSTRY ANALYSIS

• Changes in Natural Environment

• We have identified various spheres of environments
that affects businesses but there is an environment that
affects all sectors- the natural environment.
• Heavy monsoon rain and strong typhoon can destroy
agricultural produce that can drastically reduce supply
and affect the price of agricultural commodities.

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QUIZ:

1. It Is the gap or difference between revenue and cost.

2. This refers to the number of sellers and buyers in the market.
3. This refer to inherent features of the industry and the various means
devised in the market to prevent the entry of potential players and
competitors that want to take advantage of the enormous profit in
industry.
4. It refer to requirements for a large production plants for a feasible
operation in the industry.
5. This element refers to the unevenness in the distribution of
information among the actors in the market.

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6 – 10 Poster’s Five Forces Of Competitive Position
PRINCIPLES, TOOLS,
AND TECHNIQUES
a. competition
b. customers
c. suppliers
d. competitors
e. substitutes
A. COMPETITION

Principles of Competition
- Competition is the quest for achieving
superior results, the best results in a specific
field, in business, in sports, or in social
activities, the best results compared to
others. Competition is the fight for a limited
resource, for a prize or for an award.
 TOOLS OF COMPETITION

• Positioning Comparisons - This is a matter of branding and general

positioning. Gartner Magic-Quadrant is the name of a series of market
reports. The reports contain a vast amount of research done on four types of
technology providers in fast-growing markets allowing a broad view of your
competitors and market share
• Product Comparisons - Advertising campaigns, discounts, and specials are
common knowledge, easily found on websites, brochures, TV advertising, etc.
What Runs Where- is a handy tool for monitoring your competitors’ ads. It
covers many ad networks and countries, allowing you to track competitors
worldwide.
 Tools of Competition
• SEO - There are numerous tools to help determine how your
website performs. Google Insights- to understand industry
trends, consumer insights and content possibilities. It's a good way
to compare yourself to the market and see where your brand is
placed.
• Websites - These days, customers google your business or go
directly to your website before you even know they’re a customer.
WooRank- helps to better your website based on the results of
a project analyzing either your site or your competitors.
 TOOLS OF COMPETITION

• Social Media - A key factor in this marketing climate is analyzing the

integration of social media into their marketing strategy. InfiniGraph-
keeps you up to date with trends in your specific industry. It's beneficial
for both competitor analysis and improving your own content.
• Blogging - Subscribe to your competitors’ blogs. Check out customer
engagement through shares and comments. SocialMention- focuses on
blogs and social media, tracking keywords and company names, allowing
you to keep track of what’s said across social platforms - and with what
sentiment.
TECHNIQUES OF COMPETITION

1. Create Utility and Usefulness with your

Product.
2. Change Your Pricing
3. Emphasize Your Product’s Key Benefit to
the Customer
4. Deliver True Value of Your Product to Your
Customer
 B. COSTUMERS
PRINCIPLES FOR CUSTOMERS
• Speed- speed or responsiveness shows up in almost all
studies as a main determinant for service quality.
• Accuracy- besides being fast, your service answers
should, obviously, be correct. Johnston's study shows
that customers regard accuracy as the minimum. It
won't raise customer satisfaction, but inaccuracy
definitely causes dissatisfaction.
 PRINCIPLES FOR CUSTOMERS

• Transparency- "what the hell is taking so long?" We all

recognize this feeling. Not knowing what is happening or
what makes us feel uneasy which is why transparency is just
as critical to service as speed and accuracy.
PRINCIPLES FOR CUSTOMERS

• Accessibility- if your customer has a problem, how easy is it

for him or her to get in touch. For a long time, the entire
customer service theory focused on delighting the
customers on exceeding expectations.
• Empowerment- We all lie to feel in control. A good service
offers this feeling to its customers.
 TOOLS FOR CUSTOMERS

• Online communities - Online communities allows customers to engage with other

customers, give direct feedback on products, and share their passion for your
product or brand.
• Discussion Forums - A forum is a specific type of online community that creates an
opportunity for crowd sourcing. Here, you can collect and respond to customer
feedback.
• Automatic callback - we've all had the unpleasant experience of being put on hold
for an annoyingly long period of time. By the time an operator is able to assist you,
you're already irritated at having had to wait for X amount of time. If your service
system allows a user to enter their phone number for an agent to call them back
without losing their place in the service queue, even better.
TOOLS FOR CUSTOMERS

• Live chat - As more people shopping online, there are

people are looking for online support. Offering a live chat
option is another way to foster a good online experience
for your customers. Live chat options can be used for more
than just customer service questions its also a good way to
provide information that might encourage a purchase
decision.
TECHNIQUES FOR CUSTOMERS

• Engage in active listening- Active listening is essential for

effective communication. It allows for a better understanding
of the customers' needs and shows a willingness to help. Allow
the customer to talk without interruption, reflect back their
main question or concern and ask clarifying questions when
necessarily.
• Highlight Understanding- Ensure that each customer is aware
that you understood their needs. By using active listening
techniques and asking relevant questions, you will
communicate that you understand them and are making an
effort to help solve their problem.
 TECHNIQUES FOR CUSTOMERS

• Be Courteous- Be polite and have respect for your customers. Always use
"please", and "thank you" and create an inviting environment for the customers.
• Call the customer by his name- Ask the customer their name and pronounce it
correctly. This communicates respect for the customer and lets them know that
they are important.
• Go the extra smile- demonstrate through actions that the customer is
important by giving more than the minimum effort required. By taking the
initiative to provide better service or give the customer something extra,
customers will feel valued and appreciated.
 TECHNIQUES FOR CUSTOMERS

• Ask, don’t demand- Statements can sound harsh. Asking appropriate questions
makes the conversation more collaborative.
• Empower- Empower customers with adequate information to make informed
decisions. When there are options, thoroughly describe each available
alternative. By offering choices, customers will be more involved in solving
their problems. This results in a higher level of customer satisfaction.
• Be proactive - Engage in proactive steps to satisfy the customer’s needs. Being
proactive will also help to reduce barriers when problem solving.
 TECHNIQUES FOR CUSTOMERS

• Highlight pros and cons- When describing a product or service, include both
its strengths and weaknesses relative to alternatives. By providing balanced
recommendations, customers will view you as more credible. This increases
trust and customer satisfaction.
• Explain- Customers are not always familiar with your company’s policies or
procedures. Thoroughly explain to customers what you’re doing and why
you’re doing it. A clear understanding tends to decrease customer frustration.
• Use plain language- Avoid technical terms, jargon and acronyms. Be
professional, concise and clear.
QUIZ

• 1-3. Give 3 examples of Principles?

• 4-5. Give 2 examples of Tools
• 6-7. Give 2 examples of Techniques
• 8-10. In your own opinion why do we need Principles, Tools,
and Techniques for the customers.
 C. SUPPLIERS

Principles of Suppliers
• The media has been dominated by horror stories of supply
chain failure over the past several weeks.Despite an increasing
number of organisations embracing supplier relationship
management (SRM) in recent years, most implement
programs with insufficient skills and capabilities at their
disposal, and a lack of understanding of the capacity or
bandwidth required to assure sustained success.
 PRINCIPLES OF SUPPLIERS

• Relationship with applicable laws - The Supplier shall comply with all national laws
and all laws applicable to the Supplier and its operations
• Human rights- The Supplier shall respect internationally recognized human rights
• Labor rights and working conditions - The Supplier shall respect internationally
recognized rights and principles as set out in the International Labour
Organization’s Core Conventions and Declaration on Fundamental Principles and
Rights at Work.
 PRINCIPLES OF SUPPLIERS

• Health and Safety- The Supplier shall promote the good health of
Workers, and shall provide and maintain a safe and secure working
environment in accordance with applicable laws and internationally
recognised standards
• Environment- The Supplier shall take a precautionary approach
towards environmental and climate challenges, ensure that
responsible practices for managing environmental impacts are in
place, and encourage the development and diffusion of
environmentally friendly technologies
 PRINCIPLES OF SUPPLIERS

• Privacy, freedom of expression and data protection: The Supplier

shall appropriately recognize and respect privacy and freedom of
expression within the Supplier’s operations.
• Prohibited Business Practices
• Competition - The Supplier shall always meet competitors in an
honest and professional manner
• Bribery, Corruption and Fraud :The Supplier shall comply with
applicable laws and regulations concerning bribery, corruption and
fraud
 TOOLS TO THE SUPPLIERS:

• Talk to your suppliers regularly.

• Pay your suppliers' accounts promptly.
• Communicate with a supplier before the due date for payment, should you foresee a delay in paying an account.
• Build good relations with your current suppliers' representatives.
• Be fair but firm with industry sales representatives – they can easily take up a lot of your time.
• Avoid rush orders wherever possible – they can cause significant stress in your business and put a strain on the
relationship with your suppliers.
• Monitor the financial position of your suppliers – talk with industry colleagues and competitors about the general
financial stability of those businesses that supply goods and services to you.
• Address any issues of concern in relationships with your suppliers as they arise.
• Refer damaged or faulty goods to the supplier promptly, with supporting documentation.
• Be prepared to review and renegotiate the terms of trade with your suppliers from time-to-time.
 TECHNIQUES TO THE SUPPLIERS:

• Regular communication - One important quality of managing your suppliers is regular and
constant communication
• Putting objectives in place - Another important step you can take to better manage your
relationship with your supplier has to do with putting objectives in place at the beginning of
the production process.
• Regular meetings - Regular meetings are another way to insure effective communication
between your business and your supplier
• Putting things in writing - One of the most important things you can do when it comes to
managing your relationship with your supplier involves putting things in writing.
• Make sure you’re focused on your supplier’s needs, alongside yours - Just as your business has
its own unique requirements which need attending to, so will your supplier
 D. COMPETITORS
PRINCIPLES OF COMPETITOR'S :

• Race Yourself And Set The Tone (That’s Faster Than Everyone Else) - The most
important piece is this—how focused you are on your goals, and how
enthusiastic you are with your craft.
• Don’t Sell To Prospects—Push Boundaries To Fragment And Attract The Right
Prospects - Do what doesn’t feel safe and what others won’t say
• Make A Plan To Be #1 In Your Segment - If you don’t know how markets work
and blindly attacking one—you’re planning for mediocrity
• Grow Faster Than Everyone Else - Grow faster than everyone else is not asking
you to have the the growth gods come down and make it rain growth
 TOOLS OF COMPETITORS:

• SimilarWeb — Widely used as a traffic estimation tool, SimilarWeb has loads of cool
features that let you peek behind the scenes at your competitor’s strategy.
• Audiense — This service will help you analyze your competitors’ audience based on
their Twitter followers.
• Builtwith — Dig deep into your competitor’s website technologies and tools with this
handy service. Builtwith can uncover their web server, advertising services they use,
analytics technologies, and much more.
• Simply Measured — A free tool from SimplyMeasured called Facebook Competitive
Analysis can easily compare your Facebook fan page with that of your rival.
• Rival IQ — Rival IQ will analyze your social media performance across all the major
social networks and compare it to your competition.
PRINCIPLES, TOOLS AND
TECHNIQUES
(SUBSTITUTES)

REPORTED BY: AILA J. BARRIENTOS

WHAT IS
PRINCIPLES?
• The Principle of Substitution is the
basis for the market data approach to
appraisal. This principle says that the
maximum value of a property usually is
established by the cost of acquiring an
equivalent substitute property that has
the same use, design, and income.
• The principle of substitution is
extremely important in real
estate. It is the process used
that identifies alternatives that
would satisfy the same want,
desire, or need.
• The Principle of Substitution is the
basis for the market data approach
to appraisal. This principle says
that the maximum value of a
property usually is established by
the cost of acquiring an equivalent
substitute property that has the
same use, design, and income.
3 TYPES OF PRINCIPLES
OF SUBSTITUTION.
1. The cost approach - if a buyer can build a
home for less money than an existing
property cost, he won't pay more for the
existing property.

2. The sales comparison approach - if

properties are similar and competitive in
terms of utility, the property with the lowest
price will likely have the greatest demand.
3. The income capitalization
approach - if a tenant is going to
rent a property, he will likely rent
the property that costs less but
delivers the same satisfaction and
utility than a higher-priced rental
property.
• In economics, one way that two
or more goods can be
classified is by examining the
relationship of the demand
schedules when the price of
one good changes.
• This relationship between demand
schedules leads to classification of
goods as either substitutes or
complements. Substitute goods
are goods which, as a result of
changed conditions, may replace
each other in use or consumption.
QUIZ:

1-3. What are the three types of

principles?
4-5. It is the basis for the market data
approach to appraisal.
6-7. In economics, one way that two
or more goods can be classified.
How do we classified it?
8. If a buyer can build a home for less money than
an existing property cost, he won't pay more for
the existing property. What kind of principle it is?
9. If a tenant is going to rent a property, he will
likely rent the property that costs less but
delivers the same satisfaction and utility than a
higher-priced rental property. What kind of
principle it is?
10. if properties are similar and competitive in
terms of utility, the property with the lowest price
will likely have the greatest demand. What kind of
principle it is?