APPLIED ECONOMICS

Different Principles, Tools,

and Techniques in Creating a
Business
Group 2
 For a person to put up a business, it is essential that a
comprehensive analysis must first be made. According to
Richard Lannon (2016), "there are many tools and
techniques that can be applied to a strategic analysis. The
challenge is selecting the best approach, tools, and
techniques to use given the business problem or
opportunity."
 Understanding the objectives that you want to achieve
based on your mission and vision that you have envisioned
in your business proposal which should be always aligned.
This is why the following common analysis tools will be
very important for us to achieve a thorough study.
 Common Analysis Tools and Techniques

VMOST Analysis The Swot The TOWS

Analysis Analysis

Porter's Five PESTLE

Forces 02 Analysis

Group 2
VMOST Analysis

VMOST stands for Vision, Mission, Objectives,

Strategy, and Tactical. VMOST is a tool that can help
you determine whether your business activities are in
line with your plan and strategies Because alignment is
crucial to the success of a strategy, so this can be a
useful process to go through.
VMOST Analysis

This Guideline in using VMOST analysis consists

on 4 Steps. In each of these Steps, it proposes to define
certain Factors related to the Company (Consuunt, n.d.).
 4
Steps
1. Vision & Mission:
• Vision: How you see the Market, and its
Future.
• Mission: The Role that the Company plays
in it.
2. Objectives: The Goals to be Achieved (and When).
•They should be Defined and Measurable
 4
Steps
3. Strategy: What Methodology will be used to achieve those
Goals.

• It will vary depending on the project.

4. Tactics: What Actions will be used to comply with that

Strategy.
Example of VMOST
Analysis

Here is another example from Consuunt (n.d.):

1. Vision & Mission:

• Your Vision: High-quality Food is very expensive
and must be accessible to everyone.
• Your Mission: To offer high quality food in an
affordable and attractive way for everyone.
Example of VMOST
Analysis
2. Objectives
• Have the Restaurant Open and fully operational
before 6 months.
• Have a 10% Profit Margin.
• 20% of your Clients must be Loyal Clients.
3. Strategy
• Customer Satisfaction is at the center of everything.
• You'll focus on a Total Quality approach.
 Example of VMOST
Analysis

4. Tactics
• You'll implement a Continuous Learning process to
find what your Customers value the most.
• You'll use recipes that people know but employing
good products.
• You'll check Social media to track How your
Customers perceive your Restaurant...
• You'll analyze your Income and Costs once a
month.
The SWOT
Analysis

The SWOT analysis was created in the 1960's by

business gurus, Edmund P. Learned, C. Roland
Christensen, Kenneth Andrews, and William D. Brook
in their book, "Business Policy, Text and Cases"
(Sathyabama, n.d.).
 The SWOT
Analysis
SWOT, which stands for Strengths, Weaknesses,
Opportunities, and Threats, is an analytical framework that can
help a company meet its challenges and identify new markets.
The framework can help identify the business's risks and
rewards. It is also a means of identifying the internal and
external forces that may affect the business. It is very helpful in
assessing new ventures.
 The SWOT
Analysis
The initiators, Learned, Christensen, Andrews, and Book
used a diagram as guide for identifying the company's strengths
(S), weaknesses (W), opportunities (O), and threats (T). S
(strengths) and W (weaknesses) actually refer to the internal
factors, and these are the resources and experiences readily
available to the business proponent. Usually included as internal
factors are:
 Internal
Factors
1. Financial resources such as money and sources
of funds for investment,

2. Physical resources, such as the company's

location, facilities, machinery, and equipment
3. Human resources consisting of employees;

4. Access to natural resources, trademarks,

patents, and copyrights; and
 Internal
Factors

5. Current processes, such as employee

programs, department hierarchies and
software systems, sales and distribution
capabilities, marketing programs, etc.
 External
Factors

On the hand, when we speak of external forces, these are

those that affect a company, an organization, an individual,
and those outside their control. These may include:

1. Economic trends including local, national and international

financial trends, developments in the country's stock market,
reforms in the banking system, growth of the Gross Domestic
Product;
 External
Factors

2. Market trends, such as new products or technology or

evolving buyers' profiles, including changes in tastes and
lifestyle behaviour;

3. National and local laws and statutes as well as political,

environmental, and economic regulations;
 External
Factors

4. Demographic characteristics of the target market such as

the age, the gender, the culture of the customers;

5. Relationships with suppliers and co-owners; and

6. Competitive threats.
 The SWOT
Analysis
Before an owner can plan for its business' future, he/she
must first evaluate the business by identifying and analyzing
internal and external resources and threats. The SWOT analysis is
a tool that can help a proponent by enabling him/her to identify
and assess the internal and external forces that can affect the
business, When used properly and regularly, this can serve as
guide for the company to attain success.
 The SWOT
Analysis
It is a guide to prepare for a new venture, design
business strategies, and identify areas of change and reform.
When used properly, the business owner can anticipate
problems, including possible solutions and take advantage of
identified opportunities. The owner can maximize its
strengths and attempt to cut out its weaknesses (Dinio &
Villasis 2017).
Table 1. Table for SWOT Analysis template.
Strength Weakness

S W
O T

Opportunity Threat
 The SWOT
Analysis
When drafting a SWOT analysis, what is created is a
table split up into four columns to list each element side by
side, for comparison. Most of the time, the business'
strengths and weaknesses will not match the listed
opportunities and threats, and this is where the owner should
attempt to somehow make them meet.
 Table 2. Sample SWOT Analysis.
Strengths Weaknesses
Government incentives Difficulty of organization
Low capital requirements Costly set-up
Market acceptance
Experienced leaders
Opportunities Threats
Project may replace imported
Entry of competitors
goods available in the market Time consuming production
Will improve employee welfare process
Improved company reputation Opposition from residents in the
community
 The TOWS
Analysis
TOWS Analysis is a variant of the classic business tool,
SWOT Analysis created by Heinz Weihrich. It is a variant of
the classic business tool, SWOT Analysis. Both TOWS and
SWOT are having the same acronyms for Strengths,
Weaknesses, Opportunities and Threats, and in reverse order
of the words.
 The TOWS
Analysis
TOWS analysis first matches internal factors to external factors
to help identify relevant strategic options that an organization could
pursue. By combining the external environment's opportunities and
threats with the internal organization's strengths and weaknesses,
we can come up with four basic strategies. It can help an
organization to see how it can take advantage of opportunities,
reduce threats, overcome weaknesses and exploit any strengths.
 4 TOWS
Strategies
As a result, you structure your thinking to cover all
strategic perspectives with corresponding action items:

Strengths/Opportunities (SO) Strength/Threats (ST)

Weaknesses/Opportunities (WO) Weaknesses/Threats (WT)

 Strengths/Opportunities (SO):

Consider all strengths one by one listed in the

SWOT Analysis with each opportunity to determine
how each internal strength can help you capitalize on
each external opportunity.
 Strength/Threats (ST):

Consider all strengths one by one listed in the

SWOT Analysis with each threat to determine how
each internal strength can help you avoid every
external threat.
 Weaknesses/Opportunities (WO):

Consider all weaknesses one by one listed in the

SWOT Analysis with each opportunity to determine
how each internal weakness can be eliminated by
using each external opportunity...
 Weaknesses/Opportunities (WO):

Consider all weaknesses one by one listed in the

SWOT Analysis with each opportunity to determine
how each internal weakness can be eliminated by
using each external opportunity...
 Weaknesses/Threats (WT):

Consider all weaknesses one by one listed in the

SWOT Analysis with each threat to determine both
can be avoided.

The inner four squares inside the Matrix

represent what happens when the corresponding
column and row labels come together.
 Porter’s Five Forces

Porter’s Five Forces is a framework to analyze

the potential profitability of a marketplace. It was
invented by Michael Porter in 1979 and has been used
consistency by thousands of companies across the
world since originally being published (GetLucidity,
n.d.).
 Porter’s Five Forces

Five Forces looks at five key areas in a market that

impact your price and profitability. The forces
analyzed are:

• Bargaining power of Buyers

• Bargaining power of Suppliers
• Threat of Substitutes
• Threat of New Entrants
• Competitive Rivalry
 Full List of Five Forces Factors

To help kickstart your analysis on Five Forces here’s a

list of the factors you should be considering
(GetLucidity, n.d.).
1.Competitive Rivalry
• Range of products and services offered
• Brand loyalty
• Number of competitors in market
• Ease of switching between providers
• Market growth rate
• Industry lifecycle point
Full List of Five Forces Factors

2. Power of Buyers

• Number of buyers and market size

• Value of each buyer
• Ease of switching to competitor
• Number of options for buyers
• Alternative options for buyers
• Sensitivity to price points
 Full List of Five Forces Factors

3. Power of Suppliers

• Number of suppliers in market

• Size of suppliers in market
• Risk of supplier moving into your market
• Cost point of suppliers
• Substitution options for the supplier product or service
• Ease to move between suppliers
• Differentiation of suppliers offering
• How big a customer you are to the suppliers
 Full List of Five Forces Factors

4. Threat of New Entrants

• Brand reputation
• Customer loyalty
• Your differentiation
• Market growth rate
• Entry capital requirements
• Economies of scale
• Logistics and distribution networks
 Full List of Five Forces Factors

4. Threat of New Entrants

• Skills requirements
• Ease of access to technology
• Input requirements
• Operational margins
• Industry knowledge requirements
• Government regulation
• Ease for customers to move provider
 Full List of Five Forces Factors

5. Threat of Substitution

• Current substitute products on offer

• Reasons for buyer churn
• Price of substitute vs product or service
• Quality of substitute vs product or service
• Cost of switching
• Usage trends
• External trends
PESTLE Analysis

PESTLE analysis is a strategic management tool that

businesses use to identify macro-economic factors that it
needs to consider. The word 'PESTLE' stands for the six
factors Political, Economic, Social, Technological,
Legal, and Environmental. Together, they form the basis
for identifying key issues that may impact the strategic
direction of the company (Boyce 2021).
 Here are the factors elaborated below by De Bruin (2016):

Political
These factors are all about how and to what degree
a government intervenes in the economy or a certain
industry. Basically, all the influences that a
government has on your business could be classified
here. This can include government policy, political
stability or instability, corruption, foreign trade policy,
tax policy, labor laws, environmental law and trade
restrictions.
 Political

Here are the guide questions:

• What government policies or political groups could

be beneficial or detrimental to our success?

• Is the political environment stable or likely to

change?
Economic Factors

Economic factors are determinants of a certain

economy's performance. Factors include economic
growth, exchange rates, inflation rates, interest rates,
disposable income of consumers and unemployment
rates.
Economic Factors

Here are the guide questions:

• What economic factors will impact on us moving

forward?
• Does the current economic performance affect us?
• How does each economic factor impact our pricing,
revenues, and costs?
 Social Factors
This dimension of the general environment represents the
demographic characteristics, norms, customs and values of
the population within which the organization operates. This
includes population trends such as the population growth
rate, age distribution, income distribution, career attitudes,
safety emphasis, health consciousness, lifestyle attitudes and
cultural barriers. These factors are especially important for
marketers when targeting certain customers.
 Social Factors

In addition, it also says something about the local

workforce and its willingness to work under certain
conditions.
Here are the guide questions:

• How do our consumer's values and beliefs impact on

their buying habits?
• How does human behavior or cultural trends play a
role in our business?
 Technological Factors

These factors pertain to innovations in technology that may

affect the operations of the industry and the market favorably
or unfavorably. This refers to technology incentives, the level
of innovation, automation, research and development (R&D)
activity, technological change and the amount of technological
awareness that a market possesses. These factors may influence
decisions to enter or not enter certain Industries, to launch or
not launch certain products or to outsource production activities
abroad.
 Technological Factors

By knowing what is going on technology-wise, you may be

able to prevent your company from spending a lot of money on
developing a technology that would become obsolete very soon
due to disruptive technological changes elsewhere. Here are the
guide questions:

• What innovations and technological advancements are

available or on the horizon?

• How might they affect our operations?

 Environmental Factors

Environmental factors have come to the forefront only

relatively recently. They have become important due to the
increasing scarcity of raw materials, pollution targets and carbon
footprint targets set by governments. These factors include
ecological and environmental aspects such as weather, climate,
environmental offsets and climate change which may especially
affect industries such as tourism, farming, agriculture and insurance.
Furthermore, growing awareness of the potential impacts of climate
change is affecting how companies operate and the products they
offer.
 Environmental Factors

This has led to many companies getting more and more

involved in practices such as corporate social responsibility
(CSR) and sustainability.
Here are the guide questions:

• What regulations and laws apply to our business?

• Do they help or hinder our business?

• Do we understand the laws across all our markets?

 Legal Factors
Although these factors may have some overlap with the
political factors, they include more specific laws such as
discrimination laws, antitrust laws, employment laws,
consumer protection laws, copyright and patent laws, and
health and safety laws. It is clear that companies need to know
what is and what is not legal in order to trade successfully and
ethically. If an organization trades globally this becomes
especially tricky since each country has its own set of rules and
regulations.
 Legal Factors

Here are the guide questions:

• How does our physical environment affect us and vice versa?

• What are the effects of climate, weather or geographical

location?

• Are we prepared for future environmental targets?

THANK YOU!!