Republic of the Philippines

University of Eastern Philippines

UNIVERSITY OF EASTERN PHILIPPINES LABORATORY HIGH
SCHOOL
University Town, Northern Samar

MODULE 5 in

ENTREPRENEURSHIP
Academic Year 2022-2023

This belongs to:

Name: ______________________________
Grade & Section: ____________________________

RHOAN MAE G. EDRIA

Subject Teacher
For questions or inquiries, you may contact me at this number 09518342506 or send me a private message
through messenger.
DISCLAIMER
No copyright is intended. All information and materials included in these modules are owned by their
respective copyright holders. The school and the teacher (whose name appeared on the cover
page) do not represent nor claim ownership over them.
ENTREPRENEURSHIP
 DEVELOPING A BUSINESS PLAN
Lesson 1: Preparing a Business Plan

Learning Outcomes
 Explain what a business plan is, its focus, types and content.
 Distinguish between a business plan and feasibility plan.
 Determine possible product/service that will meet peoples need by accomplishing
the new product/ new service template.
Definition of a Business Plan
A business plan is “a formal statement of a set of business goals, the reason why
they are believed attainable and the plan for reaching goals. It may also contain
background information about the organization or team attempting to reach those goals.”
Focus of a Business Plan
Externally focused target goals that are important to external stakeholders,
particularly financial stakeholders. They typically have detailed information about the
organization or team attempting to reach goals.
Internally focused business plan targets intermediate goals required to reach
external goals. They may cover the development of new products, a new service, a new It
system, a restructuring of finance, or the refurbishing of a factory.
Categories of a Business Plan
1. Business Plan for Profit – Typically focuses on financial goals.
2. Marketing Plan – Targets changes in perception and branding as its primary
goals.
3. Project Plan – Describes the goals of a particular project.
4. Business Plan for Non-profit and government agency – Tends to focus on service
goals.
5. Operational Plans – Describes the goals of an internal organization, working
group or department.
Contents of Business Plan
A business plan has the following parts:
1. Executive Summary
It guides proponents or investors on the overall feasibility of the proposed
project at a glance. Summarizes the major highlights and findings of each major aspect of
the study. The conclusion of the study is its focal point.
2. Project Background and History
It narrates the project conceptualization and the details the events that led to
the study. It also presents the project proponents, the proposed name of the project, the
type of business proposal/project and the project location.
 3. Management and Personnel Feasibility
It pinpoints the project’s general to specific market feasibility topics. It
presents the market and an analysis of past, present and future demand and supply
situations for the particular product(s). if the conditions presented are feasible, then a look
at the marketing practices of your competitors will be studied. It presents a summary of
sales projections of the project study’s entire duration and the project’s marketing system
and forms design.
4. Production Feasibility
This refers to the manufacturing aspects of the product. It includes the details
of what the products is and how they will be produced/raised using proposed location,
production size (capacity) and lay-out. It also looks into the machineries and equipment,
raw materials and manpower requirements, as well as the detailed civil engineering and lay
outing of the project, as applicable. It also presents the project utilities, wastes and waste
management methods and the production system’s documentation and forms.
5. Financial Feasibility
If enables the entrepreneur to know how much capitalization will be needed to
finance the project and who will be the project’s financiers. It determines the most
adaptable financing scheme, in terms of the financier’s term and conditions of repayment.
It identifies the financial soundness of the business plan with representation of
some assumptions to the financial projections as well as the projected financial statements
and financial analysis including financial ratios, break even points, sensitivity analysis,
project rate of return, and payback period to prove the financial feasibility of the project.
6. Socio Economic Feasibility
This is viewing the project’s feasibility only from the point of view or from the
standpoint of the project’s proponents/investors. This part presents the project’s feasibility
as to how it will be beneficial to other people and entities.
7. Project implementation and Timetable
These include the details of all activities to be considered during the project’s
pre-investment and pre-operating phase and also the time-able of each of these activities.
Sometimes, this is included in the management and personnel feasibility to distinguish pre-
operating from normal operating activities.
Although there is no fixed way of writing a business plan, the introduction
provides a positive overview of the entire study. It includes the mission statement which
answers the following questions:
 Who is the customer?
 What do they need?
 What’s in it for the customer?
 How does the company satisfy its stakeholders?
 A description of the product or service must be stated in the introduction as
well as the market, the company, anticipated sales and profits summarized from the
income statement, and required financing.
Feasibility Study
The preparation of a business plan complements the project feasibility study. The
feasibility study in a major information source in the making critical decision whether to go
or not to go into the business.
The advantages of writing down the results of the feasibility study are as follow:
 The findings can be set out in a clear logical way, so that potential lenders can
understand the business and its likely risks/advantages. The document helps the
entrepreneur to clarify and focus his/her ideas.
 It is a reference material that can be used to plan long term development of the
business.
 The plan can be regularly consulted and updated as a guide to the business.
 When the plan shows that a successful business is possible it makes the
entrepreneur feel more confident to succeed.
 It helps the entrepreneur to decide on how much money is needed and if properly
prepared, it gives the loan agency confidence that their money will be paid.
Most fenders have little understanding of the business and the entrepreneur should
therefore write the business plan in a simple way, avoiding jargon and technical language
as much as possible. If lenders can understand what is involved in the business most likely
they will approve the loan.
It is important to include as much detail as possible as necessary do thorough
research first. It is also important to look outwards from the business to judge what
competitors will do and how the business will develop to become sustainable.
As a requirement, a detailed business plan is prepared before its implementation.
1. Conducting a Feasibility Study
An idea for business is not as sufficient reason to begin production straight
away without having thought clearly about the different aspects involved in actually running
the business. Too often, people invest money in a business only to find out later than there
is insufficient demand for the product or that it is not the type that customers want to buy.
To reduce this risk of failure and losing money, potential producers should go through the
different aspects of running their business in discussion with friends and advisers before
they commit funds or try to obtain a loan. This process is known as doing a feasibility study
and when the results are written down, the document is known as a business plan.
Here is a feasibility study checklist. It consists of questions to be answered in
order to determine the feasibility of a business plan.
Conducting a feasibility study need to be difficult or expensive, but the most
important aspects should all be taken into account to ensure that potential problems are
addressed. These are summarized in the feasibility study checklist given below.
Questions that can be answered by a feasibility study are addressed:
 Is there a demand for the product? (Find out the characteristics required of the
product and the size and value of the market)
 Who else is producing similar products? (Determine the number and type of
competitors)
 What is needed to make the product? (Find the availability and cost of staff,
equipment, service, raw materials, ingredients and packaging)
 What is the cost of producing a product? (Calculate the capital costs of getting
started and operating costs of production)
 What is the likely profit? (Calculate the difference between the expected income
from sales to an estimated share of the market and the costs of production)
Each of these aspects should be looked at seriously. When all the information has
been gathered and analyzed. It is time to make a decision on whether the proposed
investment in the business is worthwhile or whether the producer’s money could be better
spent doing something else. The same considerations should be taken into account when
an existing entrepreneur wishes to diversify production or make new product.
2. Comparison between a Feasibility Study and Business Plan
a. A feasibility study is conducted before a decision to proceed (go/no go)
b. A business plan is prepared after a decision to proceed (go/no go)
c. A feasibility study provides an investigate function.
d. A business plan provides a planning function.

Feasibility Plan Business Plan

1. Is conducted before 1. Prepared after a
a decision to proceed. PLAN decision to proceed.
2. Provides an 2. Provides a planning
investigative function. function.
ACTIVITY 1: Think of a product/service you want to introduce in the market by
accomplishing the new product/service template below.

NEW PRODUCT/SERVICE TEMPLATE

A. What is my product/service?

B. What does my product/service do?

C. How is it different or better that other

product/service?
D. Who will buy the product/service?

E. Why will they buy the product/service?

F. How will the product/service can be

promoted and sold/offered?
G. Who are my competitors?

ACTIVITY 2: Answer the following questions.

1. Explain what a business plan is and its focus?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
2. What are the parts of a business plan? What does it contain?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
3. Distinguish among the types of a business plan.
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________

Lesson 2: Market Analysis

Learning Outcomes
  Describe the unique selling proposition that differentiates one’s product/services.
 Determine who the customers are in terms of:
 Target market
 Customer requirements; and
 Market size
 Validate customer related concerns through
 Interview
 Focused group discussion;
 Survey
INTRODUCTION
To start a business, the first thing to do is to find out what is the demand for the
product by conducting a short market survey.
It is better to do market survey (necessary with assistance from partners or advisers)
because they will then properly understand their customers’ needs and how their business
should operate. If an idea is found to be feasible, this knowledge will in turn give the
confidence to go ahead when problems are encountered knowing that their products is in
demand.
It is important to think in advance about the type of information that is in needed and
to ask people the same question each time, so that their answers can be compared and
summarized. This should be a short exercise to keep the costs low and in-depth market
research is not necessary for most products. A convenient way of doing this is to prepare
simple questionnaires which can be used by entrepreneurs to remind themselves of which
questions to ask.
Sample questionnaire for new product (Tomato Jam)
Question Answers
1. Do you eat other types of Jam?  Yes
 No
2. Which types of jam do you like the List the types
best?

3. Do you think you would like tomato  Yes

jam?  No
 Not sure
1Very 2 3 4 5
Good Good Average Bad Very bad

4. What do you think of the color of

this tomato job?
 5. Do you like having the seeds in the
jam?

6. What do you think about the flavor

of this jam?

7. Do you like the texture of the jam?

8. What do you think about the jar?

9. What do you think about the label?

10. What else do you like about this

jam?

11. Is there anything that I can do

improve this jam?

Sources of New Product/Services

1. Consumer
Monitor potential ideas and needs from customers and formally arrange for
consumers to express their opinions.
2. Existing Products and Services
Analysis of products and services uncovers ways to improve offerings that
may result in a new product or services.
3. Distribution Channels
Channel members can help suggest and market new products.
4. Government (Patent Office)
Files of the patent office can suggest new product possibilities.
New products ideas can come in response to government regulations.
5. Research and Development
Conduct research on your market and your customer needs. This results to
the development and identification of new and improved product and services.

Methods of Generating New Products/Services

1. Focus Group
 A moderator leads a group of 8 to 14 participants through an open, in-depth
discussion in a directive or nondirective manner. This is an excellent method for generating
and screening ideas and concepts. It allows people to be stimulated to greater creativity.
2. Brainstorming
Good ideas emerged when the brainstorming effort focuses on a specific
product or market area.
Rules for Brainstorming:
a. No criticism of ideas or suggestion. Every idea even the wildest, non-feasible idea is
accepted.
b. Freewheeling discussion is encouraged.
c. Quantity of ideas is desired.
d. Combinations and improvement of ideas are encouraged.

3. Problem Inventory Analysis

Consumers are provided with a list of problems and are asked to identify
products that have those problems. Result must be carefully evaluated as they may
not actually reflect a new business opportunity.
Generating New Products/Services for Conventional or Innovative Business
Conventional ideas can be taken from tried and tested business models like opening
up a snack bar in competition with almost 100 others in a particular city. For the innovative
businesses however, a product can be introduced that is not yet known to the market.
Needless to say, it is where experimentation and boldness in business come in.
1. Conventional business scenario
Below are ways to start conventional business.
a. Start a business that you are familiar with.
b. Start a business due to the needs of existing business contacts.
c. Gain business inspiration from your hobby or interest.
d. Gain inspiration from an imported item.
e. Explore the possibility of import business.

2. Innovative business scenario

Here are some ways to introduce an innovative business.
a. Gain inspiration from the needs and wants of customers.
b. Gain an inspiration from the problems and issues that bothered you and
your peers.
c. Study the usual or existing solutions and venture in the alternative
solution.
d. List down existing products and find out their other uses aside from what
was stated
ACTIVITY 2
 1. Identify the product you wanted to introduce in Lesson 1 of Unit 2.
2. Classify whether the product is a conventional or an innovative business.
Survey of Market Size and Value
A different set of questions is needed when assessing the size of the market for a
particular type of product and the value of the market (the amount of money spent on that
product each month or year).
At the same time, it is possible to gather information about the types of people who
buy a particular food and where they buy it.
The information gathered from potentials consumers can be analyzed by the
entrepreneur to get a good idea of the quality characteristics of the product that consumers
prefer, the total demand for the product and the total value of the market.
This involves making a number of assumptions and it is important to consider the
following:
1. Are the people interviewed really representative of all potential’s consumers?
2. Was the number of people interviewed enough?
3. Were people giving accurate information?

Sample questionnaire about market size and value

Questions Answers
About the market size:
1. How often do you buy this product? daily weekly
monthly
2. do you buy different amounts at Yes No
different times of the year?
3. When are the times that you buy the
most?
4. How much do you buy each time? ____ pc.
5. When are the times you buy the least?
6. How much do you buy each time? ____ pc.
7. What is the amount of food in the ₱ ____ per ____ pc.
pack?

ACTIVITY 3: Prepare a survey questionnaire for the product you want to

introduce in Unit II, Lesson 1.

Market share and competition

 Market surveys and the calculation of the market size and value are important
to find out whether the demand for a product really exists.
It is therefore important from the outset, to estimate the proportion of the total
market that a new business could reasonably expect to have. This is referred as the
market share.
It is often difficult to estimate a realistic market share. The figure depends on
a large number of variables.
In many cases, new entrepreneurs over-estimate the share that they could
expect, with the result that production operates at only a small proportion of the
planned capacity.

Example- Estimates of market share for a new food business with different levels of
competition.

Competitors
Competitors are very important to the success or failure of a new business.
The entrepreneur should recognize that there are different types of competitors.

 General competitors
 Type competitors
 Brand competitors

They also compete with profit margin and level of service that they offer to retailers
and with special offers or incentives to customers.

New entrepreneurs must therefore assess each of these factors using

strengths, Weakness Opportunities and Threats (SWOT) analysis.

Example of SWOT Analysis of a New Business in Relation to Competitors

My proposed Competitor A Competitor B

business

Strengths Production likely to be Good brand image and Product is cheaper than
sited close to retailersrange of products. A and sells well. They
than can deliver at short offer good margin to
notice. retailers.
Weaknesses Difficult to find good Products more Poor quality product,
packaging. expensive than B. Uses poor label design. I’m
synthetic colors and told by retailers that
preservatives. supplies are irregular
and not always the
amount ordered.
Opportunities Retailers say demand Strong promotion by A. Appears to be
for products without expanding deliveries to
additives is increasing. I new areas according to
 can produce without newspapers reports.
added colors.
Threats There are few wealthy Cheaper products than May have over-
consumers and price is B. expanded distribution
most important factor. I networks and failing to
am not yet sure of make deliveries.
production costs.

ACTIVITY 5 Prepare a SWOT analysis of the product you want to introduce in Unit
II, Lesson 1 using the format below.

My proposed Competitor A Competitor B

business

Strengths

Weaknesses

Opportunities

Threats

Lesson 3 Marketing Strategies

Learning outcomes
 Describe the marketing mix (7Ps) in relation to the business opportunity vis-a-vis.
0.1 Product
0.2 Price
0.3 Promotion
0.4 Place
0.5 Packaging
0.6 Positioning
0.7 People
 Develop a brand name.
INTRODUCTION
A start up or a company strategy combines all its marketing goals into one
comprehensive plan. A good marketing strategy should be drawn from market research and
focus on the product mix in order to achieve maximum profit and stain the business. The
marketing is the foundation of a marketing plan.
The following questions will help in formulating the marketing strategies;
1. Who is producing similar products?
2. Where are the competitors located?
3. What is the equality and price of their products?
4. What can I do to make a new product that is better than those of the
competitors?
5. Why would customers or consumers want to change to a new product?
6. What offers or incentive do competitors give to retailers?
7. What are competitors likely do if a new product is introduced?

After developing a marketing strategy, there is a “Seven P Formula” that can be used
to continually evaluate and re-evaluate the business activities. These seven are: product,
price, promotion, place, packaging, positioning and people. As products, markets,
customers and needs change rapidly, it is a must to continually revisit these seven Ps to
ensure the business is on track and achieve the maximum results possible in today’s
marketplace.
The 7 Ps in Business Opportunity
1. Product
To begin with, develop the habit of looking as the product as an outside marketing
consultant brought in to help the company decide whether or not it’s in the right business at
this time. Ask critical questions such as, “Is the current product or service, or mix products
and services, appropriate and suitable for the market and for the customers of todays?”
a. Whenever there is difficulty selling as much of the products or services as
planned, there is a need to develop the habit of assessing the business honestly
and asking, “Are these the right products or services for the customers today?”
b. Compared to the competitors, is the product or service superior in some
significant ways to anything else available? If so, what is it? If not, could it be
developed to an area of superiority? Should this product or service be offered at
all in the current marketplace?

2. Price
The second P in the formula is price. Develop the habit of continually
examining and re-examining the prices of the products and services to sell for making sure
they’re still appropriate to the realities of the current market. Sometime there is a need to
lower the prices. At other times, it may be appropriate to raise prices. Many companies
have found that the profitability of certain products or services doesn’t justify the amount of
effort and resources that go into the producing them. By raising their prices, they may lose
a percentage of the customers, but the remaining percentage generates a profit on every
sale. Could this be appropriate?
Sometimes there is a need to change the terms and conditions of sale.
Sometimes, by spreading the price over a series of months or years. It can sell far more
than today and the interest one can charge will more than make up for the delay in cash
receipts. Sometimes products and services can be combined together with special offers
and special promotions. Sometimes it can include free additional items that cost very little to
produce but make the prices appear far more attractive to customers.
In business an experience of resistance or frustration in any part of the sales
or marketing plan, gives the entrepreneur an opening to revisit the area. Be open to the
responsibility that the current pricing structure is not ideal for the current market. Be open to
the needed revise the prices, if necessary, to remain competitive, to survive and thrive in a
fast-changing marketplace.
3. Promotion
The third habit in marketing and sales is to think in terms of promotion all the
time. Promotion includes all the ways to tell customers about the products or services and
how to market and to sale.
Small changes in the way the product is promoted and sold will lead to
dramatic changes in the results. Even small changes in the advertising can lead
immediately to higher sales. Experienced copywriters can often increase the response rate
from advertising by 500 percent by simply changing the headline on an advertisement.
Large and small companies in every industry continually experiment different
ways of advertising, promoting, and selling the products and services. Here is the rule;
whatever method of marketing and sales is being used today will, sooner or later, stop
working. Sometimes it will stop working for known reasons, and sometimes it will be for
unknown reasons. In either case, the methods of marketing and sales will eventually stop
working, and will necessitate developing new sales, marketing and advertising approaches,
offerings and strategies.
4. Place
The fourth P in the marketing mix is the place where the products or service is
actually sold. Develop the habit of reviewing and reflecting upon the exact location where
the customer meets the salesperson. Sometimes a change in place can lead to a rapid
increase in sales.
Sell the product in many different places. Some companies use direct selling,
sending salespeople out to personally meet and talk with the prospect. Some sale in the
telemarketing. Some sell through catalogs or mail order. Some sell and trade shows or in
retail establishment. Some sales in joint ventures with other similar products or services.
Some companies use manufactures representatives or distributors. Many companies use a
combination of one or more of these methods.
 In each case, the entrepreneur must make the right choice about the very
best location or place for the customer to receive essential buying information on the
product or service needed to make buying decision. In what way will it be changed? Where
else could the products or services be offered?
5. Packaging
The fifth element in the marketing mix is the packaging. Develop the habit of
understanding back and looking at every visual element in the packaging of the product or
service through the eyes of a critical prospect. Remember, customers form the first
impression within the first 30 seconds of seeing the product or some elements of the
company. Small improvements in the packaging or external appearance of the product or
service can often lead to completely different reactions from the customers.
With regard to the packaging of a company, a product or service, think in terms of
everything that the customer sees from the first moment of contact with the company all the
way through the purchasing process.
Packaging refers to the way the product or service appears from the outside.
Packaging also refers to the people and how it is dressed and groomed. It refers to the
offices, the waiting rooms, the brochures, the correspondence and every single visual
element about the company. Everything counts. Everything helps or hurts. Everything
affects the customer’s confidence.
When IBM started under the guidance of Thomas J. Watson, Sr. it was early
concluded that fully 99 percent of the visual contact a customer would have with this
company, at least initially, would be represented by IBM salespeople. Because IBM was
selling relatively sophisticated high-tech equipment, Watson knew customers would have to
have a high level of confidence in the credibility of the salesperson. It, therefore instituted a
dress and grooming code that became an inflexible set of rules and regulations within IBM.
As a result, every salesperson was required to look like a professional in every
respect. Every element of their clothing-including dark suits, dark ties, white shirts,
conservative hairstyles, shined shoes, clean fingernails-and every other feature gave off the
message of professionalism and competence. One of the highest compliments a person
could receive was, “You look like someone from IBM”.
6. Positioning
The next P is positioning, Positioning develops the habit of thinking continually
about how the products are positioned in the hearts and minds of your customers. How do
customers think and talk about the products even if it is not present? How do customers
think and talk about the company? What positioning does it have in the market, in terms of
the specific words people use when it is described and offered to others?
In the famous book by Al Reis and Jack Trout, Positioning, the authors
pointed out that how the products are seen and through about by the customers in the
critical determinant of the success in a competitive marketplace. Attribution theory says that
most customers think of the products in the terms of a single attribute, either positive or
negative. Sometimes it’s “service”. Sometimes it’s “excellence”. Sometimes it’s “quality
engineering” as with Mercedes Benz. Sometimes it’s “the ultimate driving machine”, as with
BMW. In every case, how deeply entrenched that attribute is in the minds of the customers
and prospective customers determines how readily they’ll buy the product or service and
how much they’ll pay.
7. People
The final P of the marketing mix is people. Develop the habit of thinking in
terms of the people inside and outside of the business who are responsible for every
element of the sales, marketing strategies, and activities.
It’s amazing how many entrepreneurs and business people will work
extremely hard to think through every element of the marketing strategy and the marketing
mix, and then pay little attention to the fact that every single decision and policy has to be
carried out by a specific person in a specific way. The ability to select, recruit, hire and
retain the proper people, with the skills and abilities to do the needed to job to have done, is
more important than everything else put together.
In his best-selling book, Good to Great, Jim Collins discovered the most
important factor applied by the companies was that they first of all “got the right people on
the bus, and the wrong people off the bus”. Once these companies had hired the right
people, the second step was to “get the right people in the right seats on the bus”.
To be successful in business, you must develop the habit of thinking in terms
of exactly who is going to carry out each task and responsibility. In many cases, it’s not
possible to move forward until you can attract and put the right person into the right
position. Many of the best business plans ever developed sit on shelves today because the
[people who created them] could not find the key people who could execute those plans.
Developing a Brand Name
For a new business, creating and effectively marketing a new brand name is one of
the most challenging aspects of starting a business.
For a new business, creating and effectively marketing a new brand name is one of
the most challenging aspects of getting out of the proverbial starting blocks.
Choose the wrong name and customers have no idea what your business stands for
or what it does.
Choose the right name and customers immediately identify with your value
proposition. It’s an important step, so let’s review some of the basics.
The Significance of the Brand Name
Brand name will always be incredibly important even if progressive business experts
claim that the significance of brand names is fading. As an entrepreneur, therefore it is
important that you spend a considerable amount of time and effort developing your brand
name.
How to Develop a Brand
If you are ready to brand your business, you need to have a clear understanding of
what developing a brand actually involves before you really get started. Your brand
development process should always follow these major steps:
1. Decide what is going to be trend.
Is it branding a product, a service, a company, or an individual?
2. Do the research
First, find out everything there is to know about the market. Then, find out
everything there is to know about the product or services.
3. Position the product or service.
Find and win a place for the offering in the marketplace and in consumers’
minds by providing unique solutions to problems or needs that aren’t already being
addressed by competing products.
4. Write the brand definition.
The brand definition describes what is to be offered, why it is offered, how the
offering is different and better, and what unique benefits the customers can count on, and
what promise or set of promises will make all who work with and buy from the business.
5. Develop the name, logo, and tagline.
The name is the key that unlocks the brand image in the consumer’s mind.
The logo is the benchmark or symbol that serves as the face of the brand. The tagline is the
memorable phrase that provides consumers with a quick indication of the product, brand
and market position.
6. Launch the brand.
The brand goes public when the name, logo and slogan is unveiled and when
it begins to tell the market the story of how the brand reflects what it stands for.
7. Manage, leverage, and protect the brand.
This is the “care and feeding” phase of the branding process: it’s the step that
leads to a strong healthy, resilient brand. Just like good parenting, good branding
management can be summed up in a single word-consistency.
8. Realign the brand to keep it current.
Occasionally, it can (and should) change how the brand is presented. From
time to time, there is a need to update the brand presentation (the face of the brand) to
keep it relevant to the market in which it lives.
ACTIVITY 1 Let’s Check for Understandings. ENCIRCLE the correct answer.
1. Product line can be described as ___________.
A. All the products a company makes
B. All the products a company sells
C. The development of a single product over time
D. Brands that are closely related in terms of their function and benefits
provided
E. The production facilities used to manufacture products
2. Why might a company introduce a fighter brand?
A. To open up high quality retail outlets
B. To compete with low price substitutes while protecting existing brand
reputations
C. To compete by cutting prices of existing brands
D. To obtain publicity and raise awareness for a new product launch
E. To reduce stock levels by selling off old stock at reduced prices
3. The strength of a brand’s position in the market place is built on six elements: brand
domain, brand heritage, brand assets, brand personality brand reflection and ______
A. Brand ownership
B. Brand packaging
C. Brand price
D. Brand values
E. Brand advertising
4. Global branding can be achieved in three ways; geographic extension of existing
brands, brand alliance through joint ventures and ______.
A. Brand repositioning
B. Brand promotion
C. Market penetration
D. Brand acquisition
E. Brand values
5. A brand name should _______.
A. Appeal on young people
B. Sounded like an animal or natural phenomena
C. Relate to the latest technology
D. Include the company’s name
E. Be distinctive and easy to remember
6. What is important when considering the notion of brand values? Understanding the
difference between lengths and __________.
A. Features D. variants
B. Quality E. service
C. Depth
7. For what is a family brand name used?
A. Individual products
B. Products aimed at young parents
C. All products
D. Products produced by traditional companies that are identified by the
founder’s family name
 8. What is brand equity is:
A. Profit remaining after deducting production costs
B. Brands which do not harm the environment
C. Good value products
D. Financial value of a brand based on associated good will
E. Fair trading
9. Which one of the following is NOT a reason for a company to decide to re-brand a
product or service?
A. Merger or acquisition
B. Market awareness
C. Brand familiarity
D. Corporate strategy changes
E. Legal problems
ACTIVITY 2
1. What are the 7Ps in marketing mix? Describe each.
2. Develop a brand name for the product you want to criticize in Lesson2, Unit III.?

Lesson 4 The 4Ms of Operation

Learning Outcomes
 Describe the 4Ms (Manpower, Method, Machine, Material) of operations in relation to
the business opportunity
 Develop the business model
 Forecast the revenues of the business
 Forecast the costs to be incurred
 Compute for profits
 Create the company’s five year projected financial statement

INTRODUCTION
If Sales is the engine that powers Auto Salvage yards then Production is the drive
train that gets us where we are going. Production is both reactive and proactive almost
simultaneously. It reacts to what is sold today and must meet the expectations set by the
sales team. It must also anticipate what most likely will be needed in the near future. They
key for production is to have procedures and processes that can accomplish both. Once the
procedures are set up to maximize efficiency it is time to train the production staff on their
individual responsibilities centered on the 4Ms of Production.
Production Driven by Sales
The buyer buys vehicles based on statistics of what has been sold and what has
been searched. By the same token, production managers should decide how many and
what parts to take off a vehicle based on statistics of what has been sold and searched for
on the vehicle. Why put labor into parts that make up less than 20% of sales? Why spend
pesos chasing nickels? With today’s inventory management system, the production
managers have an unprecedented amount of information at their fingertips and they need to
learn how to use it.
4Ms of Production
1. Use the Inventory Management System to establish what is needed and at what
Inventory stock levels impacts the first M-Method. Based on what is known, the
manager can determine the volume of cars that need to be processed and who will
be responsible for each step of the process. The manager will determine the most
efficient way for each part of the process to be done to eliminate damage to the
product and to eliminate areas where time and manpower are wasted. Controlling
waste is the key to efficient and profitable production.

2. The second M is Manpower. When examining the methods which are now in place,
what is the ideal number of people it will take to perform these methods and what
positions should they be in? How will the personnel be trained and measured for
performance? What is the “cycle time” of each part of the Method?

3. Machine is the third M in the sequence. When examining the facilities, vehicles and
tools, is everything needed in place to ensure the safety of the employees while
maximizing the efficiency and productivity of the department? Do all employees have
access to the same tools and equipment, if needed? Do the tools enable them to
perform tasks independently? Are they trained on how to maintain the machinery
and tools?

4. Materials is the last proportion of the MS of production. Are the materials needed is
in place to perform all parts of production and are they conveniently located to
minimize waste? Example: All material needed to clean and package are always
available and are in place to minimize effort. Does the layout of the production
department minimize wasted movement? Example; Does the part flow go in one
direction or does it zigzag throughout your facility?

Measuring Production
Once the new processes are formalized and employees are trained on how to
perform, you can begin to measure for expected performance and begin enforcing
minimums. Do get also production standards and implementation procedures. Once these
standards are known, the manager is responsible in figuring out how to motive (by means
of money/recognition) and train the employees to reach these new standards.
Production or Technical Feasibility
Once an entrepreneur has found information about potential consumers, their
requirements and the likely share of the market that could be obtained for a new product, it
is then necessary to assess whether production at this scale is technically feasible.
The series of questions below is helpful in deciding the technical requirements of the
business:
 1. Are enough raw materials of the correct quality available when needed for year-
round production?
2. Is the cost of the raw materials satisfactory?
3. Are the correct size and type of equipment available for the expected production
level and is it at a reasonable cost?
4. Can it be made by local workshops? Are maintenance and repair costs affordable?
5. Are sufficient information and expertise available to ensure that the food is
consistently made at the required quality?
6. Are suitable packaging materials available and affordable?
7. Are distribution procedures to retailers or another seller’s establishment?
8. Is a suitable building available? What modifications are needed?
9. Are service (fuel, water, electricity etc.) available and affordable?
10. Are trained workers available and are their salaries affordable?
Contents of Production or Technical Feasibility
1. Production Planning
This plan should indicate how the different stages I a process are linked
together. It should identify any “bottlenecks” in the process, the equipment that is required
for each stage and where quality assurance procedures should be used.
The data that has been found from the market surveys is added to the
process chart to indicate the scale of production that is required.
A chart is prepared and used for planning a number of different aspects of the
production process.
2. Raw Materials and Ingredients
There are two stages involved in planning the amounts of materials that are
needed to produce the required weight of product, it is necessary to calculate the amount of
each ingredient that will be needed to formulate a batch of product. Further, it is necessary
to calculate the number of losses that can be expected during preparation.
3. Equipment required
The decisions on equipment requirements are influenced by the:
3.1 The cost and availability of machinery;
3.2 The availability of people who are skilled in maintenance and repair;
3.3 The availability and cost of spare parts and the possibilities of local equipment
fabrication.

4. Packaging
Selection of packaging materials frequently causes the largest problems for
small producers and is often the main cause of delay in getting a business established.
Considerations include the following:
 4.1 the technical requirements of the product for protection against light, crushing,
air, moisture etc.;
4.2 the promotional and marketing requirements; and
4.3 the relative cost and availability of different types of packaging professional
advice should be sought from packaging specialists or agents of packaging
manufacturers.

5. Staffing Levels
Decisions on the number and types of workers that are required to operate
the proposed business are taken in conjunction with decisions on equipment procurement.
It is possible to break down the production into different stages and then
decide the number of people that will be needed for each stage of the process.
It is important also to include functions such as store management, quality
assurance and bookkeeping when planning employment levels.
Developing a Business Model
Most technical entrepreneurs focus hard on building an innovative product, but forget
that an elegant solution doesn’t automatically translate into a successful business.
Businesses require an equally elegant business model, with the right price, messaging and
delivery channel to the right target customers to keep the dream alive and growing.
Defining the right business model requires the same diligence as designing the right
product, but the approach and skills required are different. That’s why investors
acknowledge the two co-founders are often better than one – with focusing on technical
solution, and the other focusing on defining and building the business model. These two
jobs must be done in parallel.
In the investment community, this work is called proving the business model. It starts
with validating a business opportunity (a large customer segment willing to pay money to
solve a real problem), in much the same way as your proof of concept or prototype
validates your technical solution. Here are seven steps recommended for establishing the
right business model.
7 Steps Recommended in Establishing the Right Business Model
1. Size the value of the solution in the target segment
Customers often complain that existing approaches are not intuitive or
integrated, but old solutions may be familiar be familiar and locked in. Estimate your costs,
including a 50 percent gross margin, as a lower bound on a price. Products too expensive
for the market won’t succeed, and prices too low will leave an exposure. Match with
competitor prices and market demographics.
2. Confirm that the product or service solves the problem.
Once the prototype or alpha version is available, expose it to real customers
to see and feel the same excitement and delight. Look for feedback on how to make it
better fit. If it doesn’t relieve the pain, or doesn’t work no business model will be saved.
 3. Test the channel and support strategy.
Now is the time to pitch the entire business model to a group of customers or
a specially selected focus group. This is not just a product pitch, but must include all
elements of your pricing, marketing distribution and maintenance. Here again is a chance to
make pivots for almost no cost.
4. Talk to industry experts and investors.
A small advisory board of outsiders with experience in the domain can give
the unbiased needed feedback as well as connections for setting up distribution and sales
channels. It’s also valuable to talk to potential investors for their views and possible sources
of capital even if it is for a bootstrapping effort.
5. Plan and execute a pilot or local rollout.
Good traction on a limited rollout is great validation of a business model. It
allows to test costs, quality and pricing in a few stores or a single city, with minimum
jeopardy and maximum speed for recovery and corrections. Save your viral campaign and
major inventory buildup for later.
6. Focus on collecting customer references.
Give extra attention to those first few customers and ask for publishable testimonials
and word-of-mouth support in return. If there will be no support, even with the personal
efforts, take it as a red flag that the business will probably not scale at the rate you
projected.
7. Target national trade shows and industry association groups.
There is a need for positive visibility, credibility and feedback from these
organizations as a final validation of the business model as well as the product model, in
the context of major competitors. This may also be a great source for leads as a key part of
that final roll-out and scale-up effort.
The business model can be a better sustainable competitive advantage than
the product features or it can be the biggest risk exposure. Too many of the business plans
are heavy on competitive product features but light on business model details and
innovations.
Forecasting the Revenues of the Business and the Costs to be Incurred
Having completed the study of technical feasibility, the entrepreneur should then
have sufficient information to determine the costs that are likely to be involved in
production. Additionally, the market survey will have supplied information about the sale
price that could be achieved for the new product. The entrepreneur is therefore in a position
to calculate the expected income and expenditure and the gross profit that can be
achieved.
1. Start Up Costs
 The start-up capital is the amount money that is needed to buy the facilities
and equipment, to register and license the business and get the necessary
certificates.
Working capital includes the costs of raw materials, packaging, staff training,
product promotion etc. that have to be made before the business begins to generate
income from sales of the product.
The start-up capital and initial working capital are calculated to determine
whether the entrepreneur’s savings (known as the owner’s equity) will be sufficient to
start the business without a loan.
The requirement for working capital also continues as the business develops
and a ‘Cashflow’ should be prepared. Requirements for working capital will differ
among types of business. This is because of the seasonal nature of the raw
materials needed and other ingredients.

Example of Start-up costs for burger production

Start-up cost Php
Renovation of space for the store 10,000
Equipment 13,500
Registration of business 2,500
Business License 2,500
Hygiene inspection and certificate 2,500
Raw materials and ingredients for 4 weeks production 9,275
Packaging (minimum order) 2,000
Staff training (equivalent to income from 2 weeks production value) 15,000
Initial production promotion 2,500
Staff salaries for 6 weeks 36,000
TOTAL 95,775

ACTIVITY 1: List down the start-up costs of the product you want to introduce per in
Unit II, Lesson 2.

2. Operating Costs
There are two types of operating (or production) costs. Those expenses that
have to be paid even if no production takes place are called fixed costs and those
that depend on the amount of food that is produced are the variable costs.
3. Income and Profit
From the market survey, the estimated market size and share enable you to
calculate the expected sales. The gross profit (or gross loss) is the difference
between the expected income and the total operating costs over the first year,
including any loan repayments.

Income is therefore calculated as follows:

Income = Selling price per unit x number of units sold

Financial planning
 If the gross profit indicates that the proposed business is likely to be
successful, it is then necessary to repeat the calculation of monthly gross profit for
one to five years.
This will then show whether there is sufficient cash available to operate the
business without the need for further loans.
This is known as a cashflow forecast.

Example of cashflow forecast for Burger

Month J F M A M J J A S O N D Total
Income 50 60 90 120 150 190 210 220 250 270 270 290 2,170
(P’000)
Expenses 60 80 95 125 140 150 150 150 180 180 180 180 1,670
(P’000)
Cumulative (10) (30) (35) (40) (30) 10 70 140 210 300 390 500 500
Profit/loss
(P’000)

ACTIVITY 2 Prepare a cash flow forecast of the product you want to introduce in
Unit II Lesson 2 using the template below:

Template for Cash Flow Forecast for ________________

Month J F M A M J J A S O N D Total
Income
(P’000)
Expenses
(P’000)
Cumulative
Profit/loss
(P’000)

ACTIVITY 3 As an employee at Professional Business Associates’ Financial

Services Department, you are asked to complete a financial projection for A-1
Lumber Company. Accomplish this form.

Actual Projected
2017 2018 2019 2020 2021 2022
INCOME
Sales 450,398
interest 1,200
 Gross Income

Cost of Goods 213,074

Sold

EXPENSES
Labor 98,730
Electricity 9,105
Telephone 3,950
Postage 2,378
Insurance 14,400
Advertising 46,390
Office supplies 14,903
Transportation 34,071
Total Expenses
Net
Profit/(Loss)
% Of Gross
Income

Here are assumptions to consider:

Income:
 The company is projecting sales to increase at 8% each year.
 Interest income will remain at P1,200 every year.
 Use the sum function to calculate Gross Income for years 2017 through 2022.
 Cost of goods sold in 2018 will be 52% of sales.
 Cost of goods sold in 2019 through 2022 will be 45% of sales.

Expenses:
 Labor in 2018 will increase 5% from 2017.
 Labor will increase 2% per year in years 2019-2022.
 Electricity, advertising and transportation will increase 10% per year in years
2018-2022.
 Telephone, postage, and office supplies will increase 5% per year in years
2018-2022.
 Insurance will increase 15% per year in years 2018-2022.
 Use the sum function to calculate Total Expenses for years 2017 through
2022.
 Calculate Net Profit/Loss for years 2017 through 2022 (Gross Income-Cost of
Goods Sold – Total Expenses). Be sure to format any loss to show in
parenthesis.
 Calculate % of Gross Income. Be sure to format as percent.
ACTIVITY 4
What is meant by a business model? How do you develop it?
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