Applied Economics 2Q

Industry and Environmental Analysis

Profit maximization

  • Market Concentration

    • Number of sellers and buyers

  • Market Entry

    • Legal barriers and production barriers of an industry

  • Product Differentiation

    • To be unique or different from all its competitors in the industry

  • Information

    • How easy it is to acquire certain information about your products or the products of your competitors

  • Market Power

    • The ability for an enterprise to increase their price anytime within the industry

  • Market Structure

    • How a business distinguishes itself from others in its industry

  • Monopoly

    • A single firm has exclusive control over the production and distribution of a product or service

Business Opportunities Identification W3

Localization

  • Concentration of certain industry in a particular area, specialization of areas/regions

Causes of Localization

  • Nearness to markets

  • Nearness to sources of power

  • Nearness to raw materials

  • Climate or soil conditions

  • Political patronage

  • Momentum of an early start

  • Availability of finance

  • Adequate and trained labor (supply of labor)

PROS

  • Improved user experience

  • Improved customer satisfication

  • Adapting to local regulation and laws

  • Increased sales and revenue potential

CONS

  • High initial costs

  • Risk of cultural insensitivity or misinterpretation

  • Risk of inconsistency in brand messaging and voice

  • Possible errors or inaccuracies in translation

SWOT analysis

  • Strength (INTERNAL/HELPFUL)

    • Distinguishes you from other businesses

    • What your business does well

  • Weaknesses (INTERNAL/HARMFUL)

    • What can your business improve on?

  • Opportunities (EXTERNAL/HELPFUL)

    • Chances for something positive to happen

  • Threats (EXTERNAL/HARMFUL)

    • Anything that can negatively affect your business from the outside

Week #4

Socioeconomic Impact Analysis

  • A systematic analysis to assess the potential socio-economic and cultural impact of a proposed development or business on individuals, families, and communities.

Sources of raw materials

  • Internal: getting supplies within the community or country

  • External: getting supplies outside the community or country

Types of suppliers

  • Independent suppliers: sourcing materials from smaller or less known companies

  • Subsidiary of conglomerates: sourcing materials from multinational companies

Stage of product transformation

  • Raw vs. semi-processed

Market power

  • Sole buyer or major purchases vs. small company

Week #5

Business Viability

  • Ability of a business to sustain its operations and generate profits over the long term

Financial Stability

  • Ability of the financial system to facilitate and enhance economic processes, manage risks, and absorb shocks

Factors when assessing financial stability

  • Liquidity

    • basic financial health

    • amount of cash and easily-convertible-to-cash assets to manage its short-term debt obligations

  • Profitability

    • Profit maximization

    • Porter’s five forces analysis

Sustainability

  • A company’s strategy and actions to reduce harmful environmental and social impacts resulting from business operations in a particular market

Factors when assessing sustainability

  • Operation efficiencies

    • SWOT analysis and localization

    • Efficiencies for inputs and outputs

Corporate Social Responsibility (CSR)

  • Self-regulating business model that helps a company be socially accountable

TYPES OF CSR

  • Environmental Responsibility

    • Regulating energy consumption

  • Ethical Responsibility

    • Ensures to operate in fair and ethical manner. Aims to practice ethical behavior through fair treatment of all stakeholders

  • Philanthropic Responsibility

    • Aim to make the world/society a better place.

    • EX: a business dedicating a portion of their earnings to charity

  • Economic Responsibility

    • To ensure that business operations positively impact the environment, people, and society