Module 2 in Entrepreneurship in Business Proposal in Fundamentals PDF

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1 | P a g eBICOL COLLEGE INC.Senior High School DepartmentDaraga, AlbaySELF LEARNING MODULEINENTREPRENEURSHIPModule 2:EXECUTIVE SUMMARY,ENVIRONMENT ANALYSIS, ANDBUSINESS DESCRIPTION2 | P a g eENTREPRENEURSHIP – Grade 12Module 2: Executive Summary, Environment Analysis, andBusiness DescriptionRepubli...

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BICOL COLLEGE INC. Senior High School Department Daraga, Albay

SELF LEARNING MODULE IN ENTREPRENEURSHIP Module 2:

EXECUTIVE SUMMARY, ENVIRONMENT ANALYSIS, AND BUSINESS DESCRIPTION

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ENTREPRENEURSHIP – Grade 12 Module 2: Executive Summary, Environment Analysis, and Business Description Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of royalties. Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.) included in this book are owned by their respective copyright holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Regional Director: Gilbert T. Sadsad Assistant Regional Director: Jessie L. Amin Development Team of the Module

Writer: Marijo S. Balin Editor: Cynthia C. Competente Reviewers: Edwin L. Mias Christie L. Alvarez Illustrator/ Layout Artist: Jaypee M. Ignacio

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I. Title of Material/Introduction

EXECUTIVE SUMMARY, ENVIRONMENT ANALYSIS, AND BUSINESS DESCRIPTION PREPARATION This module discusses three other major parts of the business plan namely the executive summary, environmental analysis, and business description.

II. Objectives At the end of this lesson, the learner should be able to implement the business plan. Specifically, the learner must be able to : 1. Describe the executive summary, 2. Identify the major areas of an executive summary included in the environmental analysis, and 3. State the important areas to be included in the business description

III. Vocabulary List Executive - relating to or having the power to put plans or actions into effect. Summary -

a brief statement or account of the main points of something.

Environment - the circumstances, objects, or conditions by which one is surrounded Analysis - detailed examination of the elements or structure of something. Model - a description or analogy used to help visualize something that cannot be directly observed. Business Model – defines the perspective of the business in terms of its structure, production, operation, and financial activities that will lead to the achievement of the Vision, Mission, Goals, and Objectives. G

Environmental Analysis - is a strategic tool that helps determine the external and internal factors affecting the performance of the business.

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IV. Pre-Test Multiple Choice. Write the letter of your answer. 1.

is commonly the last section to be written after all other major parts have been completed. a. Introduction c. Executive Summary b. Environment Analysis d. Business Description

2. What is the most important part of your business plan? a. Executive Summary c. Background b. Table of Contents d. Financial Plan

3. True or False: If your executive summary is more than three pages it will most likely not be read. a. True: too much is not needed when writing an executive summary, the readers will be bored b. False: More is always needed when writing an executive summary c. Both of the above d. none of the above 4. Entrepreneurs may use a _ to help them understand their position against their competitors in the market. a. Business model c. Business Strategy b. Positioning map d. Business Description

5. According to this analysis where there are no consumers or buyers of the product, the business will never be created. What analysis is this? a. Global Analysis c. Consumer and competitor analysis b. Societal Analysis d. Industry analysis

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V. Learning Activities: 1. Read about all the things related to Executive Summary. 2. Be familiar about the content/parts of Executive Summary and study the sample business model. 3. Identify the Basic Elements of Environmental Analysis. 4. Study how to make a critical evaluation and evaluate a business position. 5. Read about how to determine the Most Appropriate Business Strategy. 6. Read about Business Description. Take time to Read Young Entrepreneur !

EXECUTIVE SUMMARY Although the executive summary is commonly the last section to be written after all other major parts have been completed, it is the next major part of the business plan after the introduction. It points out the overall highlights of the business plan as well as bird’s eye view of its sections. However, the executive summary must not, in any manner, provide a summary of the different major sections of the business plan. It must be written in a simple language that can be easily understood and at the same time attract the attention and influence the decision of the reader. Investors, creditors, and other significant parties usually proceed to the details usually proceed to the details of the business plan once they find the executive summary interesting, convincing, and worthy of further reading. Although there is no standard format as to its sections and contents, the executive summary must include the following sections: 1. 2. 3. 4. 5.

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Vision, mission, goals, and objectives of the business Business model Business and product position Wealth improvement approaches Parties supporting the business

VISION, MISSION, GOALS, AND OBJECTIVES At the very outset, the business plan must depict the fundamental characteristics, nature, philosophical values, identity, and image of the business. These important concerns are embodied in the vision, mission, goals, and objectives (VMGO) of the business. The VMGO must be clearly stated and easily understood. They must be reviewed and revisited at least every three years to determine whether they are still reasonable and achievable in view of the rapid changes in the business community.

BUSINESS MODEL Business Model Template BUSINESS MODEL Partner network

Key Activities

Key Resources

Cost structure

Offer

Customer Relationship

Customer Segments

Distribution Channels

Revenue statements

Figure 6.2.1. Sample Business Model The business model defines the perspective of the business in terms of its structure, production, operation, and financial activities that will lead to the achievement of the VGMO. There is no standard model that will exactly fit all types of business because they have different strengths and weaknesses, infrastructures, networks, and value propositions. The business model must basically reflect certain innovations that will indicate the competitiveness of the business in the industry. It must define how the business gives importance to its relations with customers, creditors, supplies, and internal human resources.

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BUSINESS AND PRODUCT POSITION The business and product position will help determine how the business defines its course and the process of accumulating wealth. It tells the size of the market and the target market share of the business and product. The business and product position must be able to convince the readers that the proposed business has a competitive advantage in the market. WEALTH IMPROVEMENT APPROACHES This section of the executive summary describes the methodologies or approaches that will be taken by the business in order to 1. 2. 3. 4.

Maintain a competitive advantage, Position the business in the market, Improve the market share, and Maximize the utilization of resources.

This section also includes a brief discussion of the marketing policies and financial operations of the business, and the profitability level of the industry and of the business. Standard benchmarks are good indicators in assessing the economic performance of the business. PARTIES SUPPORTING THE BUSINESS The last section of the executive summary is a description of the parties that strongly support the business. The parties that have a direct relationship with the business are as follows: 1. 2. 3. 4.

Consumers Creditors Suppliers Employees and staff

Relevant information about individuals and parties that support the business is important since the proposed business may conduct transactions with them later.

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The executive summary must cover at least three pages but must not go beyond five pages. An executive summary that is either too short or too long may discourage the reader to continue reading. ENVIRONMENTAL ANALYSIS The next major part or section of the business plan after the executive summary is the environmental analysis. It is a strategic tool that helps determine the external and internal factors affecting the performance of the business. These factors may be political, economic, social, or technological in nature. The environmental analysis may consist of at least 20 pages including the graphical representations, tables, and computations. The environmental analysis section is considered the heart of the business plan. Since the business that you intend to open in this entrepreneurial course is considered small in terms of capitalization, the industry analysis will focus mainly on the consumers and competitors. The presence of the consumers, after all, is the ultimate reason for the existence of any business endeavor. In today’s competitive business environment, an environmental analysis is already a necessity. It is perceived as the basic element for business survival. It may consist of global analysis, societal analysis, and industry analysis. GLOBAL ANALYSIS The environmental analysis section may begin with a description of the global business situation to provide enough knowledge about the global perspective or horizon if the business. A common mistake in this section is describing a business entity that operates in the global environment because a global analysis evaluates the business trend in the worldwide market. As a future entrepreneur, you should not devote the whole section of the global analysis by simply describing the business trends, for example, in the whole Asian region, in European communities, or even in mainland USA. Remember that it is not the business trend that has the most significant bearing on the global analysis but rather the possible business opportunities or ideas that the global business trend offers. The trend in the global market is the result of what happened in the past, while a possible business idea is the expected event that may happen in the future. Investors are more interested in what will happen in the future. The global trend simply acts as an indicator of any favorable sign for a business idea. However, there is a direct G

relationship between these two concepts. Once the world market is properly described, the business opportunities that the global trend provides must also be described. The reader, therefore, must be convinced that is its worth to exploit the business idea or opportunity based on the global business trend. SOCIETAL ANALYSIS After describing and possibly convincing the reader of the bright business prospect in the world market, the next step is to present the societal analysis and determine the different variables affecting the societal environment. These variables include 1. 2. 3. 4. 5. 6.

Political forces, Economic forces, Socioeconomic forces, Technological forces, Ecological forces, and Legal forces.

Most business plans fall to mention the probable levels of effects of the various forces to the proposed business, and the frequency of occurrence of the environmental factors. They simply describe the different variables or forces. A mere description of the various environmental factors does not provide any brilliant idea to the reader. The societal analysis must tell how the environmental forces affect the proposed business and how great their effects are. Assuming that you consider the interest rate and disposable income as economic variables that may effect on the proposed new business, the description of the analysis may appear as follows: Economic environment. The prevailing interest rate given by most commercial and industrial banks ranges between 10 and 12 percent and is expected to increase to 15 percent within a two-year period because of the new monetary policy of the Bangko Sentral ng Pilipinas (BSP). The move of the BSP has a substantial or very high effect on the financial operation of businesses that have high financial leverage. However, since the start-up capital requirements of the new business will be funded solely by the owners, the interest rate may appear to have a low effect on the proposed business.

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The disposable income of Filipino consumers, according to the latest data released by the National Economic Development Authority and the National Statistics Office, has substantially increased which has been attributed mainly to the new salary rates of all employees, both public and private, coupled with the high remittances of overseas contract workers. It is expected that the remittances will continue to increase at the rate of 10 percent for the next 6 to 8 years. This present trend on the disposable income may appear to have a very high favorable effect on the operations of new businesses. INDUSTRY ANALYSIS The third level of environmental analysis is the industry analysis. The industry analysis basically involved three important related tasks as follows: 1. Conducting a critical evaluation of the forces in the industry that affect the proposed business 2. Evaluating the probable position of the business in the industry 3. Determining the most appropriate strategy that may be adopted by the proposed business Conducting a Critical Evaluation Conducting a critical evaluation is the most delicate, tedious, and difficult task in industry analysis. There are some business plans that do not even show any indications that a critical analysis has been conducted, but rather, the evaluation appears to be a mere play of words. Nevertheless, not all forces in the industry, even in the societal analysis, must be analyzed and described. Only those forces that are deemed to have substantial effects, either positive or negative, to the proposed business must be critically analyzed and properly described. The industry analysis in all instances must not fail to evaluate and describe the target consumers and the competitors. Data and information on these important forces in the industry are usually the results of research work. Research work on the target consumers applies the concepts of market segmentation, market targeting, and market positioning to determine the total demand of the industry. Research work on the competitors identifies the total expected supply. The gap between the consumer demand and the competitor supply represents the unsatisfied demand.

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The unsatisfied demand may be considered the market share of the proposed business under the following conditions: 1. The proposed business has the capability to produce the product. 2. There are no expected new entrants to the industry other than the proposed business. The industry analysis needs substantial work in the process of establishing the projected demand and supply. The demand and supply analysis, also called the consumer and competitor analysis, is the backbone or the foundation of all other analyses. Where there are no consumers or buyers of the product, the business will never be created. The presence of the consumers is the ultimate reason for the existence of any business endeavor. The entrepreneur must choose the scanning tools that best suit his/her business venture. Evaluating the Business Position After conducting a critical analysis of the factors in the industry environment that primarily affect the proposed business, the next step is to evaluate the possible business position in the industry. This deals with market share and growth. Entrepreneurs may use a perceptual map, also called positioning map, to help them understand their position against their competitors in the market. It shows how the consumers respond to their products and services. The sample perceptual map shows a comparison among competing products in the market, their attributes, and the age and gender of their target consumers.

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Determining the Most Appropriate Business Strategy The last important task in the industry analysis is to describe the most appropriate strategy that may be adopted by the business. The strategy is highly influenced by the analysis of the business strengths, weaknesses, opportunities, and threats. The reason for the selection of the strategy must likewise be clearly indicated. BUSINESS DESCRIPTION The business description section presents the nature and form of the business to be undertaken, and may cover two to three pages. As to nature, the business may be a merchandising, service, manufacturing, or a hybrid. The description must include the innovative features of the business. As to form, it may either be a sole proprietorship, a partnership, or corporation. The reason/s for the selection of the form must also be indicated.

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In case the study is about an already existing business, the present status of the business must be provided, including the intended innovation. In addition, the business description also includes the following: 1. 2. 3. 4. 5. 6.

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Product or service that it plans to produce or serve Various plant and office equipment Size of the proposed business Future parties with whom contracts may be necessary Personal requirement Administrative operation

VI. Practice Tasks

Practice Task 1 - RESEARCH ME! Research about the following questions:   

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What do you think is the purpose of writing an executive summary in a business plan? What is the use of environment analysis? How about business description?

Practice Task 2 - JUSTIFY ME. Write True if the statement is correct. Otherwise write False and state your reason briefly. 1. The executive summary is the first major section that is prepared in writing the business plan. 2. The executive summary is the summary of the different sections in the business plan. 3. The executive summary appears at the end of the business plan and summarizes the details of the plan. 4. The business model defines the perspective of the business in terms of its structure, production, operation, and financial activities that will lead to the achievement of the VGMO. 5. It is necessary that the executive summary presents the business and product position to the reader. 6. In conducting the global analysis, the primary consideration is the trend in the world scenario followed by the business idea or opportunity that the trend may present. 7. All forces in the societal environment must be critically evaluated. 8. The foundation of the industry analysis is the evaluation or study conducted on the customers and competitors. 9. The primary objective in conducting the consumer analysis is to determine whether there is a demand for the product. 10.It is enough to describe the proposed business as a sole proprietorship in the business description section.

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Practice Task 3 – LOOK FOR SAMPLES! Look for samples of Executive Summary, Environment Analysis, and Business Description in the web and study it. Take notes about some observations that you can get from those samples and share it in the class. He...