Business Enterprise Simulation Midterm Reviewer PDF

**BUSINESS ENTERPRISE SIMULATION REVIEWER** **CHAPTER 1** **LESSON 1: Money Talk** Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgement and decisions by users of the information. (American Accounting Association) (AAA) Accountin...

**BUSINESS ENTERPRISE SIMULATION REVIEWER** **CHAPTER 1** **LESSON 1: Money Talk** Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgement and decisions by users of the information. (American Accounting Association) (AAA) Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are part at least of financial character, and interpreting the results thereof. (American Institute of Certified Public Accountants) (AICPA) Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economics entities, that is intended to be useful in making economic decisions. **Assets** - properties, resources, possessions, or goods that the organization own. Two types of assets: 1\. Current Asset 2\. Fixed Asset **Liabilities -** entail an organization's legal and financial responsibility and obligation. Classified as: 1\. Current liabilities 2\. Long term liabilities **Balance Sheet** - Statement of Financial Position ASSETS = LIABILITIES + OWNER'S EQUITY **Income Statement** - Profit and Loss Statement It shows the performance of the enterprise for a given period of time. It summarizes the revenues earned and expenses incurred for that period of time. **Profit** - also known as income, is the difference between revenue and expenses **LESSON 2: Bank and Financial Currency** **Securities** - can be in the form of treasury bills, notes and bonds. These are government issued and are sold by the government to raise funds. **Stocks -** Another form of investment that can be purchased through the Philippine Stock Exchange. **Stocks** - "ownerships" in a company. These are paid out thru dividends when a company is profitable. **Insurance** - protects entities from imminent downfalls or while also serving as an investment. **LESSON 3: Banking Services** **Deposits** - a bank provides a means to save our money and grow it (with little interest). We can save money through savings account, checking accounts, and time deposits. **Loans** - According to Investors Word.com, loan is an arrangement in which a lender gives money to a borrower. Loans can be typically classified as secured or unsecured. **Secured loan** - required the debtor to pledge an asset as collateral for the loan. **Unsecured loan** - does not require any collateral from the debtor. **Credit cards** - Bank allows the cardholder to purchase an item "on credit" for the cardholder to pay at a certain time or in a given number of periods. **Insurance** - Merriam- webster Dictionary defines insurance as "an agreement in which a person makes a regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something if its damaged, lost, or stolen. Insurance serves as a protection from monetary loss or hardship. **Remittance** - This is a means to transfer funds from one person to another via bank facility. Remittances include a fee for payment of the service. **Management and Consultation** - Banks provides this particular service for people who would like the bank to handle their investments and funds. **LESSON 4: Economic Concepts** The Law of Supply and Demand states that "For a market economy to function, producers must supply the goods that consumers want". **Supply** - pertains to the goods, products, or services that an organization produces. Several factors that affect supply; \> Ability to produce \> Cost of production \> Competition in the current market \> Availability of the resource or material \> Laws and regulation \> Internal Company Systems \> Nature **Demand** - a need by the customers for goods, products, and services. Demand is affected by; 1\. Quality of the product 2\. Cost of the product 3\. Availability of substitutes for a product 4\. Price of complementary or other version or models of the products **Price** is reflective of both supply and demand. In Law of Demand, If the price increase, the demand decrease. When the price decreases, the demand increases. In Law of Supply, if the price is high, the higher the quantity of supply. When the demand is higher than the supply the price tends to increase. Inversely, if there's more supply than demand, we can expect prices to decrease. **Competition** - means that there are other players in the market-other entities selling similar or the same product. If there is more competition, players have the chance to innovate to make their products more appealing than their fellow competitors. The **Demand and Supply Model** further demonstrates that when the price of a product or service increases, the demand for the good decreases (lessens in quantity) while at the same time the supply of the product or service increases in quantity. Demand slopes [downward], while supply always slopes [upward]. **Equilibrium** is encountered when there is a perfect balance in both supply and demand. That means that the number of products or services supplied is exactly the quantity being demanded. A **shortage** occurs when the supply does not meet the demand for the products or services. There is a **surplus** when there is too much supply and too little demand. **What makes a consumer choose a product or service?** Based on the research authored by Pinki Rani, the buying behavior of a consumer is influenced by four major factors: cultural, social, personal, and psychological. a. **Cultural** Culture is part of every society. It influences a person\'s behavior and what an individual wants. **Sub-cultures** include religion, nationalities, geographic regions, racial groups, and the like. Cultural trends are classified under this factor wherein whatever is \"in\" or \"trending\" is what people conform to. **b) Social** This factor generally falls into three categories: **reference groups, family, and social roles and status**. **Reference groups** are groups outside of family or relatives that a person belongs to. This is often related to social origin, age, place of residence, work, school, hobbies, and the like. An example of reference groups relating to age would be Generation X, Millenials, and Baby Boomers. **Family** is the core social structure of an individual. It is its first influencer. **Social roles and status** are the person\'s ranking or position within his or her social network or structure. An older sibling (ate or kuya) will always have the \"say\" or leadership role when it comes to his or her other siblings, while the baby of the family (bunso) is often treated with a certain amount of care. **c) Personal** Personal factors include age, occupation, economic circumstance, lifestyle, personality, and self-concept. This factor is not necessarily \"fixed\" as most of the variables indicated are changing. **d) Psychological** Psychological factors that affect our buyer behavior are motivation (see: Abraham Maslow\'s Hierarchy of Needs), perception, learning, beliefs, and attitudes. **Motivation** is the expression of a need or general desire to do or achieve something. **Perception** is a means of regarding, understanding or interpreting something. **Learning** changes individual behavior as the person progresses in life through the acquisition of knowledge, information, and experience. You learn not to touch hot objects if you have been burned. You learn that the color RED often means STOP, while GREEN means GO. **Belief and Attitude** is what a person sees and accepts to be true, right, and valued that came out from the influence of his or her social structure, experience, and learning. **CHAPTER 2** **LESSON 1: Ethics and Social Responsibility in Business** "There is one and only one social responsibility of business\... to **use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game**, which is to say, engages in open and free competition without deception or fraud\" - Milton Friedman, well known economist. (The Growing Business Handbook, 13th edition, Goodman Derrick LLP). **Business ethics** - are moral principles that guide the way a business behaves. The same principles that determine an individual\'s actions also apply to business. It is distinguishing between right and wrong, and choosing the right choice. As moral principles, business ethics should be a guide in creating business policies, practices, and codes of conduct. **Social responsibility** does not mean you are just responsible for yourself. It means you are responsible to your partners, employees, stakeholders, customers, the industry at large, the affected population, and the world. In business, social responsibility is more known as **corporate social responsibility** (CSR). Forms of CSR are environmental efforts, volunteer. **LESSON 2: Benefits to Business** **Six Reasons Companies Should Embrace CSR:** ** Innovation** ** Cost-Savings** ** Brand Differentiation** ** Long-Term Thinking** ** Customer Engagement** ** Employee Engagement** **Sustainability** - based on a simple principle: Everything that we need for our survival and well-being depends, either directly or indirectly, on our natural environment. Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.\" **LESSON 3: Business and the Law** **-** Compile and notarize all necessary documents (i.e., Articles of Incorporation, Financial Statements) \- Register your business with the Securities and Exchange Commission (SEC) /DTI/CDA \- Register with the Bureau of Internal Revenue (BIR) in order for you to pay the proper taxes and receive the necessary clearances \- Acquire a business permit; \- Acquire accounting related systems or get an accountant to help you out; \- Register with the Social Security System (SSS) Social Security Act of 1997; \- Register with the Philippine Health Insurance Corporation (PhilHealth) National Health Insurance Act of 1995; \- Register with the Home Development Mutual Fund (HDMR) or Pag-ibig Fund. Home Development Mutual Fund Law of 2009; \- Comply with regulation requirements; and pay all the necessary fees. **Laws that affect businesses:** 1. **The Labor Code of the Philippines** (PD No. 442) is a decree instituting a labor code. The Labor Code protects labor, promotes employment and human resource development, and ensures industrial peace based on social justice. 2. **Consumer Act of the Philippines** (RA No. 7394) protects the interests of the consumer, promotes his or her general welfare, and establishes standards of conduct for business and industry. 3. **Magna Carta for Micro, Small and Medium Enterprises** (MSMEs) (RA No.9501) recognizes the potential of MSMEs to generate employment and economic growth. It aims to promote entrepreneurship, help entrepreneurs, and support the growth and development of MSMEs. 4. **Go Negosyo Act** (RA No. 10644) also promotes job creation and inclusive growth through the creation and development of MSMEs. This law aims to reduce business and bureaucratic constraints in creating MSMEs. It also aims to provide incentives and benefits to MSMEs, as well as strengthen the Micro, Small, and Medium Enterprise Development (MSMED) Council. 5. **Equal Opportunity for Employment Act** (RA No. 10524) ensures that peoplewith disability are given equal job opportunities. This law also ensures that at least one percent of all positions in government, offices, and corporations be reserved for people with disability. 6. **The Solo Parents\' Welfare Act of 2000** (RA No. 8972) provides benefits and privileges to single parents and their children. 7. **The Anti-Age Discrimination in Employment Act** (RA No. 10911) protects individuals against discrimination because of their age. This law ensures that people are hired because of their knowledge, skills, qualifications, and not because of their age. **Good Business Practices and Poor Business Practices** No age discrimination, no disability discrimination. Bad: - Contractualization (called Endo) - Padrino system -- when the son of the boss gets the spot that was yours **CHAPTER 3** **LESSON 1: Business 101** **Entrepreneur** - a person who starts a business and is willing to risk loss in order to make money **Steps in Setting Up a Business:** **Phase 1: Eureka!** - used to express excitement when a discovery has been made. - "Eureka Phase" is when you have an idea for a business. - It might be a new product or invention. Angelo Casimiro -- electricity generating shoes **Phase 2: Research** **Market** - Identify the market and find out what the market thinks/wants/needs/ desires/prefers. **Competition** -- Are there competitors around? **Support** - Are there institutions that would be willing to provide the necessary support to get the product/service going? **Phase 3: Design your business plan** The contents of the business plan will be based on the information gathered during the research phase. **The business plan should include information on:** ** Product/Service** - Know what kind of product/ service you want. ** Market and Industry** - Are there threats in the vicinity? ** Operations** - Practical side of things- What are your products made of? ** Finances** - Budget side of things- Can I afford the materials? ** Strategies to make it work** - What are my marketing strategies? How do I protect my business from possible threats? **Phase 4**: **Execution** The next and final phase would be to execute your plan. Implement it in phases, and tweak as necessary. Dream big but act conservatively. Most importantly, do not be afraid to ask for help or start all over again. GoNegosyo advises that if you would like to enter into the field of business but do not have a brand new idea of a product or service in mind, you may want to consider getting a franchise. **Franchise** businesses are pre-established /known businesses (franchiser) that provide opportunities or rights to sell their product/services to others (franchisee). **CHAPTER 4** **LESSON 1: Business Plan Basics** **Mission statement** -- written declaration of an organization's purpose and focus; answers who am I, what do I do, why, who; to inform Companies and individuals create corporate or personal mission statements for themselves for the following reasons: 1. **Statement of Purpose** -- the motivation why something is done or why it exists 2. **Statement of Focus** -- the center of interest or attention 3. **Statement of Transparency** -- revolves on four key words: Clarity, Obviousness, Sheerness, Truth to not cause ambiguity or confusion 4. **Statement of Direction** -- by knowing who you are, you can set your mark and plan the future; where you begin and from here you will know where and how to move forward A great mission statement contains 4 key elements: Value, Inspiration, Plausibility, and Specificity **Objectives** -- nitty gritty, mission is broader **Specific** - What is it that you would like to achieve? Be exact. Use specific terms and avoid ambiguous terms when formulating objectives. **Measurable** - These are the details that help us see whether we are close or far from our objectives. Objectives need to be measurable so we can gauge our progress. **Achievable** - Is it attainable or something that you pulled out of a hat? Achievable objectives are realistic ones. **Relevant** - You know yourself better than anyone. Hence, you would know whether or not your goal is significant to you. Your passion for your goal is what will drive you to achieve it. **Time Bound** - crucial factor to consider in setting objectives. Normally, short-term goals span a period from days to approximately a year. You do not want the period of time allotted to reach an end to be too long that you end up losing sight of your goals. Breaking down your goal into milestones or periods should help. In setting your objective, you may need to create a timetable to reflect these milestones. **Vision Statement** - where a company would like to go and what it would like to be good at in the future; something that we set our sights to; what we want to achieve; to inspire; where am I headed? What do I want to be? **Core Values** - values state the principles, standards, ethics, morals, or ideals. These core values may be found together with or following the mission statement. Compass for actions and describe how we behave in the world. **CHAPTER 5** **LESSON 1: Research** **Research** - a careful study that is done to find and report new knowledge about something **2 General Purposes of Research**: 1. To know more about what you don't know 2. To validate on what you already know How do we conduct research? We gather data. **LESSON 2: Research Methods** **Research Methods** 1. **Secondary Research** -- using data already collected; best way to start 2. **Primary Research** - conducted to address a specific marketing question or situation Information can be gathered from:  Actual persons with firsthand experience (e.g. subscribers, customers)  Professionals (e.g. subject matter experts)  Peers  Resource materials (e.g., researches, books)  Internet **Spam** -- improper, unsolicited, or repetitive messages **LESSON 3**: **Swot Analysis** **SWOT Analysis** - "allows the owner to identify new markets and to prepare for perceived downturns or competition, and is a useful tool to aid the process of strategic planning. The key is to be able to eliminate weakness and threats and to capitalize on the strength and opportunities." **Internal Factors** - organization or person\'s resources **Financial Resources** -- amount of money that the person or organization has **Material Resources** - other non-monetary items that a person or organization may use for a particular investment **People** - refer to the persons, personalities, connections, networks, and their respective aptitude, attributes, and attitudes **Product** - be a tangible product or a service provided **Practices** - are the things that are being done by the organization or the person. It can also relate to values, policies, processes, and procedures. **Price** -- price of the product or service **Promotion** - would be the strategies that are in place or that the people plan to make use of in order to further promote their organization or business product/service. **External Factors** -- anything and everything in our environment that is relevant to the organization or person (ex: government, policies, trends) **LESSON 4: Research and Marketing** Knowing where you stand helps you know where you are going. Finding out what you think of yourself and how others see you is even better. - The SWOT analysis helps you evaluate yourself and you get to have a pretty good picture of yourself, if you do it honestly. - Furthermore, this helps you identify the strategies that you would have to improve upon to make yourself more marketable. Byrd and Megginson point out that "marketing research is helpful at several points in the life of your business. Before starting the business, you can use marketing research to find out whether the location and surrounding population are right for your proposed product.\" - Byrd and Megginson add that \"after you open the business, marketing research can help you decide \(1) whether to develop new or different products, (2) whether to expand at the original location or open additional branches, (3) when and where to change on activities such as channel of distribution and advertising and promotion strategy.\" **CHAPTER 6** **LESSON 1: Planning** **Planning** - basic management function involving formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources; an essential and indispensable task in any business **Planning may achieve the following:** 1\. Interest moneyed people in investing in your business. 2\. Guide the owners and managers in operating the business. (mission, vision, strategies, goals) 3\. Give direction to and motivate employees. 4\. Provide and environment to attract customers and prospective employees. **LESSON 2: The Planning Process** **Gather Information** -- knowing who and what you are **Establish Goals and Objectives** **Create Strategies** **Execute and Monitor** **Evaluate** **Things to check:** 1\. Potential location (could I consign with my mom who owns a small canteen?) 2\. Competition A. Other coffee vending machine stations B. Other coffee sellers (3 in 1) C. Coffee shops in the area 3\. Potential for market (most likely for lower income classes, not appealing to the elite) 4\. Management concerns (who will handle the operation; keeping of the unit) **Marketing Mix** -- also known as the 4P's; help organizations or people find out if a product or service will vie well in the market. The idea is to put the right product in the right place at the right price at the right time. **Product** - can be an actual material, product, or a service. It would depend on the organization or person. **Place** - actual location or a means to distribute your product-store outlet, online, or brochures. **Price** - how much does your product or service actually cost **Promotion** -- f2f? online?