Chapter 1

Lesson 1: Economic Principles

Economics – is the study of how to manage money and financial status of an individual, an
enterprise, an organization, or a country.
National Economic And Development Authority (NEDA) – its primary role is to formulate and
coordinate the country's economic and development policies and plans.
Business Economist – one who analyzes economic trends and data to help businesses make
informed decisions.

Needs vs. Wants

1. Needs – are essential items required for survival, such as food, water, and shelter.
2. Wants – are non-essential items or desires that enhance quality of life, like luxury
goods, entertainment, and vacations.

Scarcity vs. Shortage

1. Scarcity – means there's not enough of something to satisfy everyone’s wants or
needs. Resources are limited.
2. Shortage – happens when there isn’t enough of a specific product available right now to
meet the demand.

Intrinsic and Extrinsic Value

1. Intrinsic Value – refers to the inherent satisfaction or utility derived from a good or
service.
2. Extrinsic Value – relates to the external cost or market price of the good.

Opportunity Cost – refers to the value of the next best alternative that is foregone when a choice is
made.
Free Resources – refers to resources that are abundant in a particular context and do not have an
opportunity cost.
Utility – refers to the satisfaction or pleasure derived from consuming a good or service.
Economic Activities – encompass the entire process of creating, distributing, and using goods and
services.
Fixed and Variable Inputs
1. Fixed Inputs – are resources that remain constant in quantity regardless of the level of
output produced in the short run.
2. Variable Inputs – relates to the external cost or market price of the good.

Diminishing Marginal Returns – is an economic principle stating that as you add more of a variable
input (like labor or capital) to a fixed amount of other inputs (like machinery or land), the
additional output produced from each extra unit of input will eventually decrease.

Economic Resources – A resource is any asset or means that can be used to produce goods or
services, directly or indirectly satisfying individual or collective needs and wants.
1. Natural Resources – resources that come from nature.
2. Human resources – the labor force or individuals who contribute their skills,
knowledge, and effort to the production process.
3. Capital Resources – man-made resources used in the production of other goods and
services. This includes machinery, buildings, and tools.
4. Scarce Resources – resources that are limited in supply relative to the demand for
them.
5. Renewable Resources – resources that can regenerate naturally over time and are
sustainable if managed properly.
6. Non-Renewable Resources – resources that are finite and cannot be replenished once
exhausted.

Chapter 1
Lesson 2: Human Resource Management Basics
Human Resources Management – involves the monitoring of the culture of the organization, and is
responsible for the recruitment of appropriate workforce.

Job Analysis – outlines the human resource management plan. It has the following products.
1. Job Description – defines job title, location, duties, tools, materials, supervision,
working conditions, and risks.
2. Job Specification – outlines the qualifications, education, experience, skills, and other
attributes required for the job.
Key Functions of Management
1. Planning
2. Organizing
3. Directing
4. Controlling

Staffing – comes after job analysis and human resource planning. It includes recruitment, selection,
placement, and orientation.
1. Recruitment – is the process of searching for prospective employees and providing an
encouraging environment for them to pursue their job application in the organization.
2. Selection – evaluates applicant qualifications, skills, attitudes and values for job
suitability.
3. Placement – is the process of giving the selected candidate the most suitable job in
terms of the organizational requirement and the prospective employees’ qualifications
after the formalities of screening.

Reward, Benefits, and Compensation System – involves wage and salary administration, providing
incentive and fringe benefits schemes, as well as social security insurance, and creation of
retirement funds.

Training and Development – the process of creating avenues for employee improvement, reskilling,
and up-skilling for managerial development, career planning, and transfer or promotion
1. Training – the imparting of technical and operational skills that are needed for the
current job.
2. Development – the process of conducting suitable programs to improve one’s human
and managerial capability to handle a more expansive role in the organization.

Organizational Climate – this reflects employees' perceptions of their work environment, influencing
motivation, job satisfaction, and productivity. A positive climate promotes engagement and
recognizes employee growth.
Performance Management and Appraisal – defines the direction and movements of the careers of
people in the organization (promotion, transfer, retention, or demotion).

Chapter 1
 Lesson 3: Production and Operation Management Basics
Production – is about the creation of all goods and services, regardless of type or kind.
Production Management – deals with planning, control, and decision making necessary for carrying
out the production process.
Operations – refer to any process that accepts inputs and uses resources to change those inputs in
useful ways.
Operations Management – is focused upon administration, planning, and execution of operations
involved in production of goods and services and trying to minimize the resources, at the same
time increasing output.
Production Process – refers to manufacturing activities that result in either semi-finished product,
finished product, or a by-product.
Operation Process – refers to activities that result in the availability of a complete service or an allied
service.

Right Quality, Right Quantity, Right Time, Right Cost

1. Right Quality – not necessarily the best quality. Determined by the cost of the product
and the technical characteristics as suited to the specific requirements.
2. Right Quantity – produce the products in the right number.
3. Right Time – must aim to make the optimal utilization of input resources to achieve the
objective.
4. Right Cost – standardized unit cost.

Manufacturing Location Study – aims to find the optimal location that will result in the greatest
advantage to the organization

Productivity, Product Design, and Process Design

1. Productivity – efficient combination of land, labor, capital, and management to
optimally produce goods and services. It is also the aim of production and operations
management.
2. Product Design – should be dynamic in the context of changes in consumer
preferences, economic situation, sociological and demographic factors, and political and
legal challenges.
3. Process Design – a macroscopic decision-making of an overall process route for
converting the raw materials into finished goods.
Classification of Production Processes
1. Flow Production – also known as mass production. A sequential, steady-state
production method ideal for high-demand goods, ensuring quality control in raw material
selection before final product delivery.
2. Batch Production – divides production output into parts, allowing for quality checks and
the availability of finished parts in different functional areas, particularly for products
using various machines and tools.
3. Units Production – is a cost-effective, non-repetitive production method suitable for
products with low demand and minimal repetitive steps, but its use is limited by cost
concerns.

Supply Chain Management vs. Logistics

1. Supply Chain Management – management of a network of business activities
including procurement, manufacturing, transportation, warehousing, distribution, and
inventory management.
2. Logistics – post-procurement function focusing on delivering raw materials to
production plants and transporting finished goods to distribution points.

Warehouse Management – ensures the security and safety of goods during procurement,
production, and distribution, with value in global production and distribution due to its reach
and multi-location presence.

Chapter 1
Lesson 4: Marketing Management Basics

Market – any individual, organization, or group which has an existing or potential transaction or
exchange which begins from a customer and ends with another customer.
Market Activities – creation and delivery of superior customer value in a form of product or service.

Marketing Concepts
1. Production Concept – customers are inclined to choose products which are available
and affordable.
2. Product Concept – customers are inclined to choose products that provide the best
quality, performance, and features.
 3. Selling Concept – puts importance on the sales efforts for customers to buy the
product or service.
4. Profit Concept – emphasizes that profitability is the responsibility of marketing.
5. Modern Marketing Concept – puts the customer at the center of any marketing effort.
6. Social Marketing Concept – underscores the need for marketing activities to support
and ensure social wellbeing.

Variables in the Marketing Mix

1. Product – involves determining the product features.
2. Promotion – to persuade customers to act through making a purchase.
3. Price – is determined based on the production cost, level of demand, degree of
competition, buyer behavior, and market psychology.
4. People – refers to anyone who engages in marketing activities in a company, either
directly or indirectly.
5. Process – refers to the systems and procedures that a company uses to produce and
deliver its products or services to customers.
6. Physical Evidence – refers to all existing and potential features customers see when
engaging with a business.
7. Place – characteristics of the product itself, the buying behavior of customers, and the
financial resources of both the buyer and the seller.

Five (5) Most Common Pricing Strategies

1. Value-Based Pricing – setting prices based on its customers' perceived value and
preferences, as well as the cost of production.
2. Tiered Pricing – is a pricing strategy where companies offer different discounts or
benefits based on the quantity of goods or services purchased or the level of features
included in the product or service.
3. Regional and Market-Specific Pricing – is the ability to tailor prices to local market
conditions.
4. Psychological Pricing – is a way businesses set prices to influence how customers
perceive the value of a product or service. They do this by using tactics like pricing just
below round numbers or choosing prices that sound appealing to make products seem
more affordable or attractive.
5. Dynamic Pricing – Adjust prices in real-time based on factors like demand, location,
and time of day, particularly in vending machines and at events.
 Chapter 1
Lesson 5: Financial Management Basics

Financial Management – involves planning, organizing, directing, and controlling of financial

activities. It aims to maximize profitability, ensure liquidity, and achieve long-term financial
stability.

Elements of Financial Management

1. Investment Decision – this pertains to allocating capital to long-term assets or projects,
evaluating potential returns, and aligning investments with the company’s strategic
goals.
2. Financial Decision – this involves determining the best financing mix for the company,
balancing debt and equity to fund operations and growth. It aims to minimize cost and
maximize shareholder value.
3. Dividends Decision – this focuses on how much profit to distribute to shareholders as
dividends versus how much to retain for reinvestment. It affects shareholder satisfaction
and company growth.

Financial Management Areas of Operation

1. Cost Control
2. Pricing
3. Profit Forecasting
4. Measuring Required Rate of Return
5. Managing Assets
6. Managing Funds

Forms of Business Organization

1. Proprietorship – an unincorporated business that is owned by a single individual.
2. Partnership – operates within the same realm of advantages and disadvantages as a
proprietorship type business, with the number of ownerships as the only difference
between them.
3. Corporation – have more flexibility that can be provided for business expansion, and a
robust financial management system can be beneficial with its nature of limited liability,
 ease in raising capital and transferring ownership, as well as having unlimited business
life.

Net Income – depends on the amount of sales, cost of goods sold, operating expenses, interest
expense, and taxes.
Working Capital – derived by deducting the current liabilities form the current assets.
Liquidity – also known as the company’s current ration. Determined by dividing the current assets by
its current liabilities.
External Equity – is the business owner’s original investment.
Internal Equity – capital from the retained profits of the organization.
Financial Statements (Accounting Statements) – serve as a form of financial reports about the
company’s performance and resources.

Sales (Revenue) – COGS = Gross Profit

Gross Profit – Operating Expenses = Operating Income (EBIT)
Operating Income – Interest Expense = Earnings before Taxes
Earnings before Taxes – Income Tax = Net Income

Gross Fixed Asset – original value of depreciable assets before any depreciation expense is
deducted.
Current Debt (Short-Term Liabilities) – include accounts payable, accrued expenses, and short-
term notes.
Short-Term Notes – cash amounts borrowed that must be repaid within a short period of time.
Long-Term Debt – are loans that mature beyond a year.
Mortgage – a type of loan that is guaranteed by a collateral.
Equity – is the net worth of a business.
Retained Earnings – profits minus the dividends withdrawn from the business.

Current Assets + Fixed Assets + Other Assets = Total Assets

Debt + Ownership Equity = Total Debt and Equity
Statement of Cash Flow – shows the impact of a business’ activities on cash flow over a given
period of time.
Financing Activities – fastest sources of increasing cash flow in the business

Efficiency Ratio – determine the right mix between assets versus sales, and debt against equity.
Market Value Ratio (Market Prospect Ratio) – help predict the possible amount of earnings in the
investment.

Chapter 1
Lesson 6: Introduction to Sustainability Management

Corporate Social Responsibility (CSR) – emphasizes the corporation’s ethical responsibilities to

shareholders, customers, societies, and future generations.

The Triple Bottom Line

1. Social Performance
2. Environmental Performance
3. Financial Performance

Chapter 2
Lesson 1: The Core of Strategic Management

Goal Setting – first step in the strategic management procedure.

Four (4) Basic Elements of Strategic Management

1. Environmental Scanning – includes the comparison of the threats and opportunities of
the organization in the external business environment. SWOT analysis is performed
here.
2. Strategy Formulation – is the generation of long-term plans for the proper
management of environmental openings and fears considering the fortes and faintness
of the business.
a. Mission – an organization’s purpose or the reason for its survival.
 b. Objectives – outcomes of the planned functions. Mentions what is to be attained
by when. Attainment of the objectives will lead to the fulfillment of the company’s
mission.
c. Strategies – is a broad master plan expressing how a company will accomplish its
mission and objectives. Three kinds: corporate, business, and functional.
d. Policies – are comprehensive guidelines for making decisions linking the
formation and implementation of a strategy.
3. Strategy Implementation – is taking action in order to attain the goals of the
organization.
4. Evaluation and Control – requires an evaluation of the strategy to ascertain whether
the actual outcome matches the expected outcome of the organizational goals.

Chapter 2
Lesson 2: Strategic Management Model

Strategic Management Model – provides the basic framework for understanding how strategic
management can be operationalized at the company level. Begins with the development of the
organization’s mission and vision.

Major Types of Analysis

1. External Analysis of the Environment
2. Internal Analysis of the Organization
3. Industry Analysis

Competitive Advantage– goal of developing a strategic plan. It is the aggregation of factors that sets
a small business apart from its competitors and gives it a unique position in the market.

The Strategic Management Process (full sentence equivalents as definitions)

1. Visioning – develop a clear vision and change it into a meaningful mission statement.
2. Positioning – define the firm’s core competencies and target market segment and
position the business to compete effectively.
3. Internal Analysis – assess the company’s strengths and weaknesses.
4. External Analysis – scan the environment for significant opportunities and threats
facing the business.
5. Defining Competitive Advantage – identify the key factors for success in the business.
6. Competitor Analysis – Analyze the competition.
7. *No equivalent term in the concept map* – create company goals and objectives.
8. Strategy Formulation – formulate strategic options and select appropriate strategies.
9. Strategic Action – translate strategic plans into actions.
10. Strategic Control – establish accurate controls.