ENTREP080 NOTES

Forms of Business Organizations 3 types of Partnership

1. General Partnership
>Sole Proprietorship • all partners share the benefits and
• A sole proprietorship is a business unit drawbacks of the business.
owned and managed by a single individual. • they have unlimited control over company
• The sole owner has full legal liability operations and management.
(liability = utang, loan, debts) and unlimited • each is personally liable should legal
power over business activities. disputes arise from the company's
• If the business succeeds, the owner operations
receives all the benefits and 100 percent of 2. Limited Partnership
the profits. If the business fails, the owner • A limited partnership has a hierarchy in
shall face the consequences, both legal and terms of participation and liability. There are
financial. general partners and limited partners.
Advantages: a. General Partners
• First, It is easy to set up. • directly involved in management
• Second, it only needs one person-the sole operations and are legally liable for
owner-to make a decision. business debts.
• Third, there is utmost secrecy because b. Limited Partners
there is only one person privy to the secrets • not involved in or have minimal control
of the business. over business operations. Their personal
• Finally, sole proprietors only get taxed assets are protected from debts or claims,
once, and the amount levied is based on except for their financial investments in the
their income. company.
Disadvantages: 3. Limited Liability Partnership
• Given that the owner and business are • A partnership where all partners have
one legal entity, the proprietor has unlimited limited liability, protecting them from
liability. business debts and misconduct of other
Unlimited liability - the owner shoulders partners.
the entire financial burden of the company
including its fines and debts up to the extent
of their personal assets. Also, the owner is >Corporations
liable in all disputes involving the firm. • is a legal body that exists separately from
its owners: the shareholders.
• It should be established by or composed of
>Partnership at least 5 natural persons and not
•A business partnership binds two or more exceeding 15 persons, technically called
people into contributing money, property, or "Incorporators."
industry to set up a business or practice a • Fines, debts, and claims are paid off from
profession to divide its profits and rewards the corporations' funds, not from their
among themselves. owners' personal assets.
•There are three kinds of partnership Advantages:
agreements in business: general • Limited Liability
partnerships, limited partnerships, and
limited liability partnerships.
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• They can access more financial sources Types of business

compared to sole proprietorships or
partnerships. >Service Business
• The owners are protected from personal • A type of business that delivers intangible
liability. When responding to legal disputes, products to its clients
the corporation represents the company and • This offers professional skills, expertise,
its shareholders skilled labor, and other essential assistance.
Disadvantages: • Examples are accounting firms, physical
• Pay large amounts of taxes therapy clinics, handyman services,
• Maintaining paperwork and processes mechanic shops, delivery services,
• Corporation considers hundreds of transportation, and customer assistance.>
shareholders, each of whom must be
accounted for on paper.
>Merchandising Business
• Unlike a service business, a
>One Person Corporation (SEC) merchandising business offers tangible
• Essentially corporations with a single goods to its customers.
incorporator or stockholder. • Companies engaged in merchandising
• OPCs have the features of both a purchase completed or nearly completed
corporation and a sole proprietorship. items from manufacturers or suppliers to
• OPCs pay the required corporate income resell them for profit.
tax rate, and their single incorporators pay • Grocery stores, appliance centers,
taxes for the dividends they receive. drugstores, school supply stores,
• registered to SEC (Security Exchange bookstores, online sellers, and the like are
Commission) if ikaw lang isa companies that are engaged in
merchandising.
• Merchandising businesses belong to
>Cooperative two general categories: wholesale and
• A cooperative is a duly registered retail.
business organization owned by a group of • Wholesalers are companies that buy
individuals and is operated for their mutual directly from the product manufacturers,
benefit. then sell the products to retailers.
• The persons making up the group are • Retailers mainly purchase items from
called members who have voluntarily joined wholesalers then sell them to their
together to achieve a lawful common social consumers. Other times, they may buy
or economic end. directly from the product manufacturers. A
• Cooperatives may be incorporated or person or business that sells goods to the
unincorporated. public in relatively small quantities for use or
• Some examples of cooperatives are: consumption rather than for resale.
-water and electricity (utility) cooperatives, - • SnR, landers
cooperative banking
-credit unions, and
-housing cooperatives,
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>Manufacturing Business Internal Environment (Within the

• A manfacturing business is responsible for Business)
producing tangible commodities from raw 1. Employees - Their skills, motivation, and
materials, labor, and machines. productivity affect business success.
• Manufacturing companies operate 2. Company Culture - The values, beliefs,
factories to mass-produce goods and sell and behaviors within the organization
them to wholesalers, retailers, and 3. Management & Leadership - Decision-
occasionally to consumers directly. making styles and leadership effectiveness
• Clothing manufacturers, vehicle 4. Resources-Financial, technological, and
manufacturers, food manufacturers, and human resources available.
other enterprises that produce goods are 5. Operational Efficiency - Processes,
examples of manufacturing firms. production capabilities, and supply chain
• apple products, cars, coke 6. Company Structure - Hierarchy,
departmental organization, and
communication flow.
7. Brand Reputation - Customer
Environmental Forces and Scanning perception and internal branding efforts

• Techniques used SWOT and PEST External Environment (Outside the

Business)
ENVIRONMENTAL SCANNING 1. Economic Conditions - Inflation, interest
• The business firm's environment refers to rates, and economic growth.
the conditions and elements that define its 2. Competitors - Rival businesses offering
operations and determine its success. similar products or services.
3. Customers & Market Trends - Changing
•The internal environment consists of consumer preferences and buying behavior.
elements that have a direct impact on the 4. Technology - Advancements that impact
business operations. production, marketing, or service delivery.
•These include the employees, the board of 5. Political & Legal Factors - Government
directors, and the managers. policies, regulations, and trade laws.
6. Social & Cultural Factors -
•The elements of the internal environment Demographics, lifestyle changes, and
are directly controlled and can be freely cultural trends.
modified by the firm itself. 7. Environmental Factors - Climate
change, sustainability concerns, and
•The external environment consists of regulations.
factors that have indirect but significant
influence on the operations of the business.
•These factors, however, cannot be trolled Two types of external environment
by the firm. 1. Microenvironment
2. Macroenvironment

•Microenvironment is also known as the

"operating environment." It consists of the
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customers, suppliers, regulatory agencies, •Lack of access to technology

and competitors •Limited distribution channels
•The factors in this environment have ar • Poor location
direct relevance to the business operations, •Lack of facilities and equipment and poor
usually controllable. transportation system.

• Macroenvironment is also known as the Opportunities are factors or events that

"general environment." It consists of the can give a positive impact to the company if
economic, political, social, legal, and properly addressed.
technical environment of the business Example:
organization. •New markets
• The factors in this environment are beyond •Potential profits
the control of the firm but are important • Additional sources of raw materials
determinants of success. Increased purchasing power of consumers
• Better location
• New users or customers
S.W.O.T AND P.E.S.T ANALYSIS
Threats are external factors which may
SWOT and PEST Analysis A Strategic negatively impact the company. These are
Planning trends, changes, or movements over which
To adequately deal with the forces of the the company has no control but should be
external environment, managers and addressed to maintain its status in business.
decision-makers apply certain techniques in Examples:
gathering and analyzing information and • Increase in the price of resources
subsequently conducting strategic planning. •Entry of new competitors
•High Inflation rates.
SWOT analysis is primarily used to analyze
the microenvironment

PEST analysis is conducted to address the

firm's macroenvironment

• Strengths include the company's

attributes that give a competitive edge over
others.
•The strengths of a company contribute to
its good performance and a positive
reputation in the business scene.

•Weaknesses are the attributes of a

company that need to be improved or
changed. These attributes may hinder the
company's growth and performance.
Examples:
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licensing, patenting, technological shifts,

and outsourcing decisions. An important
technological factor at present is the
Internet, which has greatly improved the
way business functions are done.

The Benefits of Strategic Planning Using

SWOT and PEST Analysis

PEST Analysis SWOT analysis and PEST analysis help

• PEST analysis is a method used in companies in formulating strategies and
analyzing the Political, Economic, Social, aligning their vision and mission to the
and Technological forces affecting the general direction of the business
company. environment where they operate.
• This technique focuses on the factors that
define the macroenvironment of the
business.

Political factors include laws, regulations,

and restrictions that may intervene or affect
the company's business course. Significant
political factors include tax policies, labor
laws, environmental laws, trade restrictions,
and tariffs.

Economic factors directly affect the

capability of business to generate profits.
These include economic growth, interest
rates, exchange rates, and inflation rate.
The increase in the prices of raw materials
and basic commodities is also an important
factor that affects business.

Social factors include demographic

aspects such as age, group affiliation,
religion, civil status, and the economic
status of consumers. Companies focus on
information regarding their target market,
particularly its buying habits, attitudes,
ethics, personalities, and values.

Technological factors include research

and development activities, automation,