Business Enterprise Simulation

BUSINESS
ENTERPRISE
SIMULATION
BUSINESS ENTERPRISE SIMULATION
LESSON 1:
SCOPE AND
LIMITATION
The series of Accountancy, Business and Management (ABM) textbooks
provides the basis for his Business Enterprise Simulation course.
The Organization and Management course stated the businessmen

usually start from scratch (Geralde-Orjalo and Fries 2016). For this
course, the students also create a new business from zero and are
considered ‘start-ups’.
Since it is the simplest business form, this course is designed for a
single proprietorship. Caoile (2017) cites that the only requirement
for single proprietorships is the registration with the Department of
Trade and Industry (DTI), apart from the local permis, i.e., barangay
clearance and business permits.
To replicate the enterprise planning and establishment, the students

applying at the ABM Incubation Laboratory ABMIL are shown in annex
A of this book.
For ease in implementation and with the 80 contact hours for the
course, this business enterprise simulation is intended for the service
and merchandising industry sectors. A shortlist of social
entrepreneurship ventures as cited by Garalde-Orjalo and Frias are in
annex B of this book.
Lists of promising service and merchandising enterprises and social

entrepreneurship ventures that the learner-entrepreneurs may choose
to engage can be found in the website of Philippine Statistics Authority.
Definitions of service and merchandising businesses, as cited in the

Exploring Small Business and Personal Finance textbook.
A merchandising type of business is the buy and sell business. Firms

under this category purchase products and sell the same at a higher
price without changing the form of the products. Retailing is the sale of
goods in small quantities, while wholesaling is the sale of goods in
large volumes. A familiar retailing business is the Philippines sari-sari
store.
A service type of business offers merchandise with no physical form

like skills, field of expertise, and consultancy. Service business
examples include the beauty parlors, repair shops, and transportation
vehicles. Medical, dental, accounting, legal, architectural design and
other professional services are also service business examples.
Consultations with parents, business mentors, and teachers help

shorten and focus the product idea list for and with learner-
entrepreneurs. The prevailing trends and preferred services often serve
as light-bulbs experiences for budding business practitioners who may
improve on the quality, reduce the cost, or make the said services or
products more accessible to their target.
Engagement in social entrepreneurship ventures is an exercise in

business ethics. Wherever possible agent, distributor, or dealer
participation in social entrepreneurship ventures may be considered for
the course.
Religious and nongovernmental organizations (NGO’s) also have

entrepreneurship projects for their respective communities. Whenever
possible, these poverty assistance projects could be used for the
course.
Prior studies made in the ABM courses may also be used as starting
points for the business Enterprise Simulation course. It is useful to take
note of the course schedule in annex C to ensure compliance with time
frames and attendance tasks.
To allow for completion of a business cycle during business mentors to
aid the enterprise groups in completing the course requirements.
Consultation hours with business mentors may also be established to
assist the enterprise group
The critical scope and limitations for the course include the
following:
1. Geographic scope: Where is the target market located and/or where
are the services or merchandising facilities located?
2. Period scope, or the most recent three years, for historical data on
the sector and target market population; nearest 70 class sessions for
projected data, as stated in the business Enterprise Simulation
Schedule.
3. Functional scope; Which business functions are covered by the
Enterprise Business Plan?
Most enterprise groups may opt to consider their school and/or

residential area communities as their geographic scope due to time and
implementation constraints. The period score is given variable due to
the 80 contact hours of the Business Enterprise Simulation course.
Finally, the functional score is limited only to the management,
marketing, operations, and finance functions.
It is important to note that the production or manufacturing function is

not covered by the Enterprise Business Plan, as only merchandising
and service sectors are considered activities.
If and when school environments allow for integration with other
strands or tracks = Science, Technology, Engineering, and
Mathematics (STEM)strand, Humanities and Social Science (HUMMS)
strand, Technological and Livelihood Education (TLE) and Technical-
Vocational Livelihood (TVL) Tract, Sports Tract and Arts and Design
Track - may be used to integrate student requirements for the said
courses.
For example, a repair and maintenance service project of ABM Strand
students may engage the STEM and/or TLE and TVL Track. Other track
integration possibilities would be tutor or instructors from Academic,
Arts and design projects from STEM Strand, TLE and TVL and other
strands or tract may be sold by the ABM merchandising. enterprise
group.
All, if not most of the models, methods, tools and concepts used for the Business
Enterprise Simulation course are drawn from the ABM Strand textbooks as follows:
• Applied Economics (Caoile 2017)

• Business Ethics and Social Responsibility: Principles, Policies, Programs and
Practices (Garalde-Orjalo and Frias 2016)
• Business Mathematics for Filipinos (Chan Shio, et al. 2017)
• Exploring Small Business and Personal Finance (Benito, Pao, and Yumang 2016)
• Fundamentals of Accountancy, Business and Management: A Textbook in Basic
Accounting 1 and 2 (Frias 2016)
• Marketing for Beginners: The principles of Marketing (Mendiola, Tanchingco,
and Agustin 2017)
• Organization and Management: Concepts, Casalests, and Exercises (Garalde-
Orjalo and Frias 2016)
Research data required for the course may be drawn from both secondary and
primary data sources.
Secondary data sources include the public documents, books, journals,

magazines, the internet, and the internal database of the enterprise.
Primary data sources include surveys, experiments, and observational research.
The conduct of market research, marketing mix development, and the creation of
effective marketing plans are some of the tools and concepts from the textbook of
Marketing for Beginners: The principles of Marketing (Mendiola, Tanchingco,
and Agustin 2017).
The presentation and analysis of business data, and consumptions on costs and
expenses are tools taken from Business Mathematics for Filipinos (Chan Shio, et al.
2017). Selected tools and methods for these include markup and margins, trade
discounts, salaries, and wages computations, and presentation and analysis tools
for business data.
Registration, licenses, permits, and other reporting requirements for business

cycles are drawn from Fundamentals of Accountancy, Business and
Management: A Textbook in Basic Accounting 1 and 2 (Frias 2016). It is
worthwhile to get the learner-entrepreneurs to access the websites of the relevant
agencies for the application process.
The accounting cycles for merchandising and service businesses. And the requisite
worksheets for reporting enterprise performance, are also drawn from Frias (2016)
and Exploring Small Business and Personal Finance (Benito, Pao and Yumang
2016) textbooks. Sample cash budgets and financial statements are in Simulation
Activity 8: Financial Study of this textbook.
The performance reports for the business execution and implementation phase for
this course are from Fundamentals of Accountancy, Business and Management: A
Textbook in Basic Accounting 1 and 2 (Frias 2016) and Organization and
Management: Concepts, Casalests, and Exercises (Garalde-Orjalo and Frias 2016).
A checklist for performance reports is in Simulation Activity 10: Performance
Reports of this textbook.
Financial planning tools and methods of analysis for the course are from Benito,
Pao, and Yuman (2016). Vertical and Horizontal analysis and profitability ratios are
discussed in the financial study of the Enterprise Business Plan.
The principles and practices to emphasize the role of enterprise in economic

development are obtained from Garalde-Orjalo and Frias (2016). Selected
economic indicators for the service and merchandising sectors that may be used
for the course can be found in the website of Philippine Statistics Authority. Scan
the QR code to access the link .
Methods, models and tools of the management functions in the Enterprise
Business Plan is taken from Organization and Management: Concepts, Casalests,
and Exercises (Garalde-Orjalo and Frias 2016). The said methods, models, and
tools include the Porter model for micro-environment analysis, the Political,
Economic, Social and Technological (PEST) model for macro-environment analysis
and the action plan template for strategic planning.
Other concepts for the Enterprise Business Plan include delegation, span of
control, and authority in the organization charts. Engagement or investment in
business beyond profit through social entrepreneurship ventures, and the practice
of and business ethics principles of transparency and accountability through the
performance and financial reports are also used in the Enterprise Business Plan
Sections.
CHAPTER 2:
ENTERPRISE
BUSINESS PLAN
LESSON 3:
INTRODUCTION,
BACKGROUND OF
THE ENTERPRISE
Recent statistics from the Philippines Statistical Authority

shows favorable growth rates for the service sectors.
It is apparent that most start-ups decide to invest in these

sectors because of their economic contribution and growth
rates.
The choices of most learner-entrepreneurs may be in retail-

trade and other services sub-sectors under the service sector.
As cited in the Business Ethics and Social Responsibility:

Principles, Policies, Programs and Practices (Garalde-Orjalo
and Frias 2016), the principal role of business in economic
development in the creation of jobs. The number of
employees engaged by the enterprise and the salaries and
wages paid for the teams simulate the job creation process.
This Business Enterprise Simulation course permits the

learner-entrepreneur to practice the observance of business
ethics through safe and inexpensive products and services for
customers, decent wages for employees, realistic returns for
investors and owners, and decent transactions with suppliers.
Most learner-entrepreneurs groups may opt to locate their

enterprises inside the school environment or in their
residential communities. The choice of an accessible location
may be due to time, financial, and other constraints. The
choice of location is a critical decision since the primary target
market of their enterprise is the population in the chosen
locality.
It is vital to understand the market environment and that the

method of collecting, understanding and collecting data is
through market research (Mendiola, Tanchingco, and
Agustin 2017). Through market research, the target market
can be described as its price sensitivity, buying patterns, and
other characteristics needed to match the product or service
ideas of the start-up groups.
LESSON 4:
STRATEGIC
PLANNING
A start-up enterprise typically engages in strategic planning.

The output for strategic planning is as follows:
• Vision, mission, goals, and objectives

• Environmental analysis
a. Macro Environment: PEST
b. Micro-environment: Porter Model
c. SWOT analysis
d. Strategy formulation
Organization and Management: Concepts, Casalests, and
Exercises (Garalde-Orjalo and Frias 2016) learnings state that
organizations do not exist in a vacuum. The planning
functions are completed in dynamic environments - external
and internal - as shown in the strategic management process.
The term vision is often explained to answer the question,

Where do we want to go? A vision statement is, therefore,
an affirmation of what the enterprise wants to become.
In the business Enterprise Simulation course, a vision
statement may not be required because of the time limitations
for the subject.
A mission statement is a declaration of the purpose of the
organization. It often defines the scope of its operations in product,
market, and service terms. It is helpful to answer the following
questions in formulating the mission statement:
• What business are we in or what business do we want to be in?
• What customer needs are we satisfying and how do we intend to
satisfy them?
• What type of work environment do we intend to provide to our
employees?
• Who are shareholders and what do we expect in terms of returns on
investment (ROI)?
• What is our community and what do we expect to contribute to the
external community?
Goals are short-term directions, often stated in specific
metrics, such as geographic, periodic and other numerical
terms. Goals allow organizations to be directed toward
specific sites or locations over stated periods of time and with
fixed profits or sales growth. An example of a goal statement
is to earn maximum profits.
Objectives are specific targets set by entrepreneurs to direct

them into achieving their goals.
ONE GOAL MAY HAVE MORE THAN ONE OBJECTIVE TO

ACHIEVE IT.
It is helpful for the enterprise groups to be S-M-A-RT: make
the vision, mission, and goal statements specific, measurable,
attainable, realistic and time-bound. Goals or objectives may
be limited to:
• Marketing objectives, such as sales volume and value targets for
the period covered.
• Financial objectives, such as gross or net profit percentages, as
drawn from the projected financial statements;
• Management objectives, such as enterprise types choice and
completion of business registration requirements;
• Internal objectives, such as expected learnings from the business
simulation; and
• Customer objectives, with surveys from clients for product or
service improvement, or other pertinent customer satisfaction
comments.
The practice of business ethics, i.e., objectives related to socio-economic issues,
may be imputed in the choice of sectors and product or service ideas.
LESSON 4:
ENVIRONMENTAL
ANALYSIS
LESSON 2.3: ENVIRONMENTAL ANALYSIS
The strategic management process shown in figure 2.1 proceeds with
analysis of the external and internal environments than an enterprise
belongs to. The PEST and/or PESTEL models are often used for
macro-environmental analysis, while Porter model is often used for
internal or micro-environment analysis.
MACRO-ENVIRONMENT: PEST
The external environment, which includes the government, economic
conditions, social and other factors that generally affect all
organizations, is also called the macro-environment (Bateman and Snell
2008). The macro environment may be defined by the acronym PEST,
which lists the Political, Economic, Sociological, and Technical variables
in the said environment.
A variation on the PEST acronym is PESTEL, which stands for Political,
Economic, Sociological, Technical, Environment, and Legal factors in the
environment.
The analysis of the external environment gives rise to

opportunities and threats for the enterprise. The PEST
variables may be employed as a checklist for opportunities
and threats from the macro-environment that a firm has little
or no control of.
Opportunities are external possibilities or chances that may occur
and benefit the business. Such occurrences may or may not happen.
Some occurrences include
1. Possibility of getting business offers from the external communities;

2. Sudden shifts in customer’s tastes, which favor the entrepreneur’s
products; and
3. Changes in market trends due to new developments, such as
additional grade level in the school community.
Threats are undesirable occurrences in the market and are
disadvantageous to the business and may include the following:
1. Entry of low cost companies in to the market

2. A rise in the sale of substitute goods
3. Costly regulatory requirements
4. Growing bargaining power of customers and suppliers
5. Changing customer/buyer needs and tastes
6. Changes in demographics
For example, some merchandising industries may see the changes in
tax laws, e.g., the imposition of value-added tax (VAT) as a threat,
whereas the propensity to spend and the consumption patterns may be
viewed as an opportunity. The service industries may see technological
advancements and developments as opportunities, while interest,
inflation and tax rates as threats.
Due to the time and other resource constraints of the Business
Enterprise Simulation course, the macro-environment: PEST data may
be derived from the school or community environment where the
students locate their businesses. Data collection may include student or
community demographics and competitor enterprises situated in the
chosen locations.
MICRO-ENVIRONMENT: PORTER MODEL
Strengths and weaknesses refer to the presence or absence of internal

resources in a given enterprise. Internal resources may include management,
manpower, money, materials, and machinery, including technology. Examples of
enterprise strengths are skilled manpower, positive returns, and cutting edge
equipment, while weaknesses may be the lack of reliable suppliers of materials and
limited production capacity.
The micro-environment or the competitive environment defined in the

Porter model is composed of five forces - competitors, new entrants,
suppliers, buyers, and substitutes - as shows dynamic interaction
between and among the forces as illustrated by the arrows. New
entrants, substitutes, and complements enter rival firms in an existing
industry as do suppliers and customers. The cyclical arrows in the
center indicate uninterrupted movement of industry participants. The
rival firms appear and horizontal positions are buffeted by all five
forces, including the position that they belong to. At any point in time,
each force in the model is not static - the population of suppliers,
customers, rival firms, new entrants, and substitutes is shifting.
Information for the five forces in the Porter model is gathered for a given location
in a specific industry sector or subsector. For example, a retail store in a residential
community will require data for the salon service sector in the given community
where the outlet is located.
The buyer population may be the population in the residential community or taken
from the foot traffic in the retail store location. The rival firms in the residential
community consist of other outlets in the given location.
SUPPLIERS NEW ENTRANTS
RIVAL FIRMS
SUSBSTITUTES AND
COMPLIMENTS CUSTOMERS
The other data on Porter’s forces - suppliers, entrants and substitutes - will be
diverse for different residential communities. Local regulations in residential
communities may alter the opportunities and strengths for retail stores. For
example, garbage and waste disposal plans may cost more in upscale residential
areas - effectively - a weakness for the enterprise.
Substitutes for lower income residential communities may include cheaper fare
from ambulant vendors and/or carts offering readily available and relatively
inexpensive wares. When the new enterprise offers more expensive fare, a
weakness then exists for the retail outlet.
It is important to reiterate that the five forces of Porter model change; the
population for the buyer population, for instance, is not an inactive data. The foot
traffic, or the population of potential consumers visiting the given location, is not a
single statistic. The population is perhaps higher during the weekends or holidays.
The same is true for the other data - suppliers, entrants, substitutes, and rival
firms. There is a continuous flow of incoming suppliers and/or outgoing rivals. For
the completion of records of the Porter model, the vibrant nature of the
competitive environment must be considered
The Porter model may be simplified for the Business Enterprise Simulation course
and may just state a listing of strengths and weaknesses which may include:
Strengths
1. High quality of products
2. Affordable but profitable prices
3. Ability of the product to meet the customer’s tastes
4. Efficiency and effectiveness in serving customers
5. Ability to attract customers
6. Good business location
7. Good and well-trained marketing staff
8. High entrepreneurial spirit
The Porter model may be simplified for the Business Enterprise Simulation course
and may just state a listing of strengths and weaknesses which may include:
Weaknesses
1. Being new in the market and having a weak market image
2. Weak distribution channels
3. Below the average marketing skills
4. High overall unit costs relative to competitors
5. Narrow product line
6. Inaccessible location to customers
MANAGEMENT
STUDY
The business enterprise simulation continues with the organizing
function. The output for the organizing function is as follows:
1. Enterprise form
2. Organizational chart
3. Registrations and licenses
An organization is defined as having two or more individuals working
toward the attainment of a goal or goals. For this enterprise simulation
course, the business organization is a sole proprietorship.
ENTERPRISE FORM
In sole proprietorship, an individual owns all the assets and is the
simplest business form.
Although the source of capital may be limited for sole proprietorships,
most start-ups choose the business form. It is easy to form and has
minimal requirements for submission to government offices during its
business life. Since only the owner makes decisions for the enterprise,
it is able to be flexible and responsive to its environment. This textbook
is written with those advantages in mind to allow the student-
entrepreneurs to complete a business cycle during the course
schedule.
ORGANIZATIONAL CHART
The organizational chart is a traditional picture of the positions in a
firm, how they are arranged, who reports to whom, and what the
specific positions execute in the enterprise. The boxes represent
different roles and the reporting authority is represented by the levels
of the boxes and the lines connecting them.
The vertical structure, or top to button line in an organization, is rooted
on basic concepts of authority, span of control and delegation.
OWNER/PROPRIETOR
FINANCE/
MARKETING TEAM OPERATION TEAM
TEAMACCOUNTING
Authority allows owners of enterprises to decide for the organization

and assign work tasks to those in the lower levels of the enterprise. As
shown in figure 2.4, the owner/proprietor can give orders to the
marketing, finance and operations teams in the lower boxes. The
management levels in the pyramid show the hierarchy and levels or
authority in an organization.
Figure 2.4 also shows three subordinates under the owner/proprietor.

This number of subordinates who report directly to an executive or
supervisor is called the span of control.
Different management levels and spans of control allow for authority to
be spread in organizations. The assignment of new or additional
responsibilities to a subordinate is called delegation. This concept
allows managers to get more work done through others - an essential
feature in supervision and administration.
OWNER/
PROPRIETOR
FINANCE/ OPERATION
MARKETING TEAMACCOUNT
TEAM ING TEAM
The organizational chart for Business Enterprise Simulation course may

be simple, as the human resource functions may be lodged with the
sole proprietor. It is recommended that the assigned sole proprietor-
owners exercise the staffing process, even if only the recruitment and
selections step is included. The practice of the interview and/or
application from potential marketing, finance, or operation members or
employees ensures good teamwork for the business planning and
implementation activities.
The manufacturing function is not included in this course, as only

merchandising and service industries are covered. To simplify further,
the finance and accounting functions may be lodged in a single person,
as the merchandising and service transactions are straightforward and
easier to document.
The operations team may be tasked to arrange for transportation,
communication, purchasing and other functions assigned by the owner
or proprietor.
All enterprise group members are paid salaries and wages by the
owner-sole proprietor. It is recommended that uniform wages are
established for Business Enterprise Simulation courses. As stipulated in
the Business Ethics and Social Responsibility course (Garalde-Orjalo
and Frias 2016), an essential element of legal responsibilities for
enterprise is the payment of decent wages to its employees.
Chan Shio, Briones, Mallari, and Garces (2017) detailed the component
of salaries and wages to guide the owner-entrepreneur. Dependent on
the guidelines set by academic institutions, overtime pay and/or
employee benefits may be implemented for the Business Enterprise
Simulation course.
Whenever time permits, a run through of the staffing process may be
exercised by the learner-entrepreneurs.
RECRUITMENT
At very least, it is proposed that a list of
what the position is required to do, or
SELECTION
the job descriptions, may be
documented by the learner-
entrepreneur. TRAINING AND DEVELOPMENT
PERFORMANCE APPRAISAL
REWARD SYSTEM DESIGN

REGISTRATIONS AND LICENSES
The registration and reporting requirements for single proprietorships
include the business name registration with the Department of Trade
and Industry (DTI) and applications with the BIR, SSS, Pag-IBIG and
Philhealth.
For the Business Enterprise Simulation course, students may refer to

the website of DTI (www.dti.gov.ph) regarding the business name
registration application forms for sole proprietor, either new
applications or renewal applications.
It is noted that fees for the Business Name Registration may be

collected from the enterprise groups as a business ethics exercise on
legal responsibilities. Obedience to and compliance with pertinent
government rules, laws and provisions comprise legal responsibilities.
Time constraint of the course may not allow for applications with
other government agencies. The business mentor may, however, guide
the enterprise groups in the use of the relevant government websites
to view the appropriate forms.

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BUSINESS

The Organization and Management course stated the businessmen

To replicate the enterprise planning and establishment, the students

Lists of promising service and merchandising enterprises and social

Definitions of service and merchandising businesses, as cited in the

A merchandising type of business is the buy and sell business. Firms

A service type of business offers merchandise with no physical form

Consultations with parents, business mentors, and teachers help

Engagement in social entrepreneurship ventures is an exercise in

Religious and nongovernmental organizations (NGO’s) also have

Most enterprise groups may opt to consider their school and/or

It is important to note that the production or manufacturing function is

• Applied Economics (Caoile 2017)

Secondary data sources include the public documents, books, journals,

Primary data sources include surveys, experiments, and observational research.

Registration, licenses, permits, and other reporting requirements for business

The principles and practices to emphasize the role of enterprise in economic

Recent statistics from the Philippines Statistical Authority

It is apparent that most start-ups decide to invest in these

The choices of most learner-entrepreneurs may be in retail-

As cited in the Business Ethics and Social Responsibility:

This Business Enterprise Simulation course permits the

Most learner-entrepreneurs groups may opt to locate their

It is vital to understand the market environment and that the

A start-up enterprise typically engages in strategic planning.

• Vision, mission, goals, and objectives

The term vision is often explained to answer the question,

Objectives are specific targets set by entrepreneurs to direct

ONE GOAL MAY HAVE MORE THAN ONE OBJECTIVE TO

The analysis of the external environment gives rise to

1. Possibility of getting business offers from the external communities;

1. Entry of low cost companies in to the market

MICRO-ENVIRONMENT: PORTER MODEL

Strengths and weaknesses refer to the presence or absence of internal

The micro-environment or the competitive environment defined in the

SUPPLIERS NEW ENTRANTS

Authority allows owners of enterprises to decide for the organization

Figure 2.4 also shows three subordinates under the owner/proprietor.

The organizational chart for Business Enterprise Simulation course may

The manufacturing function is not included in this course, as only

REWARD SYSTEM DESIGN

For the Business Enterprise Simulation course, students may refer to

It is noted that fees for the Business Name Registration may be

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