Part I.

Discussion.

• Discuss the major changes in the Philippine economy from colonial era
to present.
• Spanish Era
Following several more Spanish expeditions after Magellan’s, the first
permanent settlement was established in Cebu in 1565. After defeating a
local Muslim ruler, the Spanish set up their capital at Manila in 1571, and they
named their new colony after King Philip II of Spain. In doing so, the Spanish
sought to acquire a share in the lucrative spice trade, develop better contacts
with China and Japan, and gain converts to Christianity.
Trade in the Philippines centered around the “Manila galleons,” which sailed
from Acapulco on the west coast of Mexico (New Spain) with shipments of
silver bullion and minted coin that were exchanged for return cargoes of
Chinese goods, mainly silk textiles and porcelain. But, as this trade thrived,
another unwelcome element was introduced — sojourning Chinese
entrepreneurs and service providers.
The galleon trade ceased in 1815, and from that date onward the Royal
Company of the Philippines, which had been chartered in 1785, promoted
direct and tariff-free trade between the islands and Spain.
In 1834 the Royal Company of the Philippines was abolished, and free trade
was formally recognized. With its excellent harbor, Manila became an open
port for Asian, European, and North American traders. In 1873 additional
ports were opened to foreign commerce, and by the late nineteenth century
three crops—tobacco, abaca, and sugar—dominated Philippine exports.
• American Era
The economic development of the Philippines under the United States may
be attributed to the free trade relations that the Americans imposed upon the
country. Filipino products entered the United States without paying custom
tariffs. There was a limit or quota to the amount of tax free Filipino products.
However American products were not limited.
Business boom retail trade inside the Philippines also doubled from, 1907-
1935. Filipinos had more money to buy different things, however they liked to
buy imported goods.
The Philippines entered the industrial age during the time of Americans. It
favored the use of machines and the mass production of goods in big
factories.
During the American era, the Philippines became an Asian leader in
transportation and communications. Americans developed our railroads in
Luzon, Cebu, and Panay. More ports for shipping were opened up. Pier 7 in
 manila was the largest port in Asia.
New banks opened during the American era. In 1906, the postal savings bank
was introduced and the Philippine national bank was established.
•
•
• Japanese Era
The Japanese occupation of the Philippines redirected a prosperous, open,
peacetime economy into one geared for military objectives. The occupying
Japanese military organization above all had the prime objective of
prosecuting a war. Economic and other issues were subordinated to this
objective, even as a civil government was set up that was run by Filipinos.
Initially, this civil government was turned over to a commission type
government with a chairman. Then, an “independent” Philippine Republic was
established that was still virtually subservient to the interests of the occupying
power.
• After Colonial Period
A compilation of the development plans of the Philippines for the past five
decades reflect both the economic situation during the period, the primary
challenges, and the overall policy direction that each political leader
prioritized – Rehabilitation Plan in the 1950s, Socio-economic Development
Plan in the 1960, the Development Plan in the 1970s, Poverty Eradication
Plan in the 1980s, Human Development Plan in the 1990s, and the Good
Governance Plan in the first years of the 21st century.
During this time, several major policy measures have been implemented. As
early as 1949, the Philippines aimed to pursue an economic transition from
an agricultural to an industrial economy with minimal dependence on outside
markets. An industrialization strategy based on import substitution was born
out of this purpose during the 50s that resulted in favored domestic
industries that used up large portions of official foreign reserves that
negatively affected the balance of payments. Moreover, due to the strategy’s
association with a fixed or managed exchange rate regime, a series of
balance of payments crisis was often experienced with every collapse of the
peso, forcing the government to seek liquidity from the International
Monetary Fund (IMF). This has led to large deficits in the current account
and soaring foreign debt of the national government. After the 1986
revolution, the government sought to restore democracy, macroeconomic
stability, improve economic efficiency and competitiveness through trade
liberalization, tariff reduction, and the accession to the World Trade
Organization (WTO). It also aimed to correct the large fiscal deficit through
consolidation and tax reform, and the privatization of several government
own and controlled corporations such as the Philippine National Bank (PNB)
and Petron, as well as the recognition of the central bank as an independent
agency whose key policy tool is inflation targeting.
 Over 20 years later, the Philippine Development Plan 2011-2016 seeks to
achieve inclusive growth through structural change that requires the greater
participation of investment in a consumer-driven economy in the demand-
side, and a broad-based industrial expansion in the supply-side. By
improving and supporting the second-tier growth areas of the country,
massive employment generation across regions will ensue thereby lifting
more households out of poverty.
• Present a clear distinction of the different aspect of industry environment
namely: new entrant, substitute and competitor.
• New Entrant
New entrant are those who are not currently competing in the market, but may
enter the market to offer the same product. As such, a high threat of new
entrants is an undesirable factor, since it means that the potential for increased
competition is great. And increased competition is almost certain to bring with it
lower prices, lost sales, and lower market share.
• Substitute
Substitute are products or services that may arise to take the place of existing
product offered by a company. The threat of substitute products is just as
detrimental (destructive) as the threat of new entrants, as it also portends (be a
sign or warning) the possibility of lower prices, lost sales, and lower market
share.
• Competitor
The intensity of rivalry in an industry is the extent to which competitors within an
industry compete with one another and limit other profit potential. If rivalry is
fierce the profit potential in the industry declines for all firms. Low intensity of
rivalry increases profit potential and makes the industry less
competitive. Competition intensifies when a firm identifies the opportunity to
improve its position or senses competitive pressure from other businesses in its
industry, which can result in price wars, advertising battles, new product
introductions or modifications, and even increased customer service or
warranties.

• Discuss the importance of environmental scanning to a management

practitioner.
Environmental scanning is a method of gathering information from the
external environment for use in issues management and the strategic
decision- making process. It's an early warning system for changes outside
the organization—a type of radar to pick up the new or unexpected in order to
help top management plan for the organization's future. In addition to
detecting emerging issues, the strategic intelligence provided by
environmental scanning can also help quantify existing problems. In addition
to detecting threats and opportunities for the organization, environmental
 scanning also encourages future-oriented thinking in the dominant coalition.

• Explain the significance of Bargaining Power and recommend ways of

maintaining it.
In negotiating, bargaining power is the capacity of one party to dominate the
other due to its influence, power, size, or status, or through a combination of
different persuasion tactics.

Bargaining Power of Buyers

The presence of powerful buyers reduces the profit potential in an industry.
Buyers increase competition within an industry by forcing down prices,
bargaining for improved quality or more services, and playing competitors
against each other. The result is diminished industry profitability.
Ways of maintaining it:
• The buyer group is concentrated, or purchases large volumes relative to the
seller’s sales.
• Products purchased from the industry represent a significant percentage of the
buyer’s costs or purchases.
• Products purchased from the industry are standard or undifferentiated—
alternative suppliers are easy to find and competitors are played against
each other.
• Few switching costs exist (little penalty for moving to another supplier).
• Profits earned are low (greater incentive to reduce purchasing costs).
• Buyers pose a significant threat of backward integration—buyers demand
concessions, and may engage in tapered integration (producing some
components in-house and purchasing the rest from outside suppliers).
• The industry’s product is not important to the quality of the buyer’s products or
services.
• The buyer has full information (their knowledge of demand, market prices and
supplier costs provides them with leverage).
Bargaining Power of Suppliers
The presence of powerful suppliers reduces the profit potential in an industry.
Suppliers increase competition within an industry by threatening to raise
prices or reduce the quality of goods and services. As a result, they reduce
profitability in an industry where companies cannot recover cost increases in
their own prices.
Ways of maintaining it:
• It is dominated by a small number of companies and is more concentrated than
 the industry to which it sells
• It is not required to contend with substitute products for sale in the industry
• The industry is not one of the supplier’s important customers
• Its products are an important part of the buyer’s business
• Its products are differentiated or there are built-up switching costs
• It poses a definite threat of forward integration

• Enumerate and explain the advantages and disadvantages of different

legal form of business enterprise.

• Sole Proprietorship
• This is when only one person owns and controls the business.

Advantages

Ease of formation. Starting a sole proprietorship is much easier to

set up and register. It only requires minimal amount of capital, lower
cost of in registering of government permits and licenses.
Ownership. The owner has the sole authority to make decisions on
behalf of the company.
Tax benefits. The owner is not required to file a separate business
tax return. Instead, will list business information and figures within
individual tax return. This can save additional costs on accounting
and tax filing.
Distribution of profits. Sole proprietor enjoys all the profit the
business produces. He has the sole discretion to reinvest the money
back into the business to expand the company, or to use it for
personal purposes.

Disadvantages

Unlimited personal liablility. There is no legal distinction between

the business and owner in a sole proprietorship, and therefore any
 assets owned by either are financially at risk. Debts, losses or
lawsuits that can't be paid by the business will need to be covered by
the owner even if that means using personal assets.
Lack of financial controls. The looser structure of a proprietorship
won't require financial statements and maintaining company minutes
as a corporation. The lack of accounting controls can result in the
owner being lax about financial matters, perhaps falling behind in
payments or not getting paid on time.
Limited capital. In a sole proprietorship, the owner arranges for the
required capital for the business. It is difficult for a single individual
to raise a huge amount of capital. The owner's own funds as well as
borrowed funds sometimes become insufficient to meet the
requirement of the business' growth and expansion.
Lack of continuity. The existence of the business is dependent on
the life of the owner. Illness, death, etc. of the owner brings and end
to the business.

• Partnership
• As defined, a type of business organization in which two or more individuals
mutually contributes money, skills, and other resources, to divide profit
among themselves.

Advantages

Mutual capital. Due to the nature of the business, the partners will
fund the business with start up capital. This means that the more
partners there are, the more contribution (capital or industrial) they
can put up into the business, which allow better flexibility and more
potential for growth.
Flexibility. A partnership is generally easier to form, manage and
run. They are less strictly regulated than companies, in terms of the
laws governing the formation and because the partners' have the
only say in the way the business is run (without interference by
shareholders) they are far more flexible in terms of management, as
long as all the partners agree.
Shared responsibility. Partners can share responsibility of the
running of the business. This will allow them to make the most of
their abilities. Rather than splitting the management and taking an
equal share of each business task, they might well split the work
according to their skills.
Decision making. Partners share the decision making and can help
each other out when they need to. More partners means more
brains that can be picked for business ideas and for solving of
problems that the business encounters.
Disadvantages
Disagreements. Obviously people are likely to have different ideas on
how the business should be run, who should be doing what and what
the best interests of the business are. This can lead to disagreements
and disputes, which might not only harm the business, but also the
relationship of those involved.
Partnership agreements. Because the partnership is jointly run, it is
necessary that all the partners agree with things that are being done.
This means that in some circumstances there are less freedoms with
regards to the management of the business.
Unlimited liability assumed by the partners. Generally, partners are
liable upto their personal interest in meeting the partnership's liabilit
to the creditor.
Double taxation. Generally, partnership is taxed the same with the
corporation, which is 30% of the net income. After, the partners'
divide their share and this will form part in their individual income
tax return, which means another tax.
Partnership dissolution. As partnership is only bound by mutual
agreement, it can be dissolved anytime. Illness, death, insanity,
disagreement between the partners can cause the termination of the
partnership.
• Corporation
• A legal entity that is separate and distinct from its owners.
Advantages

Limits liability. The liability of the owners towards the creditors is

limited to their investment in the company. This means that in case
of liquidation of the company, if the company's assets are insufficient
to meet the liability, nothing is required to be contributed by the
owners. Only the onwers' contribution is at stake rather than their
personal assets.
Going concern. The power of succession gives a corporation
continuous existence. The death of the shareholder will not
terminate the corporation. The shares of ownership or interest of a
corporation can be transferred from one owner to another. A
corporation continues to exist until the shareholders decide to
dissolve it or merge with another business.
Shares of ownership are transferable. The shares of stock or interest
of a publicly traded corporation can be traded easily through a
stockbroker. Shares of corporations are freely transferable except
when shareholders have "buy-sell" agreements restricting when and
to whom shares may be sold or transferred. SEC may also limit the
transferability of certain shares. For non-publicly traded
corporations, the stock certificate can be transferred or assigned to
another owner by executing a deed of assignment of shares of stock.
It attract more investors. It can attract more investors because of its
stock structure, perpetual existence, ownership transferability, and
limited liability. It allows to raise more capital or equity to manage
and expand their operations.

Disadvantages

• Incorporation is costly. Incorporating a business needs to file with

the SEC and may involve a lot of formal and legal papers, such as by
laws, articles of incorporation, affidavit and board resolutions. This is
 sometimes done by getting the service of a corporate attorney or
firms which are specialized in incorporating a business. It may also
require higher amount of intial or paid up capital for other types of
corporation like financing and lending corporations.
Highly regulated. Generally, corporations are regulated by SEC.
Special corporations, on the other hand, may be required with
secondary licenses and are further regulated by other government
agencies, such as BSP for financing and lending companies, CHED for
secondary schools and IC for insurance companies. Moreover, the
corporations also need to comply with the quarterly or annual
reportorial requirements with the SEC and other agencies requiring
those reports for certain types of corporations. This means that the
more compliance it requires, the more paper works and cost it
involves.
It may result to double taxation. Since the corporation is already
taxed on its income, distributing this income to shareholders in the
form of dividends may result to double taxation. This is because the
dividend income received by the shareholders is also taxed on their
personal income tax returns.
It is note easy to dissolve. Corporations are difficult to dissolve, as it
is also difficult to form. Everything is regulated from formation, to
operation, and to dissolution. An application for dissolution must be
filed with the SEC with completed requirements, including tax
clearance with the BIR. The liquidation process is also regulated to
ensure that the rights of any creditor having a claim against it are not
prejudiced.

• Discuss the relationship of Good Governance to sustainable Economic

progress.
It is widely recognized that good governance is essential to sustainable
development. Well-functioning legal institutions and governments bound by
 the rule of law are, in turn, vital to good governance. Weak legal and judicial
systems – where laws are not enforced and non-compliance and corruption
are the norm – undermine respect for the rule of law, engender environmental
degradation, and undermine progress towards sustainable development.
While many factors play an important role in development, good governance
is now recognized as playing an essential role in the advancement of
sustainable development. Good governance promotes accountability,
transparency, efficiency, and rule of law in public institutions at all levels. In
addition, it allows for sound and efficient management of human, natural,
economic, and financial resources for equitable and sustainable development.
Moreover, under good governance, there are clear decision-making
procedures at the level of public authorities, civil society participation in
decision-making processes, and the ability to enforce rights and obligations
through legal mechanisms.
These aspects of good governance do not in themselves ensure that society
is run well nor do they guarantee sustainable development. However, their
absence severely limits that possibility and can, at worst, impede it.
Economic growth is a critical but not the sole requirement for success in the
fight against poverty. It is equally important to have a social policy that places
particular emphasis on meeting basic human needs. Education, training and
extension services as well as availability of credit foster self-reliance and
initiative in people of all segments of society.
A further component is a social climate in which the door to full personal
development is open to everyone – regardless of gender, race, socio-cultural
background or other differences. Where a socio-economic ambiance of this
quality has been put into effect it has led to impressive economic success
from which the lowest income groups have also benefited, since government
expenditures in the education and social welfare sectors could be financed
from it.

• List down the strengths and weaknesses of Philippine being an

archipelago, with emphasis on business perspective.
• Advantages
• The Philippines is surrounded mostly with bodies of water, therefore rich
in marine resources that can be a source employment and income
gained from the fishing/marine industry.
• Venturing in real estate business like hotels and resorts is one of
progressing businesses due to the abundance of wonderful
beaches around the country.
• Tourism in the Philippines is progressive because they enjoy the
 diversity each region they visited offers like the difference in culture,
norms, foods, beautiful sceneries and the like.
• Each region offers variety of products that represents their culture and
personality which can be exported around the globe.
• Disadvantages
• Archipelago hinders fast development especially in trade, transportation
and communication.
• Philippines is prone to natural calamities such as storms that destroy
many businesses and can lead to casualties.
• Basic utilities and commodities are not as easy to come by because of
the distance from the main sources and the erratic schedules of
boats ferrying the supplies.
• Agricultural/Marine products are also difficult to transport from one
island to another and the transportation costs raise the prices.
• Rural development and industrialization to far flung islands almost nil
affecting employment and livelihood of the island populace.

• Explain the essence of Corporate Social Responsibility to business

enterprise and cite an organization which is active in CSR activities.
The entirety of CSR can be discerned from the three words this phrase contains:
corporate, social, and responsibility. CSR covers the relationship between corporations
and the societies with which they interact. CSR also includes the responsibilities that are
inherent on both sides of these relationships. CSR defines society in its widest sense and
on many levels, to include all stakeholder and constituent groups that maintain an
ongoing interest in the organization's operations. Society acts as fertilizer for business to
grow, right from providing a ground till flourishing it successfully.
Corporate social responsibility is not a difficult concept and can be explained
as Corporate – means organized business, Social - means everything dealing
with the people, Responsibility - means accountability between the two. The
term corporate social responsibility (CSR) what is generally understood is that
business has an obligation to society that extends beyond its obligation to its
shareholders or owners. The philosophy is basically to give back to the
society, what it has taken from it, during profit maximization and wealth
creation it could take the form of community relationship, volunteers’
assistance programs, healthcare initiatives, special education, training
program and scholarship, preservation of cultural heritage and environment
etc. CSR also called as CR or corporate citizenship and responsible business
CSR is a concept whereby it considers the interest of society by taking
responsibility for the impact of their activities on customers, suppliers,
employees, shareholders, communities, and other stakeholders and the
environment.
Corporate social responsibility is operating a business in a manner which
 meets or excels the ethical, legal, commercial and public expectations that a
society has from the business. There has been a sea change in the nature of
the triangular relationship between companies, the state and the society. No
longer can firms continue to act as independent entities regardless of the
interest of the general public. The evolution of the relationship between
companies and society has been one of slow transformation from a
philanthropic coexistence to one where the mutual interest of all the
stakeholders is gaining paramount importance. Companies are beginning to
realize the fact that in order to gain strategic initiative and to ensure continued
existence, business practices may have to be molded from the normal
practice of solely focusing on profits to factor in public goodwill and
responsible business etiquettes.
Lexmark Research and Development Corporation is known for their active
CSR activities. Every year, the year-end bonus of its employees lies on the
following metrics: Energy Conservation, Segregation of Wastes, and
accomplishment of annual CSR activity outside the company. Just recently,
they conducted the “Adopt a School Program” in which the CSSC Accounting
sponsored the ID taking, printing, and distribution to the Pardo School Kids.

• Cite at least three aspects of macroeconomic policy and discuss your

assessment on its importance in achieving inclusive growth.
The recent financial crisis has highlighted the damaging impacts on living
standards that can result from macroeconomic instability. Large swings in
economic activity, high inflation, unsustainable debt levels and volatility in
exchange rates and financial markets can all contribute to job losses and
increasing poverty, endangering progress towards achieving the MDGs.
Maintaining macroeconomic stability therefore is a prerequisite for sustained
and inclusive development.
Monetary policy
Monetary policy attempts to control the amount of money in circulation or the
cost and availability of credit. The objective is straightforward even if difficult
to put into practice. If money is readily available because, say, interest rates
are low, people can afford to borrow and spend. But unless production keeps
pace, there will not be enough goods and services to meet the demand this
borrowing and spending creates. In the face of the excessive demand,
producers and suppliers have incentives to raise their prices. As time goes
by, prices spiral upward, leading to uncontrolled inflation during which dollars
lose their value. The key to keeping inflation in check is to maintain stable
interest rates and not let the money supply grow too rapidly.
Fiscal Policy
Fiscal policy is the use of government's revenue and expenditure as
instruments to influence the economy. Examples of such tools
are expenditure, taxes, debt.
 For example, if the economy is producing less than potential output,
government spending can be used to employ idle resources and boost output.
Government spending does not have to make up for the entire output gap.
There is a multiplier effect that boosts the impact of government spending.
For example, when the government pays for a bridge, the project not only
adds the value of the bridge to output, it also allows the bridge workers to
increase their consumption and investment, which also help close the output
gap.
The effects of fiscal policy can be limited by crowding out. When government
takes on spending projects, it limits the amount of resources available for the
private sector to use. Crowding out occurs when government spending simply
replaces private sector output instead of adding additional output to the
economy. Crowding out also occurs when government spending raises
interest rates which limits investment. Defenders of fiscal stimulus argue that
crowding out is not a concern when the economy is depressed, plenty of
resources are left idle, and interest rates are low.
Fiscal policy can be implemented through automatic stabilizers. Automatic
stabilizers do not suffer from the policy lags of discretionary fiscal policy.
Automatic stabilizers use conventional fiscal mechanisms but take effect as
soon as the economy takes a downturn: spending on unemployment benefits
automatically increases when unemployment rises and, in a progressive
income tax system, the effective tax rate automatically falls when incomes
decline.
Stabilization Policy
A macroeconomic strategy enacted by governments and central banks to
keep economic growth stable, along with price levels and unemployment.
Ongoing stabilization policy includes monitoring the business cycle and
adjusting benchmark interest rates to control aggregate demand in the
economy. The goal is to avoid erratic changes in total output, as measured by
GDP and large changes in inflation; stabilization of these factors generally
leads to moderate changes in the employment rate as well.
Stabilization policies are also used to help an economy recover from a
specific economic crisis or shock, such as sovereign debt defaults or a stock
market crash. In these instances stabilization policies may come from
governments directly through overt legislation, securities reforms, or from
international banking groups, such as the World Bank.
As economies become more complex and advanced, top economists believe
that maintaining a steady price level and pace of growth is the key to long-
term prosperity. When any of the aforementioned variables becomes too
volatile, there are unforeseen consequences and effects to the broad
economy that keep markets from functioning at their optimum level of
efficiency.
• Explain the significance of inclusive growth.
Inclusive growth is a concept that advances equitable opportunities for
economic participants during economic growth with benefits incurred by
every section of society.
The definition of inclusive growth implies direct links between the
macroeconomic and microeconomic determinants of the economy and
economic growth. The microeconomic dimension captures the importance of
structural transformation for economic diversification and competition, while
the macro dimension refers to changes in economic aggregates such as the
country’s gross national product (GNP) or gross domestic product (GDP),
total factor productivity, and aggregate factor inputs.
Inclusive growth basically means making sure everyone is included in
growth, regardless of their economic class, gender, sex, disability and
religion. Inclusive growth approach takes on long term perspective and the
focus is on productive employment rather than merely direct income
redistribution as a means of increasing income for excluded groups. Thus
inclusive growth approach took a long term perspective of development.
According to World Bank, the growth said to be inclusive when the growth to
be sustainable in long run and it should be broad based across the sector
and inclusive of large part of countries labor force. Inclusiveness should
understand in the sense and focusing on equality of opportunity in terms
access to markets, resources and unbiased regulatory environment for
business and individual.

Part II. Case Writing.

Wannaburger Case Study
Background
Entrepreneur Jon Clemence opened his first restaurant on Edinburgh’s
Royal Mile (High Street) in 2004. It was originally called ‘Relish’ but a year
later he changed the name of the restaurant to ‘Wannaburger’ as he wanted
it to be more fun. He says Wannaburger is a dedication to the humble
hamburger and a desire to bring people really good food, really fast. He
wants Wannaburger to focus on using the best quality ingredients to prepare
the best possible hamburgers – a restaurant where the food does the talking.
Location
He chose a location center of Edinburgh (in Scotland) and had large
numbers of tourists who visited the area every day. The business
focused on providing high-quality burgers, including vegetarian, in an
American diner style. Customers order their food at tables and are not
served by queuing, paying and then waiting.
Growth
In 2006 Jon wanted to expand and so he opened another Wannaburger near to
Edinburgh’s well-known shopping area, Princes Street (point A on the map).
With this new restaurant his aim was to provide hamburgers quicker,
cheaper and in a way that enabled the customer to eat them as they were
intended – with their hands. Some of the burgers were re-designed to enable
Wannaburger to offer better value portions and to get the food to customers
quicker, allowing people to have a faster, slicker and more enjoyable
experience whilst still giving them time to enjoy the BIG burger experience.
Green issues
Wannaburger also thought of the environment, sacking the dishwasher and
using a London-based bio-packaging company to package their food,
meaning everything could be either composted or recycled.
The future
After the success of Wannaburger Jon now wants to grow further but is not sure how to
expand or change the business.
Questions:
• What is the best alternative location in Scotland for Wannaburger?
• What are the pricing and promotion policies to compete with other fast-food
businesses?
• Identify sources of finance to allow Wannaburger to expand.