MODULE 5

BUSINESSES IN THE NEW NORMAL

Lesson 1 E-Commerce

Lesson 2 Franchising

Lesson 3 Investment

Lesson 4 Business Challenges in the New

Normal
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MODULE 5
BUSINESS IN THE NEW NORMAL

 INTRODUCTION
As the world fitfully rebounds from the Great Recession, many global
managers are confronting a “new normal:” the prospect of slow growth
for many years to come. Managing in this new era will be different – and much will
rest on how willing CEOs and their executive teams are to stray from their comfort
zone and challenge their traditional ways.
For the past two decades it has been possible (if not always achievable) to be
successful simply by riding market growth. For most companies, those days are over.
Our base assumption, as we write this, is that economic growth over the next several
years will be wildly uneven, with most western economies – including those of the
United States, the Euro zone, the UK and Japan – growing modestly, or not at all. At
the same time, China, India and other developing economies will continue to grow
as much as 8 percent to 10 percent per year. Moreover, there will be intense
competition everywhere.
To cope with these challenges, executives will need to question, reassess,
and redefine their managerial thinking. They will have to reexamine the context in
which they make decisions. Some basic beliefs and received managerial wisdoms will
need to be challenged.

OBJECTIVES

After reading this module, you will be able to:

1. Explain how E-Commerce is implemented;
2. Explain the concept of Franchising and how it differs with independent
business
3. Identify various types of investment and their risks
4. Understand the impact of the COVID-19 pandemic to businesses
5. Determine the strategies to be employed by businesses in the new normal

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Lesson 1


Learning Outcomes:
E – COMMERCE

At the end of the lesson, students are expected to:

1. Define what E-Commerce is all about and discuss its success factors
2. Determine the sources of problems in E-Commerce and recommend possible
solution

What is E-Commerce?
The “electronic” or E-Commerce or E-Business refers
to the technology system. The word “commerce” refers
to the traditional business models.
E-commerce (electronic commerce) is the
buying and selling of goods and services, or the
transmitting of funds or data, over an electronic
network, primarily the internet. These business
transactions occur either as business-to-business (B2B),
business-to-consumer (B2C), consumer-to-consumer or consumer-to-business. The
terms e-commerce and e-business are often used interchangeably. The term e-tail
is also sometimes used in reference to the transactional processes for online
shopping.
Information Technology in Marketing
The Internet
In the early 1970’s the INTERNET was a part of US Government project. Its
original purpose was to link researchers at many different sites and allow them to
exchange information. The procedure was cumbersome for broad commercial
applications; hence, in 1989 the World Wide Web (www in brevity) was developed.
It provided access to a portion of the target INTERNET, making it possible for users
to share a full range of communications from text to graphics and audio messages.
Any individual or organization can register to a website. A collection of web files
beginning with a home page, which is accessible through a unique addressed.
The web opened the door to an array of commercial developments. The most
basic is the web browser which provides Internet visitors with the necessary
application program to look at and interact with individual’s websites. Netscape
Navigator and Microsoft’s Internet Explorer are two of the well-known web browsers.
Websites grow in number that the need for electronic directory became apparent.
To assist web visitors, the browser developers and others have created
gateway or portal websites. A portal is an entrance and a guide to the rest of the
Web. Typically, a portal offers a directory of websites, a search engine to look for

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information designed to attract visitors. Some of the better-known portals are

Netscape, Lycos, Excite, and the America On-line.
Electronic Networking
Networks are individuals or organization linked together to share data,
exchange information and ideas, and perform tasks. Electronic networks are created
when the individuals or organizations are linked via some form of
telecommunication.
In business, when the personal computers of individual in a company of the
department are linked together, a local electronic network of intranet is created.
The power of this network is expanded when they include a server, which is a more
powerful central computer than can store large databases and perform sophisticated
analysis.
Electronic Commerce
When the firms reconfigure its marketing operations around the interactions
made possible by its web connections, it is engaging in electronic commerce (e-
commerce). This is a sophisticated network that can link a large number of firms at
different levels of a distribution channel in what is called extranet.
Extranet allows business partners access to highly sensitive data about current
operations, as well as future plans. Thus, they require strong relationship and a high
level of trust. In return, they speed up decision making with the result that products
get to market more quickly and at a lower cost.
Success Factors in E-Commerce
A. Technical and Organizational Aspects
In many cases, an e-commerce company will survive not only based on its
product, but having a well-organized business structure and a secure, well-designed
website. Such factors include:
 Providing an easy secure way for customers to order. Credit cards are the
most popular means of sending payments on the Internet, accounting for
90% of on-line purchases. Card numbers are transferred securely between
the customer and merchant through independent payment gateways.
 Providing reliability and security. Parallel server, hardware redundancy,
fail safe technology, information encryption and firewalls can enhance
these requirements.
 Providing a 360-degree view of the customer relationship, defined as
ensuring that all employees, suppliers, and partners have a complete view
and the same view of the customer.
 Constructing a commercially sound business model.
 Engineering n electronic value chain in which one focuses on a “limited”
number of core competencies – the opposite of a one-stop shop (electronic
stores can appear either specialist or generalist if properly programmed).

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 Operating on or near the cutting edge of technology and staying there as

technology changes (but remembering that the fundamentals of
commerce remain indifferent to technology).
 Setting up an organization of sufficient alertness and agility to respond
quickly to any changes in the economic, social and physical environment.
 Providing an attractive website. The tasteful use of color, graphics,
animation, photographs, fonts, and white-space percentage may add
success in this respect.
 Streamlining business processes, possibly through reengineering and
information technologies.
B. Customer-Oriented
A successful e-commerce organization must also provide an enjoyable and
rewarding experience to its customers. Many factors go into making this possible.
Such factors include:
 Providing value to customers. Vendors can achieve this by offering a
product or product in line that attracts potential customers at a
competitive price, as in non-electronic commerce.
 Providing service and performance. Offering a responsive, user-friendly
purchasing experience, just like a flesh-blood retailer, may go some way
to achieving these goals.
 Providing an incentive for customers to buy or return. Sales promotion to
this end can involve coupons, special offers and discounts. Cross-linked
websites and advertising affiliates programs can also help.
 Providing personal attention. Personalized websites’ special offers may go
some of the way to substitute for face-to-face human interaction found at
a traditional point sale.
 Providing a sense of community. Chat rooms, discussions boards, soliciting
customer input, and loyalty programs (sometimes called affinity programs)
can help in this respect.
 Owning the customer’s total experience. E-retailers foster this by treating
any contacts with customer as part of the total experience, an experience
that becomes as synonymous with the brand.
 Letting customers help themselves. Provision of a self-serve site, which is
easy to use without assistance, can help in this respect.
 Helping customers to do their job of consuming. E-tailors and online
shopping directories can provide such help through ample comparative
information and good search facilities.
 Provision of component information and safety and health comments may
assist e-tailors to define the customers’ job.
Types of E-Commerce

Business-to-business (B2B) e-commerce refers to the electronic exchange of

products, services or information between businesses rather than between
businesses and consumers. Examples include online directories and product and

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supply exchange websites that allow businesses to search for products, services and
information and to initiate transactions through e-procurement interfaces.

Business-to-consumer (B2C) is the retail part of e-commerce on the internet. It is

when businesses sell products, services or information directly to consumers. The
term was popular during the dot-com boom of the late 1990s, when online retailers
and sellers of goods were a novelty.
Today, there are innumerable virtual stores and malls on the internet selling all
types of consumer goods. The most recognized example of these sites is Amazon,
which dominates the B2C market.

Consumer-to-consumer (C2C) is a type of e-commerce in which consumers trade

products, services and information with each other online. These transactions are
generally conducted through a third party that provides an online platform on which
the transactions are carried out.
Online auctions and classified advertisements are two examples of C2C platforms,
with eBay and Craigslist being two of the most popular of these platforms. Because
eBay is a business, this form of e-commerce could also be called C2B2C -- consumer-
to-business-to-consumer.

Consumer-to-business (C2B) is a type of e-commerce in which consumers make

their products and services available online for companies to bid on and purchase.
This is the opposite of the traditional commerce model of B2C.
A popular example of a C2B platform is a market that sells royalty-free photographs,
images, media and design elements, such as iStock. Another example would be a job
board.

Business-to-administration (B2A) refers to transactions conducted online between

companies and public administration or government bodies. Many branches of
government are dependent on e-services or products in one way or another,
especially when it comes to legal documents, registers, social security, fiscals and
employment. Businesses can supply these electronically. B2A services have grown
considerably in recent years as investments have been made in e-government
capabilities.

Consumer-to-administration (C2A) refers to transactions conducted online

between individual consumers and public administration or government bodies. The
government rarely buys products or services from citizens, but individuals frequently
use electronic means in the following areas:
• Education: disseminating information, distance learning/online lectures, etc.
• Social security: distributing information, making payments, etc.
• Taxes: filing tax returns, making payments, etc.
• Health: making appointments, providing information about illnesses, making
health services payments, etc.

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Steps to Analyze when looking at the creation of an online business

1. Consideration
Despite the obvious advantages to e-commerce, it does not always meet the
long term needs of a company. If the market of the product is quite small, then,
there is no need to engage in e-commerce, as it will be less difficult to gain
competitive advantage, and would only result in unnecessary costs and expenses.
Secondly, if the company wishes to remain domestic and not expand its services,
then, a company would be better suited to follow the normal processes of
advertising than participating in e-commerce. Finally, a company must consider
whether the business would even succeed or thrive in the e-commerce environment.
For example, selling food online would not be an amiable venture as the ultimate
costs (wastage, storage, and transportation) would outweigh the benefits.
However, if a company believes that their product has great market potential
outside of their domestic realm, and feels that they can participate in e-commerce,
then, sometime must be taken to lay down the floor plan for the business. Some
aspects to consider are:
 What is the idea for the business?
 Is it a product or service?
 What is the name of it?
 Will you emphasize price, quality, service, or quantity?
 What is the target market?

2. Implementation
The key to successful start of business online is choosing the right web
host. Try to find one that offers guarantees and flexible responds to your concern,
and quite simply, is one that simply offers the services you want and need.
Once you have found the right web host for you and created an account,
the next step is start building your site. This is going to be the bread and butter of
your business. Having an attractive yet simple site will have a great impact. It
ensures that a great project, the right image is directed to the right target market
for your product. It should be easy to navigate and have solid search option. Also, it
clarifies what sort of policies you will implement, such as return policies, acceptance
or rejection of credit cards, check-out, and any other payment option such as checks
or money orders. Finding the right merchant account to help you accept credit is
important. If you are selling product, there are many types of software out there to
help you create an effective and efficient ordering system. Look at the features that
you will need for your site and compare them to the software that is available. Some
may be expensive and others will be free.
3. Finalization
Now that you have created the website and are ready to begin, the next step
is to market your online business. The options are numerous and can include the
following:
 Join a search engine and find a fee for placement;
 Contact with affiliate sites and programs;

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 Advertise;
 Virally market; and
 Use promotions.
The key step is to develop some sort of public relation strategy. Your
customers are the most important aspects of your business. Make them happy. This
can include offering links on your site to answer frequently asked questions (FAQs),
shipping quickly, designing a system for easy returns, as well as any other type of
customer service.
It is also important to constantly change and maintain the freshness of your
site. This includes altering colors and creating new displays. Another noteworthy
option is to include some sort of statistical counter so that you find out where your
customers are logging in from and what they do on your site. Test any advertisement
that you create to see how effective they are.
Five Strategies for Selling Online
1. Rethinking Revenue Streams
 Varieties of methods of selling have been used and are being used to
increase their market and their Return of Investment (ROI).
2. Reengineering the Business
 Companies reinvent the way they do business, changing how they
distribute goods, and how they collaborate within the company and with
suppliers.
3. Empowering Customers
 E-Commerce provides a venue for buyers to have the best choice and
best prices for products.

4. Providing Customer Service

 Merchants have become more creative in providing value-added
services to generate customer loyalty.
5. Joining the Global Economy
 The web is not just for the technology savvy; it is also for men, women,
and children of different countries, religions, and nationalities
participating in the new market.


To view more about E-Commerce, log on to:

 https://www.youtube.com/watch?time_continue=5&v
=c0aU5txarGQ&feature=emb_logo
 https://www.youtube.com/watch?v=CqlsgjnePmg

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Basta E-Commerce,
MADALI
Market Access. DigitAlization. Logistics Integration

WORDS TO PONDER

You should learn from your com petitor, but never

copy. Copy and your die. – Jack M a

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Lesson 2


Learning Outcomes:
FRANCHISING

At the end of the lesson, students are expected to:

1. Explain the concept of Franchising and how it differs with independent
business
2. Determine how to manage and know the different models and costing of
franchising
3. Identify the processes involved in franchising and enumerate the different
successful franchising business

What is Franchising?
Franchising originated from the French word Franchir, which means “for
free.” It is a marketing concept where an innovative method of distributing goods
and services. It is not a business itself but a method of doing business, wherein the
franchiser license trademarks, and tried and proven methods of doing business to a
franchisee, in exchange for a recurring payment, and usually a percentage piece of
gross sales and gross profits, as well as the annual fees. Various tangible and
intangibles, such as national or international advertising, training, and other support
services, are commonly made available by the entity licensing the “chain store” or
franchise outlet (commonly shortened to the one word “franchise”), and may indeed
be required by the franchiser, which generally requires audited books, and may
subject the franchisee or the outlet to periodic and surprise spot checks. Failure of
such test typically involves non-renewal or cancellation of franchise rights.
Franchising is used to describe a number of business models, the most
commonly identified of which is “business format franchising.” There are other
models that are also dependent on franchise relationship. These include the
following:
A. Manufacturer – Retailer Relationship. It is where the retailer as
franchisee, sells the franchiser’s product directly to the public. (e.g. New motor
vehicles dealerships).
B. Manufacturer – Wholesaler Relationship. It is where the franchisee
under license, manufactures, and distributes the franchiser’s product. (e.g. Soft
drink bottling arrangements).
C. Wholesaler – Retailer Relationship. It is where the retailer, as
franchisee, purchase products for retail sale from a franchiser-wholesaler
(frequently a Cooperative of the franchisee retailers) who have formed a wholesaling
company through which they are contractually obliged to purchase (e.g. hardware
and automotive product stores).

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D. Retailer – Retailer Relationship. It is where the franchiser markets a

service or a product under a common name and standardized system through a
network of franchisees. This is a classic business format franchise.
The first two categories above are often referred to as product under a
common name franchises. These include arrangements in which franchisees are
granted the right to distribute a manufacturer’s product within a specified territory
or at a specific location, generally with the use of the manufacturer’s identifying
name or trademark, in exchange for fees or royalties.
The Business Format Franchise, however, differs from product and trade
name franchises through the use of format, or a comprehensive system for the
conduct of the business, including such elements as business planning, management
system, location, appearance and image, and quality of goods.
Standardization, consistency, and uniformity across all aspects are hallmarks
of the business format franchise.
Business format franchising is today’s fastest growing segment of franchising
and had spread to virtually every sector of the economy in Australia. It has
significantly more franchise system, more outlets, more employees, and more
opportunities than product and trade name franchise.
Business format franchising requires a unique relationship between the
franchiser (the owner of the system) and the franchisee (owner of individual outlet),
which is commonly referred to as a “commercial marriage”.
This ongoing business relationship includes the product, service and
trademark, as well as the entire business concept itself from marketing strategy and
plan, operational standard, systems, and format, to training, quality control, and
ongoing assistance, guidance, and supervision.

In short, it provides small business (the franchisee) with the tools of big
business (provided by the franchiser).
It is also a win – win relationship, where the franchiser is able to expand its
market presence without eroding its own capital, and the franchise gains through
access to established business system, for their own commercial advantage.
The “commercial marriage” between franchiser and franchisee is ultimately
a legal relationship, with the full obligation and responsibilities of both parties
outlined in a highly detailed franchise agreement. This commercial contract varies
in length and conditions from one system to the next, such that it would be almost
impossible for any two franchise system to have identical agreements.
By nature of the relationship, the franchise agreement will be imbalanced in
favor of the franchiser, as the franchiser must at all times remain in control over
certain standards critical to the ongoing success of the business format.
The Pros and Cons of Franchise Ownership

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PROS CONS
1. Proven Business Model 1. Rules and regulations
2. Market-tested products or services 2. Fees and royalties
3. Brand recognition 3. High start-up costs
4. Territory security
5. Marketing support
6. Training program
7. Operational assistance
8. Built-in support system
* To understand this, log on to https://www.guidantfinancial.com/buying-a-franchise-
guide/introduction-to-franchising/

How much does it cost to buy a franchise?

Buying a franchise is a sort of buying an established business. It involves the
kind of business arrangement; however, it is not merely buying a business system
and walking away. The Franchisee is affiliating himself with an on-going business
concern (Franchiser), which the Franchisee takes part in many aspects. The
franchiser receives benefits for which the franchisee has to pay some money, and
the typical costs or expenses involves the following:
 Initial licensing fees
 Security deposits
 Building cost for the outlet
 Pre-operating expenses
 Initial operating capital
The initial fees include payment for the use of the franchiser’s trademarks
and business system, while the building costs include the expenses for leasehold
improvements, equipment, furniture, fixtures, construction management, and
design fees. The pre-operating expenses include the cost of registering the business
and training the franchisee’s employees. The franchisee also sets aside an amount
to cover the branch for the first month or for the first two months.
The continuing franchise fees are paid after signing the franchising
agreements or the franchiser-franchisee relationship. Once the business starts
operating, the franchise begins paying royalty – usually a percentage of the gross
sales receipts. The royalty fees may also be flat fees per period (per month or year),
while the franchiser collects in return for the use of business name, product, support
system that goes along with the franchising business in addition to the fixed royalty
charges. Some franchisers often charge a cooperative advertising royalty. The
advertising cost/charge takes care of the new product and promotional campaign of
the franchisers whose immediate beneficiaries are the franchisees themselves.

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The normal business expenses cover all the other costs outside of the fees
and charges shelled out by the franchisee and paid to the franchiser. As the franchise
is a separate business entity by itself and is governed by its own corporate rules and
organizational structure, the normal business expenses are rent, payroll, taxes,
product supplies, business supplies, utilities, and business equipment.
The Rules on Franchising Fees
There are two groups involve in a franchise, the franchiser (the person or
company leasing the rights to business name and system) and the franchisee (the
person who purchase it).
The right to the franchise is sold by the franchiser to the franchisee for an
initial sum of money, often called the up-front entry fee or franchise fee. This money
will be paid once the contract has been signed. The contract (franchise agreement)
typically details the responsibilities of both franchiser and franchisee, and usually
for a specific length of time (typically 7 years). Once the contract expires, it must
be renewed. State laws often have an impact on the option for this renewal.
The initial franchise fee does not include anything, except the rights to use
the name and system, and sometimes training, procedures, manuals, and other
assistance like the site selection. It does not include any of the necessary
inventories, fixtures, furniture, and real state.
In addition to the franchise fee, the franchisee must pay the franchiser royalty
fees, or other on-going payments. These payments are usually put into a general
account and use for national and regional promotion for the entire chain.
How do we select the right Franchise?
There are several steps to be followed, begin with the weeding out process.
First of all, think about the work environment you are interested in, and the
requirements to run a business. For example, you like working late (and long) hours,
hiring and managing employees, and dealing with the public. If so, consider the food
service industry. Think long and hard about what “fits” your lifestyle. Involve your
family or any friends and associates you may want to pull into the business. Write
down your objectives. Sometimes, just the act of writing things down helps you more
to clearly identify what you really want.
Once you identified the general category of business you want, visit some of
the franchising website, search on what investment levels you can afford, the type
of business you want, and sometimes, the geographical location. Some even give you
the estimated breakdown of what your total investment will be, as well as the
ongoing royalty and advertisement payments. You can also use a franchising
consultant to help narrow down your choices.
When you get a list put together, begin contacting the franchisers for
additional information. One thing to keep in mind throughout this process is that
while you are shopping for a franchise, those franchises are also out there shopping

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for franchisees. You will be interrogated as much as you interrogate them. You both
have to agree that it is a good match in order to proceed.

What is a Franchise Agreement?

It is a contract that binds the
franchiser and the franchisee to the franchise
relationship, and indicates the terms and
conditions of the franchise.
The greatest mistake many
franchisees make is not reading the whole
franchise agreement, since it is long and usually
has a minimum of 30 pages. While it is good to
ask a lawyer to review the contract, the
franchisee must first read and try to understand its contents, and to make sure he
or she is willing to abide by its term.
What should I look for in the Documents?
A. The Site/Location. If you can, visit the site being offered to determine if it
fits to your business plan.
B. The projected financial plan. You must arrive at a projected financial with
the site at hand. Ask the franchiser to help you crunch the numbers. You will
need to know where your customers will be coming from and the projected
sales you will be making from the outlet. Remember that no franchiser never
guarantees your income.

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C. The Franchise Agreement. This is the most important document you will need
to study, so take your time. This agreement spells out your obligations to the
franchiser and his obligations to you. It is a suggestion that you read every
page at least three times for at least 10 days. Underline the sections you do
not fully understand, then, get a lawyer who is familiar with franchising to
explain them to you. As soon as you are ready, set a meeting with the
franchiser and have him explain the agreement and its contents. The
agreement is a very comprehensive documents. Do not sign it unless you are
sure about what you are getting into.

What questions you may ask to the franchiser and the franchisees?
For the Franchiser:
 How long have you been in business?
 Where is your first franchise branch?
 How much is the total investment?
 What does the investment include?
 How do I apply for a franchise?
 When do I get to see the documents
for my review?
 What kind of support do I receive when I become a franchisee?
 What niche does your company have?
 Is it possible to obtain a list and addresses of your franchisees?
 How often do you meet with franchisees?
For the Franchisees:
 How did you decide on getting this franchise?
 How many franchise outlets are you opening?
 What kind of support do you get from the franchiser?
 Given another chance, will you get the same franchise?
 Are you in touch with your fellow franchisees?
CASE STUDY
Jollibee and several variants of the mark are
registered trademarks in the Philippines and many
other Asian countries, and also in the United
Kingdom of Great Britain and Northern Ireland,
the United States of America and Europe.
Today, Jollibee Foods Corporation uses six
different brands (including “Jollibee” for its core fast
food business; “Greenwich” for its pizza and
pasta chain, and “Chowking” for its oriental food
outlets). It owns many trademarks including “Bee
Happy”, “Yumburger”, “Chickenjoy” and “Amazing
Aloha” and has registered all of its logos, some of
them in several countries.
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Jollibee Foods Corporation relies on a franchising model for the operation of about
half of its outlets in the Philippines. In order to protect the company’s high
quality and service standards, potential franchisees must conform to a specific
profile (self-driven entrepreneurs with good management skills, good community
standing and excellent interpersonal skills).
Successful franchising applicants undergo a three-month, full-time Operations
Training Program (BOTP) at a designated training restaurant; this program is
supplemented with other programs, which are designed to enrich the
franchisee's management and analytical skills, and are necessary in order
for the franchisee to run a successful restaurant operation.
Support for franchisees does not end there however: Jollibee also provides advice
and assistance with restaurant layout and design, equipment
specifications, furniture and fixtures, and construction management. Jollibee
field personnel provide consulting services once the outlets are operational.
Additional support to franchisees is provided in the form of creative
advertising and marketing programs, product development, and manufacturing
and logistics facilities.
The Jollibee Word, Logo and Mascot are registered trademarks of Jollibee Foods
Corporation. All rights reserved.

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Lesson 3


Learning Outcomes:
INVESTMENTS

At the end of the lesson, students are expected to:

1. Explain the various relevance of Investing
2. Identify various types of investment
3. List the different risk in investing

INTRODUCTION
As early as seven years old I learned the value of saving my
money by putting it in my pink piggy bank. During my high
school days my father taught me how to save my money in the
bank, which is a common practice and is probably true to most
of us. We normally put our hard earned money in the banks for
security or future use. Banks are good as our piggy banks but not to achieve our goal
to grow out our money. Banks offer 1% annual interest only or for P100,000
investment you will be earning only P1,000 pesos per year, which is not enough for
you to achieve your financial goals. However there are other ways to grow your
money, while you sleep and play… as an apothegm “let your money works for you”
and that is through investments.
WHAT IS INVESTMENT?
An investment is any monetary or non-monetary item acquired in a goal of creating
income in the future. These are pre-need products that are not consumable at the
moment but instead be used in the future to create wealth.
Investing will allow you to lay your hard earned money in vehicles that provide
opportunity to have bigger rates of return. And if you invest wisely the risk of losing
your money in investment is very low.
RELEVANCE OF INVESTING
The following are essential reasons why
investing.
1. Investing appreciates the value of hard
earned money. Stocks, bonds, and CD
offer higher return over long period of
time, which allows you to build wealth
overtime.

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2. Saving for retirement. Preparing money for retirement is essential to safeguard

your future. When you take risk in investing your money at a younger age your
chances of earning greater wealth is possible. While, as we grow older it is wise to
invest in a least risky investment or those which are conservative investments.

3. Earning greater yields. Putting your money in investment rather than in savings
will earn higher return on your money, the bigger the risk in investment the bigger
the return.

4. Reaching financial goals. Investing your money to bonds, cd or stocks will help
you reach your financial goals later. The return of your investment can be used to
attain financial goals such as buying new car, venturing to business or paying of
tuition for children’s education.

5. Start and expand a business and supporting others. Through investing you will be
able to start and expand your business venture which you will not be able to earn
through savings. In addition, many investors are willing to support local
entrepreneurs and local artist and contribute to creation of new job and products in
the community.

TYPES OF INVESTMENTS

1.NON- MONETARY INVESTMENTS

Non- monetary assets are those assets that you can’t easily determine in exact pesos
once you want it to be liquidated. Its value changes or fluctuates over certain period
of time. Example are plants, equipment, machineries and property.

2. FINANCIAL INVESTMENT
Financial investment is a monetary asset that put in any financial institution for the
hope that it will earn and appreciate into bigger amount of money later. Some
financial investments includes certificate of deposit, bonds, stocks, mutual funds
and gold, which pay interest to the owners or will generate at a higher price later
for a profit.
TYPES OF FINANCIAL INVESTMENT
1. Stocks
Stocks carry more risk than some other investments, but also have the potential to
reap higher rewards overtime as compared to others. When you buy stock, you are
buying a small portion of that company called share. Investors normally buy stock in
companies they foresee will go up in value, because if that will happen stocks will
definitely increase as well, hence, stocks can be sold at a higher profit. When you
own stocks you are called stockholder or o shareholder since you share in the
company’s stocks and profits. Stock Market is where you can buy and sell stocks
through stock brokers.

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There are two kinds of stock- common and preferred stocks. When you buy common
stocks in the company you will be allowed to vote and attend stockholders meetings
while if you own preferred stocks , you are priority in receiving dividends and
dividends is at a fixed rate.
Common stock allows the stockholder to vote and attend stockholders' meetings.
Preferred stockholders have priority in receiving dividends, and may receive
dividends at a fixed annual rate. Preferred stockholders are also first in line to
recover any remaining assets after a corporate liquidation.
There are two ways to earn from stock investment
1. Stocks can be sold when prices goes , higher than its acquisition price.
2. Stockholders received dividends on a regular basis as their share of profits
from the company.
2. Bonds
Bonds is an investment where there is an agreement that the face value of
the bond will be paid to its holder after the identified period of time. Bonds is almost
opposite of a typical loan, where the debtor ask money to the creditor. In bonds,
the borrower (bond issuer) approaches lenders (bondholder) for some amount of
money, contract (bond/proof of debt) that states the terms of conditions will be
produce by the borrower. E.i. company (borrower) may indicate there that in 10
years’ time they will be paying the holder of the bond the face value of the bond
plus 5% interest rate on an annual basis.
In this case, it is the borrower who sets the terms and in addition, the borrower can
set up bonds for multiple bondholders. Bonds can also be traded in stock market.
Types of Bonds

1.Maturity-based bonds. Based on term of maturity

a. Treasury Bills (T-bills) – This are bonds short terms bonds that
matures in less than a year. The most con tenors (length of
maturity) for T-bills are 91 days, 181 days, and 364 days.

b. Treasury Bonds (T-bonds) – This are bonds long term normally

matures for 2-year, 5-year, 7-year, 10-year, 20-year, and 30-
year bonds.

2. Issuer-based bonds. Based on issuer

a. Treasury Securities – Bonds issued by the Bureau of Treasury

b. Government Bonds – Bonds that are issued by various government
agencies like HDMF, Government National Mortgage Association
(GNMA), Federal National Mortgage Association, and others.
c. Municipal Bonds – Bonds issued by the local government units (LGUs).
d. Corporate Bonds – Bonds issued by public and private companies.

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In the Philippines the minimum investment for retail treasury bonds is amounted
to P5,000.00 only, while for corporate retails bonds and treasury bills is
P50,000.00

3. Mutual Funds
Mutual funds represent a mixture of financial investments
which includes bonds, stocks, CD and other financial
instruments. The fund manager does the buying and selling
of stocks, in exchange it is the obligation of the investor to
pay annual fees and other charges for the operation of the
fund. There are three categories of mutual funds based on
the level of perceived risk: Growth-oriented mutual funds include a larger proportion
of stocks and other potentially high-yield financial instruments. Mutual funds
designed to preserve present income emphasize Treasury bonds or other relatively
safe investments. Stability funds aim for investment growth with a minimum of risk
by focusing on "blue-chip" stocks and high-quality bonds.
4. Annuities
Annuities are long term investments either as life time income, retirement
investments, or legacy. In annuities you pay out to certain financial company for a
certain period of time, once you reach the endowment, you will collect payment.
If you die prior to collection of payment your beneficiaries will receive death
benefits. However, if you began collecting annuity payments and you die, death
benefits will not be granted. For some financial institutions, once annuity begun
collecting and the terms is fixed the remaining payments will be received by the
beneficiaries. Pay annuity to beneficiaries if the term for annuitization year is fix.
5. Certificate of Deposit.
CD is also called time deposit. This is a financial product commonly offered by the
banks, thrift institutions and credit unions. This is different from ordinary savings
account since it offers higher interest and fixed rate. Time deposits have lower risk
as compared to other investments since it guarantee return of investment plus
interest.

3. MARKET INVESTMENT
The most common market for average investor is the stock market. The stock
market is where investors normally buy and shares ownership traded by private and
public companies. Money is earned in this market in two ways first is through trading
and the second is through dividends. At present trading already exist through
electronic marketplaces via internet using various applications. Through this
application buyers can sell stocks and sellers can place orders.
Types of stocks at the Philippine Stock Exchange (PSE) includes cumulative
preferred stock, common stock, and convertible preferred stock, preferred stock.

Successful Investing is bout managing

RISK and not avoiding it

Benjamin Graham

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FINANCIAL RISK IN INVESTING

Financial risk is risk normally encounter by the firm due to losses in market
due to stability of currencies, prices of stocks in the market and interest rates and
more. The following are some various types of financial risk.

a) Credit Risk- This arises when the debtor fails to fulfill his promises to
pay. Credit risk usually arises when the obligations are not fully fulfill
due to the changes in foreign exchange policies, fail to make payment
due to line of credit, mortgage loan or other loan or when one party
truly fails to fulfill the obligations because of insolvency. These cases
may result to loss of principal and interest on the part of the lender
and cash flow problem.

b) Market Risk – This rise because of the changes of prices of the financial
instrument due to interest rates, stock prices or instability of the stock
or the market.

c) Legal Risk – This risk arises due to court proceedings or legal problems
of the company when it needs face some financial threat because of
the procedures.

d) Liquidity Risk- this type of risk arises due to inability performs

transactions. It may arise because of lack of buyers or lack of sellers
versus number of orders. This is also true when the market does not
want to trade the asset being offered by the enterprise (Market
liquidity) which results to inability of the enterprise to pay debts and
obligations due to sudden cash outflows (funding liquidity)

e) Operational risk- This type of risk arises due to failure of management

to perform well which results to technical failures, internal and
external problems, system problems.

Learn more about investment :

https://www.youtube.com/watch?v=covxjhXsCi8
https://www.youtube.com/watch?v=zFF64ZDrx1k

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Lesson 4


Learning Outcomes:
BUSINESS IN THE NEW NORMAL

At the end of the lesson, students are expected to:

1. Understand the impact of the COVID-19 pandemic to businesses.
2. Describe the measures employed by businesses during the COVID-19
Pandemic.
3. Discuss the strategies to be employed by businesses in the new normal.

Impact of COVID-19 Pandemic to Businesses

The COVID-19 virus, which has infected millions of people, is continuously
hurting the global economy. While it is difficult to predict how long will be the
economic impact of the pandemic, the ongoing lockdowns have resulted in job
losses, supply chain problems, travel restrictions, and business disruptions across
the world (https://www.pwc.com/ph).

In the Philippines, economists have lowered the 2020 growth forecast to 0.2%
from the initial target rate which was 6.5% to 7.5%. The economic slowdown being
experienced is due to lower household consumption, decline in cash remittances,
ban of public transport and business closures, attributed by the COVID19 pandemic.
Potential job losses in the country will reach 1.8 million, as estimated by the
National Economic and Development Authority (NEDA). These economic impact of
the pandemic, as experts say, may still be managed depending on the response of
the government, and the cooperation of the people.

One of the initiatives under Republic Act. No. 11469, also known as The
Bayanihan to Heal as One Act, is the PHP1.0bn Enterprise Rehabilitation Financing
(ERF) facility under the Pondo sa Pagbabago at Pag-asenso initiative of the
Department of Trade and Industry’s (DTI) Small Business Corp. (SB Corp.). Through
this facility, micro enterprises with an asset size of up to PHP3m may borrow up to
PHP200,000, while small enterprises with an asset size ranging from over PHP3m to
PHP10m may borrow up to PHP500,000. Loans provided by the ERF will carry an
interest rate of 0.5% per month or 6.0% per annum. Proceeds from the loan should
be used for loan amortizations, inventory replacements, and working capital
requirements.

While the government has provided assistance, and is planning to introduce

more programs to help the MSMEs recover from the impact of COVID-19, additional
help is needed because the country has over a million MSMEs nationwide. Technology
startups, for instance, need dedicated programs and funding facilities because
majority will not meet the banks’ standard loan requirements.

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Measures Employed by Business during the COVID-19 Pandemic

Startups from the logistics, education technology, enterprise services,

financial technology, and healthcare sectors are some of the entities positively
impacted by the outbreak because their products and services are critical to making
the arrangements during the Enhanced Community Quarantine (ECQ). During the
ECQ period, only employees to providers of essential products and services are
permitted to pass through control points.

These companies are the following:

• Manufacturing plants of food products, essential products medicine and

medical supplies

• Retail establishments (groceries, public markets, and drug stores)

• Logistics services

• Hospitals and medical clinics

• Food preparation/processing companies

• Delivery services for food, water, medicine and other basic necessities

• Banks and capital markets

• Power, energy, water, IT, telecommunications, waste disposal services

• Export and business process outsourcing companies.

Some parts of the country adopted work-from-home and skeletal workforce

arrangements to comply with social distancing measures. With almost everyone at
home during the ECQ period, technological tools, solutions, applications and

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infrastructure became important to support the people’s educational, employment,

and household needs.

While only 48% feel threatened by COVID-19, the founders or owners of

businesses identified financial impact and effects on operations, potential global
recession, and difficulties with funding as the top three major concerns with respect
to the pandemic. To help manage the potential negative impact, most of the
founders say that they’ve reduced their level of operations and started offering new
products and/or services to adapt to the consumers’ needs during the ECQ. During
this period, we have seen the entry of new players such as on-demand delivery
service providers, market startups offering vegetables and meat, and more.

The following were identified as critical areas to strengthen the business

during the pandemic, while also preparing the path forward:

1. Rigorous risk assessment and enhanced risk management

practices: This includes a close examination of the immediate and longer-
term financial, operational, supply chain, legal, and governance models,
as well as an assessment of competitive risks and the potential customer-
and employee-retention concerns.
2. Financial assessment and meticulous financial management: Detailed
analyses of current and future working capital and cash-flow requirements
are being conducted along with consideration of how to optimize the
availability of tax incentives; identification of alternative financing
sources; ensuring access to all available government incentives and
programs; and recognizing expense-reduction opportunities.
3. Customer attentiveness: Following a customer risk assessment,

businesses are developing strategies to enhance customer retention and

identify new customer segments. New product developments are being
explored to attract new customers along with potential acquisitions for
growing the customer base or adding new customer types.
4. Employee attentiveness: Given the potentially volatile work
environment, strategies are being developed to enhance employee
engagement and retention. These can include the consideration of flexible

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work policies, updated reward programs, employee retraining, and gaining

accessing to government support programs.
5. Operating efficiency: Internal efficiencies are examined with the goal of
identifying improved processes and procedures that could translate into
improved customer and employee experiences. This includes the potential
for streamlining or restructuring business operations; introducing
innovative cost-control approaches; identifying flexible, supply-chain
alternatives; allocating resources more efficiently; and enhancing data
collection processes to inform strategic business decisions.

These focus areas reflect the pragmatic business approach, combined with
agility and resilience, of entrepreneurs and other private enterprise leaders who are
successfully making adjustments to their businesses to sustain their success.

Business Strategies in the New Normal

As each company faces

different challenges and each
sector is impacted in different
ways, it is evident that a common
strategy to address the coronavirus
does not exist. There are,
however, some basic steps that all
businesses can follow, in order to
develop a reliable crisis response
mechanism (Papazoglou, 2020).
These steps include:

1. Building a crisis management team of key-decision makers, not limited

only to the company’s leadership, but also including representatives from
at least the strategy, operations, HR, communication s and corporate
affairs functions. This team should be empowered to make and
implement decisions quickly.
2. Immediately addressing the need for the maximum protection of
employees, through personal actions (hygiene, remote working, travel
freeze, avoiding group gatherings, etc.). People are a company’s most
important asset and their protection should be priority number one.
3. Regularly reviewing, amending and updating current business continuity
or contingency plans, as this an unprecedented and highly fluid situation,
which is drastically transforming existing assumptions, and will continue
to do so in the coming months.
4. Establishing an information mechanism, which will allow for the gathering
of accurate and up to date information from trusted sources and
cascading it to all business functions concerned, thus minimizing the risk
of misinformation.

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5. Ensuring the company’s capacity to rapidly respond to emergencies.

Incident response should be a deliberate and structured process, free of
any knee-jerk reactions and delays and not dictated by outside factors.
6. Assessing the company’s exposure to risks associated with third-parties
(i.e. supply chain, human resources, business partners) and searching for
alternate channels.
7. Ensure a systematic, transparent and positive communication with
employees, clients, suppliers and all those that – directly or indirectly –
depend on or are affected by the company. This is an essential step
towards building the highest possible level of confidence and trust
between the company and its partners.
8. Ensuring that the organization as a whole, both at a local and a global
level, is aware and understands the crisis response procedures that are in
place. Equally important is readjusting business plans, but also updating
the company’s strategy for managing major crises accordingly.

GEEC 112 – The Entrepreneurial Mind Module 5