Subject: Organization and ManagementQ1 Week 5 Module 5

Subject Teacher: Charlene Esparcia-Cadenas

Module 5

LEARNING COMPETENCY: At the end of the lesson, the learner must be able to differentiate the
phases of economic development and its impact to business environment.

Environmental Forces and Environmental Scanning

Let us check what you already know.

Matching-Type

Directions: Choose the appropriate WORD in the box and write the CORRECT answer in the space
provided before the number.

Walt Whitman Rostow Five Stages of Economic

Development
Taxes Seidel and Moichelle Profit at any cost
_______________________ 1. It is a model that can have extremely negative implications down to
road if corners are cut and poor decisions are made.

2. According to them, the small and large business drive economic

_______________________ stability and growth by providing valuable services, products and tax
dollars that directly contribute to the health of the community.

3. It is used to maintain the infrastructure of a city, state or country-road

bridges, tunnel, public transportation, libraries and other public
_______________________ buildings and services.

4. He is economist in the London B Johnson administration from 1966-

1969.
_______________________
5. It is a model on economic development developed by Rostow

_______________________

Economic development generally refers to the sustained, concerted actions of policymakers

and communities that promote the standard of living and economic health of a specific area. Economic
development can also be referred to as the quantitative and qualitative changes in the economy
(www.abbreviations.com).
Walt Whitman Rostow, also known as W.W. Rostow, was an economist in the Lyndon B.
Johnson administration from 1966-1969. He also published articles and developed models on economic
development. One of his most prominent ideas was the five stages of economic development. In this
model, he suggests that societies go through five stages of economic development as they develop and
grow.

Each of Rostow's five stages builds on the previous stage, becoming more complex and
integrated. Depending on the economic forces at play, the time it takes to move through each of Rostow's

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

stages varies. We'll begin by discussing each stage in detail, then we'll talk about how Rostow's model has
led to other ways of measuring development.
Rostow’s Five Stages Model

https://tinyurl.com/yyypvtyo

The Five Stages:

Stage One: Traditional Society
The first stage of Rostow's model and the one in which societies begin, is the traditional
society. The traditional society stage was prevalent prior to the 1700s, when most societies operated
in a relatively stable state and productivity didn't rise or fall dramatically. Trade existed, such as the
spice route between Asia and Europe, but it was timely, costly, and more of a luxury than a
necessity. Technology was very limited. Humans had access to little more than handmade tools,
transportation, and the printing press. That meant that producing goods was very human capital
intensive, which created large gaps in income inequality. These societies also relied heavily on
agricultural labor because a tremendous amount of labor was required to grow enough food to
sustain the societies.

Stage Two: Preconditions for Take-Off

There is a period of transition between the traditional society and a society that takes off, and
for a certain time that society is establishing the preconditions for take-off. These preconditions are
mostly marked by an increase in productivity, such as was found in Europe during the 1700s and
1800s. A number of factors came together to make productivity increase; for example, population hit
a critical mass that made agriculture take up such a high percentage of labor, which provided
opportunities for the establishment of educational institutions, banks, and a market for luxury goods.

Stage Three: Take-Off

When the preconditions for take-off are met, a society can take off. Educated individuals start
inventing new processes and tools, and access to capital through financial markets and banks make
it possible to produce goods and services on a larger scale. This requires a different type of skill set
from human laborers, so the economy shifts from agriculture to production. This increases wages
for everyone, taking the economic structure from a structure of kings and servants to a wealthy
class, middle class, and lower class. A lower class still exists at this stage, either because of social

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

norms that discriminate against people or simply because the number of middle-class jobs are fewer
than the total number of people.

Stage Four: Drive to Maturity

The next of Rostow's five stages has a general length of time associated with it, the drive to
maturity. According to Rostow, the drive to maturity is about a 60-year period between the take-off
and the final stage, the age of mass consumption. During this short period, an economy (the
collective of all consumers and producers) can reinvest 10-20% of what it creates into more
production. Processes are improved, quality of life is improved, and technology and new ideas
continue to become more central to society, while the cost of producing the needs for survival (like
food and shelter) becomes a smaller part of the economy. More importantly, the middle class grows
at the quickest rate of any economic class. For the modern-day U.S., this stage really took place
from after WWI, from about 1915, until around 1980, when the technology era began.

Stage Five: Age of Mass Consumption

After the drive to maturity, an economy reaches maturity and begins the final stage, the age of
mass consumption. Think of the United States, much of Europe, and some of Asia today, and you
can see this stage of development at work. The quantity and quality of products and services
increase. A society or economy in this stage can export production, bringing in money from other
countries that helps the economy grow larger beyond actual consumption.

According to Seidel, Moichelle, (2019), Small and large businesses drive economic stability and
growth by providing valuable services, products and tax dollars that directly contribute to the health of the
community. They also provide jobs, strengthening the economic health of each community where a
business is based. Even if a business is headquartered elsewhere, employing people at each local business
contributes to the success of that region, as with the wages they earn, people buy property, work, shop
and otherwise invest in where they live.

Taxes are used, among other things, to maintain the infrastructure of a city, state or country – roads,
bridges, tunnels, public transportation, libraries and other public buildings and services, including police
officers and fire-fighters, all benefit from tax money collected from individuals and businesses. These
services are essential to the good health and positive qualities of local and national citizens. In a capitalist
society like that of the United States, business growth and increased sales means collecting more taxes,
which can directly translate to better maintenance and offerings of local infrastructure and services that
benefit the community.

 The success of business directly affects the world’s economy. At its core, businesses are designed
to serve a need that people have, and to provide trusted goods and services related to that need.
When consumer confidence or trust dips in business, it isn’t just sales that are negatively affected.
This mistrust has a ripple effect and can result in a decline in a country’s general economy,
weakening the strength of its currency and buying power.

 As businesses focus more and more on providing value to shareholders instead of directly to
consumers, their interests and tactics may not align with the best interests of the consumer. A
“profit at any cost” model can have extremely negative implications down the road if corners
are cut and poor decisions are made in the name of solely working to increase shareholder profit
or are based purely on greed. No matter how efficiently you make a product or how special the
service is that you deliver, if you lose consumer confidence as a result of your business decisions,
consumers won’t support you by purchasing your goods and services, and then nobody benefits.

 Business is vital to a country’s economy. Success of businesses can drive the success of an entire
country, including through contributions to the gross domestic product, or GDP, of a nation,
which affects their world standing. If a country supports businesses with goods and services that
are in demand, everyone in the country benefits. From job creation that results in money being
put back into the community to taxes that help the government smoothly run and provide
maintenance and improvements to the country’s infrastructure, or in other ways that are helpful
for its citizens, there are dozens of ways business success translates to economic development.

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

 In addition to providing products and services that citizens and residents want, economic health
can allow for exporting goods and services to others who want those items, contribute to offering
avenues for education and training for citizens, create healthy business competition and provide
additional methods of strengthening economic development for the country as a whole.

 The role of business in relation to the economy is a pivotal one. Small businesses boost economic
revenue on a smaller scale, but one that is of vital importance, directly and positively affecting
the health, quality of life and purchasing power of residents in the local community. But small
businesses do not always stay small. Many nationally known brands today got their start as very
small businesses run out of someone’s home or garage. Start-ups can become multinational
companies that can have a huge and positive impact on the global economy, benefiting all of the
company’s employees and the communities in which those businesses thrive. Apple, Whole
Foods, Amazon, and Starbucks were all ideas started on a small scale that have had incredible,
explosive positive impacts not just on the U.S. economy, but on a global scale.

I TRUE OR FALSE: Before each statement, write TRUE if the

statement is correct or FALSE if the statement is incorrect.

________ 1. Preconditions for take-off are the second stage of economic development
whereas productivity increased found in Europe during the 1700s and 1800s.

________ 2. In the age of mass consumption, a society or economy can export production,
bringing in money from other countries that helps the economy grow larger
beyond actual consumption.

________ 3. Success of businesses can drive the success of an entire country, including
through contributions to the gross domestic product, or GDP, of a nation, which
affects their world standing.

________ 4. Traditional society stage was prevalent prior to 1900s, when most societies
https://www.wordstream.com/blog/ws/2017/12/20/swot-analysis
operated in a relatively stable state and productivity did not rise of fall
dramatically.

________ 5. Drive to maturity is about 80-year period between the take-off and the final
stage.

II MULTIPLE CHOICE: Choose the letter of the best answer. Write

your answer in the space provided.

____1. In which stage of economy reaches maturity and begins the final stage?
a. Take-Off
b. Traditional Society
c. Age of Mass Consumption
d. None of the above
____2. Who developed and published articles of the Five Stage of Economic
Development?

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

a. Walt Whitman Rostow

b. Seidel Rostow
c. Moichelle Rostow
d. Seidel and Moichelle Rostow
____3. Which stage had limited technology, and humans had access to little more
than handmade tools, transportation, and the printing press?
a. Take-Off
b. Traditional Society
c. Age of Mass Consumption
d. None of the above
____4. Which stage is about the population hit a critical mass that made
agriculture take up, such as a high percentage of labor, which provides
opportunities for establishing an educational institution, banks, and a market
for luxury goods?
a. Dive to Maturity
b. Modern Society
c. Take-Off
d. Preconditions for Take-Off
____5. Which stage is used to educate the individuals to start inventing new
processes tools, and access to capital through financial markets and
bank make it possible to produce goods and services on a larger scale?
a. Dive to Maturity
b. Modern Society
c. Take-Off
d. Preconditions for Take-Off

____6. Which of the following is used to maintain the infrastructure of a city, state or
country-roads, bridges, tunnels, public transportation, libraries and other public building
and services, including police officers and fire-fighters?
a. Taxes
b. Income
c. Savings
d. None of the Above
____7. Which of the following is a CORRECT arrangement of the Five Stages of Economic
Development?
a. Precondition for Take-off, Take-Off, Traditional Society, Age of Mass
Consumption, and Drive to Maturity
b. Traditional Society, Preconditions for Take-off, Take-off, Drive to Maturity,
and Age of Mass Consumption,
c. Traditional Society, Preconditions for Take-off, Age of Mass Consumption,
Drive to Maturity, and Take-Off
d. Age of Mass Consumption, Preconditions for Take-off, Traditional Society
____8. Which stage really took place after WWI from about 1915 until around 1980,
when the technology era began?
a. Age of Mass Consumption
b. Drive to Maturity
c. Take-off
d. Traditional Society
____9. Which of the following is NOT one of Rostow’s five stage of economic development?
a. Age of Mass Consumption
b. Drive to Maturity
c. Take-off
d. Technological Society
____10. Which of the five stages of economic development takes place over approximately 60
years?
a. Age of Mass Consumption
b. Drive to Maturity

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

c. Take-off
d. Traditional Society
ACTIVITIES
ACTIVITY 1
ESSAY
Directions: Enumerate the Rostow’s Stages of Growth and give your idea about its influence on the
business environment. Give 2 influences in each stage. Write your answer in the space provided.
PHASES OF ECONOMIC DEVELOPMENT POINT OF VIEW
1.
2.
3.
4.
5.

ACTIVITIES
ACTIVITY 2

Direction: Using the Graphic Organizer, give your own idea about the five stage of economic
development and write your answer in a yellow paper.

Five Stages of
Economic Development

RUBRICS
4 Expert – Piece is extraordinary, and very informative and well organized
3 Accomplished – Piece has an interesting style, and somewhat informative and
organized
2 Capable – Piece has little style, gives some new information but poorly organized.
1 Beginner - Piece has no style and, and gives no new information and very poorly
organized

REFLECTIVE LEARNING SHEETS

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila
Subject: Organization and ManagementQ1 Week 5 Module 5
Subject Teacher: Charlene Esparcia-Cadenas

Reflective Question: Give the different phases of economic development. How can it change your
point of view as a student particularly in the field of business? Explain in 1 to 2 sentences only. Write
your answer in the space provided.

PHASES OF ECONOMIC DEVELOPMENT POINT OF VIEW

1.
2.

3.

4.

5.

Reference: DIVISION OF CITY SCHOOLS – MANILA

Writers: Mameto T. Goneda, MSIT Manila Education Center Arroceros Forest Park
Jupiter Q. Whiteside, MBA Antonio J. Villegas St. Ermita, Manila