ORGANIZATION AND AMANAGEMENT

Quarter 1 Week 4 Module 4

Learning Competency
Differentiate the phases of
Economic development and its
Impact to business enviroment

Objective

To learn the different phases of economic development and its impact to business environment,
Rostows 5 stages of growth.

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The Phases of Economic Development and Its Impact to
LESSON
5 Business Environment
 EXPECTATIONs

As we study and immerse ourselves in “Organization and Management” in the process, it is

necessary to discuss and differentiate the phases of economic development. The module is subjected to
discuss Module 4 – The Phases of Economic Development and Its Impact to Business Environment.

After going through the module, you are expected to:

1. Different the phases of economic development and its impact to business environment.

Let us start your journey in learning thru a

Pre-Test.
pretest
Good luck!

Fill in the Black

Directions: Choose the CORRECT word from the table below and write your 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 decision are made.
2. According to them, the 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.
3. It is used to maintain the infrastructure of a city, state or country- road, bridges, tunnel, public
transportation, libraries and other public buildings.
4. He is economist in the Lyndon B Johnson administration from 1966-1969.
5. It is a model on economic development develop by Rostow.

LOOKING BACK TO YOUR

LESSON
As we go further, let us try to recall our lesson about the forms of business organization.

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  The Five Stages of Economic Development, is a model developed by Walt Withman Rostow. The
five stages are 1) Traditional Society, 2) Preconditions for Take-off, 3) Take-off, 4) Drive to
maturity, and 5) Age of Mass Consumption.
 Partnership consists of two or more persons who bind themselves to contribute money or
industry to a common fund, with the intention of dividing the profits among themselves.
 Sole proprietorship is the simplest form of business and the easiest to register, through the
Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and
Industry (DTI). It is owned by an individual who has full control/authority of its own and owns all
the assets, as well as personally answers all liabilities or losses.
 Corporation is a juridical entity established under the Corporation Code and registered with the
SEC.
 Cooperative is an organization established for the purpose of purchasing and marketing the
products or its members, i.e., shareholders, and/or procuring supplies for resale to the
members, whose profits are distributed to the members (in the form of patronage
dividends),not on the basis of the members ‘ equity.

Matching-Type

Directions: Match the column A to column B. Write your answer in the space provided before the
number.

A
1. Marked by an increase in productivity B
In Europe during the 1700s and 1800s
2. The economy is able to reinvest 10-20% a. Traditional Society
Of what it creates into more production. b. Modern Society
3. A society or economy is able to export c. Precondition for Take-Off
Production from other countries d. Take-Off
4. Number of middle-class jobs are fewer e. Age of Mass Consumption
Than the total number of people. f. Drive to Maturity
5. These societies relied heavily on agricultural
Labor.

Enjoy reading…..
BRIEF
INTRODUCTION

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 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.abbeviation.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 article 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 easch of
Rostow’s stages varie. We’ll begin by discussing each stage in detail, then we’ll talk about how model
has led to other ways of measuring development.

Rostow’s Five Stages Model

Rostow’s 5 Stages of Growth

Stage 5 High Mass Consumption
Dependent on Global Economy or
Market Managing Economies Consumer oriented, durable goods flourish, service
sector becomes dominant

Dependent on Growth and Stage 4 Drive to Maturity

Developed Economies Diversification, innovation, less reliance
on import, investment

Stage 3 Take Off

Dependent on Sub-urban Economy
Industrialisation, growing investment,
regional growth, political change

Stage 2 Transitional Satge Dependent on Social appreciation of

Specialization, surpluses, infrastructure Education and Skill Development

Stage 1 Traditional Society

Dependent on Rural Economy
Subsistence, barter, agriculture

The Five Stages:

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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 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 laborer, so the economy shifts from agriculture to production. This
increases wages for everyone, taking the economic structure from structure of kings and
servants to a wealthy class, middle class, and lower class. A lower class skill exists at this stage,
either because of social 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-yar period between the take-
off and final stage, the age of mass consumption. During this short period, an economy (the
collective all consumers and producers) is able to reinvest 10-20% 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

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 took place from after WWI, from about 1915, until around 1980, when the technology are
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 is able to export production, bringing in
money from other countries that helps the economy grow larger beyond actual consumption.

According to Seidel, Moichellle, (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 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 benefits 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
capitalist society like that of the United State, business growth and increased sales means collecting
more taxes, which can directly translate to better maintenance and offerings of local infrastructure and
services that benefits to the community.

 The success of business as a whole directly affect the world’s economy. At its core,
business are designed to serve a particular need that people have, and to provide
trusted goods services related to that need. When consumer confidence or trust dips in
business, is isn’t just sale that are negatively affected. This mistrust has a ripple effect
and 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 based purely or 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 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 support businesses with

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 the 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 translate to economic development.
 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’s od vital importance, directly and
positively affective the health, quality of life and purchasing power of residents in the
local community. But small businesses don’t always stay small. Many nationally known
brands today got their start as very small businesses run out of someone’s homes 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’ 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.

ACTIVITY
Activity 1: Independent Activity

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

Five Stages of Economic Development

Activity 2: Independent Activity

ESSAY
Directions: Enumerate the Rostow’s Stages of Growth and give your idea about is influence to
7 in each stage. Write your answer in the space
the business environment. Give 2 influences
provides.

Rostow’s Stage of Growth Influence to Business Environment

1
2
3
4
5

Remember

 Walk Whitman Rostow, also 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.
 The Five Stages of Economic Development model is developed by Walt Withman
Rostow. The five stages are 1)Traditional Society, 2) Preconditions for take-off, 3) Take-
off, 4) Drive to maturity, and 5) Age of Mass Consumption.
 Taxes are used, among other things, to maintain the infrastructure of a city, state or
country-roads, bridges, tunnel, public transportation, libraries and other public buildings
 and services including police officers and fire- fighters, all benefit tax money collected
from individuals and business.
 Profit 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
shareholders profit or are based purely on greed.

Check your understandimg

True or False

Direction : Before each statement, write TRUE if the statement is correct FALSE if the statement is
incorrect

1. Preconditions for take-off are second stage of economic development, whereas productivity
increased found in Europe during the 1700s and 18700s.
2. In the age of mass consumption, a society or economy is able to export production, bringing
in money from other countries that helps the economy grow larger beyond actual
consumption.
3. Success of business can drive the success
8 of an entire country, including through
contributions to the gross domestic product, GPD, of a nation, which affects their world
standing.
4. Traditional society stage was prevalent prior to 1900s, when most societies operated in a
relatively stable state and productivity didn’t ride of fall dramatically.
5. Drive to maturity is about 80-year period between the take-off and the final stage.

POST-TEST

MULTIPLE CHOICE: Choose the letter of the best answers. 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?
a. Walt Whitman Rostow
b. Seidel Rostow
c. Moichelle Rostow
d. Seildel and Moichelle Rostow
3. Which stage had limited technology, and human 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 used to educated the individuals 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 investing new processes and 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,
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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, Traditional Society, Age of Mass Consumption, and Drive to
Maturity
b. Traditional Society, Precondition for Take-off, Take-off, Drive to Maturity and Age of Mass
Consumption
c. Traditional Society, Precondition for Take-off, Age of Mass Consumption, Drive to Maturity
and Take-off
d. Age of Mass Consumption, Precondition for Take-off, Traditional Society
8. Which stage really took place after WWI from about 1915 until around 1980, when the
technology are 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
c. Take-off
d. Traditional Society

REFLECTIVE LEARNING SHEETS

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. 10.
4.
5.

REFERENCES

Books
Darr, k. (2013). Introduction to Management and Leadership concepts, Priciples and Practice,
Jones and BartlettLearning Retrived from https/www.google.com.et
Mintzberg., H (1989); MINTZBERG ON MANAGEMENT. Reprinted by permission of Free Press, a
division of Simon & Schuster, Inc.