THE ROLE OF BUSINESS IN SOCIAL AND ECONOMIC DEVELOPMENT

BUSINESS – An enterprise agency or firm, an entity involved in the provision of good and or services to consumers.

 Prevalent in capitalist economies, where most of them are privately owned and provide goods and services to
customers in exchange for other goods services and money.
 may also be a nonprofit social enterprise or state-owned public enterprises targeted for specific social and
economic objectives.

A nonprofit (NPO) business organization has been granted tax-exempt status by the Internal Revenue Services because
of its further social cause and provides a public benefit. Donations made to a nonprofit organization are typically tax
deductible to individuals and business that make them, and the nonprofit pays no tax on the received donations or other
money earned through fundraising activities.

Ex.

 Hospitals
 Universities
 national charities
 churches
 foundations

Tax Deductible- A tax deduction is an item you can subtract from your taxable income to lower the amount of taxes you
owe.

NATURE OF BUSINESS

ECONOMY- A place or a country where resources are managed by a government to bring about maximum benefits for
the entire society.

Third World Countries or Developing Economies

Described as those with average income earned, rate of literacy and health services lower that those industrialized
developed nations. They are characterized because they have high potential for growth and for achieving the status of
developed countries.

Early Caribbean Economies

TAINO INDIANS- Pre-Columbian indigenous inhabitants of the Bahamas, Greater Antilles and of the Lesser Antilles. Their
name Taino comes from their encounter with Christopher Columbus in Bahamas on October 12, 1492. They are
composed of Hispaniola, Puerto Rico and Jamaica and relied more on agriculture and fishing.

KALINAGO INDIANS OR CARIBS- Traded with the Eastern Taino of the Carribean Islands. They relied mostly on hunting,
agriculture and fishing. They produced silver products found by Juan Ponce de Leon in Taino communities. Kalinago lived
throughout northeastern South America, Trinidad and Tobago, Barbados, Windward Islands and Dominica.

Kalinago and Taino Indians are examples of a system of economics because although they lived simple lives, these
communities were ruled by a leader who organized all economic activities. Most of the Carribean countries, it is
consumer demand that drives the production and distribution of goods and services.

Barter- The exchange of goods or services for other goods and services. This system is done to obtain those commodities
that they did not produce of themselves.

Problems with the Barter System:

 A common measure of value did not exist.

 A double coincidence of wants may not exist.

Instrument of Exchange:

Money- Anything that is acceptable for the purchase of goods and services. Presently is in the form of notes and coins.
Early forms of money included shells, beads, precious metals and stones.

Characteristics of Money:

 Acceptable – Universally accepted.

 Convertible – Easily exchange for goods and services
 Divisible- Can be easily broken down into smaller units.
  Durable – Long lasting
 Homogeneous- Similar , ex. All 100 dollar bills are the same appearance.
 Scarce- Ensures its value
 Portable- Easy to carry

Functions of Money

 A measure of value - The price of an item indicates its value.

 A medium of exchange
 Standard for deferred payments. Used to repay debts overtime.
 A store of wealth, it can be easily stored or saved.

Types of Money

 Near money- Assets that can be easily turn into cash such as certificate of deposits.
 Notes and coins- Quasi money/ Substitutes money- Postal orders, soda machine tokens, cheques and credit
cards.
 Bank Draft- A cheque which guarantees payment to the receiver from the issuing bank.
 Bill of Exchange- This used to pay for goods bought overseas on credit.
 Cheques- An order to the bank to make payment to the payee stated.
 Credit cards and Debit card- This allows the card holder to make payments by simply presenting the card to the
seller.

Credit Card Facility- A loan given to a customer and thus it is repaid at an interest.

Debit Card- Issued against a customer’s account balance and is therefore not a loan.

Ecommerce – Electronic commerce, it is a buying and selling of goods and services using the internet. It allows for a full
range of trading activities on internet such advertising, placing orders, delivery and making payments.

Electronic Transfer- A system used to transfer funds electronically rather than paper-based payment methods.

Ex.

 Credit card payment

 debit card transactions,
 remittances and money transfer.

Internet Banking- Customers can go –online to view their balances and transaction history and transfer funds.

Money Order- Can be used to make payments locally and overseas, as they are made of currency in which they are to be
paid. The payee will cash the money order at his bank.

Tele-Banking- This system allows the bank’s customer to use simply the telephone to get his banking services done
rather than visiting the bank.

Reasons for Starting a Business

 Being your own boss

 Financial Independence
 Self-actualization/ Fulfillment
 To create employment for relatives, friends and community members.
 To use your skills and knowledge for yourself

FORMS OF BUSINESS ORGANIZATIONS

Business Organizations are centered on creating goods and services for profit.

SOLE PROPRIETORSHIP – The business is owned and operated by one individual. The owner has full authority on the
business and owns all assets and profits but at the same time is personally liable for all the obligations and losses.

PARTNERSHIP – Two or more persons bind themselves to contribute money, property, or industry to a common fund
with the intention of dividing the profits and sharing the liabilities among themselves.

CORPORATION- Composed of 5 to 15 persons, who are called incorporators, they hold of at least one share and are
bound by the articles of incorporation filed with the Security and Exchange Commission (SEC).
ADVANTAGES OF CORPORATION

Unlimited life- A corporation has an unlimited life, as it may exist well beyond the lifespan of the original owners.

Credibility- Customers, suppliers, investors and financial institutions may see a business as more credible if it is a
corporation.

Ease of transferring ownership- Corporation can easily transfer ownership should the

original owners decide to sell it by transferring the company’s stock certificate to another shareholder.

PROTECTING PERSONAL ASSETS- Owners of a corporation are liable for business losses and debts up to the equivalent of
their investment in the corporation.

Reasons for Promoting Sustainable Development in the Corporation

 Good management practice

 Adherence to government policy
 Public opinion
 New opportunities

OTHER TYPES OF BUSINESS ORGANIZATION

CONGLOMERATES - Group of unrelated companies (restaurant, shoe store, travel agency etc.) under one umbrella. A
parent company owns a controlling stake in each company which conducts business separately.

COOPERATIVES- They are business entities owned by their members who purchase shares to join them.

Ex.

 retail/ consumer
 cooperatives and producer
 cooperatives.

FRANCHISE- Business will begin by the owner acquiring a franchise to operate under an already existing business name.

 An agreement between a FRANCHISEE – the person requesting to set up business) and the parent company to
allow the franchise to sell its products and services.

GOVERNMENT DEPARTMENTS – These include the government ministries (finance and education) A minister is
appointed in charge of each ministry. These departments are very important to the running of government.

LOCAL AND MUNICIPAL AUTHORITIES - These are government bodies which are run by elected local officials, they fulfill
the local needs and allow for more balances local development.

MULTINATIONALS- A global organization directed from a centre office.

Ex.

 Pfizer
 Coca Cola
 Johnson and Johnson
 Procter and Gamble

NATIONALIZED INDUSTRIES – Government owned and controlled businesses. A chairman and board of directors are
appointed by the government in most countries, they provide essential services such as water, electricity and
transportation and other goods at very affordable cost or free. They are supported by taxpayer’s money and do not
operate on the basis of making profits.

THE ROLES OF BUSINESS ORGANIZATIONS IN THE SOCIET

 Providing goods and services

 Creating employment opportunities
 Advancing the economy
 Promoting sustainability
 Investing in innovation and excellence

1987 Phil. Constitution, Art. XII Sec. 1 - Highlights the role of private enterprises in supporting equitable distribution of
income and wealth, sustaining production of goods and services and expanding productivity, therefore raising the
quality of life.