LESSON 1

Contemporary Issues Facing the Filipino Entrepreneur

Learning Competencies: Analyze the effects of contemporary

economic issues affecting the Filipino entrepreneur.

Business, as they say, is like a gamble. It

takes a brave heart to invest their resources
with no guarantee that there will be a return
of investments. One of the challenges that
entrepreneurs face is the opportunity cost
investing in different portfolios and
interest rates that go with them.
 INVESTMENTS
An investment is a product that people buy with the hope that they
will be beneficial or will generate income in the future. We classify
investments as either long-term investments or short-term investments.
One of the usual long-term investments is buying a property or
engaging in real estate. The process is simple: you buy any property
then wait for the value to increase as years go by. Waiting time is over
when you decide to sell the property, usually at a higher price, and
move on to the next opportunity to invest.
Banks offer a variety of short-term investments. Savings and time
deposits are the usual venues for these types. Security risk is low, gain
is also low, and interest rates are fixed.
 Other financial intermediaries usually offer other types of
investments like stocks and bonds. The Philippine Stock Exchange is
a place where traders buy and sell stocks for profit. Ideally, a broker
buys stocks and sells them at a higher price later.
In putting up business, it is necessary to know the initial investment
of the entrepreneur so that he able to assess if he needs additional
investment. What is investment? It is defined as building up the capital
stock for more future production and consumption.
Effects to entrepreneur:
Low interest rate attracts more entrepreneurs to invest, while high
interest rates lessen the opportunity of the entrepreneurs to start their
business in the country.
 RENTALS

Having your own small business is also an investment, but there

are things that you should consider. In any kind of market structure, the
first few months of operation usually find the business experiencing
losses. This is because of fixed costs which include rent, machinery,
and equipment. Theoretically, as a business continues to operate
efficiently, both variable and fixed costs are distributed among the
output equally making it profitable. Profit will only be experienced by
the business if quantity output is exactly at the point where cost is at its
lowest.
In case you decide to expand, (all things being constant) your
business will incur profits. But you need to consider the
initial capitalization, cost of expanding, and vulnerability of
the market before you really venture in such project.
 As an investor, what will you do if you don’t own land or space to be
used for your business? The answer is rent or lease a land or space. But,
how does rental affect your business operations?

Effects to entrepreneur:
In Income Statement, rental fee is in expense account which means the
bigger the place/space, the higher the cost. Also consider the location; it is
more costly to rent in urban areas than in rural areas.
 MINIMUM WAGE

Increasing cost of businesses is brought about by increasing

wages. In the Philippine setting' each region has its own minimum wage
determined by the standard of living of its residents. Every now and then,
the government tries to increase minimum wage. This minimum wage is
expected to be enough for the ordinary worker to afford things that he/she
usually buys.
What is minimum wage and how it is determined? It refers to the lowest
wage permitted by law below which if paid by employer will subject him to
penalty from the government. In the Philippines, the Department of Labor
and Employment (DOLE)issued wage order for minimum wage earners
effective January 1. 2020.
 But how was minimum wage determined? Minimum wage rates are
determined by factors such as poverty threshold, prevailing wage rates as
determined by the Labor Force Survey, and socio-economic indicators
which insure better workers protection.
The National Wages and Productivity Board (NWPC) Wage Order NO.
RTWPB-XI-20, the prevailing minimum wage for non-agricultural
establishments employing 10 or more workers in the region XI shall pay
their employees at P396.00 per day while workers in the agricultural sector
will receive minimum salary of P381.00 daily and retail/service
establishments with not more than 10 workers pay 381.00 per day.
Effects to entrepreneur:
Over and above minimum wage is the voluntary productivity-based pay,
which encourages workers and enterprises to become more competitive
and productive by rewarding employees supplementary pay based on the
quality of their performance.
 TAXES

Tax is also a significant issue facing the entrepreneur. Taxes are

considered inflows for the government and outflows for firms.
Businesses apply either a percentage tax on gross receipts (3%) or
value added (12%). This is a burden for the business. Any tax for that
matter is a burden.
Business taxes should be paid every month while income tax from
business is paid quarterly. This is around 30% if gross receipts reached
500,000 annually or around gross sales. Tax is the lifeblood of the
economy. It fuels the social services provided by the government to its
citizen. But how does tax affect the entrepreneur?
Effects to entrepreneur:
High taxes tend to lessen investment because this is considered an
additional cost on the part of the entrepreneur. Low taxes mean fewer
government projects such as school buildings, roads, bridges and
providing social services to people.
 1

Lesson 2

Different Principles, Tools, and

Techniques in creating a Business Part1
Learning Competency: Identify and explain different principles,
tools, and techniques in creating a business.
 2

In economic analysis, the main concern is to realize the

maximum profit. In relations, this lesson discusses the various
perspectives, principles, tools, and techniques used in business
to identify commercial opportunities.

Economic Analysis of Profit Maximization

• Profit - Is the gap or difference between revenue and cost. Thus,

the condition of for maximum profit is when marginal revenue is
equal to marginal cost.
 3

Table 3.1: Factors Leading to Profit Maximization

Profitability
Minimal Profit Medium Profit High Profit
Factors
Market Many sellers Few Sellers One seller
Concentration
No barriers to Entry Some Scale Barriers Scale and legal
Market Entry Contestable Market Barriers Gov’t
Barriers
Homogenous Good Some degree of Highly Differentiated
Product
Product Product
Differentiation
differentiation
Perfect Information Limited Information Very limited
Information
for all Participants Information
No market power Limited Market High Market Power
Market Power
Power
Perfect Competition Oligopoly or Monopoly
Market Structure Monopolistic
Competition
 4

Market Concentration
This refers to the number of sellers and buyers in the market.
The more concentrated the market means the lesser producers are
there in the industry.

Barriers to Entry
This refers to inherent features of the industry and the various
means devised in the market to prevent the entry of potential
players and competitors that want to take advantage of the
enormous profit in industry.
 5

Two categories of Market Barriers

❖ Scale Barriers refer to requirements for a large production
plants for a feasible operation in the industry.
❖ Legal Barriers refer to proprietary rights and their
corresponding legal protection extended to existing market
players in the production and distribution of a product or service.

Product differentiation
This factor refers to the ability of a business firm to create a
market niche through several means of varying its products and
services.
 6

Limited Information
This element refers to the unevenness in the distribution of
information among the actors in the market.

Competition (let’s revisit the Competition and

Market Structure)

Pure competition is the first type of market structure where there

are many sellers, none of which controls the prices and output of
the whole industry.

The characteristics of two different businesses may change within

a day or may be fixed within a specific time. There is still no
 7

guarantee that it will remain a pure competition or it may transform

to be a variation of pure competition.
A fish market is an example of pure competition. If there are many
sellers of bangus in a place, there are no barriers to entry, and the
fish sold are homogenous, then we consider the pure competition.
But if somebody sells boneless bangus, then we experience a
Variation of pure competition. If this arrangement continues, then
the seller would have a competitive advantage over other sellers.
When the time comes that all sellers now sell boneless' bangus,
then the market goes back to being pure competition.

Pure monopoly, on the other hand, is where there is only one seller
who represents the whole industry. There is only one product or
service with no substitutes. Due to severe barriers to entry no other
entities can compete in the market.
 8

Oligopoly is where there are a few sellers of differentiated products

with strict barriers to entry. The oil industry is considered an
oligopoly and the Organization of Petroleum Exporting Countries
(OPEC) is a cartel. The difference between the two is that the
OPEC is an organization whose members are known to be part of
one whole system, with the system acting as one.

Monopolistic competition is where there are many sellers with

unique products, each trying to gain a competitive advantage.
Advertising plays a vital role in promoting the uniqueness product.
Many sellers belong to pure competition and some belong to
monopolistic competitor depending if the seller/supplier has loyal
consumers.
 9

The best type of business for a new competitor is under pure

competition where it is easy to penetrate the industry because there
are no barriers to entry. Barriers to entry may come in two forms:
(1) industry barrier, where initial capitalization of a business is very
expensive and (2) government intervention, where licenses are
difficult to secure or taxes are very high. These types of barriers to
entry are both absent in pure competition.
 10

CUSTOMERS
In Economics the word market may refer to the structure
where the firm belongs. In other disciplines, the word "market"
refers to the type of customers and their number as well.

Knowing and understanding your customers are essential to

identify the service or good to present to the market.
Market segmentation is categorizing your customers according
to demographic and geographic groups. This is done to meet the
demands of different types of consumers.
Demographics play an important role in knowing your
customers. Demographics describe the kind of customers you have
in terms of gender, age, and income. Customers' needs and wants
are also identified through demographics. There are generally three
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types of products based on consumer gender — those

goods/services for males only, those for females only, and those
that cater to both.
Age plays an important part in knowing your customers. There
is a need to have versions of a product for children, teens, and
adults.
Income is also a determinant of quantity demanded or how
much a consumer is willing to Purchase
Income may also be based on the bracket where the
consumer belongs. They are low-income earners or class D, also
upper middle and lower middle-income earners or classes B and C,
and finally there is class A where consumers are considered as
high-income earners.

Geographic segment refers to belonging to a certain place.

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They can be as urban or rural areas, western, eastern, southern,

and northern parts of a certain country or region, and it may also
refer to different provinces or cities.
This information can help the businessman develop a product
that will fit the budget and tastes/preferences of certain buyers.
 13

SUPPLIERS
A supplier is defined as the source of materials used in
production by a producer, a seller, or a manufacturer. Before one
enters into a business, one needs to first determine the sources of
raw materials. If one is getting a machine for a factory or business,
one needs to see the specifications of capital inputs.
Some businesses are capital intensive and manufacturers
invest a lot in machinery and equipment. It is recommended that
branded ones are purchased but the after-service and replacement
of parts must also be considered. For consistency in service or
product, it is best to stick with one brand.
 14

COMPETITORS
There are three types of competitors based on the four market
structures and there are variations of these as well.
The first type is where competitors have the same qualities and
characteristics. None of them has leverage over other competitors.
In a purely competitive environment, this happens when the product
they are selling is homogenous in nature.
The good thing about this type of competition is its predictability.
In this type of competition, one knows the exact kind of
merchandise or service of the competitors.
The second type of competitor is one who tries to get loyal
customers by having a leverage or competitive advantage. The next
thing to do in a competitive market is to innovate the product and
try to make it different from other products. This is to avoid being
 15

predictable among competitors. Competitors try to change some of

the components of an existing product or service by altering a part
of it.
The opportunity to be part of this market is relatively difficult
compared with the first type. It is difficult because one needs to think
of a way to sell his or her commodity or service by being different in
a good way, that customers will prefer his or her product over
others. It will also make customers come back and become loyal
customers.
The third type of competitors are those who collude, Colluding
occurs when competitors conspire as one having the same
objectives. The reason for this is because there are so few
competitors that it is easier for them to coordinate and control prices
and output to give equal benefits to all of them. This is not an easy
task for there are many requirements to make this happen. Aside
 16

from having only a few sellers, there should be something in

common among the competitors like having the same material in
making their products. The said material should be very difficult to
acquire, and entry to the industry should be difficult.
There are variations of the third type. One is where there are
few sellers with a leader having the biggest capital. The biggest
seller gets leadership when it comes to storage. When materials are
stored in bulk and their prices increase, then it takes time before an
increase in Price can be implemented. Compared with a smaller
competitor with smaller storage capacity' the smaller competitor is
incapable of maintaining price stability. Furthermore, each time
there is an increase in the prices of materials the smaller player
needs to increase the selling price of the product.
Being a leader is not always just about the size of storage or
how big the factory is. At times when the industry experiences a
 17

rollback, the smallest player gets the most benefit• When you have
a smaller capacity to store materials or inventories, it is also easier
for you to decrease your selling price when prices of materials
decrease. This time you become the leader.
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SUBSTITUTES
Substitutes are goods that can replace other goods because of
similarities, appearances, use, among others. Theoretically, an
increase in the price of one good increase the quantity demand of
the substitute. If a consumer finds goods A and B to be similar, then
an increase in the price of good A will make the consumer turn to
good B.
In business opportunities, being a substitute is a promising
venture. A lot of businesses start as substitutes for other
businesses which are considered prospects. It only takes one shot
for one to be "in."
 1

Lesson 3
Different Principles, Tools, and Techniques in
creating a Business Part 2
Learning Competency: Identify and explain different principles, tools, and
techniques in creating a business.
 2

THE ENTREPRENEUR'S CHECKLIST

The most practical and realistic business opportunities should fulfill the
following criteria:

1. There must be a market for the product or service, otherwise; you will be
producing something that nobody wants to buy.
Although some may say that you can create demand for your product or
service, it is best to know if there is an existing market. The only exception to
this rule is if you are proposing to make an innovative product or service where
many can be "potential Buyers “

2. Accessible location is necessary to reduce operating costs.

Location is vital to maintaining smooth and efficient operations. Proximity
to the sources of your product's raw materials contributes significantly to cost-
effectiveness; the farther away your firm is from your sources, the more you
will have to pay for shipping, and the higher your operating costs will be.
 3

3. Minimizing fixed and variable costs is a must.

Fixed costs are costs that a business incurs which do not change as the
business increases or decreases the number of goods or services it produces.
The business must pay these costs regardless of their sales volume.
Variable costs, on the other hand, rise and fall proportionally with the
number of goods or services produced.
Capital-intensive businesses and industries are those which require more
fixed, upfront costs than variable costs. Such high upfront costs mean that
businesses will require high production volumes in order to attain good returns
on investment.
Labor-intensive businesses and industries, on the other hand, are those
Which require more variable costs (specifically labor or manpower) than fixed
costs.

4. Compliance with legal requirements is a must.

Philippine laws require that all businesses be registered with the
Department of Trade and Industry (for sole proprietorships) or the Securities
and Exchange commission (for partnerships and corporations); that they
 4

obtain a business permit from their local government unit; and that they be
registered with the Bureau of Internal Revenue.
 5

THE SWOT ANALYSIS

Analysis was created in the 1960s by
business gurus, Edmund P. Learned, C. Roland
Christensen, Kenneth Andrews, and William D.
Book in their book, Business Policy, Text and
Cases (Irwin 1969).
The SWOT analysis, (Strengths,
Weaknesses, Opportunities, and Threats) is
used to analyze an organization or process to
evaluate the internal (strengths and
weaknesses) and external (opportunities and
threats) factors which may prove favorable or
unfavorable in achieving its objectives.

Strengths are positive characteristics that give an organization or business an

advantage over other businesses. Weaknesses are the negative attributes of a
business. Opportunities are external possibilities that the business can venture into
or take advantage of, and threats are negative external factors.
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https://corporatefinanceinstitute.com/resources/knowledge/strategy/swot-analysis/
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SWOT Analysis example

To help you get a better sense of what at SWOT example actually looks like,
we’re going to look at UPer Crust Pies, a specialty meat and fruit pie cafe in
Michigan’s Upper Peninsula. They sell hot, ready-to-go pies and frozen take-home
options, as well as an assortment of fresh salads and beverages.
The company is planning to open its first location in downtown Yubetchatown
and is very focused on developing a business model that will make it easy to
expand quickly and that opens up the possibility of franchising. Here’s what their
SWOT analysis might look like:
 8

SWOT analysis for UPer Crust Pies

9
 10

How to use your SWOT Analysis

With your SWOT analysis complete, you’re ready to convert it into a real strategy.
After all, the exercise is about producing a strategy that you can work on during
the next few months.
The first step is to look at your strengths and figure out how you can use those
strengths to take advantage of your opportunities. Then, look at how your strengths
can combat the threats that are in the market. Use this analysis to produce a list
of actions that you can take.
With your action list in hand, look at your company calendar and start placing goals
(or milestones) on it. What do you want to accomplish in each calendar quarter (or
month) moving forward?
You’ll also want to do this by analyzing how external opportunities might help you
combat your own, internal weaknesses. Can you also minimize those weaknesses
so you can avoid the threats that you identified?
Again, you’ll have an action list that you’ll want to prioritize and schedule.
 11

UPer Crust Pies — Potential strategies for growth

Back to the UPer Crust Pies example: Based on their SWOT analysis, here are a
few potential strategies for growth to help you think through how to translate your
SWOT into actionable goals.
1. Investigate investors. UPer Crust Pies might investigate its options for
obtaining capital.
2. Create a marketing plan. Because UPer Crust Pies wants to execute a specific
marketing strategy—targeting working families by emphasizing that their
dinner option is both healthy and convenient—the company should develop a
marketing plan.
3. Plan a grand opening. A key piece of that marketing plan will be the store’s
grand opening, and the promotional strategies necessary to get UPer Crust
Pies’ target market in the door.

Next steps with your SWOT Analysis

With your goals and actions in hand, you’ll be a long way toward completing a
strategic plan for your business. The actions that you generate from your SWOT
analysis will fit right into the milestones portion of your Plan and will give you a
concrete foundation that you can grow your business from.
Lesson 4 Types of Industry
Learning Competency:
Distinguish the different services/products of business and industry in the locality
 There are lots of industry classifications which are typically grouped into larger
categories like the International Trade where we import and export products. Rice
is one of the products were Philippines imports and exports from other countries.
Another sector in industry is the Agricultural Business. This business sector
involves with farming and farming-related commercial activities like ranching,
piggery and poultry. This business includes all the steps required to dispatch an
agricultural product to market: production, processing and distribution.
Another sector that can be classified in the business industry is the Service
where it offers intangible products like financing services that being offer in the
banks and other financing firms. Another example of a service business is the car
wash where you can see in almost all places in the country.
Manufacturing refers to any industry that produces products from raw
materials by the use of human labor or machinery and that is normally carried out
orderly with division of work. Aside from huge manufacturing firms, we can also
consider Bakeshops as one of the manufacturing industries where they make
finished product like cakes and pastries.
There are five types of industries. These are:

AGRIBUSINESS

Agriculture has been defined as the science and art of producing livestock and
cultivating plants and . The agricultural sector has been an important component
of the Philippine economy. It has been a major source of employment to millions
of Filipino workers and it contributed one third of the of the country’s Gross
Domestic Product in 1970’s but it declined to 8.74% in 2016. Because of this, a
number of initiatives have been implemented to enhance the sector’s productivity.
One of these is the development of the production of food grains and crops like
rice, banana, pineapple, coffee, camote, monggo, corn, coconut and calamansi.
The development of fish and animal production have been implemented too.
RETAIL

Retail includes the sale of merchandise from a one point of purchase directly
to a consumer who tends to utilize that product. The single purchase could be a
brick- and-mortar retail store, a catalog, an internet shopping website, or even a
mobile phone.
The retail activity is at the last point of the chain. Manufacturers sell huge
quantities of goods to retailers, and retailers tends to sell those same quantities of
goods to customers.
SERVICE

A service industry is any industry that produces value that is primarily

intangible such as advice, consultation, customer service, knowledge,
management, data and experiences. Advanced economies are undergoing a long-
term shift whereby service industries are turning into a larger component of
economic output similar to other industries such agriculture and manufacturing.

The following are common examples of service industries.

SERVICE INDUSTRY EXAMPLES

HOSPITALITY Hotel, Restaurant

TRANSPORTATION Flight and Tour

MEDIA/ENTERTAINMENT Newspaper, Cinema

HEALTHCARE Hospital, Clinic

FINANCE Bank Loan/Investment Agency

HEALTHCARE Hospital, Clinic

Service industry offers services rather than tangible objects.

MANUFACTURING

Manufacturing is the processing of raw materials into finished goods through

the use of equipment, tools, and processes. Manufacturing is process that allows
enterprises to sell finished products at a price over the cost of the raw materials
used.
Manufacturing, any industry that produces products from raw materials by the
use of human labor or machinery and that is normally carried out orderly with
division of work.
INTERNATIONAL TRADE

International trade is the exchange of services and goods from one country to
another. This type of trade gives opportunity to a world economy, in which prices,
or demand and supply, affect and are affected by global events.
Trading worldwide gives consumers and countries the chance to be exposed
to goods and services that cannot be found to their own countries. Most of the
products that can be found on the international market: food, water, stocks,
clothes, spare parts, oil, jewelry, currencies, and wine. Services are also traded
like consulting, tourism, transportation and banking.
What is an 'Import'?
An import is a good or service that brought from the other countries. The word
"import" comes from the word "port" since goods are often travelled via ships or
boats to foreign countries. Countries are often like to import goods that their local
industries cannot produce as effectively or at low price as the exporting country.
Countries can also import raw materials that cannot be found within its borders.
What is an 'Export'?
 Exports are goods and services made in one country and sold to buyers in
another. Exports are important to modern economies, because they provide
opportunities to people and firms many channels of distribution for their goods.
One of the major functions of diplomacy and foreign policy between countries is to
improve economic trade, encouraging imports and exports for the advantage of
all trading parties.

Exporting is done on a huge scale. The opposite of it is importing, which was

mentioned earlier, that means a country is receiving goods from another country.
It is an essential part of an economy.
LESSON 1

Socio-economic Factors
Affecting Business and
Business as a Commitment
Learning Competencies:
Identify and explain the various socioeconomic factors affecting business and industry.
Analyze and evaluate the viability of a business and its impact on the community.

1
 Part of owning a business is
listening to the needs and wants
of your consumer. More often
than not, businesses survive
because they know how to cater
to the needs of their consumers.
Thus, it is important to
understand how businesses and
consumers interact with each
other.

2
What are the socioeconomic factors and how these
affect businesses and industry in general?

Business has to pass through various socioeconomic

factors and has to be affected by such factors in its will of
making money or profit by producing or buying and selling
products in the form goods and services.
Socio-economic factors include all transactions that
the business has to interact with comprising land, labor,
capital, and technology.

3
 Furthermore, Socio-economic factors are
considerations about how the business itself operates from
within taking into account the capital, capacity of business,
the sources or suppliers, the product to be produced, and
the services to be offered, among others.
Socio-economic Factors Affecting Business also
includes the practice of consumer in using new products
and services. If households are experiencing poverty
alleviation due to employment opportunities adding more
to their income, there is a great tendency for them to spend
more money in the market place demanding new products
and services. Thus, businesses are doing well in the
process producing sustainable employment in return or

4
even expansion of the same business or opening up
another form of business catering not just the basic needs
but somehow luxurious wants of consumers.
The impact of the availability of raw materials or supply
for business is another thing that affects business. It is
necessary to determine the investors’ needed capital and
expected income.
In a larger industry it may include the government
intervention on taxes or its policy on investment, and the
import export dollar transactions that the business maybe
dealing with. If the policies of the government are favorable
to foreign trade and relations, then outside contacts and
influence will be promoted but if government adopts
5
“nationalistic” policies, then it will close the country to
foreign influence which in turn affect the viability of local
business and industries.
Other factors affecting business may include the
following:

a. Payment of Government Taxes

Barangay, Municipal, or City permits, and real estate
taxes, are paid in local government units while value
added tax, import-export duties, income taxes are due to
national government.

6
b. Mode of the International Trade
Some businesses especially the medium and large-
scale enterprises are usually affected by the dollar
exchange rate in the economic transactions, because it
may directly affect the exports and imports cost of
products which in turn may directly or indirectly affect
production cost and the setting of the selling price.

7
How are You Going to Determine the Socio-Economic
Status of Consumers as a Factor Affecting Business or
Industry?

Consumer’s Behavior and Its Significance on Business

The determination of the consumer’s behavior and their
decisions on what to buy for consumptions is another
factor. Consumptions refer to the use of goods and
services to satisfy the basic needs and wants of
consumers. Different socioeconomic classes will generally
have different priorities, and this will affect how consumers
spend their money.

8
 As investors ready to use capital for business, you must
be able to look for a secured or feasible consumer. It is
therefore imperative that we get to please the consumer, so
he/she will buy from you instead of from your competitors.
Once satisfied the buyer would be eventually become our
”suki” or regular customer.

9
Determining the Socio-Economic Status of Consumers
and Its Effects on Industry

Wherever your small business or big business as an

industry is located, there are going to be socioeconomic
factors that affect it, because social class, that is upper
class, middle class, and lower-class individual status are
attributable to the socioeconomic factors that determine the
success and failure of every business.

10
The following are the main parameters of socio-economic
status of consumers or buyers:
Income - when income is scarce, customers tend to restrict
their spending to essential items;
Education/Skills - A society that has it that a well-educated
and skilled population flourishes because individuals are
employable in well-paying jobs; and
Occupation - refers to the type of jobs people perform by
virtue of their skills, experiences or choice.

11
 A person who may have education or skills has a greater
tendency to land a job or may acquire permanent
occupation that generates income. It is therefore important
to consider the implications of these socioeconomic factors
on your business decision-making. Moreover, customers in
the different social classes have different tastes and
preferences. Be sure not to ignore the consequences of
these socioeconomic parameters in deciding what products
you are going to produce or sell.

12
 Business as a Commitment to Foster Sustainable
Economy

Business has to establish relations with the

community be it a small or large social unit where people
have something in common, in norms, religion, values, or
13
identity because it determines the very existence and
sustainability of business itself.
Business as a provider of both goods and services
is extremely important to the economy, starting from a
community where it emanates and up to the country’s
economic sustainability. Any business must also be
concerned with consumer welfare, job creation,
environmental issues, uplifting the quality of people’s lives
in a community, and contributing to the whole economy.
The business generated jobs because they need human
resource to produce and sell their goods and services to the
consumers.

14
 Once you get into business one of the most significant
things that you have to do other than the establishment of
employees-employer healthy relationships is to ensure
customers patronage by maintaining or improving your
products’ quality and offered services.
In the business world everything doesn’t always go just
right. Problems happen, big and small. A negative issue
can be a major company’s problem, or become an
unexpected opportunity to build positive promotion of
products or services by the same company itself.
We often hear that medium and small size businesses
are the engines of job creation in general. Their value and
the role they play in Philippine economy is sometimes
15
underestimated. But the truth is they have the greater
impact on our economy, especially in communities or
localities like the barangays and towns.

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Establishing the Appropriate Business in the Localities
Small industries contribute to local economies by
bringing progress and improvement to the community in
which the business is established. Small industries also
help motivate economic growth by providing employment
openings to people who may not be employable by larger
corporations.
But doing local business is not just about making profit
but also a way for community involvement of investors by
creating more jobs, increase tax base, provide product
diversity for healthy competition, and in some ways creating
a community identity for tourism and other potentialities in
the localities. Hence, small business in the localities is
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affecting the income generation of households within those
localities which in turn also have impact in the nation’s
economy. Households also enable businesses to tailor
products and services to best suit them as consumers.

No matter how small or big a business is, to be

prosperous, investors must ask the following question
to begin with:
How will you get the raw materials or supply?
What is the potential market size or demand?
Who are your competitors?
Who are your target customers?
What is your potential selling price?
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 It is also very important to establish Organizational
Control that includes control in developing rules,
guidelines, procedures, limits or other protocols for
directing the work and processes of employees and
department of the business by the management.

Business Impact in its Operation

1. Impact to the Consumer – bringing some new and
innovative products or service to the market is always
welcome to consumers who is looking value for his
money.
2. Impact on Suppliers and Investors – businesses
provide opportunities for suppliers and investors that will
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 supply them their needs and which means income for
them.
3. Impact on the Government – this will benefit from
the establishment of new businesses through revenues
earned on fees collected from them and on tax imposed
on the incomes of the business.
4. Impact on Households – businesses mean
employment opportunities for the Filipinos.

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Impact on the local government’s programs
CSR or the Corporate Social Responsibility has
become a growing trend among businesses today. Small
and big corporations increased focus on projects like
scholarships, housing, tree planting, and other related
programs for the communities which are usually anchored
on the Local Government Units (LGU) programs.

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Lesson 2

Business’ Impact
Learning Competency:
Formulate recommendations and strategies on how to minimize and
maximize a business’ negative impact and positive impact, respectively.
 In an interconnected world, the impacts of any transaction arise from
buyer-supplier relationship because of spillover effects or externalities.
Externalities are effects of transactions that happened to parties outside
the transactions of buyers and sellers. If the spillover effects enhance the
welfare of a third party, it is called positive externality or positive impact.
But if the third party’s welfare is reduced, the spillover effect is called
negative externality or negative impact.
Some examples of Positive Impact of Business to the Society
1. Sourcing raw materials from renewable resources
2. Sourcing labor services, technical professionals, and managers in
huge plantations and mining companies may opt to build communities
within their business complex that has educational, health, social, and
cultural religious facilities.
3. Construction of infrastructure like roads that have positive effect on
the neighboring communities and where other business enterprise
may be encouraged to establish their presence nearby to cater the
needs of the of the community
4. The impact of the sales of firm of its outputs to other firms as
intermediate inputs and as capital goods. These repeated transactions
of constant sales contribute to the strengthening of the integration of
the economy.
5. Exporting its products to earn foreign exchange but these earnings
contribute to the accumulation of the country’s foreign reserves.
Some examples of Negative Impact of Business to the Society
1. Technology used in processing the raw materials can be energy
intensive that emits smoke, and produce air and water pollutants.
2. The extraction of mineral deposits, can lead to noise and water
pollution as well as soil erosion to the detriment of the neighboring
communities. The disposal of wastes of these huge extractive
operations can threaten ecological balance as chemicals mixed with
water at warmer temperatures are disposed in rivers, bays, and seas.
3. Usage of plastic bags and polystyrene or Styrofoam in wrapping
consumer goods can have adverse effects on the environment.
4. The intense advertising campaigns made by fast food companies can
alter the consumption habits of the young that can have undesirable
effects on their future health.
5. The sale of additional cars can further aggravate the traffic congestion
in the cities. Jeepney drivers providing transport service daily to
millions of Filipino commuter expose an equal number of people to air
pollution.
Recommendations on Managing the Impacts of a Business
Enterprise
1. There is a need to improve the productivity of firms’ workers.
2. Business enterprise should source their raw materials, labor, and
capital inputs from the community where they operate.
3. Use environment friendly alternatives in the production process and
distribution procedures.
4. Be socially responsible as commercial enterprises.
5. People should participate in the production of intermediate goods
within the country.
6. Enhance the productivity of the service sector.
7. Carry out measures to protect consumers.