11
Organization and
Management
Quarter 1 – Module 4:
The Firm and Its Environment:
Phases of Economic
Development and
Forms of Business Organizations
1
Lesson The Firm and Its Environment:
Phases of
3 Economic Development
What’s New
Let’s have fun with this activity!
You have finally gauged your knowledge about business environment. Now, let’s continue our next
activity.
Instruction: Take a look in the crossword puzzle and shade with your pencil/pen the word or group
of words inside the box. There are 10 word/s for you to find. So, enjoy finding words…
Activity 1. “Crossword Puzzle”
A C N O Y X F G H K W T Y
E T R A N S I T I O N R O
C G R N A K A S J E O A L
O H B T G L P Z M E R A F
N N W A M R K P H K T S Y
O J D G C T O T M I H I I
M O F O F L S W P L G T U
I N L L E U T A T B A I S
C R S V H Y C B H H M O A
E L E T P N R N X J I N F
A D L B A I D L Q O K K D
B A V M P H A S E S L W G
M Z U P O P U L A T I O N
A H G O V E R N M E N T T
D E M O G R A P H I C K E
2
What Is It
Good Job! Now that you have completed the activity, let’s proceed on other set of
activities.
Let’s reflect!
Activity 2
Instruction: Write your answer on the space provided below.
1. What can you say about our previous activity? What is your learning with regards to the
activity done?
Answer:
2. Could you identify the different phases of economic development based on the given
crossword puzzle?
Answer:
3. Is the term “economic development” synonymous with “economic growth”?
Explain your answer.
Answer:
3
THE FIRM AND ITS ENVIRONMENT: Phases of Economic Development
Economic development is a total process which includes not only economic growth or the increase in
the given amount of goods and a service produced by the country’s economy, but also considers the
social, political, cultural, and spiritual aspects of the country’s growth.
Economic development phases are the distinct stages involved in the total process of economic
development in a particular country. These include economic growth, improvement of the Human
Development Index (HDI), availability of benefits provided by science and technology, and the
societal improvement of the opportunities and general welfare of its members.
Economic growth is the increase in the given amount of goods and services
produced by the country’s earning.
Adam Smith was the first “development economist.” His work, The Wealth of Nations, was
published in 1776. The scientific study of the processes and problems of society in Asia, Africa, and
North America has emerged only over the past 50 years.
Inclusive growth means, first of all, growth that is rapid enough to matter, given the country’s large
population, geographical differences, and social complexity. It is a sustained growth that creates
jobs, draws the majority into the economic and social mainstream, and continuously reduces mass
poverty.
Sustainable economic development ensures that the present needs of a particular generation are
fully met without endangering the ability of future generations to also fully meet their own needs.
Business managers must be conscious of their decisions to avoid the abuse of ecological elements –
air, water, and soil – as this will threaten sustainable economic development.
Different countries have different management strategies to encourage ecological respect and
prevent damage to the environment. Common environmental and ecological problems that have to
be dealt with by business managers include destruction of natural habitats, depletion of clean water
resources, urban, industrial, and agricultural pollution and many more.
4
In September 2000, world leaders gathered for the Millennium Summit, and thus adopted the
United Nations (UN) Millennium Declaration. By doing so, they had committed their nations to a
global partnership toward the reduction of extreme poverty and the pursuit of the Millennium
Development Goals (MDG).
Picture captured by the writer (from DepEd Book)
Figure 2.3
United Nations Development Programme (UNDP) reported that in 2012 almost all countries
improved their human development status. This figure identifies the 40 countries from the south
with notable improvements since 1990.
Note: Countries have the 45 degree line had a higher HDI value in 2012 than in 1990. Black and gray
markers indicate countries with significantly larger than predicted increases in HDI value between
1990 and 2012given their HDI value in 1990. These countries were identified based on residuals
obtained from a regression of the change in log of HDI between 2012 and 1990 on the log in 1990.
Countries that are labelled are a selected group of rapid HDI improvers.
Source: HRDO calculations
The MDGs, according to the UN, are “the world’s time-bound and quantified targets for addressing
extreme poverty, hunger, disease, lack of adequate shelter, and exclusion ̶ while promoting gender
equality, education, and environmental stability.” The deadline for the fulfilment of the MDGs was set
for 2015. The following are the MDGs:
1. Eradicate extreme hunger and poverty
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child morality
5. Improve maternal health
6. Combat HIV/AIDS, Malaria and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development
Meanwhile, the National Economic and Development Authority (NEDA) has laid out the Philippine
Development Plan (PDP) 2011 – 2016, which “adopts a framework of
5
inclusive growth, which is high growth that is sustained, generates mass employment, and reduces
poverty.” The PDP is focused on the following areas:
1. Pursuit of Inclusive Growth
2. Macroeconomic Policy
3. Competitive Industry and Services Sectors
4. Competitive and Sustainable Agriculture and Fisheries Sector
5. Accelerating Infrastructure Development
6. Resilient and Inclusive Financial Sector
7. Good Governance and the Rule of Law
8. Social Development
9. Peace and Security
10. Conservation, Protection, and Rehabilitation of the Environment and Natural Resources
It is evident from the PDP focused areas that they cover not only the economic and industrial goals
of the Philippines but also the social, environmental, and peace and security aspects.
The MDG’s and the PDP can help guide the management of businesses in the Philippine setting. In
particular, the PDP must be taken into consideration in order to deem management as appropriate
or country-specific.
Another potential means for economic growth and development is the planned integration of the 10
Southeast Asian nations in 2015 which include the Philippines. The Association of Southeast Asian
Nations (ASEAN) Economic Community (AEC) could help in the Philippines achieve its goal of
inclusive growth that creates jobs and reduces poverty.
According to a joint study by the International Labor Organization (ILO) and the Asian Development
Bank (ADB) titled “ASEAN Community 2015: Managing Integration for Better Jobs and Shared
Prosperity,” released in October 2014, the success of the AEC lies in the decisive actions taken by
member states regarding policy recommendations, strengthening regional cooperation that may
bring about structural changes, improvement of business and job opportunities and job quality,
enhancement of skills boosting productivity, better wages, and management of labor migration.
These may ensure that the benefits of equitable growth and development are shared among
member countries and sectors.
Since the AEC is envisioned to become a single common market and production base for an
estimated 600 million people of different nationalities, it means freer flow of goods, services,
investments, and labor. The study concluded that “new opportunities for growth and prosperity may
emerge, but the challenge is to ensure that growth is inclusive and prosperity is shared.”
Obviously, managers of business here in the Philippines must be concerned about the findings of the
study, as these are new challenges for them. The improvement of management style and the skills
training and education of their human resources are needed in order to cope with the possible
changes that will be brought about by the ASEAN integration 2015.
6
Lesson The Firm and Its
Environment: Forms of
4 Business Organizations
Congratulations you made it!
Now, let’s proceed to our next lesson. We are going to study the different forms of business
organization. This module would assist you as Senior High School learner to analyse the forms and
economic roles of business organizations.
So, let’s begin….
The form of a business organization may depend on its purpose, nature of operations, and
resources. However, a business organization’s form may change with the changing times and the
demands they present.
An organization is a collection of people working together to achieve a common purpose.
Business organization is a collection of people working together to achieve a common purpose in
relation to their organization’s mission, vision, goals, and objectives, sharing a common
organizational culture.
Organizational culture is the set of beliefs and values shared by organization members which
guide them as they work together to achieve their common purpose.
There are three main types of business organizations:
1. Sole/Single Proprietorship
2. Partnership
3. Corporation
• Sole/Single proprietorship is a business owned by one person only.
• Partnership is a business formed when two or more partners formally agree to be joint
owners of a business.
• Corporation is a business entity involving five or more persons owning it.
Summarizing the advantages and disadvantages of the forms of business organizations will help
potential entrepreneurs/businessman decide which form to choose. See table 1.
7
Table 1
Forms of Business Organization
Type of Firm Advantages Disadvantages
• creation is simple and low cost • owner is liable to all
Sole/Single • owner gets all the profits risks and losses
Proprietorship • decision-making is the sole • limited capital and other
responsibility of the owner resources
• solo owner has to do long
hours of work
• establishment is easy • business control is limited
Partnership • equal division of profits based since it has to be shared with
on their agreement as partners other partners
• availability of a pool of skills, • profits are shared
knowledge, and talents • wrong decisions made by a
partner are binding to other
partner/s
• invested property
becomes the joint property of
both all partners
• less liability of stockholders • major decisions cannot be
Corporation • capability to attract larger done easily, even if urgent,
amount of capital without the approval of the
• transfer of stock ownership is board of directors
easier • corporate and individual
• large pool of talents, skills, and profits are taxed separately,
knowledge resulting in double taxation
• division of profits is fair, and additional expenses
depending on number of stock • more rules and regulations
units owned have to be complied with
Changing Forms of Business Organization
Change is constant and organizations continue to undergo various changes to ensure effectiveness,
efficiency, and relevance in the world of business.
Simple business organizations – these refers to business organizations with few departments,
centralized authority with a wide span of control, and with few formal rules and regulations. These
are easy to manage because of their simple form. However, change of form follows as the company
expands its operation.
8
Functional business organizations – these pertain to business organizations that group together
those with similar or related specialized duties that introduce the concept of delegation of authority
to functional managers like the personnel manager, sales manager, or financial manager but allow
CEO’s to retain authority for strategic decisions.
Divisional business organizations – these are business organizations made up of separate business
units that are semi-autonomous or semi-independent, with division head responsible for his or her
unit’s performance.
Profit business organizations – these are business organizations designed for the purpose of
achieving their organization’s mission, vision, goals, and objectives and maintaining their
organizational stability through income generation and profit- making activities. Immediate revenues
or cost factors account for their success or failure.
Non-profit organizations – these are business organizations designed for the purpose of achieving
organization’s mission, vision, goals, and objectives, providing service to clients without expecting
monetary gains or financial benefits for their endeavours. Their success or failure may be measured
by the high or low evaluation scores they obtain.
Open/flexible business organizations – these are formed to meet today’s
changing work environment.
Business organizations affect and are affected by the environment: therefore, change becomes
inevitable. Other forms of business organizations:
1. Team structures – where organizations as a whole is made up of work teams (small, but
focused) that work together to achieve the organization’s purpose; popular in collectivist
culture.
2. Matrix business organizations – those which assign experts or specialist belonging to
different functional departments to work together on one or more projects; exhibits
dual reporting relationships in which managers report to two superiors – the functional
manager and the divisional manager.
3. Project business structure – a business organizational form with a flexible design, where
the employees continuously work on projects assigned to them; projects may be short-
term or long-term and members disband when the project is completed.
4. Boundaryless business organization – a business organization whose design eliminates
vertical, horizontal, or external boundaries, and is described to be flexible and
unstructured; there are no barriers to information flow and, therefore, completion of
work is fast.
5. Virtual business organization – made up of a small group of full-time workers and
outside experts who are hired on a temporary basis to work on assigned projects;
members usually communicate online.
Great job! You have come this far. Now that you have learned so much about the forms of business
organization, it’s time to test and apply what knowledge you gained from the discussions and
activities.
9
Now, that you are done with the lessons of this module, let us try to answer what you have learned
on the discussion by answering the questions below.
Let’s try this!
Activity 3. True or False
Instruction: Write True if the statement correctly describes the forms of business organization
context. Otherwise, write False. Write your answer on a space provided before the number.
_______ 1. Profit business organizations are business organizations designed for the purpose of achieving
organization’s mission, vision, goals, and objectives, providing service to clients without expecting monetary
gains or financial benefits for their endeavors.
2. Adam Smith was the third development economist.
3. The PDP is focused on competitive and sustainable agriculture and fisheries sector.
4. NEDA means National Economic and Development Authority
5. Sustainable economic development ensures that the present needs of a particular
generation are fully met without endangering the ability of future generations to also
fully meet their own needs.
6. Organization is a collection of companies working together to achieve a common
purpose.
7. Team structure is where organizations as a whole is made up of work teams (small, but
focused) that work together to achieve the organization’s purpose; popular in
collectivist culture.
8. Simple business organizations are business organizations made up of separate business
units that are semi-autonomous or semi- independent, with division head responsible
for his or her unit’s performance.
9. Nonprofit organizations are formed to meet today’s changing work environment.
[Link] is a business formed when two or more partners formally agree to be
joint owners of a business.
10
Assessment
Instruction: Read the statement/s carefully and write the correct letter in the space provided.
a. Adam Smith h. Organizational Culture
b. Inclusive Growth i. September 2000
c. Economic Development Phases j. Economic Growth
d. Corporation k. Team Structures
e. Business Organization l. Economic Development
f. National Economic and Development m. Sole/Single Proprietorship
Authority n. Organization
g. Partnership
h. Functional business organization
1. It is a collection of people working together to achieve a common
purpose in relation to their organization’s mission, vision, goals,
and objectives, sharing a common organizational culture.
2. This pertains to business organizations that group together those
with similar or related specialized duties that introduce the concept of delegation
of authority to functional managers.
3. It is a collection of people working together to achieve a common
purpose.
4. It is a business entity involving five or more persons owning it.
5. World leaders gathered for the Millennium Summit and adopted the
11
United Nations (UN) Millennium Declaration.
6. NEDA means
7. It is a business formed when two or more partners formally agree to be joint
owners of a business.
8. It is a total process which includes not only economic growth or the increase in
the given amount of goods and services produced by the country’s economy, but
also considers the social, political, cultural,
and spiritual of country’s growth.
9. It is a set of beliefs and values shared by organization members which guide them
as they work together to achieve their common
purpose.
10. He is the first development economist.
11. It increases in the given amount of goods and services produced by
the country’s earning.
12. It is a business owned by one person only.
13. Growth that is rapid enough to matter, given the country’s large
population, geographical differences, and social complexity.
14. These are distinct stages involved in the total process of economic
development in a particular country.
15. It is where the organization as a whole is made up of work teams
(small, but focused) that work together to achieve the organization’s
purpose; popular in collectivist culture.