SocioEconomic

Impact Analysis
THIS MODULE IS ALL ABOUT THE BASIC CONCEPTS
OF SOCIO-ECONOMIC IMPACT OF BUSINESS ON VARIOUS
SECTORS OF THE COMMUNITY. THE FOCUS OOF
ANALYSIS IS ON THE IMPACTS OF BUSINESS OPERATIONS
ON VARIOUS SECTORS THAT INTERACT WITH IN ITS
PRODUCTION AND DISTRIBUTION ACTIVITIES.

This module has three lessons:

Lesson 1 - Various Socio-economic Factos Affecting
Business and Industry
Lesson 2 - Viability of Business and its Impact on the
Community
Lesson3 - Strategies to Minimize Negative
Impact or Maximize Positive Impact of Business
 LEARNING OBJECTIVES:
1. Identify and explain the various
socioeconomic factors affecting business and
industry
2. Analyze and evaluate the viability of a
business and its impact on the community
3. Formulate recommendations and strategies
on how to minimize and maximize a business'
negative impact, respectively
I. SOCIO ECONOMIC FACTORS AFFECTING BUSINESS AND
INDUSTRY

In the previous lesson you have seen how a business company

and an industry interact with external factors , forces and

environments affecting its probability.

In this lesson, you focus on the understanding of the socio-

economic factors affecting business which will help you make

better decision about the future and direction of your business.

You will be able to analyze on the impact of business operations

on various sectors as it interact with its production and selling

activities.
 1. WHAT ARE THE SOCIO-ECONOMIC FACTORS
AND HOW THESE AFFECT BUSINESS AND
INDUSTRY IN GENERAL?

Business has to pass through various socioeconomic

factors and jas tp ne affected nu such factors in its
will of making money or profit by producing or
buying and selling products in the form of goods and
services. Socio economic factors include all
transactions that the business has to interact with
comprising land, labor, capital, and technology.
Business could not operate without a rented or
owned real estate. It could not function without
employing laborers, and providing investment.
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 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. If raw materials needed for supply become
scarce there is a tendency for business to increase the
price employing the law of demand and supply to insure
returns of investment.
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 favourable to foreign trade and
relations, then outside contacts and influence will
be promoted but if government adopts
“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 FF:

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. Taxes paid by business
enterprise are considered a component of production
cost because it is added to capital outlay of the
business in the operation.
OTHER FACTORS AFFECTING BUSINESS MAY INCLUDE THE FF:

b. Mode of the International Trade

The five most common modes of international-market

entry are exporting, licensing, partnering, acquisition,
and greenfield venturing. By choosing to license or
franchise its offerings, a firm lowers its financial risks
but also gives up control over the manufacturing and
marketing of its products in the new country.
2. Consumer’s Behavior and Its Significance on
Business

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.
 DETERMINE THE SOCIO-ECONOMIC STATUS OF
CONSUMERS AS A FACTOR AFFECTING BUSINESS OR INDUSTRY?

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.

As investors ready to use capital for business, you must be able to look for
a secured or feasible consumers. The consumers are the persons who buy
the products business offers for sale. 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.
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. Be it being an
industry (big business) or a community investment (small
or medium size business)
 CONSUMERS OR BUYERS

- Education / Skills
- Occupation
- Income
 CONSUMERS OR BUYERS
When income is scarce, customers tend to restrict their spending to essential items;
A society that has it that a well-educated and skilled population flourishes because
individuals are employable in well-paying jobs; and skills, experiences or choice.

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. Your decisions should be sensitive to the prevailing
economic conditions (ex. when pricing and stocking your business). Consumers
have the tendency to avoid expensive items during periods of economic failure.
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.
 II. VIABILITY OF A BUSINESS AND ITS
IMPACT ON THE COMMUNITY
How does business become viable or profitable? This question probably arises
from your attention upon reading the lesson title. But this particular question
has already been given explanation in the previous lesson in the discussion of
socioeconomic factors and their effect to business and iindustry, along with the
determination of the socio-economic status of consumer in ensuring
sales and profitability. Thus, generally, business is viable when it
survived through various socio-economic factors in its operation
and still making money along the way and is able to sustain its
growth and development.
 A. 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 identity because it
determine the very existence and sustainability
of business itself.
 A. BUSINESS AS A COMMITMENT TO
FOSTER SUSTAINABLE ECONOMY

Businessas a provider of both goods and services is

extremelyimportantto 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. It is also an opportunity for the entrepreneurs to
create solutions from the problems and crisis the society is
facing.
 A. BUSINESS AS A COMMITMENT TO
FOSTER SUSTAINABLE ECONOMY

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.
Business must also make a relevant impact to the consumer, the
supplier and investors, to our government, and to every household.
B. ESTABLISHING THE APPROPRIATE BUSINESS IN THE
LOCALITIES
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 underestimated. But

the truth is they have the greater impact on our economy,

especially in communities or localities like the barangays and

towns.

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.

B. ESTABLISHING THE APPROPRIATE BUSINESS IN THE
LOCALITIES

But base, doing local business is not just about making profit

but also a way for community involvement of investors by

creating more jobs, 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 affecting the income

generation of households within those localities which in turn

also have impact in the nation’s economy.

 B. ESTABLISHING THE APPROPRIATE BUSINESS IN THE
LOCALITIES

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:

1. How will you get the raw materials or supply?

2. What is the potential market size or demand?

3. Who are your competitors?

4. Who are your target customers?

5. What is your potential selling price?

B. ESTABLISHING THE APPROPRIATE BUSINESS IN THE
LOCALITIES

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.

C. BUSINESS IMPACT IN ITS OPERATION

Successful entrepreneurs start their

businesses by determining viable

business model or idea with high

community impact potential like

choosing the right product to produce

or sell that is innovative and service

oriented.
 C. BUSINESS IMPACT IN ITS OPERATION

1. IMPACT TO THE
CUSTOMER

bringing some new and innovative

products or service to the market is

always welcome to consumers who is

looking value for his money.

 C. BUSINESS IMPACT IN ITS OPERATION

2. IMPACT ON SUPPLIERS
AND INVESTORS
businesses provide opportunities for suppliers and

investors that will supply them their needs and which

means income for them. More business means more

jobs, more hired workers means more income, more

investment means more production and return of

investment, more income to the economy is leading to

economic growth.
 C. BUSINESS IMPACT IN ITS OPERATION

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.
 C. BUSINESS IMPACT IN ITS OPERATION

4. IMPACT ON HOUSEHOLDS
businesses mean employment

opportunities for the Filipinos.

 C. BUSINESS IMPACT IN ITS OPERATION

5. 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.

III. RECOMMENDATIONS AND STRATEGIES TO MINIMIZE AND
MAXIMIZE A BUSINESS’S NEGATIVE AND POSITIVE IMPACT

From the previous lesson, we discussed about the socio-economic impact

of the business to the community. Then we traced the impacts of the
businesses on its’ own suppliers of inputs and its buyers of outputs.
Impacts brought by direct or indirect transactions between the firm and its
clients.

On this lesson, we will be discussing on how to minimize the negative

impact and maximize the positive.
III. RECOMMENDATIONS AND STRATEGIES TO MINIMIZE AND
MAXIMIZE A BUSINESS’S NEGATIVE AND POSITIVE IMPACT

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 neighbouring
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 neighbouring 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.
SOME EXAMPLES OF NEGATIVE IMPACT OF BUSINESS TO THE
SOCIETY
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.

From this discussion, we recognize that any business transaction will have positive and
negative spillover effects to other individuals, community, and to the environment.
Aside from this given reality, it is still most important to manage these effects by
enhancing the positive effects and mitigating the negative effects.
 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.
Thank You!