Quarter 4 - Module 2:

Business Analysis and its Socio-Economic

Impact

Senior High School

DRAFT
Department of Education ● Republic of the Philippines

DRAFT
Applied Economics - Senior High School
Alternative Delivery Mode 2020
Quarter 4 – Module 2: Business Analysis and its Socio-Economic Impact
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any work
of the Government of the Philippines. However, prior approval of the government agency or
office wherein the work is created shall be necessary for exploitation of such work for profit.
Such agency or office may, among other things, impose as a condition the payment of
royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names,
trademarks, etc.) included in this book are owned by their respective copyright holders.
Every effort has been exerted to locate and seek permission to use these materials from
their respective copyright owners. The publisher and authors do not represent nor claim
ownership over them.

Published by the Department of Education

Secretary: Leonor Magtolis- Briones
Undersecretary:
Assistant Secretary:

Development Team of the Module

Authors: MARIA CECILIA N. GABAS & LIZA C. CARREON

Reviewer: GLENN S. MANLUPIG

Illustrator: MARIA CECILIA N. GABAS & ALLEN JOY A. VEDRA

Layout Artist: MARIE ANTONIETTE N. IPANAG

Management Team: LINDO CAYADONG

Printed in the Philippines by: __________________________________________________

Department of Education – Bureau of Learning Resources (DepEd-BLR)
Office Address: ________________________________________________________
Telefax: ________________________________________________________
E-mail Address: ________________________________________________________

i
 Senior High School

Applied Economics
Quarter 4 - Module 2:
Business Analysis and its Socio-
Economic Impact

This instructional material was collaboratively developed and

reviewed by educators from public and private schools, colleges,
and/or universities. We encourage teachers and other education
stakeholders to email their feedback, comments, and
recommendations to the Department of Education at
action@deped.gov.ph.

Department of Education • Republic of the Philippines

FAIR USE AND CONTENT DISCLAIMER: This SLM (Self Learning Module) is for
educational purposes only. Borrowed materials (i.e., songs, stories, poems, pictures,
photos, brand names, trademarks, etc.) included in these modules are owned by
their respective copyright holders. The publisher and authors do not represent nor
claim ownership over them. Sincerest appreciation to those who have made
significant contributions to these modules.

ii
 Table of Contents

Page
Introductory Message………………………………………… v
Icons of this Module…………………………………………….. v

MODULE I Economics and the Real World

What I Know……………………………………. vii
Pre-Test…………………………………………. viii
Lesson 3:
Industry and Environmental Analysis:…….. 1
Business Opportunities Identification
Activity
2.3.1 Fill Me In…………………………………………. 1

Lesson 3.1
Principles, Tools, and Technques…………. 2

Lesson 3.2
Tools in Evaluating a Business…………….. 3
Activity
2.3.2 Find My Match…………………………………… 7
2.3.3 Check Your Understanding…………………….. 8
2.3.4 Making It Count!…………………………………. 8

Lesson 3.3
Industry Analysis……………………………… 8
Lesson 3.4
Environmental Analysis……………………… 11
Activity
2.3.5 Fill Me In…………………………………………. 12
2.3.6 Sum Me UP……………………………………… 13
2.3.7 I Can Do This!…………………………………… 13

Lesson 4:
Socio-Economic Impact Study……………… 14

Lesson 4.1
Socio-Economic Impact in a Business……… 14

Activity
2.4.1 Picture Surfing Analysis…………………………. 14
2.4.2 Making It Count!………………………………….. 18
2.4.3 Sum Me UP………………………………………. 18
2.4.4 I Can Do This!……………………………………. 19

iii
 2.4.5 Data Connection……………………………………. 19

Assessment (Post-Test) …………………………………………… 20

Answer Key……………………………………………………….…. 22
References………………………………………………………….. 24

iv
Introductory Message

Dear Teachers and Learners! The writers welcome you all to this Applied Economics
Module. This material tries to bring you to the basic principles of applied economics, and its
application to contemporary economic issues facing the Filipino entrepreneur such as prices
of commodities, minimum wage, rent, and taxes. It also covers an analysis of industries for
identification of potential business opportunities. The main output of the course is the
preparation of a socioeconomic impact study of a business venture.
As your partner in learning, we hope that you will not miss out every detail that we
the writers would like you to learn in this material. Do enjoy it as there are challenging and
interesting activities inside this learning module. Congratulations in advance for this will
make you the master of your own learning.
Ops! you wait for a while, for an easy use of this material take note of some few
reminders
1. Take your time to read every detail that this module contains.
2. This material contains Module 1 and Module 2 and each of which is provided
with activities/tests that will surely lead you to learn.
3. Here are the Icons used as your guide in every part of the lesson.

Icons of this Module

What I Need to This part contains learning objectives that
are set for you to learn as you go along the
Know module.
This is an assessment as to your level of
knowledge to the subject matter at hand,
What I know meant specifically to gauge prior related
knowledge.
This part connects the previous lesson with
What’s In that of the current one.

This is an introduction of the new lesson

What’s New through various activities before it will be
presented to you
This is a discussion of the activities as a
What is It way to deepen your discovery and
understanding of the concept.
This is a follow-up activity that is intended
What’s More for you to practice further in order to master
the competencies.

What I Have This activity is designed to process what

you have learned from the lesson
Learned

v
 This is a task that is designed to showcase
your skills and knowledge gained, and
What I can do applied into real-life concerns and
situations.

4. Please do follow the directions given per activity so your experience to the use
of this material will be meaningful and fruitful.
5. Answer all the tests in this material. Answer keys are provided for all the tests
made and can be found at the last page for every module. Make sure to do the
activity first before checking your answers against the answer key so that your
work is fulfilling and learning will take place.
6. As a courtesy to the future users, PLEASE DO NOT WRITE
ANYTHING ON ANY PART OF THIS MODULE. Write your answer/s on a
separate sheet of paper, notebook, workbook or whichever is specified by
your facilitator

Special Reminders for you learners;

1. Answer every activity intelligently and diligently.
2. Write your answer as directed by your facilitator.
3. Feel free to approach or communicate with your teacher/facilitator whenever
you need help.
4. Check your own answer as the answer keys are prepared at the end of every
module.
5. Don’t forget to put a smiley face if you finish the activity within the allotted
time.

vi
 Module 2
Business Analysis and its Socio-
Economic Impact

What I Need To Know

Hello, dear Learner! How are you today? Before reading this module, what
comes into your mind when you hear the word business? Or have you dreamed of to
become a successful businessman/businesswoman someday? Do you ever wonder
if knowledge in basic economics and its principles can be practically applied in real
life business?

Although most Filipinos dream of affluence, it seems to be one that is

impossible to attain. This is mostly so because the Philippine economy has always
been saddled with difficulties which appeared to be insurmountable. Low productivity
in the workplace, graft and corruption in the government, the declining value of the
peso, and an unfavorable balance of trade are only some of the more serious
concerns affecting Philippine economic development.

In this module, it is expected that Applied Economics will prepare you for a
world of entrepreneurship. You will be guided on how to prepare for starting a
business, analyzing opportunities, assessing the requirements, measuring his/her
own interests and capacity to assume risk, and preparing a feasibility study for your
intended project. Finally, pre-test and post-test are given to measure your mastery of
learning.

This module covers the following lessons:

Lesson 3: Industry and Environmental Analysis: Business Opportunities
Identification
Lesson 4: Socioeconomic Impact Study
In this module you are expected to the the following tasks:

1. Identify and explain different principles, tools, and techniques in creating a business
(ABM_AE12-IIa-d-9);
2. Distinguish the different services/products of business and industry in the locality
(ABM_AE12-IIa-d-10);
3. Identify and explain the various socioeconomic factors affecting business and
industry (ABM_AE12-IIe-g-11);
4. Analyze and evaluate the viability of a business and its impact on the community
(ABM_AE12-IIe-g-12);
5. Formulate recommendations and strategies on how to minimize and maximize a
business’s negative impact and positive impact, respectively (ABM_AE12-IIe-g-13);

viii
 What I Know
Pre-test

Directions. Read the test items carefully and encircle the letter of your choice that
best answers the statement.
1. It is an analytical framework that can help a company meet its challenges and
identify new markets.
A. SWOT Analysis C. Industry Analysis
B. PEST Analysis D. Market Analysis

2. In acronym for political, economic, social, and technological- external factors that
commonly affect business activities and performance.
A. SWOT Analysis C. Industry Anaysis
B. PEST Analysis D. Market Analysis

3. The exchange of goods and services between countries is called ____________.

A. Agribusiness C. Retail Industry
B. International Trade D. Wholesale

4. It is the process of raw materials into finished goods through the use of tools and
processes.
A. Agribusiness C. Service
B. Manufacturing D. Retail

5. Which of the following statement is correct.

A. A product that is sold to global market is an import.
B. Export is an international trade whereby the goods/services are brought into
one country from another.
C. Import is an international trade whereby goods produced in one country are
shipped to another country for future sale or trade.
D. International trade gives countries the opportunity to be exposed to goods and
services not available in their own countries.

6. It refers to the exchange of goods and services between countries.

A. Exporting Goods C. International Trade
B. Importing Services D. National Economic Trading

viii
 Less Industry and Environmental Analysis: Business
on Opportunities Identification
7. The following statements are the impact of the businesses to the government,
except:
A. Businesses conduct projects like tree planting and housing
B. Employees hired by the businesses pay personal income taxes to BIR
C. Tax are imposed on the incomes of the business
D. The benefit provided by businesses through the payments of taxes

8. The following are examples of positive impact of business to the society, except:
A. 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
community.
B. 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.
C. 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.
D. Using non-renewable raw materials like oil and minerals have high
environmental costs.

9. The production of goods or related services within an economy.

A. Business C. Industry
B. Community D. Locality

10. Provide permits, security, and protection policy to businesses in exchange for
taxes paid for the economy.

A. Community C. Government
B. Household D. Investors

3 What’s In

Business success has always been associated with economic growth.

Adequate capital, however, is a prerequisite to the existence of business firms. Since
this is so, business success is highly dependent on the availability of capital. Apart
from availability, however, its proper management is a key ingredient in the survival
and growth of business.

viii
 As you go along the contents, you will learn about the nature of economics
and how it is applied in our lives. Applied Economics will help you understand why
the prices of the basic needs are increasing and it will help you become a better
decision-maker. You will find out that many of the economic problems in our country
can actually be solved with a careful study of economics.

What’s New

Activity 2.3.1 Fill Me In

Think of a business that you know in your community. Evaluate and describe its
nature in terms of ownership and activities.

Business Name Ownership Activities Description

> Operating for 3 years
Ex. Maria’s Eatery Sole Proprietorship Selling foods > Prices are affordable
> Accessible to
transportation

viii
 What Is It

Business is largely responsible for bringing into the market a wide array of
products and services which were not previously available. High technology items
like the latest cellphone models, video equipment, portable computers, and many
others find their way in the open market. This happens even as business continues
to provide mankind with basic necessities like food and shelter. Profit-making has
been adapted as a measure to motivate enterprising persons to engage in business.
A business is just a small portion of an industry. It is an undertaking by a
person or a group of persons who are partners, or of stockholders who own a
juridical entity known as a corporation. Its main objective is to earn profit for the
owners. An industry, on the other hand, is the aggregation of the different
businesses engaged in the same line of undertaking. For example, Celine is a
business firm that is part of the country’s shoe industry.

Lesson 3.1 Principles, Tools, and Techniques

For a person to put up a business, it is essential that an industry analysis first
be made. Commonly used is a system known as the SWOT analysis, which lists the
strengths, weaknesses, opportunities, and threats that the business faces.
Business Organization
From a legal point of view, there are four ways to form a business:

1. Sole Proprietorship

A sole proprietorship is owned by a single individual who is singly responsible

for running the business and is accountable for all debts and obligations related to
the business. The sole proprietor enjoys exclusive control and decision-making as
well as gets all the profits earned but he also shoulders all losses and has unlimited
liability which means payment of his loans will extend to his personal assets.

2. Partnership

A partnership is an agreement in which two or more persons combine their

resources in a business with a view to making profit. A partnership agreement is
drawn up and profits are divided among the partners according to the terms of
agreement.

3. Corporation

A corporation is a legal entity that is separate from its owners, the

shareholders. No shareholder is personally liable for the debts, obligations, or acts of
the corporation. Directors and officers can bear liability for their involvement with the

2
corporation. The legal entity of the corporation gives it an individual identity of its
own. Corporations normally can exist for a life of 50 years, which is renewable for
another 50 years. Owners have limited liabilities. However, corporations are
burdened by heavy taxes.

4. Cooperative

A cooperative is an entity organized by people with similar needs to provide

themselves with goods or services or to jointly use available resources to improve
their income. Cooperative members have an equal say in decision-making with one
vote per member regardless of number of shares held, there is open and voluntary
membership and surplus earning is returned to the members according to the
amount of their patronage.

Lesson 3.2 Tools in Evaluating a Business

The SWOT Analysis
The SWOT 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).
SWOT, which stands for Strengths, Weaknesses, Opportunities, and Threats,
is an analytical framework that can help a company meet its challenges and identify
new markets. The framework can help identify the business’s risks and rewards. It is
also a means of identifying the internal and external forces that may affect the
business. It is very helpful in assessing new ventures. The initiators, Learned,
Christensen, Andrews, and Book used a diagram as guide for identifying the
company’s strengths (S), weaknesses (W), opportunities (O), and threats (T). S
(strengths) and W (weaknesses) actually refer to the internal factors, and these are
the resources and experiences readily available to the business proponent. Usually
included as internal factors are:

1. financial resources such as money and sources of funds for investment;

2. physical resources, such as the company’s location, facilities, machinery,
and equipment
3. human resources consisting of employees;
4. access to natural resources, trademarks, patents, and copyrights; and
5. current processes, such as employee programs, department hierarchies
and software systems, sales and distribution capabilities, marketing programs, etc.

On the other hand, when we speak of external forces, these are those that
affect company, an organization, an individual, and those outside their control.
These may include:

3
  economic trends including local, national and international financial trends,
developments in the country’s stock market, reforms in the banking system,
growth of the Gross Domestic Product;
 market trends, such as new products or technology or evolving buyers’
profiles, including changes in tastes and lifestyle behavior;
 national and local laws and statutes as well as political, environmental, and
economic regulations;
 demographic characteristics of the target market such as the age, the
gender, the culture of the customers;
 relationships with suppliers and co-owners; and
 Competitive threats.

Strength Weakness

S W
O T
Opportunity Threat

Figure 1. Table for SWOT Analysis

When drafting a SWOT analysis, what is created is a table split up into four
columns to list each element side by side, for comparison. Most of the time, the
business’ strengths and weaknesses will not match the listed opportunities and
threats, and this is where the owner should attempt to somehow make them meet.
Figure 1 presents a SWOT analysis template that can be used as a guide to
identify the strengths, weaknesses, opportunities, and threats.

4
 STRENGTHS WEAKNESSES

 Government incentives  Difficulty of organization

 Low Capital requirements
 Market acceptance
 Experienced leaders
Opportunities
Project may replace imported good
 Costly set- up
 Possible pollution problems
 Lack of training of workers
Threats
 Entry of competitors

 Will improve employee welfare  Time consuming

 Improved company reputation production processes

 Opposition from residents in the
community
Source: Ryan Goodrich, Business News Daily Contributor
(2015)

PEST ANALYSIS
PEST is an acronym for political, economic, social, and technological -
external factors that commonly affect business activities and performance. Created
by Harvard professor Francis Aguilar in 1967, PEST can work alone or be used in
combination with other tools, such as Porter’s Five Forces and SWOT Analysis to
determine an organization’s overall outlook.
To get the most out of a PEST analysis, businesses should understand each
of the four factors:
1. Political
This factor looks at how government regulations and legal issues affect a
company’s ability to be profitable and successful. Issues that must be considered
include tax guidelines, copyright and property law enforcement, political stability,
trade regulations, social and environmental policy, employment laws and safety
regulations. Companies should also consider their local and federal power structure,
and discuss how anticipated shifts in power could affect their business.
2. Economic
This factor examines the outside economic issues that can play a role in a
company’s success. Items to consider include economic growth, exchange, inflation
and interest rates, economic stability, anticipated shifts in commodity and resource
costs, unemployment policies, credit availability and unemployment policies.
3. Social
This issue analyzes the demographic and cultural aspects of the company’s
market. These factors help businesses examine consumer needs and determine

4
what pushes them to make purchases. Among the items that should be examined
are demographics, population growth rates, age distribution, attitudes toward work,

4
job market trends, religious and ethical beliefs, lifestyle changes, educational and
environmental issues and health consciousness.
4. Technological
This factor takes into consideration technology issues that affect how an
organization delivers its product or service to the marketplace. Among the specific
items that need to be considered are technological advancements, government
spending on technological research, the life cycle of current technology, the role of
the Internet and how any changes to it may play out, and the impact of potential
information technology changes. In addition, companies should consider how
generational shifts, and their related technological expectations, are likely to affect
those who will use their product and how it is delivered.
PORTER’S FIVE FORCES OF COMPETITIVE POSITION ANALYSIS
Another analytical tool that can be used to assess a business is Porter’s Five
Forces of Competitive Position Analysis. It was developed in 1979 by Michael E.
Porter of Harvard Business School as a framework or a guide for assessing and
evaluating the competitive strength and position of a business organization.

Figure 2. Porter’s Five Forces of Competitive Position Analysis

Let us discuss these five forces that need to be evaluated:

1. Supplier power - It is essential to evaluate how much power the supplier
is capable to drive up prices. A supplier benefits this power if there are few
supplier of an essential input and they therefore control the supply of that
input. The more unique the product, the easier it is for the supplier to drive up
price.

2. Buyer power - An evaluation of how easy it is for buyers to direct prices

down. This is directed by the: number of customers in the market; worth of
each buyer to the organisation; and cost to the interchange from one supplier
to another. If a business has just a less of powerful buyers, they are usually
able to dictate terms.

6
 3. Number of competitors - The major driver is the number and competitor’s
capability in the market. A lot of competitors, offering common products and
services, will reduce market attractiveness.

4. Possibility of substitution - Where common products available in a

market, it improves the livelihood of customers switching to alternatives in
response to price increases. This lessen both the power of suppliers and the
attractiveness of the market.

5. Possibility of new entrants -Profitable markets attract new entrants,

which destroy profitability. Unless current have strong and long lasting
barriers to entry, for example capital requirements or government policies and
regulations, then profitability will slow down to a competitive rate.

What’s More

Activity 2.3.2 Find My Match.

Directions: Match the items in Column A with Column B.
Column A Column B
1. An analytical framework which stands for Strengths, a. Sole proprietorship
Weaknesses, Opportunities, and Threats, that can
help a company meet its challenges and identify new
markets.
2. Owned by a single individual who is singly b. Cooperative
responsible for running the business.
3. An analytical tool that can be used as a guide for c. PEST Analysis
assessing and evaluating the competitive strength and
position of a business organization.
4. An entity organized by people with similar needs to d. SWOT Analysis
provide themselves with goods or services or to jointly
use available resources to improve their income.
5. An acronym for political, economic, social, and e. Porter’s Five Forces of
technological external factors that commonly affect Competitive Position
business activities and performance. Analysis
f. Corporation

7
 What Have I Learned

Activity 2.3.3 Check Your Understanding

1. Why is competition an important factor that has to be studied before putting up a
business?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

2. When you decide on putting up a business, how do you choose the market that
you should cater to?
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

What I Can Do

Activity 2.3.4. Making It Count!

Select one business in your locality to study. Prepare a SWOT analysis using the
quadrant presentation comparing how many in each quandrant is positive and
negative. Do this in your journal.

Lesson 3.3 Industry Analysis

In a book published by the Development Academy of the Philippines, “How to
Prepare Project Feasibility Studies,” it includes an industry analysis of the following
important factors.

COMPETITION

Who are the major businesses in the industry? Are there locations close to
your proposed business? Have they been long existing or still new entrants? What is

8
the market share of each of these businesses? It is very important that you know
your competitors and be ready for them. Your aim is to win their customers, convince
them to buy from you instead, and remain as loyal customers.

CUSTOMERS

Who will you sell your product to? The target market must be identified. Who
exactly will buy your products? What income groups? What are age brackets? What
gender? What career groups? What type of people will you cater to, based on their
preferences, lifestyles, and buying habits?

SUPPLIERS

A business may need one or more suppliers. It is important to develop

suppliers who are reliable in terms of the quality of what they supply and their
dependability in coming up with the things you order from them. With modern
technology, one can easily go online and shop for suppliers, look at reviews made by
other retailers to determine who the reliable ones are.

A business owner can buy directly from the manufacturers. This will be the
cheapest source since there are no middlemen involved. However, this is only
recommended if the supplier’s location is convenient and will not involve expensive
delivery costs.

Another alternative is to buy from distributors. They are wholesalers or

brokers who buy in big quantities from manufacturers, add a mark-up to their
purchase price, and sell to retailers. Their prices are higher but they can sell in small
quantities, which the manufacturers would not normally do.

A third source of goods is through imports. Some businessmen go to nearby

countries to buy their goods or raw materials there. This is advisable if the prices
abroad are relatively cheaper and no heavy import duties will raise the prices and
make the goods less competitive in the country and when transport costs are not
excessive.

It is important to maintain good relationships with one’s suppliers; they are the
key to one’s continued accessto goods and to raw materials that will be needed for
the business (Dinio, et al., 2017).

SUBSTITUTES

Substitutes are goods that can be used in place of another. These are goods
that may, even if partly, satisfy the same needs of a consumer such that the
consumer may use one instead of another. Some goods are close substitutes while
others are not. For example, Pepsi Cola may be a very good substitute for Coca
Cola, but not everybody will be willing to switch brands becausethey have developed
a taste for a particular cola. This is why manufacturers try to differentiate their

9
products from their competitors so that the customers will develop product loyalty for
their brand.

Types of Industries
1. Agribusiness
The gricultural 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. For animal production, there are two types
that can be engaged to one is livestock and the other is poultry. These two are
commonly engaged by the small entrepreneurs which provide livelihood that can
provide income and employment opportunities to poor households.
2. 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.
3. 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

10
4. 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. In the common sense, manufacturing denotes the assembly of parts into
finished products on an equal large scale. Among the most essential manufacturing
industries are those that make aircraft, computers, chemicals, refined petroleum
products, consumer electronic, clothing, electrical equipment, furniture, heavy
machinery, ships, steel, automobiles, and tools and dies.

5. 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. A product that is sold to the
international market is an export, and a product that is bought from the international
market is an import.

Lesson 3.4 Environmental Analysis

The other analysis that has to be done is an analysis of the environment in

which the business will operate. This means an evaluation of the possible or
probable effects of external forces and conditions on the survival and growth of the
business.

An environmental analysis includes a thorough study of:

ECONOMIC FORCES

This involves a look at economic factors such as income of the people,

specifically the target market, economic conditions such as inflation, recession,
prosperity, demand, and supply in the market.

PHYSICAL ENVIRONMENT

11
 This includes a look at the population size, the geography of the place where
business will be located, land distribution, climate, and in today’s global warming
situation, whether or not the area is prone to flood or earthquake.

11
POLITICAL FACTORS

The type of government, the stability and strength of the government, and
good leadership are factors that can be an advantage to a business.

CULTURE AND LIFESTYLES

It is important to study cultural practices such as fiestas, celebration of the

Christmas season, trends in consumption patterns, as a means to identify the goods
and services that will fit into these celebrations and spending behavior.

COMPETITION

This is something that needs to be studied. As already mentioned above, the

degree of competition in the market and the extent and strength of competition are
all very vital in determining the success or failure of a business.

What’s More

Activity 2.3.5 Fill Me In

Directions: Identify which type of industries are the following statements can be
associated with. Write the letter that corresponds to your answer in the space
provided for.
A. Agribusiness C. Service E. International Trade
B. Retail D. Manufacturing

1. Production of livestock and poultry are done mostly by poor households as

backyard and livelihood ventures.
2. Vegetable oil is one of the Philippines top export product.
3. Maria works in a Spa and Beauty Salon in the city.
4. Flor bakes cupcakes and sells it in a cheaper price.
5. Sarah owns a boutique. She buys her stocks in bulk and sells it by piece.

12
 What Have I Learned

Activity 2.3.6 Sum Me UP

Based on the lesson, I have realized that _______________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________
___________________________________________________________________

What I Can Do

Activity 2.3.7. I Can Do This!

Suggest a business that you want to put up. Justify your choice of business. Discuss
the environment that should be studied in terms of the location you decided to
choose. Based on the environmental analysis, identify all the factors that need to be
studied in the specific environment/location. Do this in your journal.

13
 Lesso
n4 Socio-Economic Impact Study

4 In the previous lesson, you already learned how a business company and an
industry interact with external factors, forces, and environments affecting its
profitability.

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

factors affecting business which will help you make better decisions about the future
and direction of your business. You will be able to analyze and evaluate the viability
of a business and its impact on the community.

Lesson 4.1 Socio-Economic Impact of a Business

What I Need to Know

Putting up a business is not just all about profits. It is also concerned with
consumer welfare, job creation, environmental issues, uplifting the quality of life, and
contributing to the economy. Let us now look at how a business can impact the
consumer, the suppliers and the investors, the government, and households.

What’s New

Activity 2.4.1. Picture Surfing Analysis

Directions: Search for pictures or images related to the words numbered below. Cut
and paste the pictures inside the box corresponding the word. Describe the picture
briefly.
Consumer
___________________________________
___________________________________
1. ___________________________________
___________________________________
___________________________________

14
 Supplier
___________________________________
___________________________________
___________________________________
2. ___________________________________
___________________________________

Government
___________________________________
___________________________________
___________________________________
3. ___________________________________
___________________________________

Households
___________________________________
___________________________________
___________________________________
4. ___________________________________
___________________________________

International Trade
___________________________________
___________________________________
___________________________________
5. ___________________________________
___________________________________

15
 What Is It

Impact on the Consumer

A new business, especially one that is innovative and focused on bringing
some new product or service to the market, is always welcome to the consumer who
is looking value for his money. If the new business is selling a product that has close
substitutes in the market, then the owner of the business will try his best to win the
consumers away from the existing sellers by offering something that will benefit the
buyers.
How can the new business accomplish this? One good way is to innovate the
product; come up with new features that are not found in the existing competing
goods. This can be in the form of a better appearance, a new feature or ingredient or
a new convenient way of making the product available. A new business therefore
means new products or services available to the buyers, giving them more choices
(Dinio, et al., 2017).
Since the new seller will try to attract buyers, another strategy that could be
adopted is to improve the quality of the good making it a notch higher than those
already being sold in the market. Although this may mean high prices for better
quality goods, this could cater to a market that is more after quality than low price.
Initially, as a bsiness starts, the seller may make the product available at
introductory prices lower than the other substitutes in the market. This will definitely
be an advantage to the price conscious buyers who have limited budgets.
As long as a new business can provide new goods and services, better quality
of goods and more options, the consumer can benefit from it. But if a business
comes up with a low quality good and does not provide the consumer value for his
money, then this business will have a negative impact on the market.

Impact on Suppliers and Investors

A new business will also provide opportunities for suppliers and investors. If a
new construction company is set up, then this opens up opportunities for the other
businesses that will supply them their needs, tools, wood, cement, steel, paints, nail,
screws, and decorators. Many suppliers will now get a chance to sell to the newly
established business, which means income for them.
Demand for the goods provided by the suppliers will increase. These
suppliers will now need to produce more of them and they will need to hire more
workers who will earn wages from being employed. More capital will be needed to
invest in the production of these tools and materials, generating again income for the
economy. Investors get to earn returns on their investments, with capital plowed
back into more investments and generating more income for the economy, thus,
leading to economic growth

16
Impact on the Government
The government will also benefit from the establishment of new businesses,
through revenues earned on fees collected from them and on taxes imposed on the
incomes of the businesses.
Before a business can be set up, it has to meet requirements to start
operating. First, the business owner has to apply to start its business. Licenses have
to be obtained. Organizational fees have to be paid. On the municipal level, the local
government earns revenue from these fees and licenses. This means money added
to their local budget to provide social services to the community, for the development
of the company, to pay salaries of local officials and workers, to maintain peace and
order and to subsidize public schools.
On the national level, the government gets to impose taxes on the incomes
earned by the businesses. Employees hired by these businesses also have to pay
personal income taxes to the Bureau of Internal Revenue (BIR). For employed
workers, these taxes are regularly withheld by their employers and remitted to the
BIR.
These tax revenues fuel development because they are used by the
government for national activities and for budget allocations for its programs. The
national government has revenues to finance its projects, to pay government
officials, to build schools, to improve the military, to promote peace and order all over
the country, to build housing for the proor, and to provide health services and
improved welfare programs for the people.

Impact on Households
New businesses mean employment opportunities for the Filipinos. Those who
have jobs but are earning low-wages may find better paying jobs with the new
companies. Unemployed workers looking for work may have the chance of being
employed by these companies. The pool of unemployed workers will definitely
decrease. Being employed will enable them to buy their basic needs and even some
luxuries. This means that their quality of life and their standard of living will improve.
Acquisition of wealth and assets can now follow both for the business owners
and the employees they hire. Profits earned by the owners can be invested back into
the business for expansion, or some can be withdrawn by the owners which they can
use to buy new cars or new houses. Success stories on television shows feature
rags-to-riches stories of entrepreneurs who used to be very poor, but with hard work
and persistence, were able to make their businesses succeed, enabling them to
send their children to good expensive schools, building big houses, and buying two
or more cars housed in their garage. The owners, because of their success, manage
to acquire wealth and buy assets which are fruits of their hard work.
With the growing focus on preserving the environment for future generations,
businesses also get to contribute their share. So-called green structures for buildings
are means used to prevent further damage to the environment. Instilling the value of
recycling and reusing of resources among employees and family members may also
become the advocacy of these businesses. Spreading information on the dangers of

17
global warming may be promoted by the business owners. Thus, businesses
become instruments for society to have a better place to live in.

Impact on the Community

Corporate Social Responsibility (CSR) has become a growing trend among
businesses today. As a result of this, corporations and even small businesses have
increased their focus on projects that provide scholarships to poor but deserving
students, allocating budgets for housing for low-income families such as participation
in programs like the Gawad Kalinga, environmental protection including tree planting,
elimination of pollution, and other environment related programs. Communities
benefit from business-sponsored activities that include sports fests and wellness
programs, livelihood projects, micro financing, and even medical and dental
missions.

What’s More

Activity 2.4.2. Making it Count!

Look for a successful small business in your neighborhood. Interview the owner, find
out the reasons for putting up the business, the problems encountered, and the
reasons for its success. Do this in your journal.

What I have Learned

Activity 2.4.3. Sum Me UP

Based on the lesson, I have realized that _______________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________
___________________________________________________________________

18
 What I Can Do

Activity 2.4.4. I Can Do This!

Identify at least 10 goods that you always consume at home. How many are
imported from other countries and produced locally? Find locally made consumer
goods that compete with these imports. If you can find at least one or two, compare
their prices and quality. Do this in your journal.

Additional Activities

Activity 2.4.5 Data Connection

Research on business opportunities. Look for a business where the industry is not
yet saturated with so many firms. Once you have identified a business, prepare a
business proposal.
The business proposal should include the following:
a. A description of the good or service to be offered;
b. Target market of your product;
c. Proposed location and reason for the choice of this location;
d. Long-term objectives of the business;
e. Estimated capital requirements;
f. Sources of capital;
g. Form of business organization: Sole proprietorship, Partnership, or
Corporation
h. Suggested pricing for the product or service;
i. Mode of promotion or advertising used;
j. Technical requirements: Machines, Building, Tools needed; and
k. Socio-economic Impact: Positive Effects of the Project and Negative Effects of
the Project

19
 Assessment
Post-test

Directions. Read the test items carefully and encircle the letter of your choice that
best answers the statement.
1. It is an analytical framework that can help a company meet its challenges and
identify new markets.
A. SWOT Analysis C. Industry Analysis
B. PEST Analysis D. Market Analysis

2. In acronym for political, economic, social, and technological- external factors that
commonly affect business activities and performance.
A. SWOT Analysis C. Industry Anaysis
B. PEST Analysis D. Market Analysis

3. The exchange of goods and services between countries is called ____________.

A. Agribusiness C. Retail Industry
B. International Trade D. Wholesale

4. It is the process of raw materials into finished goods through the use of tools and
processes.
A. Agribusiness C. Service
B. Manufacturing D. Retail

5. Which of the following statement is correct.

A. A product that is sold to global market is an import.
B. Export is an international trade whereby the goods/services are brought
into one country from another.
C. Import is an international trade whereby goods produced in one country are
shipped to another country for future sale or trade.
D. International trade gives countries the opportunity to be exposed to goods
and services not available in their own countries.

6. It refers to the exchange of goods and services between countries.

A. Exporting Goods C. International Trade
B. Importing Services D. National Economic Trading

7. The following statements are the impact of the businesses to the government,
except:
A. Businesses conduct projects like tree planting and housing
B. Employees hired by the businesses pay personal income taxes to BIR
C. Tax are imposed on the incomes of the business

20
 D. The benefit provided by businesses through the payments of taxes

8. The following are examples of positive impact of business to the society, except:

A. 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
community.
B. 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.
C. 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.
D. Using non-renewable raw materials like oil and minerals have high
environmental costs.

9. The production of goods or related services within an economy.

A. Business C. Industry
B. Community D. Locality

10. Provide permits, security, and protection policy to businesses in exchange for
taxes paid for the economy.

A. Community C. Government
B. Household D. Investor

21
 Answer Key

PRE-TEST
1. A 6. C
2. B 7. B
3. B 8. D
4. B 9. C
5. D 10. C

Activity 2.3.1 Fill Me In

(answers may vary)
Activity 2.3.2 Find My Match
1. D
2. A
3. E
4. B
5. C

Activity 2.3.3. Check Your Understanding

(answers may vary)
Activity 2.3.4. Making It Count!
(answers may vary)
Activity 2.3.5. Fill Me In
1. A
2. E.
3. C.
4. D
6. B

22
Activity 2.3.6. Sum Me UP
(answers may vary)
Activity 2.3.7. I Can Do This!
(answers may vary)
Activity 2.4.1. Picture Surfing Analysis
(answers may vary)
Activity 2.4.2. Making It Count!
(answers may vary)
Activity 2.4.3. Sum Me UP
(answers may vary)
Activity 2.4.4. I Can Do This!
(answers may vary)
Activity 2.4.5. Data Connection
(answers may vary)

POST-TEST
1. A 6. C
2. B 7. B
3. B 8. D
4. B 9. C
5. D 10. C

23
 References
Bangko Sentral ng Pilipinas. Treasury Department Reference Exchange Rate
Bulletin. July 30, 2020.
Dinio, Rosemary P. and George A. Villasis. Applied Economics. Manila,Philippines.
Rex Book Store, 2017.
Leańo, Roman Jr. D. Fundamentals of Economics with Agrarian Reform, Taxation
and Cooperatives (A Modular Approach). Manila, Philippines. Mindshapers
Co., Inc. 2012.
Macrotrends. Philippine Inflation Rate (2010-2019) June 30,
2020.https://www.macrotrends.net/countries/PHL/philippines/inflation-rate-cpi
Pagoso, Cristobal M. et al. Introductory Microeconomics. Manila, Philippines. Rex
Book Store, 2006.
Philippine Statistics Authority. Survey on Overseas Filipinos. 2014
Philippine Statistics Authority. Philippine Unemployment Rate from 1999-2019.
https://www.statista.com/statistics/578722/uemployment-rate-in-philippines/
Villegas, Bernardo M. Basic Economics. Manila, Philippines. Center for
Research and Communication Foundation, Inc., 2010.

24
21