SHS

Organization and Management

Module 4: Quarter 1, Week 3 & 4
ABM - Organization and Management
Garde 11 Module 4: Quarter 1, Week 3 & 4
First Edition, 2020

Copyright © 2020
La Union Schools Division
Region I

All rights reserved. No part of this module may be reproduced in any form
without written permission from the copyright owners.

Development Team of the Module

Author: BRIAN O. RILLORAZA, Ph. D.

Editor: SDO La Union, Learning Resource Quality Assurance Team

Illustrator: Ernesto F. Ramos Jr., P II

Management Team:

ATTY. Donato D. Balderas, Jr.

Schools Division Superintendent

Vivian Luz S. Pagatpatan, PhD

Assistant Schools Division Superintendent

German E. Flora, PhD, CID Chief

Virgilio C. Boado, PhD, EPS in Charge of LRMS

Mario B. Paneda, Ed.D, EPS in Charge of Araling Panlipunan

Michael Jason D. Morales, PDO II

Claire P. Toluyen, Librarian II
Organization and Management
Module 4: Quarter 1, Week 3 & 4
 Target

Understanding the local and international business environment of the firm

requires managers of organizations to sharpen their cultural intelligence. Cultural
intelligence is an individual’s ability to favorably receive and adjust to an unfamiliar
way of doing things. This will enable them to develop their ability to accept and adapt
to different cultures, both local and international, that may affect the organization to
which they belong.

In your previous lesson, you are done with the SWOT analysis which is one of
the most structured and used planning method locally and internationally to
evaluate a business venture. You have also familiarized yourself on the inflation rate
which is the rate reflected during a period of above normal general price increases;
Gross national product (GNP) which the total domestic and foreign output claimed
by the residents of a country; Gross Domestic Product (GDP) the total final output of
goods and services produced by the country’s economy, within the country’s territory
and currency exchange product which is the rate at which central banks will
exchange the country’s currency for another.

This module will provide you with information and activities that will help you
analyze and understand the forms and economic roles and business organizations.

After going through this module, you are expected to:

1. explain the role of business in relation to the economy ABM_AOM11-Ic-d-7

Before going on, check how much you know about this topic.
Answer the pretest on the next page in a separate sheet of paper.

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 Jumpstart
For you to understand the lesson well, do the following activities.
Have fun and good luck!

Activity 1. TRUE/ FALSE.

Directions: Read each statement below carefully. Mark “T” for statements

you believe are true, and “F” for statements you believe are false. Write

your answers in a separate sheet of paper.

1. Business employs people within an economy to create goods and services for
others to purchase.
2. Market is a social arrangement that allows buyers and sellers to discover
information and complete voluntary exchanges of goods and services.
3. Commerce is what increases our standard of living.
4. Trade is an act of trading something of economic value such as a good, service,
information, or money between two entities.
5. Change is constant and organizations continue to undergo various changes to
ensure effectiveness, efficiency, and relevance in the world of business.
6. Malthusian is a theory on economic growth which depends on the rate of the
population of a certain area.
7. Human Capital Based is refers to the knowledge, skill sets and Motivation that
people have, which provide economic value.
8. A LA KUZNETS is the existence of a pattern or behavior, between economic growth
and environmental degradation, consistent with the environmental Kuznets curve
(EKC) hypothesis.
9. Government -LED (Local Economic Development) is an approach towards
economic development which allows and encourages local people to work together
to achieve sustainable economic growth and development.
10. A LA KUZNETS describes economic growth as inversely proportional to
population.

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 Discover

Business employs people within an economy. Without jobs, people cannot

purchase goods and services. People employed in businesses also create goods and
services for others to purchase. Sometimes this can include selling directly to the
consumer, such as a hamburger chain selling food to a patron. Other times,
businesses can sell to other businesses, such as when wholesalers sell goods out of
a warehouse to grocery stores. All of these businesses operate under the laws of
supply and demand where businesses compete by a combination of offering superior
products and lower prices.

Business also drives the economy through investment. People looking to build
wealth over time or to generate a stream of income from dividends choose to invest
in businesses. Businesses encourage investment by keeping their profit margins
large and their cost of doing business low. By doing this or even demonstrating the
potential to do these two things, businesses help drive the economy by encouraging
investment.

These aspects of business are true of a market economy, an economy driven

by people's free choice to produce and consume.

The Role of Business in the Economy

1. Market
• is a social arrangement that allows buyers and sellers to discover
information and complete voluntary exchanges of goods and services.
• allow you as a consumer to purchase the goods and services that you
want. Through markets, information is transmitted between buyers
and sellers about:

a. The goods and services desired by consumers, and;

b. The price of those goods and services
• bring consumers and producers together to coordinate the exchange of
resources. Both the buyer and seller must stand to gain from the trade
or else the transaction will not occur.

2. Coordinating Trade and Commerce

• Commerce is an act of trading something of economic value such as a

good, service, information, or money between two entities.

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 • Trade is what increases our standard of living. Instead of having to
produce everything that you consume on your own, you are able to
trade with others and obtain a higher quality of life.

3. Product or Service Specialization

• Businesses bring “specialized” people, equipment, and other resources
together and coordinate the production of goods and services.

4. Economies of Scale
• When more units of a good or a service can be produces on a larger
scale, yet with (on average) less cost input cost, economies of scale are
achieved.

This means that as a business grows and production units increase, a

business will have a better chance to decrease its cost.

5. Positive and Negative Externalities

• An externality is defined as a benefit or cost that is imposed on a third
party, such as society, other than the producer or consumer of a good
or service, or, more simply, an economic side effect.

Phases of Business Organization

The form of a business organization may depend on its purpose, nature of
operation, and resources. However, a business organization’s form may change with
the changing times and the demands they present.

Change is constant and organizations continue to undergo various changes to

ensure effectiveness, efficiency, and relevance in the world of business.

Economic Development

• Is the process by which a nation improves the economic, political, and

social well-being of its people.
• can be defined as efforts that seek to improve the economic well-being
and quality of life for a community by creating and/or retaining jobs
and supporting or growing incomes and the tax base.

1. Malthusian: Thomas Robert Malthus (1766-1834)

• A theory about economic growth which depends
on the rate of the population of a certain area.
• The economic growth is inversely proportional to
population. The smaller population, the higher the
economic growth and vice versa.
Figure 1:
Malthusian Theory

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 2. Government -LED (Local Economic Development)
• An approach towards economic development which allows and encourages
local people to work together to achieve sustainable economic growth and
development.
• Support the formation of a partnership between local and national
institutions towards strategic implementations.

3. A LA KUZNETS (GOVERNMENT VS. ENVIRONMENT) by Simon Kuznets

• The existence of a pattern or behavior, between economic growth and
environmental degradation, consistent with the environmental Kuznets
curve (EKC) hypothesis.

4. Human Capital Based

• Is a measure of the economic value of an employee’s skillFigure
set. 2:
• Refers to the knowledge, skill sets and motivation thatKuznets
people have,
Curvewhich
provide economic value.
• It could be invested in through education, training and enhanced benefits
that lead to an improvement in the quality and level of production.
5. Post demographic transition
• Proposed in 1929 by Warren Thompson
• Is the transition from high birth and death rate to lower birth and death
rate as the country develops from pre-industrial to an industrialized
economic system.
• fertility rate decreases when child mortality is low, and is weakly
dependent in GDP.

Types of Business Organization

It is important that the business owner seriously considers the different forms of
business organization—types such as sole proprietorship, partnership, and corporation.
Which organizational form is most appropriate can be influenced by tax issues, legal
issues, financial concerns, and personal concerns. For the purpose of this overview, basic
information is presented to establish a general impression of the business organization.

1. Sole Proprietorship

A Sole Proprietorship consists of one individual doing business. Sole

Proprietorships are the most numerous form of business organization in
the United States, however, they account for little in the way of aggregate
business receipts.

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 Advantages

• Ease of formation and dissolution. Establishing a sole proprietorship

can be as simple as printing up business cards or hanging a sign
announcing the business. Taking work as a contract carpenter or
freelance photographer, for example, can establish a sole
proprietorship. Likewise, a sole proprietorship is equally easy to
dissolve.
• Typically, there are low start-up costs and low operational overhead.
• Ownership of all profits.
• Sole Proprietorships are typically subject to fewer regulations.
• No corporate income taxes. Any income realized by a sole
proprietorship is declared on the owner’s individual income tax
return.

Disadvantages

• Unlimited liability. Owners who organize their business as a sole

proprietorship are personally responsible for the obligations of the
business, including actions of any employee representing the
business.
• Limited life. In most cases, if a business owner dies, the business
dies as well.
• It may be difficult for an individual to raise capital. It’s common for
funding to be in the form of personal savings or personal loans.

The most daunting disadvantage of organizing as a sole proprietorship

is the aspect of unlimited liability. An advantage of a sole proprietorship is
filing taxes as an individual rather than paying corporate tax rates. Some
hybrid forms of business organization may be employed to take advantage of
limited liability and lower tax rates for those businesses that meet the
requirements. These include S Corporations, and Limited Liability Companies
(LLC’s). Where S-Corps are a Federal Entity, LLC’s are regulated by the various
states. LLC’s give the option for profits from the business to pass through to
the owner’s individual income tax return.

2. Partnership

A Partnership consists of two or more individuals in business together.

Partnerships may be as small as mom and pop type operations, or as large as
some of the big legal or accounting firms that may have dozens of partners. There
are different types of partnerships—general partnership, limited partnership, and
limited liability partnership—the basic differences stemming around the degree
of personal liability and management control.

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 Advantages

• Synergy. There is clear potential for the enhancement of value resulting from
two or more individuals combining strengths.
• Partnerships are relatively easy to form; however, considerable thought should
be put into developing a partnership agreement at the point of formation.
• Partnerships may be subject to fewer regulations than corporations.
• There is stronger potential of access to greater amounts of capital.
• No corporate income taxes. Partnerships declare income by filing a
partnership income tax return. Yet the partnership pays no taxes when this
partnership tax return is filed. Rather, the individual partners declare their
pro-rata share of the net income of the partnership on their individual income
tax returns and pay taxes at the individual income tax rate.

Disadvantages

• Unlimited liability. General partners are individually responsible for the

obligations of the business, creating personal risk.
• Limited life. A partnership may end upon the withdrawal or death of a partner.
• There is a real possibility of disputes or conflicts between partners which could
lead to dissolving the partnership. This scenario enforces the need of a
partnership agreement.

As pointed out, unlimited liability exists for partnerships just as for sole
proprietorships. One way to alleviate this risk is through Limited Liability
Partnerships (LLP’s). As with LLC’s, LLP’s may offer some tax advantages while
providing some risk protection for owners.

3. Corporation

Corporations are probably the dominant form of business organization in

the United States. Although fewer in number, corporations account for the lion’s
share of aggregate business receipts in the U.S. economy. A corporation is a legal
entity doing business, and is distinct from the individuals within the entity. Public
corporations are owned by shareholders who elect a board of directors to oversee
primary responsibilities. Along with standard, for-profit corporations, there are
charitable, not-for-profit corporations.

Advantages

• Unlimited commercial life. The corporation is an entity of its own and does not
dissolve when ownership changes.
• Greater flexibility in raising capital through the sale of stock.
• Ease of transferring ownership by selling stock.
• Limited liability. This limited liability is probably the biggest advantage to
organizing as a corporation. Individual owners in corporations have limits on

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 their personal liability. Even if a corporation is sued for billions of dollars,
individual shareholder’s liability is generally limited to the value of their own
stock in the corporation.

Disadvantages

• Regulatory restrictions. Corporations are typically more closely monitored by

governmental agencies, including federal, state, and local. Complying with
regulations can be costly.
• Higher organizational and operational costs. Corporations have to file articles
of incorporation with the appropriate state authorities. These legal and clerical
expenses, along with other recurring operational expenses, can contribute to
budgetary challenges.
• Double taxation. The possibility of double taxation arises when companies
declare and pay taxes on the net income of the corporation, which they pay
through their corporate income tax returns. If the corporation also pays out
dividends to individual shareholders, those shareholders must declare that
dividend income as personal income and pay taxes at the individual income
tax rates. Thus, the possibility of double taxation.

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 Explore

Here are some enrichment activities for you to work on to master and
strengthen the basic concepts you have learned from this lesson.

Enrichment Activity 1. Matching Type

Direction: Match column A to column B. Select a letter from column B that

best expresses the relationship of the phases of economic development in
column A. Write your answers in a separate sheet of paper.
COLUMN A
1. Malthusian Theory e
2. Government -LED c
3. A La Kuznets Curve d
4. Human Capital Based a
5. Post demographic b
transition
COLUMN B
A. Knowledge, skill sets and motivation that
people have, which provide economic value.
B. The transition from high birth and death
rate to lower birth and death rate as the
country develops from pre-industrial to an
industrialized economic system.
C. Supports the formation of a partnership
between local and national institutions
towards strategic implementations.
D. The existence of a pattern or behavior,
between economic growth and environmental
degradation
E. A theory about economic growth which
depends on the rate of the population of a
certain area.
F. It is constant, and organizations continue
to undergo various changes to ensure
effectiveness, efficiency, and relevance in the
world of business.

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Enrichment Activity 2.

Direction: Arrange the jumbled words below, use the description to arrive with
the correct type of Business Organization. Write your answers in a separate
sheet of paper.
No.
1 TRAPRENPIHS Consists of two or more individuals in business together.
There is stronger potential of access to greater amounts
of capital.
2 TOINAROPCOR A type of business organization that is a legal entity
doing business and is distinct from the individuals
within the entity. Greater flexibility in raising capital
through the sale of stock is one of the advantages.

3 LOSE A type of organization which is consists of one individual

OPRPREITROPIHS doing the business.

Enrichment Activity 3. Multiple Choice

Direction: Read and analyze the statements below, choose the word or group
of words that best describe each statement inside the box. Write your answer
in a separate sheet of paper.

Trade Market Commerce

Economies of Scale Externality Product Specialization

1. It is a social arrangement that allows buyers and sellers to discover information

and complete voluntary exchange of goods and services.

2. An act of trading something of economic value such as good, service, information,

or money between two entities.

3. This increases our standard of living.

4. A benefit or cost that is imposed on the third party, such as society, other than
producer or consumer of a good or services.

5. A role of business in the economy in which, as business grows and production

units increase, a business will have a better chance to decrease its cost.

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 Deepen

At this point, in your own words elucidate the following Roles, Phases and
Forms of Business Organizations briefly but substantially. Use a separate sheet of
paper for your answers.

A. Role of Business in the Economy

• Market
• Coordinating Trade and Commerce
• Product or Service Specialization
• Economies of Scale
• Positive and Negative Externalities

B. Phases of Business Organization

• Malthusian Theory
• Government -LED (Local Economic Development)
• A LA KUZNETS (GOVERNMENT VS. ENVIRONMENT)
• Human Capital Based
• Post demographic transition

C. Differentiate the various forms of business organizations.

• Sole Proprietorship
• Partnership
• Corporation

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 Gauge

I. Multiple Choice Direction: Read and analyze the statements and choose the word
or group of words that best describe each statement on the box below. Write your
answers in a separate sheet of paper. 1 point each

Trade Market Commerce

Economies of Scale Externality Product Specialization

1. It is a social arrangement that allows buyers and sellers to discover information

and complete voluntary exchange of goods and services.

2. An act of trading something of economic value such as good, service, information,

or money between two entities.

3. This increases our standard of living.

4. A benefit or cost that is imposed on the third party, such as society, other than
producer or consumer of a good or service.

5. A role of business in the economy in which, as business grows and production

units increase, a business will have a better chance to decrease its cost.

II: TRUE/ FALSE. Directions: Read each statement below carefully. Write “T” for
statements you believe are true, and “F” for statements you believe are false. Write
your answer in a separate sheet of paper. 1 point each

1. Market is a social arrangement that allows buyers and sellers to discover

information and complete voluntary exchanges of goods and services.

2. Trade is an act of trading something of economic value such as a good, service,

information, or money between two entities.

3. Change is constant, and organizations continue to undergo various changes to

ensure effectiveness, efficiency, and relevance in the world of business.

4. A LA KUZNETS is the existence of a pattern or behavior, between economic

growth and environmental degradation, consistent with the environmental
Kuznets curve (EKC) hypothesis.

5. Government -LED (Local Economic Development) is an approach towards

economic growth and development which allows and encourages local people
to work together to achieve sustainable economic.

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III. Essay: Discuss the difference between the various forms of business
organizations. Write your answers in a separate sheet of paper. 10 points

• Sole Proprietorship
• Partnership
• Corporation
Scoring Rubric
Level of General Presentation Reasoning,
Achievement Argumentation
Exemplary • Provides a clear and thorough • Demonstrates an
(10 pts) introduction and background accurate and complete
• Addresses the question understanding of the
• Presents arguments in a logical question
order • Uses several arguments
• Uses acceptable style and and backs arguments
grammar (no errors) with examples, data that
support the conclusion
Quality • Combination of above traits, but • Uses only one argument
(8 pts) less consistently represented (1-2 and example that
errors supports conclusion
• Same as above but less thorough,
still accurate
Adequate • Does not address the question • Demonstrates minimal
(6 pts) explicitly, though does so understanding of
tangentially question, still accurate
• States a somewhat relevant • Uses a small subset of
argument possible ideas for support
• Presents some arguments in a of the argument.
logical order
• Uses adequate style and grammar
(more than 2 errors)
Needs • Does not address the question • Does not demonstrate
improvement • States no relevant arguments understanding of the
(4 pts) • Is not clearly or logically organized question, inaccurate
• Fails to use acceptable style and • Does not provide evidence
grammar to support response to
the question
No Answer (0
pts)

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References:

George Silandote, Jr. (April 4, 2017) The Role of business in the economy.
Retrieved July 5, 2020 from
https://www.slideshare.net/GeorgeJrSilandote/the-role-of-business-in-the-
economy

Tich Pagaduan. (July 16, 2017) Phases of Economic Development. Retrieved

July 5, 2020 from https://www.slideshare.net/RichPagaduan1/phases-of-
economic-development.

https://studyfinance.com/types-of-business-organization

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 18
Answer Key
Activity 1. True/ False
1. T
2. T
3. F
4. F
5. T
6. T
7. T
8. T
9. T
10. F
Enrichment Activity 1. Matching Type
1. E
2. C
3. D
4. A
5. B
Enrichment Activity 2
1. Partnership
2. Corporation
3. Sole Proprietorship
Enrichment Activity 3. Multiple Choice
1. Market
2. Commerce
3. Trade
4. Externality
5. Economies of Scale
Guage
I.MULTIPLE CHOICE
1. Market
2. Commerce
3. Trade
4. Externality
5. Economies of scale
II. TRUE/ FALSE
1. T
2. F
3. T
4. T
5. T