MODULE 1 – BUSINESS: IT’S CONCEPT AND ROLE FOR

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MODULE 1 – BUSINESS: IT’S CONCEPT AND ROLE FOR MAN AND NATIONAL
ECONOMY

INTRODUCTION

Business is everywhere- Looking around the places where you in, there are lot of small-
medium-or even large business enterprises that offers their goods and services in order
to satisfy man’s needs and even wants. But do you know how they came up with those
business ideas? Those are all products of imaginative and creative mind together with
some of innovative ideas of an entrepreneur who conducts series of marketing research
and studies before its final presentation to the perspective consumer or customer.
Likewise, this module will provide information that will help person to know the concept
of business, the resources needed in starting a business, the process it should take to
be a registered business enterprise in accordance to our law and give insights on the
relation of business to an individual and national economy.

LEARNING OUTCOMES:

After reading this module, the learner should be able to:

1. Explain the concept of business;

2. Analyze the relationship of business to man’s and national economy;
3. Identify factors of production;
4. Cite some reasons why people engage in business;
5. Identify the process needed in establishing a business.

TIME:

The time allotted for this module is 6 hours.

LEARNER DESCRIPTION

The participants in this module are BSA and BSBA students.

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MODULE CONTENTS:

LESSON 1.1: Concept of Business

What Is a Business?

A business is defined as an enterprise or organization

engaged in commercial, manufacturing, or professional
activities. The term business also refers to organized
activities of individual or team to create and distribute
goods and services aimed to meet the economic needs of
consumers with an objective of eventually earning profit.
Entrepreneurs usually start with conducting a market
research wherein they are studying the demands, needs
and wants of the community. https://images.app.goo.gl/NTS7DYAhxkFiS
U369

Activity 1.1:

1. Define business in your own words.

2. Name at least three business organizations or establishment that inspires you to

start your own business; and tell something on how they inspire you.

References:

Conrado, Inigo Jr.

Hayes, A. (2020). Business. Retrieved from:https://www.investopedia. com/terms/
b/business.asp

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LESSON 1.2: Relationship of Business and Economy

Businesses provide goods and services that drive economic output. The production
of goods came from the factors offered by the society like ( labor, capital, land,
entrepreneur). While business deals with selling product or services to a consumer,
economics deals with supply and demand of all products in the country. They are
related since performance of business in general affect economy at large.

References:
Conrado, I (2017). Management for Filiponos: Principles and Applications

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LESSON 1.3: Elements of a Business

The factors of production are resources that are the building blocks of the economy;
they are what people use to produce goods and services. Economists divide the
factors of production into four categories: land, labor, capital, and entrepreneurship.

The first factor of production is land, which refers to all the

natural resources that serves as raw materials for the
production of a certain goods. This includes not just land, but
anything that comes from the land. Some common land or
natural resources are water, oil, copper, natural gas, coal, and
forests. The income that resource owners earn in return for
land resources is called rent.

The second factor of production is labor. Labor is the effort that

people contribute to the production of goods and services. If
you have ever been paid for a job, you have contributed labor
resources to the production of goods or services. The income
earned by labor resources is called wages and is the largest
source of income for most people.

The third factor of production is capital. Think of capital as the

machinery, tools and buildings humans use to produce goods
and services. Some common examples of capital include
hammers, forklifts, conveyer belts, computers, and delivery
vans. The income earned by owners of capital resources is
interest.

The fourth factor of production is entrepreneurship. An

entrepreneur is a person who combines the other factors of
production - land, labor, and capital - to earn a profit. The most
successful entrepreneurs are innovators who come up with new
ways of producing goods and services or creating new goods and
services for marketing. Without the entrepreneur mixing land, labor
and capital in new ways, there would not be many of the
developments we see around us. . Entrepreneurs are a vital
engine of economic growth helping to build some of the largest firms in the world as
well as some of the small businesses in your neighborhood. Entrepreneurs thrive in

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economies where they have the freedom to start businesses and buy resources
freely. The payment to entrepreneurship is profit.

Activity 1.3.1:
Direction: Complete the diagram below by supplying the needed information.

FACTORS OF PRODUCTION
FACTOR DEFINITION RETURN

References:

Factors of production. Retrieved from https://www.stlouisfed.org/education/economic-

lowdown-podcast-series/episode-2-factors-of-production

Factors of productionhttps://www.tutor2u.net/economics/reference/factors-of-production

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LESSON 1.4: Why do People Engage in Business ?

Profit Motive

Entrepreneurs in exchange of producing goods and services looks into two important
aspect (a) primary is to earn profit (b) help in the enhancement and advancement of
today’s living. Profit could be measured by deducting expenses from the company’s
revenues. Gaining profit in a business entity has a great impact specially for small
businesses: it allows a company to secure financing from a bank, attract new investors
to fund its operations and grow its business.

Aside from profit motive, people engage in business because of the following reasons:
power, profit, service to the community, prestige, livelihood, social approval, etc.
Businessmen want to earn profit, serve" the community, and achieve prestige because
of certain stimuli, and these are the motivational factors. These factors can be clearly
explained and directly linked with the theory postulated by Abraham W. Maslow, an
industrial psychologist. According to his Hierarchy of Needs theory, there are five needs
of men that are to be satisfied continually in the following order:

1. Physiological or biological need - the

essentials for survival, such as the need for food, clothing, shelter, sex, air, water;
2. Safety need - the desire for security, stability, or protection against danger;
3. Social need - the need for group belongingness, affection, love, and friendship;
4. Ego or self-esteem need - the need for self-recognition or group satisfaction;
5. Self-fulfillment need - the need for the realization of personal goal or ambition.
References:

Johnson, R (2019). What are the benefits of making a profit? Retreived from:
https://smallbusiness.chron.com/benefits-making-profit-38877.html

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LESSON 1.5: Kinds of Business and Forms of Ownership

Kinds of Business
1. Industries involve the conversion of raw materials into finished products or goods
and the application of labor upon raw materials so that greater usefulness becomes
possible after the process in the industrial group can be divided into extractive
industries: farming, fishing, and mining. The manufacturing industries use materials and
supplies turned out by the extractive industries and change these raw materials into
various articles of materials for further production of goods and new products
2. Commerce involves the process of buying and selling where the goods are moved
from the point of production to the point of consumption. Consumption involves
purchasing and the actual investment of capital in the merchandise handled with the
intention of reselling at a profit.
3. Service enterprises are primarily concerned with the satisfaction of the needs and
wants of the consumers. These are subdividedinto: (a) public and community service;
and (b) professional or trade service, Examples of the first group are transportation
companies, MERALCO, motion picture producers, and newspaper publishers. Pro-
fessional and trade services are businesses which capitalize on personal skill and talent
for rendering service. Payment for such personalized service is usually in the form of
fees which are sometimes called retainer's fee.

Forms of Business Ownership

1. Sole Proprietorship

 These entities are owned by one person, usually the one who is accountable for
the day-to-day running of business.
 Sole proprietors own all of the business' assets and the profits that it generates.

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Advantages:

 Easiest and least expensive form of ownership to organize.

 Sole proprietors are in complete control, and within the parameters of the law,
may make decisions as they see fit.
 Sole proprietors receive all income generated by the business to keep or
reinvest.
 Profits from the business flow-through directly to the owner’s personal tax return.
 The business is easy to dissolve, if desired.

Disadvantges:
 Sole proprietors have unlimited liability and are legally responsible for all debts
against the business. Their business and personal assets are at risk.
 Funds are limited with their personal savings or loans
 May have a hard time attracting high-calibre employees

2. Partnership

By the contract of partnership two or more persons bind themselves to contribute

money, property, or industry to a common fund, with the intention of dividing the profits
among themselves.

Advantages of a Partnership

 Partnerships are relatively easy to establish; however time should be invested in

developing the partnership agreement.
 With more than one owner, the ability to raise funds may be increased.
 The profits from the business flow directly through to the partners’ personal tax
returns.
 Prospective employees may be attracted to the business if given the incentive to
become a partner.
 The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

 Partners are jointly and individually liable for the actions of the other partners.
 Profits must be shared with others.
 Since decisions are shared, disagreements can occur.
 Some employee benefits are not deductible from business income on tax returns.
 The partnership may have a limited life; it may end upon the withdrawal or death of a
partner.

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Types of Partnerships that should be considered:

General Partnership
Partners divide responsibility for management and liability, as well as the shares of
profit or loss according to their internal agreement. Equal shares are assumed unless
there is a written agreement that states differently.
Limited Partnership and Partnership with Limited Liability
“Limited” means that most of the partners have limited liability (to the extent of their
investment) as well as limited input regarding management decisions, which generally
encourages investors for short term projects, or for investing in capital assets. This form
of ownership is not often used for operating retail or service businesses. Forming a
limited partnership is more complex and formal than that of a general partnership.

3. Corporation

A corporation is an artificial being created by operation of law having the right of

succession and the powers, attributes and properties expressly authorized by law
or incident to its existence

Advantages

 Shareholders have limited liability for the corporation’s debts or judgments

against the corporations.
 Generally, shareholders can only be held accountable for their investment in
stock of the company. (Note however, that officers can be held personally liable
for their actions, such as the failure to withhold and pay employment taxes.)
 Corporations can raise additional funds through the sale of stock.
 A corporation may deduct the cost of benefits it provides to officers and
employees.

Disadvantages

 The process of incorporation requires more time and money than other forms of
organization.
 Corporations are monitored by federal, state and some local agencies, and as a
result may have more paperwork to comply with regulations.
 Incorporating may result in higher overall taxes. Dividends paid to shareholders are
not deductible form business income, thus this income can be taxed twice.

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Activity 1.5.1:
Direction: List down 10 business establishments near on your area and classify them
according to the chart given below

Business Kinds of Business Types of Ownership

Industry Commerce Services Sole Partnership Corporation
Proprietorship
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Activity 1.5.2:
Group Activity (Performance Task)
Direction: Divide the class into three groups. Each group will select among the three
business ownership and will prepare a short discussion why did they choose the said
ownership.

References:

De Leon, H (2017). Law on partnership and corporation. Retrieved from

https://kupdf.net/download/law-on-partnership-and-corporation-by-hector-de-
leon_59657ceadc0d6075302be310_pdf page 1&39.
Forms of Business Organization Retrieved from: https://www.allbusiness.com/forms-of-
business-ownership

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LESSON 1.6: Kinds of Economic System & Medium of Exchange

1. Capitalism – a system in which the means of production are owned and

operated by private individuals.
2. Socialism – the ownership of production and capital by the government and
the regulation by society, as a whole, of the process of production and
distribution, and of the giving of essential services.
3. Communism – stands for the collective ownership by the government of
consumption goods and production goods.

Medium of Exchange

1. Barter Economy

A barter economy is a cashless economic system

where goods and services are exchanged based on
the agreement of the parties involved

2. Money Economy
Through time and evolution, money was used as a
medium of exchange. Money solved the problem of barter
economy, when such objects became standardized in
value and regular in appearance so that it became
identified and accepted by the general public as a medium
of exchange. Consequently, a monetary system evolved. Money is anything
which is characterized by its general acceptability, it redeem ability in precious
metals, or public acceptance in any institution using it.

3. Money and Credit Economy

Credit is the power to obtain economic goods and

services in exchangefor the promise to pay the agreed
equivalent at some future time. Credit supplements
money as a medium of exchange. Modem business
operations have expanded through the availment of
credit facilities, because the use of credit makes possible
the growth of production and of sales.

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LESSON 1.7: Feasibility Study and Its Component

A feasibility study is a study that takes into account all of the related factors of a project
— including economic, technological , legal, and scheduling considerations— to assess
the probability of successfully completing the project. Program managers use feasibility
reports to determine a project's pros and cons before spending a lot of time and
resources in it.

The Importance of Feasibility Studies

Feasibility studies are important to business development. They can allow a business to
address where and how it will operate. They can also identify potential obstacles that
may impede its operations and recognize the amount of funding it will need to get the
business up and running. Feasibility studies aim for marketing strategies that could help
convince investors or banks that investing in a particular project or business is a wise
choice.

Components of a Good Feasibility Study

Marketing Aspect – to determine the quantity of the product hat can be sold at a certain
price given the competitive situation.

Organization and Management Aspect – it includes study of the officers and key
personnel, basic cosiderations in forming the organizations, form of ownership,
organizational chart, and project schedule.

Technical Aspect – it determines to what extent the project meets the technical
soundness criteria.

Financial Aspect- It quantifies the result of the marketing, technical, management,

taxation and legal phases of the project study, and express in peso terms the outcome
of the operating project.

Socio- Economic Aspect- It determines how the project will affect:

1. Income
2. Taxes
3. Price
4. Local producers
5. community

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Activity 1.7.1:
Direction: Form 5 groups in a class. From a group formulate a probable business
proposal. Submit at least 5 business ideas and its title

Business Idea Title

References:
Kenton, W. (2020). What is a feasibility study? Retrieved from: https : / / www . investopedia
. com / terms/f/feasibility-study.asp

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LESSON 1.8: How to Register your Business?

Whether the type of enterprise you want to run in the Philippines is a sole
proprietorship, a partnership, or a corporation, the basic legal requirements of starting a
business in the Philippines are the following:

1. Register the business with the corresponding department or agency

Sole proprietorships must be registered with the Department of Trade and Industry
(DTI). Partnerships and corporations, on the other hand, must be registered with the
Securities and Exchange Commission (SEC). The name of the business is also
included in the registration.

2. Obtain a business permit

Head to the local government unit of the place you intend to operate your business in.
Secure a business or mayor’s permit. Each municipality has its own specific
requirements and procedures for the registration of businesses, so be sure to check the
individual websites of these areas for more information.

Many of the basic requirements include:

 DTI or SEC registration form
 Barangay clearance
 Zoning clearance
 Sketch of the location
 Land title or contract of lease
 Community tax certificate
 Public liability insurance
 Occupancy permit
 Sanitary permit
 Environmental permit
 Fire permit

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3. Register with the Bureau of Internal Revenue (BIR)

After obtaining the necessary documents and permits, register the business with the
Bureau of Internal Revenue (BIR). Business owners need to get a Taxpayer
Identification Number (TIN) from the Revenue District Office (RDO) within the registered
location of the business.

There are two kinds BIR forms you can fill out depending on the type of business you’re
starting. These forms are:
 Form 1901 for people who are self-employed, single proprietors, or professionals
 Form 1903 for partnerships and corporations

4. Registering with the SSS, PhilHealth, and Pag-IBIG Fund

If you hire employees, register them with the necessary government programs. The
Social Security System (SSS) is a social insurance program that collects the monthly
contribution of employees, along with the share of their employer. The SSS gives
employees health and retirement benefits from their monthly contributions, along with a
variety of small loans. An SSS membership is mandatory for all employees who are 60
years old and below.

The Philippine Health Insurance Corporation (PhilHealth) is another government agency

that requires monthly contributions from the employee and the employer.

The Home Development Mutual Fund (Pag-IBIG Fund) provides a variety of housing
loans to employees. Monthly contributions are deducted from the salary of the
employee.

5. Additional requirements:
Aside from the requirements mentioned above, there are also other special
requirements that businesses need. These requirements depend on the nature of the

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business and their corresponding industry. If you intend to open a school or offer
training or education programs, register with the Department of Education (DepEd). For
businesses that sell food products, register with the Bureau of Food and Drugs (BFAD)

LESSON 1.9: Socio Economic Contribution of Entrepreneurship

 Entrepreneurship creates employment

 Entrepreneurship improves the quality of life
 Entrepreneurship contributes to more equitable distribution of income taxes
and
 therefore eases social unrest.
 Entrepreneurship utilizes and mobilizes resources for greater national
productivity.
 Entrepreneurship brings social benefits through the government.

ONLINE READING MATERIALS:

 Read an article about the factors of production available at :

https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-
2-factors-of-production
 Read Chapter 1 of the book “ Management for Filipinos” by Conrado, Inigo Jr.
available both in LMS and other media platform ( email )

ONLINE VIDEO LINKS AND MATERIALS:

 Watch the online video lecture of the course instructor uploaded at NEO LMS
and to the class shared Google drive (if applicable).

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TEST YOUR KNOWLEDGE:

Direction: Write True if the given statement is true and write the correct word or
statement that could make the statement correct.
1. Business is any activity that involves in the production of goods and/ or service only.
2. Power is the primary motive in a capital system.
3. Industry involves the conversion of inputs into outputs.
4. Socialism is an economic system that is owned and operated by private individual.
5. When your sales is much higher than your expenses, the you gain profit

Identify in which kind of business does the following falls

1. Universal Robina
2. Citimart Group of Companies
3. Maynilad
4. Robinsons Mall
5. Epson
6. Jollibee
7. J&T Express
8. Yamaha
9. University of Batangas
10. S&R

Enumeration
1-4 Elements of Business system
5-7 Medium of Exchange
8-10 Forms of Business ownership
11-15 Maslow’s Heirarchy of Needs
20-25 Aspect of feasibility study

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MODULE REFERENCES:

Conrado, INigo Jr.( 2017). Management for Filipinos: Principles and Applications

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