Quarter 1 Week 5 Module 5

Learning Competency:
Differentiate the phases of
economic development and its
impact to business environment.
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 LESSON 5 The Phases of Economic Development and Its Impact
to Business Environment

EXPECTATIONS

As we study and immerse ourselves in “Organization and Management” in the

process, it is necessary to discuss and differentiate the phases of economic development.
The module is subjected to discuss Module 5 – The Phases of Economic Development and
Its Impact to Business Environment.

After going through the module, you are expected to:

1. differentiate the phases of economic development and its impact to business

environment.

Let us start your journey in

learning thru a Pre-test.
PRETEST Good luck!

Fill in the Blank

Directions: Choose the CORRECT word from the table below and write your answer in
the space provided before the number.

Walt Whitman Rostow Five Stages of Economic Development

Taxes Seidel and Moichelle Profit at any cost

1. It is a model that can have extremely negative implications down to

road if corners are cut and poor decision are made.
2. According to them, the small and large businesses drive economic
stability and growth by providing valuable services, products and tax dollars that
directly contribute to the health of the community.
3. It is used to maintain the infrastructure of a city, state or country-
road, bridges, tunnel, public transportation, libraries and other public buildings
and services.
4. He is economist in the Lyndon B Johnson administration from 1966-
1969.
5. it is a model on economic development developed by Rostow.

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LOOKING BACK TO YOUR LESSON
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As we go further, let us try to recall our lesson about the forms of business
organization.
 The Five Stages of Economic Development, is a model developed by Walt
Withman Rostow. The five stages are 1) Traditional Society, 2) Preconditions for
Take-off, 3) Take-Off, 4) Drive to maturity, and 5) Age of Mass Consumption.
 Partnership consists of two or more persons who bind themselves to contribute
money or industry to a common fund, with the intention of dividing the profits
among themselves.
 Sole proprietorship is the simplest form of business and the easiest to register,
through the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the
Department of Trade and Industry (DTI). It is owned by an individual who has full
control/authority of its own and owns all the assets, as well as personally
answers all liabilities or losses.
 Corporation is a juridical entity established under the Corporation Code and
registered with the SEC.

Matching-type

Directions: Match the column A to column B. Write your answer in the space provided
before the number.

A B

1. Marked by an increase in productivity a. Traditional Society

In Europe during the 1700s and 1800s b. Modern Society
2. The economy is able to reinvest 10-20% c. Precondition for Take-Off
of what it creates into more production. d. Take-Off
3. A society or economy is able to export e. Age of Mass
Consumption production from other countries f. Drive to Maturity
4. Number of middle-class jobs are fewer
than the total number of people.
5. These societies relied heavily on agricultural
labor.

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 Learning Module for Organization and Management

Enjoy reading…..

BRIEF INTRODUCTION

Economic development generally refers to the sustained, concerted actions of

policymakers and communities that promote the standard of living and economic health of
a specific area. Economic development can also be referred to as the quantitative and
qualitative changes in the economy (www.abbreviations.com).

Walt Whitman Rostow, also known as W.W. Rostow, was an economist in the
Lyndon B. Johnson administration from 1966-1969. He also published articles and
developed models on economic development. One of his most prominent ideas was the five
stages of economic development. In this model, he suggests that societies go through five
stages of economic development as they develop and grow.

Each of Rostow's five stages builds on the previous stage, becoming more complex
and integrated. Depending on the economic forces at play, the time it takes to move
through each of Rostow's stages varies. We'll begin by discussing each stage in detail, then
we'll talk about how Rostow's model has led to other ways of measuring development.

Rostow's Five Stages Model

Source: https://www.google.com/search?q=picture+of+rostow+five+stages&sxsrf
=ALeKk0288PaufIUzRw6A_LG2oc46olspgw:

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 Learning Module for Organization and Management
The Five Stages:

Stage One: Traditional Society

The first stage of Rostow's model and the one in which societies begin, is the
traditional society. The traditional society stage was prevalent prior to the 1700s,
when most societies operated in a relatively stable state and productivity didn't rise
or fall dramatically. Trade existed, such as the spice route between Asia and Europe,
but it was timely, costly, and more of a luxury than a necessity. Technology was very
limited. Humans had access to little more than handmade tools, transportation, and
the printing press. That meant that producing goods was very human capital
intensive, which created large gaps in income inequality. These societies also relied
heavily on agricultural labor because a tremendous amount of labor was required to
grow enough food to sustain the societies.

Stage Two: Preconditions for Take-Off

There is a period of transition between the traditional society and a society that takes off,
and for a certain time that society is establishing the preconditions for take-off. These
preconditions are mostly marked by an increase in productivity, such as was found in
Europe during the 1700s and 1800s. A number of factors came together to make
productivity increase; for example, population hit a critical mass that made agriculture
take up such a high percentage of labor, which provided opportunities for the
establishment of educational institutions, banks, and a market for luxury goods.

Stage Three: Take-Off

When the preconditions for take-off are met, a society can take off. Educated
individuals start inventing new processes and tools, and access to capital through
financial markets and banks make it possible to produce goods and services on a
larger scale. This requires a different type of skill set from human laborers, so the
economy shifts from agriculture to production. This increases wages for everyone,
taking the economic structure from a structure of kings and servants to a wealthy
class, middle class, and lower class. A lower class still exists at this stage, either
because of social norms that discriminate against people or simply because the
number of middle-class jobs are fewer than the total number of people.

Stage Four: Drive to Maturity

The next of Rostow's five stages has a general length of time associated with it, the drive
to maturity. According to Rostow, the drive to maturity is about a 60-year period
between the take-off and the final stage, the age of mass consumption. During this short
period, an economy (the collective of all consumers and producers) is able to reinvest 10-
20% of what it creates into more production. Processes are improved, quality of life is
improved, and technology and new ideas continue to become more central to society,
while the cost of producing the needs for survival (like food and shelter) becomes a
smaller part of the economy. More importantly, the middle class grows at the quickest
rate of any economic class. For the modern-day U.S., this stage

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really took place from after WWI, from about 1915, until around 1980, when the
technology era began.

Stage Five: Age of Mass Consumption

After the drive to maturity, an economy reaches maturity and begins the final stage,
the age of mass consumption. Think of the United States, much of Europe, and some
of Asia today, and you can see this stage of development at work. The quantity and
quality of products and services increase. A society or economy in this stage is able
to export production, bringing in money from other countries that helps the economy
grow larger beyond actual consumption.

According to Seidel, Moichelle, (2019), Small and large businesses drive economic
stability and growth by providing valuable services, products and tax dollars that directly
contribute to the health of the community. They also provide jobs, strengthening the
economic health of each community where a business is based. Even if a business is
headquartered elsewhere, employing people at each local business contributes to the
success of that region, as with the wages they earn, people buy property, work, shop and
otherwise invest in where they live.

Taxes are used, among other things, to maintain the infrastructure of a city, state or
country – roads, bridges, tunnels, public transportation, libraries and other public
buildings and services, including police officers and fire-fighters, all benefit from tax money
collected from individuals and businesses. These services are essential to the good health
and positive qualities of local and national citizens. In a capitalist society like that of the
United States, business growth and increased sales means collecting more taxes, which can
directly translate to better maintenance and offerings of local infrastructure and services
that benefit the community.

 The success of business as a whole directly affects the world’s economy. At its core,
businesses are designed to serve a particular need that people have, and to provide
trusted goods and services related to that need. When consumer confidence or trust
dips in business, it isn’t just sales that are negatively affected. This mistrust has a
ripple effect and can result in a decline in a country’s general economy, weakening
the strength of its currency and buying power.

 As businesses focus more and more on providing value to shareholders instead of

directly to consumers, their interests and tactics may not align with the best interests of
the consumer. A “profit at any cost” model can have extremely negative implications
down the road if corners are cut and poor decisions are made in the name of solely
working to increase shareholder profit or are based purely on greed. No matter how
efficiently you make a product or how special the service is that you deliver, if you lose
consumer confidence as a result of your business decisions, consumers won’t support
you by purchasing your goods and services, and then nobody benefits.

 Business is vital to a country’s economy. Success of businesses can drive the success of
an entire country, including through contributions to the gross domestic product, or
GDP, of a nation, which affects their world standing. If a country supports businesses
with goods and services that are in demand, everyone in the country
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 Learning Module for Organization and Management
benefits. From job creation that results in money being put back into the community
to taxes that help the government smoothly run and provide maintenance and
improvements to the country’s infrastructure, or in other ways that are helpful for its
citizens, there are dozens of ways business success translates to economic
development.

 In addition to providing products and services that citizens and residents want,
economic health can allow for exporting goods and services to others who want those
items, contribute to offering avenues for education and training for citizens, create
healthy business competition and provide additional methods of strengthening
economic development for the country as a whole.

 The role of business in relation to the economy is a pivotal one. Small businesses boost
economic revenue on a smaller scale, but one that’s of vital importance, directly and
positively affecting the health, quality of life and purchasing power of residents in the
local community. But small businesses don’t always stay small. Many nationally known
brands today got their start as very small businesses run out of someone’s home or
garage. Start-ups can become multinational companies that can have a huge and
positive impact on the global economy, benefiting all of the company’s employees and the
communities in which those businesses thrive. Apple, Whole Foods, Amazon and
Starbucks were all ideas started on a small scale that have had incredible, explosive
positive impacts not just on the U.S. economy, but on a global scale.

ACTIVITIES

Activity 1: Independent Activity

Directions: Using the Graphic Organizer, give your own idea about the five stage of
economic development and write your answer in a yellow paper.

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 Learning Module for Organization and Management
Activity 2: Independent Activity

ESSAY
Directions: Enumerate the Rostow’s Stages of Growth and give your idea about its
influence to the business environment. Give 2 influences in each stage. Write your answer
in the space provided.

Rostow’s Stages of Growth Influence to Business Environment

1.

2.

3.

4.

5.

REMEMBER


Walk Whitman Rostow, also known as W.W. Rostow was an economist in the Lyndon B. Johnson
administration from 1966-1969. He also published articles and developed models on economic development.

The Five Stages of Economic Development model is developed by Walt Withman Rostow. The five
stages are 1) Traditional Society, 2) Preconditions for Take-off, 3) Take-Off, 4) Drive to maturity, and 5)
Age of Mass Consumption.

Taxes are used, among other things, to maintain the infrastructure of a city, state or country-roads, bridges,
tunnel, public transportation, libraries and other public buildings and services including police officers and
fire-fighters, all benefit tax money collected from individuals and businesses.

Profit at any cost model can have extremely negative implications down the road if corners are cut and poor
decisions are made in the name of solely working to increase shareholders profit or are based purely on greed.

CHECK YOUR UNDERSTANDING

True or False
Directions: Before each statement, write TRUE if the statement is correct or FALSE if the
statement is incorrect.

1. Preconditions for take-off are the second stage of economic development,

whereas productivity increased found in Europe during the 1700s and 1800s.

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 Learning Module for Organization and Management
2. In the age of mass consumption, a society or economy is able to export
production, bringing in money from other countries that helps the economy grow larger
beyond actual consumption.
3. Success of businesses can drive the success of an entire country, including
through contributions to the gross domestic product, or GDP, of a nation, which affects
their world standing.
4. Traditional society stage was prevalent prior to 1900s, when most societies
operated in a relatively stable state and productivity didn’t rise of fall dramatically.
5. Drive to maturity is about 80-year period between the take-off and the final
stage.

POST-TEST

MULTIPLE CHOICE: Choose the letter of the best answer. Write your answer in the space
provided.
1. In which stage of economy reaches maturity and begins the final stage?
a. Take-Off
b. Traditional Society
c. Age of Mass Consumption
d. None of the above

2. Who developed and published articles of the Five Stage of Economic Development?
a. Walt Whitman Rostow
b. Seidel Rostow
c. Moichelle Rostow
d. Seidel and Moichelle Rostow

3. Which stage had limited technology, and humans had access to little more than
handmade tools, transportation, and the printing press?
a. Take-Off
b. Traditional Society
c. Age of Mass Consumption
d. None of the above

4. Which stage is about the population hit a critical mass that made agriculture take
up, such as a high percentage of labor, which provides opportunities for establishing
an educational institution, banks, and a market for luxury goods?
a. Dive to Maturity
b. Modern Society
c. Take-Off
d. Preconditions for Take-Off

5. Which stage is used to educate the individuals to start inventing new processes
and tools, and access to capital through financial markets and bank make it possible
to produce goods and services on a larger scale?
a. Dive to Maturity
b. Modern Society
c. Take-Off
d. Preconditions for Take-Off

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6. Which of the following is used to maintain the infrastructure of a city, state or
country-roads, bridges, tunnels, public transportation, libraries and other public
building and services, including police officers and fire-fighters?
a. Taxes
b. Income
c. Savings
d. None of the Above
7. Which of the following is a CORRECT arrangement of the Five Stages of Economic
Development?
a. Precondition for Take-off, Take-Off, Traditional Society, Age of Mass
Consumption, and Drive to Maturity
b. Traditional Society, Preconditions for Take-off, Take-off, Drive to Maturity, and
Age of Mass Consumption,
c. Traditional Society, Preconditions for Take-off, Age of Mass Consumption,
Drive to Maturity, and Take-Off
d. Age of Mass Consumption, Preconditions for Take-off, Traditional Society, and

8. Which stage really took place after WWI from about 1915 until around 1980, when
the technology era began?
a. Age of Mass Consumption
b. Drive to Maturity
c. Take-off
d. Traditional Society
9. Which of the following is NOT one of Rostow’s five stage of economic development?
a. Age of Mass Consumption
b. Drive to Maturity
c. Take-off
d. Technological Society
10. Which of the five stages of economic development takes place over approximately
60 years?
a. Age of Mass Consumption
b. Drive to Maturity
c. Take-off
d. Traditional Society
REFLECTIVE LEARNING SHEETS

Reflective Question: Give the different phases of economic development. How can it
change your point of view as a student particularly in the field of business? Explain in 1 to
2 sentences only. Write your answer in the space provided.

Phases of Economic Development Point of view

1.
2.
3.
4.
5.
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REFERENCES

Books
Darr, K. (2013). Introduction to Management and Leadership Concepts, Principles and Practices, Jones and
Bartlett Learning, Retrieved from: https://www.google.com.et
Mintzberg, H. (1989). MINTZBERG ON MANAGEMENT. Reprinted by permission of Free Press, a division of
Simon & Schuster, Inc.
Robbins, S., Robbins, S. P. and Coulter, M. (2012). Management -11th ed, Pearson. Retrieved from:
www.pearsonhighered.com

Websites
Smyth, D. (2019). The Roles of Business Organizations in Economic Development. Retrieved
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https://www.managementstudyhq.com/functions-of-management.html
https://www.slideshare.net/LalaineCazar/nature-and-concept-of-
management?from_action=save
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366/evolution-of-management-thought-12679.html
https://www.mindtools.com/pages/article/management-roles.htm
https://study.com/academy/lesson/five-stages-of-economic-development.html
https://pnl-law.com/blog/forms-of-business-sole-proprietorship-partnership-corporation/
https://www.cda.gov.ph/resources/issuances/philippine-cooperative-code-of-2008/republic-
act-9520
https://bizfluent.com/info-7745795-roles-business-organizations-economic-
development.html
https://www.freepik.com/free-vector/team-leader-managing-
project_5562411.htm#page=1&query=manager in business management position=4
https://www.freepik.com/free-vector/urban-buildings-with-cityscape-
scenery_4794860.htm#page=1&query= BUSINESS ENVIRONMENT position=33
https://www.freepik.com/premium-vector/business-people-communicating-office-
banner_5523082.htm#page=1&query= BUSINESS ENVIRONMENT position=22
https://www.freepik.com/free-vector/scrum-team-discussing-
tasks_4950291.htm#page=1&query=ROLE OF BUSINESS position=6
https://www.freepik.com/free-vector/professional-group-working-
project_4950283.htm#page=1&query=ROLE OF BUSINESS position=11
https://www.investopedia.com/terms/c/corporation.asp
https://u.osu.edu/coopmastery/legal/alternative-business-structures/
https://www.google.com/search?q=picture+of+rostow+five+stages&sxsrf=ALeKk0288PaufI
UzRw6A_LG2oc46olspgw:1592726050157&source=lnms&tbm=isch&sa=X&ved=2ahUKEwi
YpsbztpLqAhVQMd4KHQggAokQ_AUoAXoECAwQAw&biw=1366&bih=637#imgrc=e6Xx34G a8SX7xM
www.abbreviations.com/abbreviation/Economic+Development

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