Lesson 1: The Business

(Module 1│Opportunity Seeking)

Instructor│Mrs. Cristy Dioneda-Docdocos

Overview

The world of business today can be summed up in a single word: change. And not just change,
but rapid change. in order to remain profitable and competitive, businesses today are finding that they
need to be more responsive than ever t
o customer demands. This is not only true of big companies like Apple, Nike, and Whole Foods
but of smaller businesses, too—like your local hardware or grocery store. The rapidly changing business
environment affects them all.

What about now? This new normal setting that requires a new mindset and mobility for growth,
as this crisis mode- pandemic, requires attitudes that hinder growth even in normal times. What would
be the first step of aspiring entrepreneurs in order to deeply understand the importance of putting up
business in the Philippine economy.

Learning Outcomes

After studying this topic, the students should be able to:

1. Understand the meaning of entrepreneurship and its elements

2. Know the importance of entrepreneurship in economic development
3. Describe the different types and forms of business and its role in industry

Learning Notes

1. What is ?

A business (entity) is an organization or any other entity engaged in commercial, professional,

charitable or industrial activities. It can be a for-profit entity or a not-for-profit entity and may or may
not have a separate existence from the people/person controlling it.

A business (activity) is a commercial activity which involves providing goods or services with a
primary motive of earning profits.

Business is a regular process of earning a profit by satisfying consumer’s needs through the
manufacturing of goods, reselling of products, providing services or carrying out all three together. It is
an occupation which requires a particular set of skills and expertise to derive maximum profit out of it.

2. What is the importance of Business?

Business is a self-employment opportunity for a person to become self-independent and master of

his ideas. It is not only beneficial to the owner but also makes an impact on society.

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 To get a detailed understanding of the importance of trading activities to the owner and the society,
let us go through the following points:

It brings profit and proves to be a source of income for the

owner.

High revenue means higher tax collection.

More industrial units and companies experience a higher

rate of employment and better living standards.
Manufacturing units involve large-scale production, which
ultimately reduces the cost of production, and people get a
continuous supply of goods at a reasonable price.

It involves brainstorming and generation of new ideas

which opens up the way for innovation and creativity.
It is a long-term process which requires the human
resource to function correctly. Therefore, it creates job
opportunities.
A good strategy and high customer satisfaction lead to a
strong customer base aiming at market expansion.

Figure 1.0

3. What are the forms of Business Organization?

Business ownership comes in many forms based on the number of owners, the liability of the
owners, representation, and motives.

Forms of
Business
Organization

Unlimited Limited
Liability Liability

Limited
Sole General Limited
Corporation Liability Cooperative
Proprietorship Partnership Partnership
Company
Figure 2.0

 Sole Proprietorship
Sole proprietorship is a business owned and operated by a single individual. It is easy to set-up,
operate, and register. All the profits of the business belong to the owner and he’s also liable for all the
liabilities incurred.

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 The biggest drawback of this business that the owner faces unlimited liability. This means that the
creditors of the business can go after the personal assets of the owner if the business is unable to pay
them.

 Partnership
When two or more persons join hands to run a business, they usually come into partnership.
Partnerships come in two forms – general and limited.
A general partnership is like sole proprietorship but with more than one owner where all the owners
face unlimited liability.
In limited partnerships, some or all of the partners have limited liability.

 Corporation
A corporation is a business which has a separate legal identity from the people who own or run it.
Ownership is usually represented in the form of shares of the stock. Corporation should comply all the
requirements to the Security Exchange Commission (SEC) to issue a Certificate of Incorporation before
the business operation.

Owners enjoy limited liability but are not necessarily involved in running the business. The business
is operated by a group (board of directors) elected by the shareholders.
Owners of the corporation called as stockholders. They enjoy the dividends they get from investing
in the corporation.

 Limited Liability Company

A limited liability company is a hybrid form of business which has characteristics of both a
corporation and a partnership. A partnership because it is not incorporated and a corporation because
all of the partners/owners enjoy limited liability.

 Cooperative
Cooperative is a private business organization owned and controlled by people for their mutual
benefits. These people are called members and are benefitted by the goods and services offered by the
cooperative. All members are expected to help run the business as the main motive of the cooperative is
to provide service to all the members rather than a return on investment.

4. What are the types of Business?

Businesses can be classified into but are not limited to 4 types.

Figure 3.0

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 Manufacturing
Manufacturing businesses are the producers who develop the product and sell it either directly to
the customer or the middlemen to conduct sales. Examples of manufacturing businesses are steel
factories, plastic factories, etc.

 Service
This type of business deals in selling intangible goods to the consumers. Unlike tangible goods,
services cannot be stored or separated from the provider.
Six types of Services:

1. Personal Services- provides services directly to the person.

2. Business Services- provides services to other businesses.
3. Education Services- provides educational services such as schools etc.
4. Repair Services- assemble and repair tools or equipments of the stuff owner.
5. Hotel and Motels- provides accommodation
6. Entertainment and Recreations- provides amusement and relaxation.

Service firms offer professional services, expertise, commission-based promotions, etc. Examples
include salons, schools, consultancy etc.

 Merchandising
Merchandising is a middlemen business strategy where the business buys products from a
manufacturer, wholesaler, or other partners, and sells the same at the retail price. It is usually known as
a ‘buy and sell’ business as they make profits by selling the products at a price higher than their cost
price.

Examples of a merchandising business are grocery stores, supermarkets, distributors etc.

 Hybrid
Hybrid businesses have the characteristics of two or more types of businesses explained above.

For example, a restaurant develops its own dishes (manufacturing), sells the products like cold
drinks which are manufactured by other businesses (merchandising), and provide service to the
customers (service).

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 Learning Activity

Please proceed to the quiz activity.

References

A. Online References

Business by Prachi M , 2018. https://theinvestorsbook.com/business.html#:~:text=Definition%3A

%20Business%20is%20a%20regular,maximum%20profit%20out%20of%20it.
HOW TO: Identify your Personal Entrepreneurial Competencies by Villena, Daryl, retrieved on 2018.
http://beta.entrepreneurship.org.ph/2018/08/09/how-to-identify-your-personal-entrepreneurial-
competencies/
What is Business? – Definition, Concepts, and Types by Aashish Pahwa, July 21, 2019,
https://www.feedough.com/what-is-business-definition-concept-types/, retrieved on August 13, 2020.

Types and Forms of Buisness by Accounting Verse, 2020.

https://www.accountingverse.com/accounting-basics/types-of-businesses.html

B. Book References

Small Enterprises Research and Development Foundation.(2013). Windows to Entrepreneurship; A

Teaching Guide. SERDEF, UP Diliman,Quezon City, Philippines

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