SOCIO-

ECONOMIC
IMPACT OF A
BUSINESS
Applied Economics – Q2
OBJECTIVES: AFTER GOING THROUGH THIS
MODULE, THE LEARNERS SHOULD BE
ABLE TO:
 1. Identify and explain the various socio-economic
factors affecting business and industry;
 2. Analyze and evaluate the viability of a business
and its impact on the community; and
 3. Formulate recommendations and strategies on
how to minimize and maximize a business negative
impact and positive impact, respectively.
 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.

 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.
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 business 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.
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, 9
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 ragsto-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 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
ACTIVITY: I CAN DO THIS! ½
CROSSWISE
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.