ORGANIZATION AND MANAGEMENT
1ST QUARTER
Lesson 4: The Firm and its Environment (continuation of Lesson 3)
I. INTRODUCTION
All managers, without exception, must consider their organization’s external and internal
environments before planning anything. Responding to the various forces/ elements of the firm’s external
and internal environment is a must because failure to do so may bring about negative effects. However,
managers must make sure that they respond based on the proper identification and evaluation of these
forces/ elements in their surrounding environments.
At the end of this lesson, the learners are expected to:
1. Analyze the forms and economic roles of business organizations.: and
2. Differentiate the phases of economic development and its impact to business environment.
We will be proceeding with our lesson proper with the use of the following e-learning platforms:
1. Edmodo;
2. Zoom;
3. Google meet; and
4. Messenger/messenger chat room.
IV. ABSTRACTION
The form of a business organization takes may depend on the purpose, nature of operations, and
resources of the company. However, a business organization’s form may change along with the changing
times and the demands they present.
To further continue with our discussion, kindly look for the following articles and videos:
1. Forms of business organization(ownership):
[Link]
2. Forms of business organization(activity):
[Link]
3. Phases of Economic Development:
[Link]
The Business Organization
Business may be defined as profit-seeking activities and enterprises that provide goods and services
necessary to an economic system. Profits refer to the rewards for businesspersons who take the risk involved
in producing and marketing goods and services. A business firm is established primarily for profit. There are
reasons, however, why anyone would want to start a business. Some of these are to do work that is enjoyable,
to do something for pleasure and pride, and to achieve financial independence. Professional managers
maintain that a business firm should achieve the following objectives:
1. Creation and distribution of a product or service.
2. Satisfaction of personal objectives like profits for owners, salaries and other compensation for
executives, wages and other compensation for employees, psychic income for all, including pride in
work, security, recognition, and acceptance.
3. Protection and enhancement of the human and physical resources; and
4. Economy and effectiveness of operation.
Kinds of Business Organization (Activity)
1. Service business is a type of business that provides labor and intangible benefits to customers. Examples
are transportation companies, professional services, entertainment, hotels and restaurants, apartments, and
banks.
2. Merchandising business is a type of nosiness that purchases products from other businesses like
manufacturers and sells them to customers at a higher retail price. Examples are grocery stores,
supermarkets, car dealers, real estate dealers, and electronics store.
3. Manufacturing business is a type of business where raw materials are transformed into finished goods
through product-processing, labor, and other manufacturing processes. Examples are manufacturers of soap
and detergent, canned goods, automobiles, and medical drugs
Forms of Business Organization (Ownership)
1. Sole Proprietorship is a type of business entity owned and operated by a single person. Sole proprietor
owns the entire business, including all assets and profits, also responsible for all the liabilities of the business.
Sole proprietor is also considered single tax payers and are assigned a single Tax Identification Number
(TIN). Owners also apply for a business trade name and register it to Department of Trade and Industry (DTI).
Advantages Disadvantages
Ease and Cost of Formation Owner’s Lack of Ability and Experience
Secrecy Difficulty in Attracting Good Employees
Distribution and Use of Profits Difficulty in Raising Funds
Control of the Business Limited Life
Government Regulation Unlimited Liability
Taxation
Closing the Business
2. Partnership. ARTICLE 1767. 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. A partnership can be general or limited partnership. General partnership is a form of partnership
wherein the partners have unlimited liability for debts and obligations of the partnership. Limited partnership
is a form of partnership wherein one or more general partners have unlimited liability and limited partners
have liability that is only up to the extent of their capital contributions. Partnership with a capital more than
three thousand pesos should register with the Securities and Exchange Commission (SEC).
Advantages Disadvantages
Ease of Formation Unlimited Liability
Pooling of knowledge and Skills Limited Life
More Funds Available Potential Conflicts
Ability to Attract and Retain Employees Difficulty in Dissolving the Business
Tax Advantage
3. 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 incidental to its existence. A corporation has a
minimum of 5 and maximum of 15 owners called shareholders. The shareholders are assigned at least one
share of the company. Their liability in only up to the extent of their share capital. The minimum paid-up
capital required of corporations in the Philippines is 5,000. There are two types of corporation: Stock and
Non-stock corporation. Stock corporation has capital stock divided into shares and dividends. Surplus profits
are given to shareholders depending on the number of shares held. Non-stock corporation does not issue
shares of stock and is established primarily for public interest such as foundation, education, social, cultural,
and other similar purposes.
Advantages Disadvantages
Limited Liability More Expensive and Complicated to Organize
Ease of Expansion Double Taxation
Ease of Transferring Ownership More Extensive Government Restriction and Reporting
Requirements
Relatively Long Life Employees Lack Personal identification With and
Commitment to Corporate Goals
Greater Ability to Hire Specialized Management
4. Cooperative is defined as “an organization composed of individuals or small businesses that have banded
together to reap the benefits of a larger organization. Cooperatives are not organized for profit, but to make
its members individually profitable or to save money.
The Different Phases of Economic Development
1. Malthusian. Proposed by 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 the
population. The smaller the population, the higher the economic growth and vice versa.
2. Government-led. 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
partnership between local and national institutions towards strategic implementations.
3. A la Kuznets. Proposed by Simon Kuznets. The existence of a patter or behavior between economic growth
and environmental degradation, consistent with the environmental Kuznets curve hypothesis.
4. Human capital-based. Is a measure of the economic value of an employee’s skill set. Refers to the
knowledge, skill sets and motivation that people have, which provide economic value
5. Post demographic transition. Proposed in 1929 by Warren Thompson. It 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 weakly dependent in GDP.
VI. REFERENCES
Organization and Management by Cabrera, Altarejos and Riaz published by Vibal
Organization and Management for Senior High School by Cynthia A. Zarate published by C & E Publishing,
Inc.
Business Organization and management by Medina 2015 published by REX Book Store
Organization and Management 2016 by Payos, Espinoza, Zorilla published by REX Book Store
